Good day ladies and gentlemen, and welcome to the Northern Technologies International Corporation First Quarter 2016 Earnings conference call and webcast. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session and instructions will follow at that time. If anyone should require operator assistance during today’s conference, please press star then zero on your touchtone telephone. As a reminder, today’s conference may be recorded. As part of the discussion today, the representatives from NTIC will be making certain forward-looking statements regarding NTIC’s future financial and operating results, as well as their business plan, objectives and expectations. Please be advised that those forward-looking statements are covered under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 and that NTIC desires to avail itself to the protections of the Safe Harbor for these statements. Please also be advised that actual results could differ materially from those stated or implied by the forward-looking statements due to certain risks or uncertainties, including these described in NTIC’s most recent annual report on Form 10-K, subsequent quarterly reports on Form 10-Q, and recent press releases. Please read the reports and other future filings that NTIC will make with the SEC. NTIC disclaims any duty to update or revise its forward-looking statements. I would now introduce the host for today’s conference, Mr. Patrick Lynch, President and CEO. Sir, please go ahead.

Thank you. Good morning. I’m Patrick Lynch, NTIC’s Chief Executive Officer, and I’m here with Matt Wolsfeld, NTIC’s Chief Financial Officer. Please note that our financial results for the first quarter of fiscal 2016 were included in a press release issued earlier this morning, a copy of which is now available at NTIC.com. During this call, we will review various key aspects of our fiscal 2016 first quarter financial results, give a brief business update, comment on our sales and earnings guidance for the full fiscal year, and then conclude with a question and answer session. Several key factors in combination made the first quarter of fiscal 2016 a disappointing one. These factors include a significant slowdown amongst some of our largest customers in heavy equipment manufacturing intended for agriculture, construction and mining use. Consequently, over the first three months of fiscal 2016, NTIC’s net sales of industrial Zerust products in North America have been sluggish when compared to the same quarter in fiscal 2015. Fortunately, during this same period we continue to see strong demand from the automotive sector and anticipate that sales of our industrial Zerust products to new and existing customers in this market segment will continue to grow throughout the remainder of fiscal 2016. We have also started to see an uptick in our December sales that now leads us to believe our fiscal 2016 second quarter will be stronger than our first across all industrial Zerust markets. Next, as we started to report in January 2015, the termination and transition away from our former joint venture in China, Tianjin Zerust, has been a difficult one. This in turn has had a significant adverse effect on our financial results for fiscal 2015 and significantly affected the financial results of our first quarter of fiscal 2016 as…

Thanks Patrick. Sales of NTIC’s Zerust products decreased over 4% across our industrial market and oil and gas market segments during the first quarter of fiscal 2016 compared to the same period in fiscal 2015. This decrease was due to lower demand in North America by existing customers, which was partially offset by increases in new sales at NTIC China. Sales of Zerust oil and gas solutions decreased by over 32% in the first quarter of 2016. NTIC had sales of $340,000 during the first quarter of 2016 compared to $502,000 for the three months ended November 30, 2014. When evaluating this result, it’s important to remember that current global oil prices, coupled with political turmoil and a deep recession in Brazil as well as management restructuring at Brazil’s state-owned oil company, Petrobras, resulted in NTIC recognizing only $2,000 in oil and gas industry-related Zerust oil and gas solution sales in Brazil during the first quarter compared to almost $105,000 for the three months ended November 30, 2015. Sales of Zerust corrosion inhibiting products to our joint ventures decreased over 29% during the first quarter of fiscal 2016 compared to fiscal 2015. Income provided by our joint venture operations decreased by 34% to almost $2.5 million during the first quarter of fiscal 2016 compared to just over $3.7 million the prior fiscal year period; however, that was mostly attributable to the termination of our joint venture license agreement with Tianjin Zerust, our former joint venture in China as previously discussed, and a significantly weakening of the various foreign currencies, including the euro, compared to the U.S. dollar. We estimate that the pretax impact of foreign currency exchange rate shift of the euro and other countries compared to the U.S. dollar on our joint venture operating income was approximately $176,000 or…

[Operator instructions] Our first question comes from the line of Tim Clarkson with Van Clemens Capital. Your line is open. Please go ahead.

Hi guys. Can you just give me a little bit more color - you kind of went through the China legal piece pretty fast. You said you had some kind of a favorable ruling. Just give us a little more color on what that was and what it means in terms of resolving the China issue.

It’s an initial hurdle where the former Chinese joint venture partner has now been compelled to turn over their books and records for further investigation into the liquidation, so they’ve been--it’s a Chinese procedural matter, but it sounds like it’s a good indicator that the courts are heading in our direction.

Okay. In terms of--is there a legal process going on in the United States too?

