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MarketScreener Homepage  >  Equities  >  Nasdaq  >  Northern Technologies International Corporation    NTIC

NORTHERN TECHNOLOGIES INTERNATIONAL CORP

(NTIC)
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NORTHERN TECHNOLOGIES INTERNATIONAL : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

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04/08/2020 | 05:19pm EDT
This Management's Discussion and Analysis provides material historical and
prospective disclosures intended to enable investors and other users to assess
NTIC's financial condition and results of operations. Statements that are not
historical are forward-looking and involve risks and uncertainties discussed
under the heading "Part I. Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations-Forward-Looking Statements" in
this report and under "Part 1. Item 1A. Risk Factors" in our annual report on
Form 10-K for the fiscal year ended August 31, 2019. The following discussion of
the results of the operations and financial condition of NTIC should be read in
conjunction with NTIC's consolidated financial statements and the related notes
thereto included under the heading "Part I. Item 1. Financial Statements."


Business Overview


NTIC develops and markets proprietary, environmentally-beneficial products and
services in over 60 countries either directly or via a network of subsidiaries,
joint ventures, independent distributors, and agents. NTIC's primary business is
corrosion prevention marketed mainly under the ZERUST® brand. NTIC has been
selling its proprietary ZERUST® products and services to the automotive,
electronics, electrical, mechanical, military, and retail consumer markets for
over 40 years and, in recent years, has targeted and expanded into the oil and
gas industry. NTIC also markets and sells a portfolio of bio-based and certified
compostable (fully biodegradable) polymer resin compounds and finished products
under the Natur-Tec® brand. These products are intended to reduce NTIC's
customers' carbon footprint and provide environmentally sound waste disposal
options.


NTIC's ZERUST® rust and corrosion inhibiting products include plastic and paper
packaging, liquids, coatings, rust removers, cleaners, and diffusers as well as
engineered solutions designed specifically for the oil and gas industry. NTIC
also offers worldwide, on-site, technical consulting for rust and corrosion
prevention issues. NTIC's technical service consultants work directly with the
end users of NTIC's ZERUST® rust and corrosion inhibiting products to analyze
their specific needs and develop systems to meet their performance requirements.
In North America, NTIC sells its ZERUST® corrosion prevention solutions through
a network of independent distributors and agents supported by a direct sales
force. Internationally, NTIC sells its ZERUST® corrosion prevention solutions
through its wholly-owned subsidiary in China, NTIC (Shanghai) Co., Ltd. (NTIC
China), its majority-owned joint venture holding company for NTIC's joint
venture investments in the Association of Southeast Asian Nations (ASEAN)
region, NTI Asean LLC (NTI Asean), certain majority-owned and wholly-owned
subsidiaries, and joint venture arrangements in North America, Europe, and Asia.
NTIC also sells products directly to its joint venture partners through its
wholly-owned subsidiary in Germany, NTIC Europe GmbH (NTI Europe).



One of NTIC's strategic initiatives is to expand into and penetrate other
markets for its ZERUST® corrosion prevention technologies. Consequently, for the
past several years, NTIC has focused significant sales and marketing efforts on
the oil and gas industry, as the infrastructure that supports that industry is
typically constructed using metals that are highly susceptible to corrosion.
NTIC believes that its ZERUST® corrosion prevention solutions will minimize
maintenance downtime on critical oil and gas industry infrastructure, extend the
life of such infrastructure, and reduce the risk of environmental pollution
due
to corrosion leaks.


NTIC markets and sells its ZERUST® rust and corrosion prevention solutions to
customers in the oil and gas industry across several countries either directly,
through its subsidiaries, or through its joint venture partners and other
strategic partners. The sale of ZERUST® corrosion prevention solutions to
customers in the oil and gas industry typically involves long sales cycles,
often including multi-year trial periods with each customer and a slow
integration process thereafter.



                                       20



Natur-Tec® bio-based and compostable plastics are manufactured using NTIC's
patented and/or proprietary technologies and are intended to replace
conventional petroleum-based plastics. The Natur-Tec®biopolymer resin compound
portfolio includes formulations that have been optimized for a variety of
applications, including blown-film extrusion, extrusion coating, injection
molding, and engineered plastics. These resin compounds are certified to be
fully biodegradable in a composting environment and are currently being used to
produce finished products, including can liners, shopping and grocery bags, lawn
and leaf bags, pet waste collection bags, cutlery, and coated paper products. In
North America, NTIC markets its Natur-Tec®resin compounds and finished products
primarily through a network of regional and national distributors as well as
independent agents. NTIC continues to see significant opportunities for finished
bioplastic products and, therefore, continues to strengthen and expand its North
American distribution network for finished Natur-Tec® bioplastic products.



Internationally, NTIC sells its Natur-Tec® resin compounds and finished products
both directly and through its wholly-owned subsidiary in China and
majority-owned subsidiaries in India and Sri Lanka, and through distributors and
certain joint ventures.


NTIC's Subsidiaries and Joint Venture Network




NTIC has ownership interests in nine operating subsidiaries in North America,
South America, Europe, and Asia. The following table sets forth a list of NTIC's
operating subsidiaries as of February 29, 2020, the country in which the
subsidiary is organized, and NTIC's ownership percentage in each subsidiary:



                                                                 NTIC
           Subsidiary Name                  Country      Percent (%) Ownership
NTIC (Shanghai) Co., Ltd                     China               100%
NTI Asean LLC                            United States            60%
Zerust Prevenção de Corrosão S.A.           Brazil                85%
ZERUST-EXCOR MEXICO, S. de R.L. de C.V      Mexico               100%
Natur-Tec India Private Limited              India                75%
Natur Tec Lanka (Pvt) Ltd                Sri Lanka(1)             75%
NTIC Europe GmbH                            Germany              100%
Zerust Singapore Pte Ltd                 Singapore(2)             60%
Zerust Vietnam Co. Ltd                    Vietnam(2)              60%



(1) Natur Tec Lanka (Pyt) Ltd. is 100% owned by Natur-Tec India Private Limited

and, therefore, indirectly owned by NTIC.

(2) Zerust Singapore Pte Ltd and Zerust Vietnam Co. Ltd are 100% owned by NTI

     Asean LLC and, therefore, indirectly owned by NTIC.



The results of these subsidiaries are fully consolidated in NTIC's consolidated financial statements.

NTIC participates in 19 active joint venture arrangements in North America,
Europe, and Asia. Each of these joint ventures generally manufactures and
markets products in the geographic territory to which it is assigned. While most
of NTIC's joint ventures exclusively sell rust and corrosion inhibiting
products, some of the joint ventures also sell NTIC's Natur-Tec® resin
compounds. NTIC has historically funded its investments in joint ventures with
cash generated from operations.



