NORTHERN TECHNOLOGIES INTERNATIONAL CORP [NTIC] Filings

10-Q 1 ntic20240531_10q.htm FORM 10-Q ntic20240531_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 31, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to __________________

Commission File Number: 001-11038

____________________

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation or organization)

41-0857886

(I.R.S. Employer Identification No.)

4201 Woodland Road

P.O. Box 69

Circle Pines, Minnesota 55014

(Address of principal executive offices) (Zip Code)

(763) 225-6600
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.02 per share	NTIC	Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐

Accelerated filer ☐

Non-accelerated filer ☒

Smaller reporting company ☒

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 10, 2024, there were 9,441,127 shares of common stock of the registrant outstanding.

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION

FORM 10-Q

May 31, 2024

TABLE OF CONTENTS

Description		Page

PART I—FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets as of May 31, 2024 (unaudited) and August 31, 2023 (audited)	1

	Consolidated Statements of Operations (unaudited) for the Three and Nine Months Ended May 31, 2024 and 2023	2

	Consolidated Statements of Comprehensive Income (unaudited) for the Three and Nine Months Ended May 31, 2024 and 2023	3

	Consolidated Statements of Equity (unaudited) for the Three and Nine Months Ended May 31, 2024 and 2023	4

	Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended May 31, 2024 and 2023	5

	Notes to Consolidated Financial Statements (unaudited)	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29

Item 4.	Controls and Procedures	30

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	32

Item 1A.	Risk Factors	32

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32

Item 3.	Defaults Upon Senior Securities	33

Item 4.	Mine Safety Disclosures	33

Item 5.	Other Information	33

Item 6.	Exhibits	33

SIGNATURES		34

_________________

This quarterly report on Form 10-Q contains certain forward-looking statements that are 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, and are subject to the safe harbor created by those sections. For more information, see “Part I. Financial Information – Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Forward-Looking Statements.”

_________________

As used in this report, references to “NTIC,” the “Company,” “we,” “our” or “us,” unless the context otherwise requires, refer to Northern Technologies International Corporation and its wholly-owned and majority-owned subsidiaries, all of which are consolidated on NTIC’s consolidated financial statements.

As used in this report, references to: (1) “NTIC China” refer to NTIC’s wholly-owned subsidiary in China, NTIC (Shanghai) Co., Ltd.; (2) “NTI Europe” refer to NTIC’s wholly-owned subsidiary in Germany, NTIC Europe GmbH; (3) “Zerust Mexico” refer to NTIC’s wholly-owned subsidiary in Mexico, ZERUST-EXCOR MEXICO, S. de R.L. de C.V.; (4) “Zerust India” refer to NTIC’s wholly-owned subsidiary in India, HNTI Limited (formerly Harita-NTI Limited); and (5)“NTI Asean” refer to NTIC’s majority-owned holding company subsidiary, NTI Asean LLC, which holds investments in certain entities that operate in the Association of Southeast Asian Nations (ASEAN) region.

NTIC’s consolidated financial statements do not include the accounts of any of its joint ventures. Except as otherwise indicated, references in this report to NTIC’s joint ventures do not include any of NTIC’s wholly-owned or majority-owned subsidiaries.

As used in this report, references to “EXCOR” refer to NTIC’s joint venture in Germany, Excor Korrosionsschutz – Technologien und Produkte GmbH.

