Northern Technologies International (NTIC) - 2025 Q2 - Quarterly Report

Financial Performance - Net sales for the three months ended February 28, 2025, were $19,072,066, a decrease of 8.5$20,842,538 for the same period in 2024[15] - Net income attributable to Northern Technologies International Corporation (NTIC) for the three months ended February 28, 2025, was $434,319, compared to$1,701,169 for the same period in 2024, a decline of 74.5%[15] - Net income for the six months ended February 28, 2025, was $1,396,774, compared to$2,953,469 for the same period in 2024, representing a decrease of approximately 53%[22] - Operating loss for the three months ended February 28, 2025, was $(332,933), compared to operating income of$2,206,271 for the same period in 2024[15] - NTIC's consolidated net sales decreased by 8.5% to $19,072,066 for the three months ended February 28, 2025, and by 1.5$40,410,459 for the six months ended February 28, 2025, compared to the same periods in the prior year[77] Assets and Liabilities - Total current assets decreased to $39,624,812 as of February 28, 2025, from$41,579,219 as of August 31, 2024, a reduction of 4.7%[12] - Total assets decreased to $93,695,214 as of February 28, 2025, from$94,676,502 as of August 31, 2024, a decline of 1.0%[12] - Total liabilities increased to $19,849,535 as of February 28, 2025, from$19,501,181 as of August 31, 2024, an increase of 1.8%[12] - NTIC's working capital was $21,416,426 as of February 28, 2025, down from$23,682,276 as of August 31, 2024[101] Cash Flow - Cash flows from operating activities for the six months ended February 28, 2025, were $3,198,741, down from$5,643,007 in the prior year, indicating a decline of about 43%[22] - Cash and cash equivalents increased to $5,090,630 as of February 28, 2025, from$4,952,184 as of August 31, 2024, an increase of 2.8%[12] - Net cash provided by operating activities during the six months ended February 28, 2025, was $3,198,741, a decrease from$5,643,007 for the same period in 2024[116] - Net cash used in investing activities for the six months ended February 28, 2025, was $2,580,757, compared to$1,505,927 for the same period in 2024[120] Expenses - Research and development expenses for the six months ended February 28, 2025, were $2,632,296, an increase from$2,348,177 in the prior year, reflecting a growth of 12.1%[15] - General and administrative expenses increased by 13.0% for the three months and 11.3% for the six months ended February 28, 2025, as a percentage of net sales rising to 19.2% and 18.6%, respectively[89] - Selling expenses decreased by 6.4% for the three months but increased by 4.1% for the six months ended February 28, 2025, with selling expenses as a percentage of net sales rising to 20.3% and 20.1%, respectively[88] Dividends - The company declared cash dividends of $0.07 per common share for both the three and six months ended February 28, 2025, consistent with the prior year[15] - The company paid dividends of$1,325,872 to stockholders during the six months ended February 28, 2025, compared to $1,319,866 in the prior year, reflecting a slight increase[22] Joint Ventures - NTIC's share of joint ventures' equity as of February 28, 2025 was$25,041,302, with undistributed earnings amounting to $24,096,958[39] - For the three months ended February 28, 2025, net sales from joint ventures totaled$19,799,875, with a gross profit of $8,241,116 and net income of$1,219,970[39] - Equity in income from joint ventures decreased by 47.3% to $620,730 for the three months and by 23.2$1,750,323 for the six months ended February 28, 2025, reflecting lower net sales and profitability from joint ventures[86] Stock and Compensation - Stock-based compensation expense for the six months ended February 28, 2025, was $676,334, slightly lower than$694,874 for the same period in 2024[22] - The company recognized stock option compensation expense of $602,821 for the six months ended February 28, 2025, compared to$694,874 for the same period in 2024[53] - As of February 28, 2025, the company had $1,618,997 of unrecognized stock option compensation expense expected to be recognized over 2.5 years[53] Market and Operational Risks - NTIC is exposed to foreign currency exchange rate risks, particularly with the Euro, Japanese Yen, Indian Rupee, Chinese Renminbi, South Korean Won, and British Pound against the U.S. Dollar[128] - The company has identified potential risks related to supply chain disruptions and the impact of geopolitical tensions on its operations and profitability[134] - NTIC's future performance may be affected by the automotive industry's shift towards electric vehicles and the associated market dynamics[134] Future Outlook - NTIC's management is focusing on expanding into the oil and gas industry, which is expected to enhance the demand for ZERUST® corrosion prevention solutions[73] - The Natur-Tec® product line is seeing significant opportunities, with ongoing efforts to expand the North American distribution network for bioplastic products[74] - NTIC expects to continue investing in joint ventures, research and development, and marketing efforts throughout fiscal 2025[103]