Yes, but that’s still in its early stages. Discovery hasn’t even been completed on that side.

How long would you expect that to resolve itself?

Without a settlement? In the interim, I’m told that discovery won’t conclude until August of this year. Thereafter, you’re looking at trial schedule.

Okay. In terms of the business that you’re doing in the new Chinese wholly owned subsidiary that you guys have 100% of, what’s the status? How’s that going?

At this time, we have sales that are--I’m looking at a chart right now, and sales are hovering right around 300 to 350 per month, which should put us at an annual run rate of around U.S. $4 million, and I think the expectation when we started the year were that we were going to be significantly higher than that. That’s the primary reason for the change in the sales guidance. But it certainly has continued to increase, and when we look at the projects that are up for bid that we’re working on, and we look at the projects that we are currently in the evaluation process for, we certainly see--you know, it’s a long sales cycle, just like it is in North America, but there’s certainly an awful lot of things that, if they start happening, will be able to get us to the sales level that we wanted to be at, at this time before.

How much volume do you need to break even on that?

It kind of depends on how much money. Not to elusive on the answer, but it really depends on how much money we’re spending on ramping up activities outside of the primary region that we were previously operating in. I would say that somewhere between the--you know, we would be profitable at over a $4 million annual run rate level, or very close to that; but as far as getting back to the kinds of profits that we were seeing from before, we would need to be probably double that.

Okay. All right, good. That’s what I wanted to know right now. Thanks.

Thank you. Once again ladies and gentlemen, if you have a question at this time, please press star then one on your touchtone telephone. Our next question comes from the line of Dick Feldman with Axiom Capital. Your line is open. Please go ahead.

Good morning. You made reference in the Natur-Tec portion of your comments that you saw new engagements taking place, both in North America and in India. Should we take that to mean that growth will accelerate there for the remainder of the year?

That’s our expectation, yes.

Okay, good. The other question I have is that does the Natur-Tec technological capabilities have any chance of benefiting from a ban placed on certain plastic nano particles in products?

You mean the plastic microbeads?

Yes.

In cosmetic products and all that? That’s not really where we were focused on, so we don’t anticipate that having any effect one way or the other on our business.

Okay, that does it for me. Thank you.

Thank you. Again ladies and gentlemen, if you have a question at this time, please press star then one. I’m showing our next question from Charles Pine with Van Clemens Company. Your line is open. Please go ahead.

Yes, I have a question on the oil and gas space. On the last conference call a couple months ago, it was communicated that you had--you made a paraphrase that your teams in the field almost had more work in the storage tank area than they could comfortably handle, and that you were actually stretched in that area and were having to have outside help. Now, it appears that over the--roughly since the last 60 days or so, that seems to have dramatically turned upside down. I guess one of the things I’m kind of curious about, my understanding was that most of your company’s customer base that you’re supposed to be going after, the oil and gas space are supposed to be more midstream and downstream companies and they’re not E&Ps, so these are companies that need to go under--you know, have basic ongoing maintenance to their infrastructure. Why are you seeing such volatility?

Well, one factor I’m told is simply cold weather, where they have been pushing off certain projects to the spring for installation, which has nothing to do with more macro--

What cold weather? It’s been much warmer than normal.

I’m just repeating what I was told. We also had certain installations we’ve been doing in Canada and in the northern parts of North America, so it might not be record cold, but cold enough for them to tell us that that’s what they’re delaying until spring. We’ve also been told in the meantime that since the oil prices have been fluctuating, that certain of the installations we had scheduled have been postponed until springtime, when they can re-evaluate some of their budgets.

All right. Is there some--are you hearing or are you factoring at some point--are you looking for somewhere--do you need to see some sort of nominal level in crude strip prices at a point of over a certain threshold before these customers are going to start increasing the volumes of the orders? What do you expect that strip price to be?

I don’t think there is a direct correlation to be made like that, Charlie. Like you said, we’re more the midstream and downstream. What is being affected is obviously a lot of these companies are restructuring, downsizing, what have you. They still have to maintain their maintenance and all that, but some of these decisions are being delayed as they are shuffling their internal teams, and that’s what we’re running into at this point.

So you said you’re continuing to receive new orders and new customers. How has the net change in--since you last communicated to us, how has that changed? How many more sort of ongoing actual discrete customers do you have versus the prior quarter?

I don’t have that information readily in front of me right now.

Would it be a material change, or not?

Well, define material. We’re talking about a few--half a dozen additional customers. Depending on their size and how many tank farms they’re operating, it could be substantial.

Okay. All right, that does it for me. Thank you.

Thank you. I’m showing no further questions at this time. I would like to turn the conference back over to management for any closing remarks.

I’d like to thank everyone for participating today and for your interest in NTIC. Have a good day.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect. Everyone have a great day.