All trademarks, trade names or service marks referred to in this report are the property of their respective owners.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS AS OF MAY 31, 2024 (UNAUDITED)

AND AUGUST 31, 2023 (AUDITED)


	May 31, 2024			August 31, 2023
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	5,794,824		$	5,406,173
Receivables:
Trade, excluding joint ventures, less allowance for doubtful accounts of $533,000 as of May 31, 2024 and August 31, 2023		14,374,856			15,645,130
Trade, joint ventures		594,331			187,912
Fees for services provided to joint ventures		1,262,153			1,296,594
Dividend receivable from joint ventures		—			1,986,027
Income taxes		463,828			34,202
Inventories		13,242,381			13,096,489
Prepaid expenses		2,170,896			2,019,029
Total current assets	$	37,903,269		$	39,671,556

PROPERTY AND EQUIPMENT, NET	$	15,678,572		$	14,065,354
OTHER ASSETS:
Investments in joint ventures		24,219,348			23,705,714
Deferred income tax, net		570,673			530,944
Intangible asset, net		5,802,438			6,159,485
Goodwill		4,782,376			4,782,376
Operating lease right of use asset		308,868			428,874
Total other assets		35,683,703			35,607,393
Total assets	$	89,265,544		$	89,344,303

LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Line of credit	$	1,988,380		$	3,600,000
Term loan		2,762,049			2,757,176
Accounts payable		6,273,261			6,056,329
Income taxes payable		17,579			13,053
Accrued liabilities:
Payroll and related benefits		2,216,767			2,305,400
Other		1,289,106			1,648,615
Current portion of operating lease		247,291			340,799
Total current liabilities	$	14,794,433		$	16,721,372
LONG-TERM LIABILITIES:
Deferred income tax, net		1,836,059			1,836,059
Operating lease, less current portion		61,577			88,075
Total long-term liabilities	$	1,897,636		$	1,924,134

COMMITMENTS AND CONTINGENCIES (Note 12)

EQUITY:
Preferred stock, no par value; authorized 10,000 shares; none issued and outstanding		—			—
Common stock, $0.02 par value per share; authorized 15,000,000 shares as of May 31, 2024 and August 31, 2023; issued and outstanding 9,441,124 and 9,424,102, respectively		188,823			188,482
Additional paid-in capital		23,104,415			21,986,767
Retained earnings		52,596,976			51,004,427
Accumulated other comprehensive loss		(7,038,745	)		(6,823,403	)
Stockholders’ equity		68,851,469			66,356,273
Non-controlling interest		3,722,006			4,342,524
Total equity		72,573,475			70,698,797
Total liabilities and equity	$	89,265,544		$	89,344,303

See notes to consolidated financial statements.

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

FOR THE THREE AND NINE MONTHS ENDED MAY 31, 2024 AND 2023


	Three Months Ended						Nine Months Ended
	May 31, 2024			May 31, 2023			May 31, 2024			May 31, 2023
NET SALES:
Net sales	$	20,686,197		$	20,969,726		$	61,710,410		$	59,193,317
Cost of goods sold		12,793,103			13,389,873			38,143,878			38,957,272
Gross profit		7,893,094			7,579,853			23,566,532			20,236,045

JOINT VENTURE OPERATIONS:
Equity in income from joint ventures		1,396,731			1,346,658			3,676,962			3,664,793
Fees for services provided to joint ventures		1,212,497			1,361,311			3,764,514			3,795,862
Total joint venture operations		2,609,228			2,707,969			7,441,476			7,460,655

OPERATING EXPENSES:
Selling expenses		4,232,887			3,893,152			12,053,839			10,996,303
General and administrative expenses		3,500,113			3,205,645			10,253,966			9,470,433
Research and development expenses		1,245,405			1,282,439			3,593,582			3,680,246
Total operating expenses		8,978,405			8,381,236			25,901,387			24,146,982

OPERATING INCOME		1,523,917			1,906,586			5,106,621			3,549,718

INTEREST INCOME		23,744			8,876			99,396			18,495
INTEREST EXPENSE		(59,939	)		(136,168	)		(248,835	)		(342,643	)

INCOME BEFORE INCOME TAX EXPENSE		1,478,722			1,779,294			4,957,182			3,225,570

INCOME TAX EXPENSE		332,400			542,295			848,391			834,823

NET INCOME		1,155,322			1,236,999			4,108,791			2,390,747

NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTERESTS		178,718			177,409			535,497			417,418