                                       21


The following table sets forth a list of NTIC's operating joint ventures as of February 29, 2020, the country in which the joint venture is organized, and NTIC's ownership percentage in each joint venture:



                                                                                    NTIC
                   Joint Venture Name                         Country      
Percent (%) Ownership
TAIYONIC LTD.                                                  Japan                 50%
ACOBAL SAS                                                     France                50%

EXCOR KORROSIONSSCHUTZ - TECHNOLOGIEN UND PRODUKTE GMBH Germany

         50%
ZERUST AB                                                      Sweden                50%
MOSTNIC-ZERUST                                                 Russia                50%
ZERUST OY                                                     Finland                50%
HARITA-NTI LTD                                                 India                 50%
ZERUST (U.K.) LTD.                                         United Kingdom            50%
EXCOR-ZERUST S.R.O.                                        Czech Republic            50%
EXCOR SP. Z.O.O.                                               Poland                50%
ZERUST A.?.                                                    Turkey                50%
ZERUST CONSUMER PRODUCTS, LLC                              United States
         50%
ZERUST - DNEPR                                                Ukraine                50%
KOREA ZERUST CO., LTD.                                     South Korea(1)            30%
ZERUST-NIC (TAIWAN) CORP.                                    Taiwan(1)               30%
PT. CHEMINDO - NTIA                                         Indonesia(1)             30%
ZERUST SPECIALTY TECH CO. LTD.                              Thailand(1)    

30%

CHONG WAH-NTIA SDN. BHD.                                    Malaysia(1)    

30%

NTIA ZERUST PHILIPPINES, INC.                              Philippines(1)  

30%

____________________________

(1) Indirect ownership interest through NTI Asean.





NTIC receives funds from its joint ventures as fees received for services that
NTIC provides to its joint ventures and as dividend distributions. The fees for
services provided to joint ventures are determined based on either a flat fee or
a percentage of sales depending on local laws and tax regulations. With respect
to NTIC's joint venture in Germany (EXCOR), NTIC recognizes an agreed upon
quarterly fee for services. NTIC recognizes equity income from each joint
venture based on the overall profitability of the joint venture. Such
profitability is subject to variability from quarter to quarter, which, in turn,
subjects NTIC's earnings to variability from quarter to quarter. The profits of
each joint venture are shared by the respective joint venture owners in
accordance with their respective ownership percentages. NTIC typically directly
or indirectly owns 50% or less of each of its joint venture entities and, thus,
does not control the decisions of these entities regarding whether to pay
dividends and, if paid, what amount is paid in a given year. The payment of a
dividend by an entity is determined by a joint vote of the owners and is not at
the sole discretion of NTIC.


NTIC accounts for the investments and financial results of its joint ventures in its financial statements utilizing the equity method of accounting.

NTIC considers EXCOR to be individually significant to NTIC's consolidated assets and income. Therefore, NTIC provides certain additional information regarding EXCOR in the notes to NTIC's consolidated financial statements and in this section of this report.



                                       22


Potential Impact of the COVID-19 Pandemic




NTIC is closely monitoring the novel strain of coronavirus (COVID-19) pandemic
and its potential impact on its business. The outbreak and continuing rapid
spread of COVID-19 has resulted in a substantial curtailment of business
activities worldwide and is causing weakened economic conditions, both in the
United States and many countries abroad. As part of intensifying efforts to
contain the spread of COVID-19, a growing number of state, local and foreign
governments have imposed various restrictions on the conduct of business and
travel. Government restrictions, such as stay-at-home orders, quarantines and
worker absenteeism as a result of COVID-19 have led to a significant number of
business closures and slowdowns. These business closures and slowdowns have
already adversely impacted and will likely continue to adversely impact NTIC
directly, as well as cause its customers and suppliers to slow or stop
production, which will likely significantly disrupt NTIC's sales, production and
supply chain. For example, as a result of the COVID-19 outbreak in China in
December 2019, NTIC experienced decreased demand for its products and services
in China and other places in Asia during the three months ended February 29,
2020. The operations at NTIC China were suspended on January 18, 2020 and did
not resume until February 28, 2020. In addition, NTIC's location in India is
currently under mandated governmental shutdown until April 15, 2020. NTIC
anticipates significantly decreased global demand for its products and services
during third quarter of fiscal 2020 and beyond. This significantly decreased
demand will likely have a material adverse effect on NTIC's business, operating
results and financial condition beginning with third quarter of fiscal 2020. Due
to the international reach of COVID-19, NTIC anticipates that its international
joint ventures will also be adversely impacted by the causes listed above, as
well as other local issues that may arise, which will likely have a material
adverse effect on NTIC's joint venture operations and equity in income from
joint ventures in the third quarter of fiscal 2020 and beyond. It is currently
not possible to predict the precise potential impact, as well as the extent of
any impact, of the COVID-19 pandemic on NTIC's business, and on the global
economy as a whole. It is also currently not possible to predict how long the
pandemic will last or the time that it will take for economic activity to return
to prior levels. A prolonged situation could have a significant adverse effect
on economies and financial markets globally, potentially leading to a
significant worldwide economic downturn, which could have a significant adverse
effect on NTIC's business, operating results and financial condition.



The extent to which the COVID-19 pandemic impacts NTIC's business will likely depend on numerous evolving factors that NTIC may not be able to accurately predict, including:

· the duration and scope of the pandemic;

· governmental, business and individuals' actions that have been and continue to

   be taken in response to the pandemic;



· the impact of the pandemic on economic activity and actions taken in response;

· the effect on NTIC's customers and demand for its products and services;

· NTIC's ability to continue to manufacture and sell its products and services,

including as a result of travel restrictions and people working from home;

· the ability of NTIC's customers to pay for its products and services; and

· any closures of NTIC's facilities and the facilities of its customers and

   supplier.




                                       23


Any of these events could materially adversely affect NTIC's business, operating results and financial condition.



Financial Overview



NTIC's management, including its chief executive officer, who is NTIC's chief
operating decision maker, reports and manages NTIC's operations in two
reportable business segments based on products sold, customer base, and
distribution center: ZERUST® products and services and Natur-Tec® products. All
share and per share data have been adjusted for all periods presented to reflect
the two-for-one stock split effective June 28, 2019.



NTIC's consolidated net sales decreased 0.6% and increased 1.7% during the three
and six months ended February 29, 2020, respectively, compared to the three and
six months ended February 28, 2019. NTIC's consolidated net sales for the three
months ended February 29, 2020 were adversely affected by reduced demand in
China and other parts of Asia as a result of the novel strain of coronavirus
(COVID-19) outbreak in China. The operations at NTIC China were suspended on
January 18, 2020 and did not resume until February 28, 2020. NTIC anticipates
that the COVID-19 outbreak will continue to significantly adversely affect
NTIC's consolidated net sales and earnings in the third quarter of fiscal 2020
and beyond.