NET INCOME ATTRIBUTABLE TO NTIC	$	976,604		$	1,059,590		$	3,573,294		$	1,973,329

NET INCOME ATTRIBUTABLE TO NTIC PER COMMON SHARE:
Basic	$	0.10		$	0.11		$	0.38		$	0.21
Diluted	$	0.10		$	0.11		$	0.36		$	0.20

WEIGHTED AVERAGE COMMON SHARES ASSUMED OUTSTANDING:
Basic		9,431,134			9,369,923			9,432,684			9,355,776
Diluted		10,015,674			9,628,069			9,819,220			9,702,610
CASH DIVIDENDS DECLARED PER COMMON SHARE	$	0.07		$	0.07		$	0.21		$	0.21

See notes to consolidated financial statements.

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

FOR THE THREE AND NINE MONTHS ENDED MAY 31, 2024 AND 2023


	Three Months Ended						Nine Months Ended
	May 31, 2024			May 31, 2023			May 31, 2024			May 31, 2023
NET INCOME	$	1,155,322		$	1,236,999		$	4,108,791		$	2,390,747
OTHER COMPREHENSIVE INCOME (LOSS) – FOREIGN CURRENCY TRANSLATION ADJUSTMENT		(251,995	)		(92,228	)		(296,281	)		388,568
COMPREHENSIVE INCOME		903,327			1,144,771			3,812,510			2,779,315
COMPREHENSIVE LOSS ATTRIBUTABLE TO NON-CONTROLLING INTERESTS		(126,578	)		(190,118	)		(454,558	)		(440,301	)
COMPREHENSIVE INCOME ATTRIBUTABLE TO NTIC	$	1,029,905		$	1,334,889		$	4,267,068		$	3,219,616

See notes to consolidated financial statements.

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

FOR THE THREE AND NINE MONTHS ENDED MAY 31, 2024 AND 2023


	STOCKHOLDERS’ EQUITY – THREE MONTHS ENDED MAY 31, 2024 AND 2023
											Accumulated
					Additional						Other			Non-
	Common Stock				Paid-in			Retained			Comprehensive			Controlling			Total
	Shares		Amount		Capital			Earnings			Income (Loss)			Interests			Equity

BALANCE AT FEBRUARY 28, 2023		9,366,357	$	187,327	$	21,058,721		$	50,319,062		$	(6,774,510	)	$	3,443,643		$	68,234,243
Stock issued for employee stock purchase plan		3,566		71		36,697			—			—			—			36,768
Stock option expense		—		—		331,303			—			—			—			331,303
Dividends paid to stockholders		—		—		—			(655,894	)		—			—			(655,894	)
Dividend received by non-controlling interest		—		—		—			—			—			(100,000	)		(100,000	)
Net income		—		—		—			1,059,590			—			177,409			1,236,999
Other comprehensive income (loss)		—		—		—			—			(104,937	)		12,709			(92,228	)
BALANCE AT MAY 31, 2023		9,369,923	$	187,398	$	21,426,721		$	50,722,758		$	(6,879,447	)	$	3,533,761		$	68,991,191

BALANCE AT FEBRUARY 29, 2024		9,427,598	$	188,552	$	22,721,667		$	52,821,250		$	(6,838,890	)	$	3,595,428		$	71,948,007
Stock issued for employee stock purchase plan		3,284		66		39,805			—			—			—			39,871
Stock options exercised		10,242		205		(205	)		—			—			—			—
Stock option expense		—		—		343,148			—			—			—			343,148
Dividends paid to stockholders		—		—		—			(660,879	)		—			—			(660,879	)
Net income		—		—		—			976,604			—			178,718			1,155,322
Other comprehensive income (loss)		—		—		—			—			(199,855	)		(52,140	)		(251,995	)
BALANCE AT MAY 31, 2024		9,441,124	$	188,823	$	23,104,415		$	52,596,976		$	(7,038,745	)	$	3,722,006		$	72,573,475