During both the three and six months ended February 29, 2020, 68.1% of NTIC's
consolidated net sales were derived from sales of ZERUST® products and services,
which decreased 1.0% and 1.1% to $9,016,222 and $18,965,734, respectively,
compared to $9,108,395 and $19,173,569 during the three and six months ended
February 28, 2019, respectively. These decreases were due to lower sales from
existing customers for existing products as a result of decreased demand. NTIC
has focused its sales efforts of ZERUST® products and services by strategically
targeting customers with specific corrosion issues in new market areas,
including the oil and gas industry and other industrial sectors that offer
sizable growth opportunities. NTIC's consolidated net sales for the six months
ended February 29, 2020 included $1,587,862 of sales made to customers in the
oil and gas industry compared to $1,343,460 for the six months ended February
28, 2019. Overall demand for ZERUST® products and services depends heavily on
the overall health of the markets in which NTIC sells its products, including
the automotive, oil and gas, agriculture, and mining markets in particular.
NTIC's sales of ZERUST®products and services for the three months ended February
29, 2020 were adversely affected by reduced demand in China and other parts of
Asia as a result of the COVID-19 outbreak in China. NTIC anticipates that the
COVID-19 outbreak will continue to significantly adversely affect sales of
ZERUST® products and services in the third quarter of fiscal 2020 and beyond.



During both the three and six months ended February 29, 2020, 31.9% of NTIC's
consolidated net sales were derived from sales of Natur-Tec® products compared
to 31.6% and 30.0% during the three and six months ended February 28, 2019,
respectively. Net sales of Natur-Tec® products increased 0.3% and 8.1% during
the three and six months ended February 29, 2020, respectively, compared to the
three and six months ended February 28, 2019 primarily due to an increase in
finished product sales in North America and finished product sales at NTIC's
majority-owned subsidiary in India, Natur-Tec India Private Limited (Natur-Tec
India), partially offset by reduced demand in China and other parts of Asia as a
result of the COVID-19 outbreak in China during the three months ended February
29, 2020. NTIC anticipates that the COVID-19 outbreak will continue to
significantly adversely affect sales of Natur-Tec® products in the third quarter
of fiscal 2020 and beyond.



Cost of goods sold as a percentage of net sales decreased to 65.6% during the
three months ended February 29, 2020, compared to 69.7% during the three months
ended February 28, 2019, and decreased to 66.4% during the six months ended
February 29, 2020, compared to 68.4% during the prior fiscal year period
primarily as a result of an increased percentage of product sales from oil and
gas products that have higher gross margins than NTIC's traditional
ZERUST®industrial products.



                                       24



NTIC's equity in income from joint ventures decreased 20.7% and 28.6% to
$1,360,804 and $2,654,794 during the three and six months ended February 29,
2020, respectively, compared to $1,715,216 and $3,719,378 during the three and
six months ended February 28, 2019, respectively. These decreases were primarily
due to corresponding decreases in net sales at the joint ventures, which
decreased 12.5% and 14.6% to $24,289,370 and $49,749,664 during the three and
six months ended February 29, 2020, respectively, compared to $27,749,880 and
$58,229,806 during the three and six months ended February 28, 2019,
respectively. These decreases in net sales of NTIC's joint ventures were
primarily due to lower sales from existing customers for existing products as a
result of decreased demand. The decreases in net sales of NTIC's joint ventures
resulted in corresponding decreases in fees for services provided to joint
ventures, as such fees are a function of net sales of NTIC's joint ventures.
NTIC anticipates that net sales of its joint ventures will decrease
significantly as a result of anticipated decreased demand as a result of the
COVID-19 outbreak and may have a significant adverse effect on NTIC's equity in
income from its joint ventures commencing in the third quarter of fiscal 2020.



NTIC's total operating expenses increased 19.7% and 6.8% to $6,461,748 and $12,360,368 during the three and six months ended February 29, 2020, respectively, compared to $5,396,155 and $11,575,203 for the three and six months ended February 28, 2019. This increase was primarily due to an increase in NTIC's personnel expenses.

NTIC spent $1,006,395 and $1,968,036 during the three and six months ended
February 29, 2020, compared to $927,537 and $1,799,694 during the three and six
months ended February 28, 2019, respectively, in connection with its research
and development activities. NTIC anticipates that it will spend a total of
between $3,500,000 and $3,700,000 in fiscal 2020 on research and development
activities.


Net income attributable to NTIC decreased to $179,834, or $0.02 per diluted
common share, for the three months ended February 29, 2020, compared to
$1,401,568, or $0.15 per diluted common share, for the three months ended
February 28, 2019, a decrease of $1,212,734, or $0.13 per diluted share. Net
income attributable to NTIC decreased to $1,392,384, or $0.15 per diluted common
share, for the six months ended February 29, 2020, compared to $2,898,627, or
$0.31 per diluted common share, for the six months ended February 28, 2019, a
decrease of $1,506,243, or $0.16 per diluted share. These decreases were
primarily the result of the increase in operating expenses and decrease in
income from joint venture operations during the current fiscal year periods
compared to the prior fiscal year periods, partially offset by increases in
gross profit.



NTIC anticipates that its earnings may be significantly adversely affected by
COVID-19 in the third quarter of fiscal 2020 and beyond and that its quarterly
net income or loss will continue to remain subject to significant volatility
primarily due to the financial performance of its subsidiaries and joint
ventures, sales of its ZERUST®products and services into the oil and gas
industry, and sales of its Natur-Tec® bioplastics products, which fluctuate more
on a quarterly basis than the traditional ZERUST® business.



NTIC's working capital, defined as current assets less current liabilities, was $29,431,014 at February 29, 2020, including $5,626,410 in cash and cash equivalents and $6,512,166 in available for sale securities, compared to $25,460,569 at August 31, 2019, including $5,856,758 in cash and cash equivalents and $3,565,258 in available for sale securities.



                                       25



On January 22, 2020, the Company's Board of Directors declared a cash dividend
of $0.065 per share of NTIC's common stock, payable on February 19, 2020 to
stockholders of record on February 5, 2020. On October 22, 2019, the Company's
Board of Directors declared a cash dividend of $0.065 per share of NTIC's common
stock, payable on November 20, 2019 to stockholders of record on November 6,
2019. During fiscal 2019, the Company's Board of Directors declared four
quarterly cash dividends of $0.06 per share each. The declaration of future
dividends is not guaranteed and will be determined by NTIC's Board of Directors
in light of conditions then existing, including NTIC's earnings, financial
condition, cash requirements, restrictions in financing agreements, business
conditions, and other factors, including without limitation the effect of
COVID-19 on its business, operating results and financial condition.



Results of Operations


The following table sets forth NTIC's results of operations for the three and six months ended February 29, 2020 and February 28, 2019.