	STOCKHOLDERS’ EQUITY – NINE MONTHS ENDED MAY 31, 2024 AND 2023
											Accumulated
					Additional						Other			Non-
	Common Stock				Paid-in			Retained			Comprehensive			Controlling			Total
	Shares		Amount		Capital			Earnings			Income (Loss)			Interests			Equity

BALANCE AT AUGUST 31, 2022		9,232,483	$	184,650	$	19,939,131		$	50,716,613		$	(7,245,132	)	$	3,649,034		$	67,244,296
Stock issued for employee stock purchase plan		7,186		143		75,321			—			—			—			75,464
Stock options exercised		130,254		2,605		413,958			—			—			—			416,563
Stock option expense		—		—		998,311			—			—			—			998,311
Dividends paid to stockholders		—		—		—			(1,967,184	)		—			—			(1,967,184	)
Dividend received by non-controlling interest		—		—		—			—			—			(555,574	)		(555,574	)
Net income		—		—		—			1,973,329			—			417,418			2,390,747
Other comprehensive income		—		—		—			—			365,685			22,883			388,568
BALANCE AT MAY 31, 2023		9,369,923	$	187,398	$	21,426,721		$	50,722,758		$	(6,879,447	)	$	3,533,761		$	68,991,191

BALANCE AT AUGUST 31, 2023		9,424,102	$	188,482	$	21,986,767		$	51,004,427		$	(6,823,403	)	$	4,342,524		$	70,698,797
Stock issued for employee stock purchase plan		6,780		136		79,831			—			—			—			79,967
Stock options exercised		10,242		205		(205	)		—			—			—			—
Stock option expense		—		—		1,038,022			—			—			—			1,038,022
Dividends paid to stockholders		—		—		—			(1,980,745	)		—			—			(1,980,745	)
Dividend received by non-controlling interest		—		—		—			—			—			(1,075,076	)		(1,075,076	)
Net income		—		—		—			3,573,294			—			535,497			4,108,791
Other comprehensive income		—		—		—			—			(215,342	)		(80,939	)		(296,281	)
BALANCE AT MAY 31, 2024		9,441,124	$	188,823	$	23,104,415		$	52,596,976		$	(7,038,745	)	$	3,722,006		$	72,573,475

See notes to consolidated financial statements.

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE NINE MONTHS ENDED MAY 31, 2024 AND 2023


	Nine Months Ended
	May 31, 2024			May 31, 2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	4,108,791		$	2,390,747
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation		1,038,022			998,311
Depreciation expense		884,421			766,091
Amortization expense		442,975			441,603
Loss on disposal of assets		—			(8,534	)
Equity in income from joint ventures		(3,676,962	)		(3,664,793	)
Dividends received from joint ventures		2,958,925			3,510,716
Deferred income taxes		(40,091	)		(76,114	)
Changes in current assets and liabilities:
Receivables:
Trade, excluding joint ventures		1,184,735			(362,810	)
Trade, joint ventures		(406,419	)		29,014
Fees for services provided to joint ventures		34,441			539,107
Dividends receivable from joint venture		1,986,027			—
Income taxes		(429,626	)		(155,828	)
Inventories		(197,240	)		2,254,758
Prepaid expenses and other		(184,366	)		184,516
Accounts payable		300,181			(2,902,121	)
Income tax payable		4,504			(29,401	)
Accrued liabilities		(424,413	)		(409,459	)
Net cash provided by operating activities		7,583,905			3,505,803

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of available for sale securities		—			5,590
Proceeds from sale of property and equipment		—			13,000
Purchases of property and equipment		(2,515,248	)		(2,607,988	)
Investments in patents		(85,928	)		(89,350	)
Net cash used in investing activities		(2,601,176	)		(2,678,748	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Dividend received by non-controlling interest		—			(555,574	)
Net payments from line of credit		(1,611,620	)		(700,000	)
Proceeds from term loan		—			2,812,504
Dividends paid on NTIC common stock		(1,980,745	)		(1,967,184	)
Proceeds from the exercise of stock options		—			416,563
Dividends received by non-controlling interest		(1,075,076	)		—
Proceeds from employee stock purchase plan		79,967			75,464
Net cash (used in) provided by financing activities		(4,587,474	)		81,773

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		(6,604	)		(47,524	)


NET INCREASE IN CASH AND CASH EQUIVALENTS		388,651			861,304
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		5,406,173			5,333,890

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	5,794,824		$	6,195,194

See notes to consolidated financial statements.

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. INTERIM FINANCIAL INFORMATION

In the opinion of management, the accompanying unaudited consolidated financial statements contain all necessary adjustments, which are of a normal recurring nature, and present fairly the consolidated financial position of Northern Technologies International Corporation and its subsidiaries (the Company) as of May 31, 2024 and August 31, 2023, the results of the Company’s operations for the three and nine months ended May 31, 2024 and 2023, the changes in stockholders’ equity for the three and nine months ended May 31, 2024 and 2023, and the Company’s cash flows for the nine months ended May 31, 2024 and 2023, in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP).

These consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s annual report on Form 10-K for the fiscal year ended August 31, 2023. These consolidated financial statements also should be read in conjunction with the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section appearing in this report.

Operating results for the three and nine months ended May 31, 2024 are not necessarily indicative of the results that may be expected for the full fiscal year ending August 31, 2024.

The Company evaluates events occurring after the date of the consolidated financial statements, through the date the consolidated financial statements were available to be issued, requiring recording or disclosure in the consolidated financial statements.

2. ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-13, Measurement of Credit Losses on Financial Instruments, which revises guidance for the accounting for credit losses on financial instruments within its scope, and in November 2018, issued ASU No. 2018-19 and in April 2019, issued ASU No. 2019-04 and in May 2019, issued ASU No. 2019-05, and in November 2019, issued ASU No. 2019-11, which amended the standard. The new standard introduces an approach, based on expected losses, to estimate credit losses on certain types of financial instruments and modifies the impairment model for available-for-sale debt securities. The new approach to estimating credit losses (referred to as the current expected credit losses model) applies to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt securities, net investments in leases and off-balance-sheet credit exposures. This ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Entities are required to apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company adopted this pronouncement on September 1, 2023, which did not have a material impact on the Company’s consolidated financial position or operating results.

3. INVENTORIES

Inventories consisted of the following:

	May 31, 2024		August 31, 2023
Production materials	$	4,887,783	$	4,960,355
Finished goods		8,354,598		8,136,134
	$	13,242,381	$	13,096,489

4. PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of the following:

	May 31, 2024			August 31, 2023
Land	$	776,965		$	496,965
Buildings and improvements		19,492,861			17,250,392
Machinery and equipment		6,173,904			5,984,364
		26,443,730			23,731,721
Less accumulated depreciation		(10,765,158	)		(9,666,367	)
	$	15,678,572		$	14,065,354

Depreciation expense was $287,018 and $884,421 for the three and nine months ended May 31, 2024, respectively, compared to $277,253 and $766,091 for the three and nine months ended May 31, 2023, respectively.

5. INTANGIBLE ASSETS, NET

Intangible assets, net consisted of the following:

	As of May 31, 2024
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Patents and trademarks	$	3,425,645	$	(2,806,590	)	$	619,055
Customer relationships		6,347,000		(1,163,617	)		5,183,383
Total intangible assets, net	$	9,772,645	$	(3,970,207	)	$	5,802,438

	As of August 31, 2023
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Patents and trademarks	$	3,339,717	$	(2,680,965	)	$	658,752
Customer relationships		6,347,000		(846,267	)		5,500,733
Total intangible assets, net	$	9,686,717	$	(3,527,232	)	$	6,159,485

Amortization expense related to intangible assets was $147,749 and $442,975 for the three and nine months ended May 31, 2024, respectively, compared $146,730 and $441,603 for the three and nine months ended May 31, 2023, respectively.