                                                                 Three Months Ended
                               February 29,       % of        February 28,       % of            $              %
                                   2020         Net Sales         2019         Net Sales       Change        Change
Net sales, excluding joint
ventures                      $ 12,988,153          98.1 %   $ 12,606,449          94.7 %   $  381,704          3.0 %
Net sales, to joint
ventures                           245,630           1.9 %        708,955           5.3 %     (463,325 )      (65.4 )%
Cost of goods sold               8,687,301          65.6 %      9,284,099          69.7 %     (596,798 )       (6.4 )%
Equity in income from joint
ventures                         1,360,804          10.3 %      1,715,216          12.9 %     (354,412 )      (20.7 )%
Fees for services provided
to joint ventures                1,256,213           9.5 %      1,436,774          10.8 %     (180,561 )      (12.6 )%
Selling expenses                 3,110,240          23.5 %      2,505,081          18.8 %      605,159         24.2 %
General and administrative
expenses                         2,345,113          17.7 %      1,963,537          14.7 %      381,576         19.4 %
Research and development
expenses                      $  1,006,395           7.6 %   $    927,537           7.0 %   $   78,858          8.5 %




                                                                   Six Months Ended
                               February 29,       % of        February 28,       % of             $               %
                                   2020         Net Sales         2019         Net Sales        Change         Change
Net sales, excluding joint
ventures                      $ 27,033,937          97.0 %   $ 26,217,314          95.7 %   $    816,623          3.1 %
Net sales, to joint
ventures                           831,246           3.0 %      1,192,142           4.3 %       (360,896 )      (30.0 )%
Cost of goods sold              18,492,385          66.4 %     18,745,236          68.4 %       (252,851 )       (1.3 )%
Equity in income from joint
ventures                         2,654,794           9.5 %      3,719,378          13.6 %     (1,064,584 )      (28.6 )%
Fees for services provided
to joint ventures                2,614,538           9.4 %      2,865,209          10.5 %       (250,671 )       (8.7 )%
Selling expenses                 5,997,532          21.5 %      5,316,175          19.4 %        681,357         12.8 %
General and administrative
expenses                         4,394,800          15.8 %      4,459,334          16.3 %        (64,534 )       (1.4 )%
Research and development
expenses                      $  1,968,036           7.1 %   $  1,799,694           6.6 %   $    168,342          9.4 %



Net Sales. NTIC's consolidated net sales decreased 0.6% and increased 1.7% to
$13,233,783 and $27,865,183 during the three and six months ended February 29,
2020, respectively, compared to the three and six months ended February 28,
2019. NTIC's consolidated net sales for the three months ended February 29, 2020
were adversely affected by reduced demand in China and other parts of Asia as a
result of the COVID-19 outbreak in China. The operations at NTIC China were
suspended on January 18, 2020 and did not resume until February 28, 2020. NTIC's
consolidated net sales to unaffiliated customers excluding NTIC's joint ventures
increased 3.0% and 3.1% to $12,988,153 and $27,033,937 during the three and six
months ended February 29, 2020, respectively, compared to the same respective
periods in fiscal 2019. These increases were primarily a result of an increase
in sales of Zerust oil & gas and Natur-Tec® products. Net sales to joint
ventures decreased 65.4% and 30.3% to $245,630 and $831,246, during the three
and six months ended February 29, 2020, respectively, compared to the same
respective periods in fiscal 2019. These decreases were primarily a result of
decreased demand and the timing of shipments compared to the prior fiscal year
periods.



                                       26


The following table sets forth NTIC's net sales by product segment for the six months ended February 29, 2020 and February 28, 2019 by segment:



                                                 Three Months Ended                             Six Months Ended
                                      February 29, 2020February 28,

2019 February 29, 2020February 28, 2019 Total ZERUST® sales

                  $        9,016,222     $        

9,108,395 $ 18,965,734$ 19,173,569 Total Natur-Tec® sales

                        4,217,561              4,207,009              8,899,449              8,235,887
Total net sales                      $       13,233,783$       13,315,404$       27,865,183$       27,409,456




During both the three and six months ended February 29, 2020, 68.1% of NTIC's
consolidated net sales were derived from sales of ZERUST® products and services,
which decreased 1.0% and 1.1% to $9,106,222 and $18,965,734 during the three and
six months ended February 29, 2020, respectively, compared to $9,108,395 and
$19,173,569 during the three and six months ended February 28, 2019,
respectively.



NTIC has strategically focused its sales efforts for ZERUST® products and
services on customers with sizeable corrosion problems in industry sectors that
offer sizable growth opportunities, including the oil and gas sector. Overall,
demand for ZERUST® products and services depends heavily on the overall health
of the market segments to which NTIC sells its products, including the
automotive, oil and gas, agriculture, and mining markets in particular.



The following table sets forth NTIC's net sales of ZERUST® products for the three and six months ended February 29, 2020 and February 28, 2019:



                                                               Three Months Ended
                                                                                     $               %
                                    February 29, 2020     February 28, 2019       Change           Change
ZERUST® industrial net sales       $       7,703,575$       8,042,154$  (338,579 )          (4.2 )%
ZERUST® joint venture net sales              245,629               708,954        (463,325 )         (65.4 )%
ZERUST® oil & gas net sales                1,067,018               357,287         709,731           198.6 %
   Total ZERUST® net sales         $       9,016,222$       9,108,395$   (92,173 )          (1.0 )%




                                                                 Six Months Ended
                                                                                       $               %
                                    February 29, 2020      February 28, 2019        Change           Change

ZERUST® industrial net sales $ 16,546,627$ 16,637,968$ (91,341 ) (0.5 )% ZERUST® joint venture net sales

               831,245              1,192,141        (360,896 )         (30.3 )%
ZERUST® oil & gas net sales                 1,587,862              1,343,460         244,402            18.2 %
   Total ZERUST® net sales         $       18,965,734$       19,173,569$  (207,835 )          (1.1 )%




NTIC's total ZERUST® net sales decreased during the three months and six months
ended February 29, 2020, compared to the prior fiscal year periods, primarily
due to an overall decreased demand for ZERUST® industrial products and services
in North America, partially offset by increased demand for ZERUST® oil and gas
products and services. NTIC's sales of ZERUST® products and services for the
three months ended February 29, 2020 were adversely affected by reduced demand
in China and other parts of Asia as a result of the COVID-19 outbreak in China.



                                       27


Demand for ZERUST® products and services decreased significantly beginning in
February 2020 largely as a result of the COVID-19 outbreak in China and may have
a significant adverse effect on sales of ZERUST®products and services in the
third quarter of fiscal 2020 and beyond. NTIC also anticipates that its sales of
ZERUST®products and services into the oil and gas industry will continue to
remain subject to significant volatility from quarter to quarter as sales are
recognized, specifically due to the volatility of oil prices. Demand for oil and
gas products around the world depends primarily on market acceptance and the
reach of NTIC's distribution network. Because of the typical size of individual
orders and overall size of NTIC's net sales derived from sales of oil and gas
products, the timing of one or more orders can materially affect NTIC's
quarterly sales compared to prior fiscal year quarters.



During both the three and six months ended February 29, 2020, 31.9% of NTIC's
consolidated net sales were derived from sales of Natur-Tec® products, which
increased 0.3% and 8.1% to $4,217,561 and $8,899,449 during the three and six
months ended February 29, 2020, respectively, compared to the three and six
months ended February 28, 2019. These increases were primarily due to an
increase in finished product sales in North America and finished product sales
at NTIC's majority-owned subsidiary in India, Natur-Tec India Private Limited
(Natur-Tec India), partially offset by decreased demand in China and other parts
of Asia as a result of the COVID-19 outbreak in China during the three months
ended February 29, 2020. NTIC anticipates that the COVID-19 outbreak will
continue to significantly adversely affect sales of Natur-Tec® products in the
third quarter of fiscal 2020 and beyond.



Cost of Goods Sold. Cost of goods sold decreased 6.4% and 1.3% for the three and
six months ended February 29, 2020, respectively, compared to the three and six
months ended February 28, 2019. Cost of goods sold as a percentage of net sales
decreased to 65.6% during the three months ended February 29, 2020, compared to
69.7% during the three months ended February 28, 2019, and decreased to 66.4%
during the six months ended February 29, 2020, compared to 68.4% during the six
months ended February 28, 2019. These increases were due primarily to an
increased percentage of product sales from ZERUST®oil and gas products that have
higher gross margins than NTIC's traditional ZERUST® industrial products.



Equity in Income from Joint Ventures. NTIC's equity in income from joint
ventures decreased 20.7% to $1,360,804 and 28.6% to $2,654,794 during the three
and six months ended February 29, 2020, respectively, compared to $1,715,216 and
$3,719,378 during the three and six months ended February 28, 2019,
respectively. These decreases were primarily a result of declining profitability
of the joint ventures during the respective periods based on decreases in net
sales. Of the total equity in income from joint ventures, NTIC had equity in
income from joint ventures of $1,710,390 attributable to EXCOR during the six
months ended February 29, 2020, compared to $2,740,907 during the six months
ended February 28, 2019. NTIC had equity in income of all other joint ventures
of $944,404 during the six months ended February 29, 2020, compared to $978,471
during the six months ended February 28, 2019.



Fees for Services Provided to Joint Ventures. NTIC recognized fee income for
services provided to joint ventures of $1,256,213 and $2,614,538 during the
three and six months ended February 29, 2020, respectively, compared to
$1,436,774 and $2,865,209 during the three and six months ended February 28,
2019, respectively, representing decreases of 12.6% and 8.7%, respectively. Fee
income for services provided to joint ventures is traditionally a function of
the sales made by NTIC's joint ventures. Total net sales of NTIC's joint
ventures decreased to $24,289,370 and $49,749,664 during the three and six
months ended February 29, 2020, respectively, compared to $27,749,880 and
$58,229,806 during the three and six months ended February 28, 2019,
respectively, representing decreases of 12.5% and 14.6%, respectively. Net sales
of NTIC's joint ventures are not included in NTIC's consolidated financial
statements. Of the total fee income for services provided to joint ventures,
fees of $420,229 were attributable to EXCOR during the six months ended February
29, 2020, compared to $430,328 attributable to EXCOR during the six months ended
February 28, 2019. NTIC anticipates that net sales of its joint ventures may
decrease significantly as a result of anticipated decreased demand as a result
of the COVID-19 outbreak and is expected to have a significant adverse effect on
NTIC's equity in income from its joint ventures for the third quarter of fiscal
2020 and beyond.



                                       28


Selling Expenses. NTIC's selling expenses increased 24.2% and 12.8% for the
three and six months ended February 29, 2020, respectively, compared to the same
respective periods in fiscal 2019 due primarily to increases in operating
expenses associated with ZERUST® sales efforts, consisting primarily of selling
and personnel expenses. Selling expenses as a percentage of net sales increased
to 23.5% and 21.5% for the three and six months ended February 29, 2020,
respectively, from 18.8% and 19.4% for the three and six months ended February
28, 2019, respectively, primarily due to the increases in personnel expenses as
previously described, partially offset by the small increase in net sales.



General and Administrative Expenses. NTIC's general and administrative expenses
increased 19.4% and decreased 1.4% for the three and six months ended February
29, 2020, respectively, compared to the same respective periods in fiscal 2019
primarily due to the timing of various expenses. As a percentage of net sales,
general and administrative expenses were 17.7% and 15.8% for the three and six
months ended February 29, 2020, respectively, from 14.7% and 16.3% for the same
respective periods in fiscal 2019, respectively. The changes in general and
administrative expenses as a percentage of net sales for the three and six-month
comparisons were primarily due to the changes in net sales and expenses as
previously described.



Research and Development Expenses. NTIC's research and development expenses
increased 8.5% and 9.4% for the three and six months ended February 29, 2020,
respectively, compared to the same respective periods in fiscal 2019 primarily
due to increases in research and development efforts.



Interest Income. NTIC's interest income increased to $55,042 and $104,080 during
the three and six months ended February 29, 2020, respectively, compared to
$15,122 and $27,909 during the three and six months ended February 28, 2019,
respectively, due to changing levels of invested cash.



Interest Expense. NTIC's interest expense increased to $9,377 and $14,821 during the three and six months ended February 29, 2020, respectively, compared to $3,835 and $6,192 during the three and six months ended February 28, 2019, respectively.




Income Before Income Tax Expense. NTIC incurred income before income tax expense
equal to $747,416 and $2,371,021 for the three and six months ended February 29,
2020, respectively, compared to $1,798,427 and $3,695,321 for the three and six
months ended February 28, 2019, respectively.



Income Tax Expense. Income tax expense was $463,594 and $727,660 for the three
and six months ended February 29, 2020, respectively, compared to income tax
expense of $246,371 and $502,074 during the three and six months ended February
28, 2019, respectively. Income tax expense was calculated based on management's
estimate of NTIC's annual effective income tax rate. The quarter-over-quarter
increase in the Company's effective income tax rate is primarily due to foreign
withholding taxes paid on dividends received from NTIC's joint ventures during
the quarter. Dividends received from NTIC's joint ventures do not represent a
component of income before income tax expense. Therefore, to the extent
dividends received from NTIC's joint ventures exceed estimated amounts, foreign
withholding taxes paid on such dividends result in an increase in the effective
income tax rate in comparison to prior periods.



NTIC considers the earnings of certain foreign joint ventures to be indefinitely
invested outside the United States on the bases of estimates that NTIC's future
domestic cash generation will be sufficient to meet future domestic cash needs.
As a result, U.S. income and foreign withholding taxes have not been recognized
on the cumulative undistributed earnings of $19,267,931 and $22,178,126 at
February 29, 2020, and August 31, 2019, respectively. To the extent
undistributed earnings of NTIC's joint ventures are distributed in the future,
they are not expected to result in any material additional income tax liability
after the application of foreign tax credits.



                                       29


Net Income Attributable to NTIC. Net income attributable to NTIC decreased to
$179,834, or $0.02 per diluted common share, for the three months ended February
29, 2020, compared to $1,401,568, or $0.15 per diluted common share, for the
three months ended February 28, 2019, a decrease of $1,221,734 or $0.13 per
diluted common share. Net income attributable to NTIC decreased to $1,392,384,
or $0.15 per diluted common share, for the six months ended February 29, 2020,
compared to $2,898,627, or $0.31 per diluted common share, for the six months
ended February 28, 2019, a decrease of $1,506,243 or $0.16 per diluted common
share. These decreases were primarily the result of the increase in operating
expenses and decreases in income from joint venture operations during the
current fiscal year periods compared to the prior fiscal year periods, partially
offset by increases in gross profit.



NTIC anticipates that its earnings will be significantly adversely affected by
COVID-19 in the third quarter of fiscal 2020 and beyond and that its quarterly
net income or loss will continue to remain subject to significant volatility
primarily due to the financial performance of its subsidiaries and joint
ventures, sales of its ZERUST®products and services into the oil and gas
industry, and sales of its Natur-Tec® bioplastics products, which fluctuate more
on a quarterly basis than the traditional ZERUST® business.