As of May 31, 2024, future amortization expense related to intangible assets for each of the next five fiscal years and thereafter is estimated as follows:

Remainder of fiscal 2024	$	285,905
Fiscal 2025		543,721
Fiscal 2026		517,990
Fiscal 2027		492,221
Fiscal 2028		479,012
Thereafter		3,483,589
Total	$	5,802,438

6. INVESTMENTS IN JOINT VENTURES

The consolidated financial statements of the Company’s foreign joint ventures are initially prepared using the accounting principles accepted in the respective joint ventures’ countries of domicile. Amounts related to foreign joint ventures reported in the below tables and the accompanying consolidated financial statements have subsequently been adjusted to conform with U.S. GAAP in all material respects. All material profits on sales recorded that remain on the consolidated balance sheet from the Company to its joint ventures and from joint ventures to other joint ventures have been eliminated for financial reporting purposes.

Financial information from the audited and unaudited financial statements of the Company’s joint venture in Germany, Excor Korrosionsschutz – Technologien und Produkte GmbH (EXCOR), and all the Company’s other joint ventures are summarized as follows:

	As of May 31, 2024
	Total		EXCOR		All Other
Current assets	$	57,436,771	$	28,022,725	$	29,414,046
Total assets		62,421,770		30,641,557		31,780,213
Current liabilities		13,167,730		2,458,389		10,709,341
Non-current liabilities		303,758		—		303,758
Joint ventures’ equity		48,949,666		28,183,169		20,766,497
NTIC’s share of joint ventures’ equity		24,219,348		14,091,586		10,127,762
NTIC’s share of joint ventures’ undistributed earnings		23,645,685		14,260,800		9,384,885

	Three Months Ended May 31, 2024
	Total		EXCOR		All Other
Net sales	$	25,602,072	$	9,977,354	$	15,624,718
Gross profit		10,713,282		4,959,536		5,753,746
Net income		2,793,738		1,623,431		1,170,307
NTIC’s share of equity in income from joint ventures		1,396,730		811,399		585,331
NTIC’s dividends received from joint ventures		567,674		—		567,674

	Nine Months Ended May 31, 2024
	Total		EXCOR		All Other
Net sales	$	72,642,714	$	27,561,950	$	45,080,764
Gross profit		30,956,162		14,164,541		16,791,620
Net income		7,351,372		4,029,182		3,322,190
NTIC’s share of equity in income from joint ventures		3,676,961		2,015,734		1,661,228
NTIC’s dividends received from joint ventures		2,958,925		1,624,950		1,333,975

	As of August 31, 2023
	Total		EXCOR		All Other
Current assets	$	55,339,662	$	27,862,458	$	27,477,204
Total assets		59,729,348		30,054,277		29,675,071
Current liabilities		11,464,247		2,687,064		8,777,183
Non-current liabilities		323,762		—		323,762
Joint ventures’ equity		47,941,339		27,367,213		20,574,126
NTIC’s share of joint ventures’ equity		23,705,714		13,683,608		10,022,106
NTIC’s share of joint ventures’ undistributed earnings		20,493,861		12,075,524		8,418,337

	Three Months Ended May 31, 2023
	Total		EXCOR		All Other
Net sales	$	26,312,548	$	10,735,862	$	15,576,686
Gross profit		10,494,244		5,085,837		5,408,407
Net income		2,692,444		1,654,151		1,038,293
NTIC’s share of equity in income from joint ventures		1,346,658		828,631		518,027
NTIC’s dividends received from joint ventures		45,977		—		45,977

	Nine Months Ended May 31, 2023
	Total		EXCOR		All Other
Net sales	$	76,525,427	$	30,590,265	$	45,935,162
Gross profit		30,223,623		14,539,314		15,684,309
Net income		7,308,398		4,761,608		2,546,790
NTIC’s share of equity in income from joint ventures		3,664,793		2,376,575		1,288,218
NTIC’s dividends received from joint ventures		3,510,716		2,459,500		1,051,216

7. CORPORATE DEBT

On January 6, 2023, the Company entered into a Credit Agreement (the Credit Agreement) with JPMorgan Chase Bank, N.A. (JPM), which provides the Company with a senior secured revolving line of credit (the Credit Facility) of up to $10.0 million, which includes a $5.0 million sublimit for standby letters of credit. Borrowings of $1,988,380 and $3,600,000 were outstanding under the Credit Facility as of May 31, 2024 and August 31, 2023, respectively.

Unless terminated earlier, the principal amount under the Credit Facility, together with all accrued unpaid interest and other amounts owing thereunder, if any, will be payable in full on the maturity date. On January 5, 2024, the Company and JPM renewed its Credit Agreement to extend the maturity date of the Credit Facility from January 6, 2024 to January 6, 2025. All other terms of the Credit Facility and the Credit Agreement remain the same.

Borrowings under the Credit Agreement bear interest at a floating rate, at the option of the Company, equal to either the CB Floating Rate or the Adjusted SOFR Rate. The term “CB Floating Rate” means the greater of the Prime Rate in the United States or 2.50%. The term “Adjusted SOFR Rate” means the term secured overnight financing rate for either one, three or six months (depending on the interest period selected by the Company) plus 0.10% per annum. With respect to any borrowings using an Adjusted SOFR Rate, there is an applicable margin of 2.15% applied per annum. There is no applicable margin with respect to borrowings using a CB Floating Rate.

To secure the Credit Agreement, the Company assigned JPM a continuing security interest in all of its right, title and interest in collateral made up for the assets of the Company.

The Credit Agreement contains customary affirmative and negative covenants, including, among other matters, limitations on the Company’s ability to incur additional debt, grant liens, engage in certain business operations and transactions, make certain investments, modify its organizational documents or form any new subsidiaries, subject to certain exceptions. Further, the Credit Agreement contains a negative covenant that restricts the ability of the Company to redeem or repurchase its common stock or pay dividends if the result of which would cause an event of default under the Credit Agreement. The Credit Agreement also requires the Company to maintain a Fixed Charge Coverage Ratio of at least 1.25 to 1.00. The term “Fixed Charge Coverage Ratio” means the ratio, computed for the Company on a consolidated basis, of net income plus income tax expense, plus amortization expense, plus depreciation expense, plus interest expense, and plus dividends received from joint ventures, minus unfinanced capital expenditures and equity in income from joint ventures, all computed for the twelve month period then ending, to scheduled principal payments made, plus scheduled finance lease payments made, plus interest expense paid, plus income tax expense paid, and plus cash distributions and dividends paid, all computed for the same twelve month period then ending. The Company was in compliance with all covenants as of May 31, 2024.

The Credit Agreement also contains customary events of default, including, without limitation, payment defaults, material inaccuracy of representations and warranties, covenant defaults, bankruptcy and insolvency proceedings, cross-defaults to certain other agreements, breach of any financial covenant and change of control. Upon the occurrence and during the continuance of any event of default, JPM may accelerate the payment of the obligations thereunder and exercise various other customary default remedies.

On each of April 10, 2023 and May 30, 2023, the Company’s wholly-owned subsidiary in China, NTIC China, entered into a loan agreement with China Construction Bank Corporation. Each term loan provided NTIC China with a RMB 10,000,000 (USD $1.45 million). Each of the term loans matures after one year with the principal due at that time, after which an extension of the loan agreement is required. Both term loans have an annual interest rate of 3.25% with interest due monthly. Both term loans are secured by an office building owned by NTIC China and the loan agreements contain certain financial and other covenants. The Company was in compliance with the covenants as of May 31, 2024. The current outstanding balance for both term loans was USD $2,762,049 as of May 31, 2024 and USD $2,757,176 as of August 31, 2023.