Other Comprehensive Income - Foreign Currency Translations Adjustment. The changes in the foreign currency translations adjustment were due to the fluctuations of the U.S. dollar compared to the Euro and other foreign currencies during the three and six months ended February 29, 2020 compared to the same periods in fiscal 2019.

Liquidity and Capital Resources




Sources of Cash and Working Capital. NTIC's working capital, defined as current
assets less current liabilities, was $29,431,014 at February 29, 2020, including
$5,626,410 in cash and cash equivalents and $6,512,166 in available for sale
securities, compared to $25,460,569 at August 31, 2019, including $5,856,758 in
cash and cash equivalents and $3,565,258 in available for sale securities.



As of February 29, 2020, NTIC had a revolving line of credit with PNC Bank of
$3,000,000 with no amounts outstanding. At the option of the Company,
outstanding advances under the line of credit bear interest at either (a) an
annual rate based on LIBOR plus 2.15% for the applicable LIBOR interest period
selected by the Company or (b) at the rate publicly announced by PNC Bank from
time to time as its prime rate. On December 16, 2019, the Company and PNC Bank
extended the maturity date of the line of credit from January 7, 2020 to January
7, 2021. All other terms of the line of credit and the loan agreement and other
documents evidencing the line of credit remain the same. It is anticipated that,
as historically has been the practice, the line of credit will be renewed each
year for one additional year for the immediate foreseeable future.



The line of credit is evidenced by an amended and restated committed line of
credit note in the principal amount of up to $3,000,000. The line of credit has
a $1,200,000 standby letter of credit sub-facility, with any standby letters of
credit issued thereunder being at the sole discretion of PNC Bank. Any lines of
credit issued by PNC Bank would decrease the availability under the revolving
line of credit.


The line of credit is subject to standard covenants, including affirmative
financial covenants, such as the maintenance of a minimum fixed charge coverage
ratio, and negative covenants, which, among other things, limit the incurrence
of additional indebtedness, loans and equity investments, disposition of assets,
mergers and consolidations, and other matters customarily restricted in such
agreements. Under the loan agreement, NTIC is subject to a minimum fixed charge
coverage ratio of 1.10:1.00. As of February 29, 2020, NTIC was in compliance
with all debt covenants.



                                       30


NTIC believes that a combination of its existing cash and cash equivalents,
available for sale securities, forecasted cash flows from future operations,
anticipated distributions of earnings, anticipated fees to NTIC for services
provided to its joint ventures, and funds available through existing or
anticipated financing arrangements will be adequate to fund its existing
operations, investments in new or existing joint ventures or subsidiaries,
capital expenditures, debt repayments, cash dividends, and any stock repurchases
for at least the next 12 months. During the remainder of fiscal 2020, NTIC
expects to continue to invest directly and through its use of working capital in
NTIC China, Zerust Mexico, NTI Europe, research and development, marketing
efforts, resources for the application of its corrosion prevention technology in
the oil and gas industry, and its Natur-Tec® bio-plastics business, although the
amounts of these various investments are not known at this time. In order to
take advantage of such new product and market opportunities to expand its
business and increase its revenues, NTIC may decide to finance such
opportunities by borrowing under its revolving line of credit or raising
additional financing through the issuance of debt or equity securities. There is
no assurance that any financing transaction will be available on terms
acceptable to NTIC or at all or that any financing transaction will not be
dilutive to NTIC's current stockholders.



NTIC traditionally has used the cash generated from its operations,
distributions of earnings from joint ventures, and fees for services provided to
its joint ventures to fund NTIC's new technology investments and capital
contributions to new and existing subsidiaries and joint ventures. NTIC's joint
ventures traditionally have operated with little or no debt and have been
self-financed with minimal initial capital investment and minimal additional
capital investment from their respective owners. Therefore, NTIC believes there
is limited exposure by NTIC's joint ventures that could materially impact their
respective operations and/or liquidity.



Uses of Cash and Cash Flows. Net cash provided by operating activities during
the six months ended February 29, 2020 was $4,207,710, which resulted
principally from NTIC's net income, dividends received from joint ventures,
stock based compensation, depreciation, amortization, and an increase in
accounts payable and accounts receivable, partially offset by NTIC's equity in
income from joint ventures, an increase in inventories and a decrease in accrued
liabilities. Net cash provided by operating activities during the six months
ended February 28, 2019, was $262,153, which resulted principally from NTIC's
net income, depreciation, amortization, and an increase in accounts payable and
accounts receivable, partially offset by NTIC's equity in income from joint
ventures, an increase in inventory, a decrease in accrued liabilities, and an
increase in income tax receivable.



NTIC's cash flows from operations are impacted by significant changes in certain
components of NTIC's working capital, including inventory turnover and changes
in receivables. NTIC considers internal and external factors when assessing the
use of its available working capital, specifically when determining inventory
levels and credit terms of customers. Key internal factors include existing
inventory levels, stock reorder points, customer forecasts, and customer
requested payment terms. Key external factors include the availability of
primary raw materials and sub-contractor production lead times. NTIC's typical
contractual terms for trade receivables, excluding joint ventures, are
traditionally 30 days and 90 days for trade receivables from its joint ventures.
Before extending unsecured credit to customers, excluding NTIC's joint ventures,
NTIC reviews customers' credit histories and will establish an allowance for
uncollectible accounts based upon factors surrounding the credit risk of
specific customers and other information. Accounts receivable over 30 days are
considered past due for most customers. NTIC does not accrue interest on past
due accounts receivable. If accounts receivables in excess of the provided
allowance are determined uncollectible, they are charged to selling expense in
the period that the determination is made. Accounts receivable are deemed
uncollectible based on NTIC exhausting reasonable efforts to collect. NTIC's
typical contractual terms for receivables for services provided to its joint
ventures are 90 days. NTIC records receivables for services provided to its
joint ventures on an accrual basis, unless circumstances exist that make the
collection of the balance uncertain, in which case the fee income will be
recorded on a cash basis until there is consistency in payments. This
determination is handled on a case by case basis.



                                       31



NTIC experienced an increase in trade receivables and increase in inventories as
of February 29, 2020, compared to August 31, 2019. Trade receivables, excluding
joint ventures, as of February 29, 2020, increased $31,027 compared to August
31, 2019, primarily related to the timing of collections and the increase in
sales.



Outstanding trade receivables, excluding joint ventures balances as of February
29, 2020 decreased to 66 days to an average of 67 days from balances outstanding
from these customers as of August 31, 2019.



Outstanding trade receivables from joint ventures as of February 29, 2020
decreased $285,298 compared to August 31, 2019, primarily due to the timing of
payments. Outstanding balances from trade receivables from joint ventures
increased an average of 3 days from an average of 115 days from balances
outstanding from these customers compared to August 31, 2019. The average days
outstanding of trade receivables from joint ventures as of February 29, 2020
were primarily due to the receivable balances at NTIC's joint ventures in South
Korea, India, and Thailand.



Outstanding receivables for services provided to joint ventures as of February
29, 2020 decreased $72,781 compared to August 31, 2019, and the average days to
pay increased an average of 2 days to an average of 83 days compared to August
31, 2019.


Net cash used in investing activities for the six months ended February 29, 2020
was $3,289,108, which was primarily the result of proceeds from the sale of
available for sale securities, additions to property and equipment, and
additions to patents, partially offset by the purchase of available for sale
securities. Net cash provided by investing activities for the six months ended
February 28, 2019 was $1,575,542, which was primarily the result of proceeds
from the sale of available for sale securities, partially offset by additions to
property and equipment, and additions to patents



Net cash used in financing activities for the six months ended February 29, 2020
was $1,146,591, which resulted from dividends paid on NTIC common stock,
partially offset by proceeds from NTIC's employee stock purchase plan. Net cash
used in financing activities for the six months ended February 28, 2019 was
$1,138,409, which resulted from dividends paid on NTIC common stock and a
dividend paid to a non-controlling interest, partially offset by an investment
by a non-controlling interest and proceeds from NTIC's employee stock purchase
plan.



Share Repurchase Plan. On January 15, 2015, NTIC's Board of Directors authorized
the repurchase of up to $3,000,000 in shares of NTIC common stock through open
market purchases or unsolicited or solicited privately negotiated transactions.
This program has no expiration date but may be terminated by NTIC's Board of
Directors at any time. No repurchases occurred during the six months ended
February 29, 2020. As of February 29, 2020, up to $2,640,548 in shares of NTIC
common stock remained available for repurchase under NTIC's stock repurchase
program.



Cash Dividends. On January 22, 2020, the Company's Board of Directors declared a
cash dividend of $0.065 per share of NTIC's common stock, payable on February
19, 2020, to stockholders of record on February 5, 2020. This was an increase
compared to the cash dividend of $0.06 per share of NTIC's common stock declared
and paid during the quarter ended February 28, 2019. The declaration of future
dividends is not guaranteed and will be determined by NTIC's Board of Directors
in light of conditions then existing, including NTIC's earnings, financial
condition, cash requirements, restrictions in financing agreements, business
conditions, and other factors, including without limitation the effect of
COVID-19 on its business, operating results and financial condition.



                                       32



Stock Split. On June 3, 2019, NTIC's Board of Directors declared a two-for-one
stock split of NTIC's common stock effected in the form of a 100% share dividend
distributed on June 28, 2019 to record holders as of June 17, 2019. As a result
of this action, approximately 4.5 million shares were issued to stockholders of
record as of June 17, 2019. The par value of the common stock remains at $0.02
per share, and, accordingly, approximately $90,900 was transferred from
additional paid-in capital to common stock. Net income and dividends declared
per share and weighted average shares outstanding presented in this report
reflect the 100 percent stock dividend. The two-for-one stock split is reflected
in the share amounts in all periods presented in this report.



Capital Expenditures and Commitments. NTIC spent $296,786 on capital expenditures during the six months ended February 29, 2020, which related primarily to the purchase of new equipment. NTIC expects to spend an aggregate of approximately $500,000 to $700,000 on capital expenditures during fiscal 2020, which it expects will relate primarily to the purchase of new equipment.




Contractual Obligations



There has been no material change to NTIC's contractual obligations as provided
in "Part II. Item 7, Management's Discussion and Analysis of Financial Condition
and Results of Operations-Contractual Obligations," included in NTIC's annual
report on Form 10-K for the fiscal year ended August 31, 2019.



Off-Balance Sheet Arrangements




NTIC does not have any relationships with unconsolidated entities or financial
partnerships, such as entities often referred to as structured finance or
special purpose entities, which are established for the purpose of facilitating
off-balance sheet financial arrangements. As such, NTIC is not materially
exposed to any financing, liquidity, market, or credit risk that could arise if
NTIC had engaged in such arrangements.



Inflation and Seasonality



Inflation in the United States and abroad historically has had little effect on
NTIC. Although NTIC's business historically has not been seasonal, NTIC believes
there is some seasonality in its business. NTIC believes its net sales in the
second fiscal quarter were adversely affected by the long Chinese New Year,
which was extended in an effort to combat the spread of COVID-19, the North
American holiday season, and overall less corrosion taking place at lower winter
temperatures worldwide.



Market Risk


NTIC is exposed to some market risk stemming from changes in foreign currency exchange rates, commodity prices, and interest rates.




Because the functional currency of NTIC's foreign operations and investments in
its foreign joint ventures is the applicable local currency, NTIC is exposed to
foreign currency exchange rate risk arising from transactions in the normal
course of business. NTIC's principal exchange rate exposure is with the Euro,
the Japanese Yen, the Indian Rupee, the Chinese Renminbi, the South Korean Won,
and the English Pound against the U.S. Dollar. NTIC's fees for services provided
to joint ventures and dividend distributions from these foreign entities are
paid in foreign currencies, and, thus, fluctuations in foreign currency exchange
rates could result in declines in NTIC's reported net income. Since NTIC's
investments in its joint ventures are accounted for using the equity method, any
changes in foreign currency exchange rates would be reflected as a foreign
currency translation adjustment and would not change NTIC's equity in income
from joint ventures reflected in its consolidated statements of operations. NTIC
does not hedge against its foreign currency exchange rate risk.



                                       33


Some raw materials used in NTIC's products are exposed to commodity price changes. The primary commodity price exposures are with a variety of plastic resins.




At the option of NTIC, outstanding advances under NTIC's $3,000,000 revolving
line of credit with PNC Bank bear interest at either (a) an annual rate based on
LIBOR plus 2.15% for the applicable LIBOR interest period selected by NTIC or
(b) at the rate publicly announced by PNC Bank from time to time as its prime
rate, and thus may subject NTIC to some market risk on interest rates. As of
February 29, 2020, NTIC had no borrowings under the line of credit.



Critical Accounting Policies and Estimates

There have been no material changes to NTIC's critical accounting policies and
estimates from the information provided in "Part II. Item 7, Management's
Discussion and Analysis of Financial Condition and Results of
Operations-Critical Accounting Policies" included in NTIC's annual report on
Form 10-K for the fiscal year ended August 31, 2019.



Recent Accounting Pronouncements

See Note 2 to NTIC's consolidated financial statements for a discussion of recent accounting pronouncements.



Forward-Looking Statements



This quarterly report on Form 10-Q contains not only historical information, but
also forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. These forward-looking statements are subject to the
safe harbor created by those sections. In addition, NTIC or others on NTIC's
behalf may make forward-looking statements from time to time in oral
presentations, including telephone conferences and/or web casts open to the
public, in press releases or reports, on NTIC's Internet web site, or otherwise.
All statements other than statements of historical facts included in this report
or expressed by NTIC orally from time to time that address activities, events,
or developments that NTIC expects, believes, or anticipates will or may occur in
the future are forward-looking statements, including, in particular, the
statements about NTIC's plans, objectives, strategies, and prospects regarding,
among other things, NTIC's financial condition, results of operations and
business, the anticipated effect of COVID-19 on NTIC's business, operating
results and financial condition, the outcome of contingencies, such as legal
proceedings and the effect of the liquidation of Tianjin Zerust, and the
operations of NTIC China. NTIC has identified some of these forward-looking
statements in this report with words like "believe," "can," "may," "could,"
"would," "might," "forecast," "possible," "potential," "project," "will,"
"should," "expect," "intend," "plan," "predict," "anticipate," "estimate,"
"approximate," "outlook," or "continue" or the negative of these words or other
words and terms of similar meaning. The use of future dates is also an
indication of a forward-looking statement. Forward-looking statements may be
contained in the notes to NTIC's consolidated financial statements and elsewhere
in this report, including under the heading "Management's Discussion and
Analysis of Financial Condition and Results of Operations."



                                       34



Forward-looking statements are based on current expectations about future events
affecting NTIC and are subject to uncertainties and factors that affect all
businesses operating in a global market as well as matters specific to NTIC.
These uncertainties and factors are difficult to predict, and many of them are
beyond NTIC's control. The following are some of the uncertainties and factors
known to us that could cause NTIC's actual results to differ materially from
what NTIC has anticipated in its forward-looking statements:



· The effect of current worldwide economic conditions and any turmoil and

disruption in the global credit and financial markets on NTIC's business;

· The effect of the novel strain of coronavirus (COVID-19) on NTIC's business,

operating results and financial condition, including disruption to our

customers, suppliers and subcontractors, as well as the global economy and

   financial markets;



· Variability in NTIC's sales of ZERUST® products and services to the oil and gas

industry and Natur-Tec®products and NTIC's equity income of joint ventures,

which variability in sales and equity in income from joint ventures, in turn,

   subject NTIC's earnings to quarterly fluctuations;



· Risks associated with NTIC's international operations and exposure to

fluctuations in foreign currency exchange rates, import duties, taxes, and

   tariffs;



· The effect of the United Kingdom's process to exit the European Union on NTIC's

operating results, including, in particular, future net sales of NTIC's

European and other joint ventures;

· The effect of the health of the U.S. automotive industry on NTIC's business;

· NTIC's dependence on the success of its joint ventures and fees and dividend

   distributions that NTIC receives from them;



· NTIC's relationships with its joint ventures and its ability to maintain those

relationships, especially in light of anticipated succession planning issues;

· Fluctuations in the cost and availability of raw materials, including resins

   and other commodities;



· The success of and risks associated with NTIC's emerging new businesses and

products and services, including in particular NTIC's ability and the ability

of NTIC's joint ventures to sell ZERUST® products and services to the oil and

gas industry and Natur-Tec® products and the often lengthy and extensive sales

   process involved in selling such products and services;



· NTIC's ability to introduce new products and services that respond to changing

   market conditions and customer demand;



· Market acceptance of NTIC's existing and new products, especially in light of

   existing and new competitive products;



· Maturation of certain existing markets for NTIC's ZERUST® products and services

   and NTIC's ability to grow market share and succeed in penetrating other
   existing and new markets;



· Increased competition, especially with respect to NTIC's ZERUST® products and

services, and the effect of such competition on NTIC's and its joint ventures'

   pricing, net sales, and margins;



· NTIC's reliance upon and its relationships with its distributors, independent

   sales representatives, and joint ventures;




                                       35


· NTIC's reliance upon suppliers;

· Oil prices, which may affect sales of NTIC's ZERUST® products and services to

   the oil and gas industry;



· NTIC's operations in China, and the risks associated therewith, the termination

of the joint venture agreements with Tianjin Zerust, and the anticipated

liquidation of Tianjin Zerust and the effect of all these events on NTIC's

   business and future operating results;



· The costs and effects of complying with laws and regulations and changes in

   tax, fiscal, government, and other regulatory policies, including rules
   relating to environmental, health, and safety matters;



· Unforeseen product quality or other problems in the development, production,

   and usage of new and existing products;



· Unforeseen production expenses incurred in connection with new customers and

   new products;



· Loss of or changes in executive management or key employees;

· Ability of management to manage around unplanned events;

· Pending and future litigation;

· NTIC's reliance on its intellectual property rights and the absence of

   infringement of the intellectual property rights of others;



· NTIC's ability to maintain effective internal control over financial reporting,

   especially in light of its joint venture arrangements;



· Changes in applicable laws or regulations and NTIC's failure to comply with

   applicable laws, rules, and regulations;



· Changes in generally accepted accounting principles and the effect of new

   accounting pronouncements;



· Fluctuations in NTIC's effective tax rate, including from the Tax Cuts and Jobs

   Act;



· The effect of extreme weather conditions on NTIC's operating results; and

· NTIC's reliance upon its management information systems.





For more information regarding these and other uncertainties and factors that
could cause NTIC's actual results to differ materially from what NTIC has
anticipated in its forward-looking statements or otherwise could materially
adversely affect its business, financial condition, or operating results, see
NTIC's annual report on Form 10-K for the fiscal year ended August 31, 2019,
under the heading "Part I. Item 1A. Risk Factors."



All forward-looking statements included in this report are expressly qualified
in their entirety by the foregoing cautionary statements. NTIC wishes to caution
readers not to place undue reliance on any forward-looking statement that speaks
only as of the date made and to recognize that forward-looking statements are
predictions of future results, which may not occur as anticipated. Actual
results could differ materially from those anticipated in the forward-looking
statements and from historical results due to the uncertainties and factors
described above and others that NTIC may consider immaterial or does not
anticipate at this time. Although NTIC believes that the expectations reflected
in its forward-looking statements are reasonable, NTIC does not know whether its
expectations will prove correct. NTIC's expectations reflected in its
forward-looking statements can be affected by inaccurate assumptions NTIC might
make or by known or unknown uncertainties and factors, including those described
above. The risks and uncertainties described above are not exclusive, and
further information concerning NTIC and its business, including factors that
potentially could materially affect its financial results or condition, may
emerge from time to time. NTIC assumes no obligation to update, amend, or
clarify forward-looking statements to reflect actual results or changes in
factors or assumptions affecting such forward-looking statements. NTIC advises
you, however, to consult any further disclosures NTIC makes on related subjects
in its annual reports on Form 10-K, quarterly reports on Form 10-Q, and current
reports on Form 8-K that NTIC files with or furnishes to the Securities and
Exchange Commission.



                                       36

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Financials (USD)
Sales 2020 49,3 M - -
Net income 2020 0,70 M - -
Net Debt 2020 - - -
P/E ratio 2020 104x
Yield 2020 -
Capitalization 66,3 M 66,3 M -
EV / Sales 2019
Capi. / Sales 2020 1,35x
Nbr of Employees 137
Free-Float 82,9%
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Technical analysis trends NORTHERN TECHNOLOGIES INTE
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Mean consensus BUY
Number of Analysts 1
Average target price 13,00 $
Last Close Price 7,29 $
Spread / Highest target 78,3%
Spread / Average Target 78,3%
Spread / Lowest Target 78,3%
EPS Revisions
Managers
NameTitle
Gregory Patrick Lynch President, Chief Executive Officer & Director
Richard J. Nigon Non-Executive Chairman
Matthew C. Wolsfeld Chief Financial Officer & Secretary
Sunggyu Lee Independent Director
Ramani Narayan Director
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