8. STOCKHOLDERS’ EQUITY

During the nine months ended May 31, 2024, the Company’s Board of Directors declared cash dividends on the following dates in the following amounts to the following holders of the Company’s common stock:

Declaration Date	Amount		Record Date	Payable Date
October 18, 2023	$	0.07	November 1, 2023	November 15, 2023
January 17, 2024	$	0.07	January 31, 2024	February 14, 2024
April 17, 2024	$	0.07	May 1, 2024	May 15, 2024

During the nine months ended May 31, 2023, the Company’s Board of Directors declared cash dividends on the following dates in the following amounts to the following holders of the Company’s common stock:

Declaration Date	Amount		Record Date	Payable Date
October 20, 2022	$	0.07	November 3, 2022	November 16, 2022
January 20, 2023	$	0.07	February 1, 2023	February 15, 2023
April 21, 2023	$	0.07	May 3, 2023	May 17, 2023

During the nine months ended May 31, 2024 and 2023, the Company repurchased no shares of its common stock.

The Company issued 3,496 and 3,620 shares of common stock on September 1, 2023 and 2022, respectively, under the Northern Technologies International Corporation Employee Stock Purchase Plan (ESPP). The Company issued 3,284 and 3,566 shares of common stock on March 1, 2024 and 2023, respectively, under the ESPP. The ESPP is compensatory for financial reporting purposes. As of May 31, 2024, 55,284 shares of common stock remained available for sale under the ESPP.

9. NET INCOME PER COMMON SHARE

Basic net income per common share is computed by dividing net income by the weighted average number of common shares outstanding. Diluted net income per share assumes the exercise of stock options using the treasury stock method, if dilutive.

The following is a reconciliation of the net income per share computation for the three and nine months ended May 31, 2024 and 2023:

	Three Months Ended				Nine Months Ended
Numerator:	May 31, 2024		May 31, 2023		May 31, 2024		May 31, 2023
Net income attributable to NTIC	$	976,604	$	1,059,590	$	3,573,294	$	1,973,329
Denominator:
Basic – weighted shares outstanding		9,431,134		9,369,923		9,432,684		9,355,776
Weighted shares assumed upon exercise of stock options		584,541		258,146		386,536		346,834
Diluted – weighted shares outstanding		10,015,674		9,628,069		9,819,220		9,702,610
Basic net income per share:	$	0.10	$	0.11	$	0.38	$	0.21
Diluted net income per share:	$	0.10	$	0.11	$	0.36	$	0.20

The dilutive impact summarized above relates to the periods when the average market price of the Company’s common stock exceeded the exercise price of the potentially dilutive option securities granted. Net income per common share was based on the weighted average number of common shares outstanding during the periods when computing basic net income per share. When dilutive, stock options are included as equivalents using the treasury stock market method when computing the diluted net income per share. Excluded from the computation of diluted net income per share for the three and nine months ended May 31, 2024 were options outstanding to purchase 305,514 shares of common stock. Excluded from the computation of diluted net income per share for the three and nine months ended May 31, 2023 were options outstanding to purchase 322,246 shares of common stock.

10. STOCK-BASED COMPENSATION

A summary of stock option activities under the Northern Technologies International Corporation 2024 Stock Incentive Plan (the 2024 Plan), the Northern Technologies International Corporation Amended and Restated 2019 Stock Incentive Plan (the 2019 Plan) and the Northern Technologies International Corporation Amended and Restated 2007 Stock Incentive Plan (the 2007 Plan) is as follows:

	Number of Options Outstanding			Weighted Average Exercise Price
Outstanding as of August 31, 2023		1,557,131		$	11.08
Granted		269,845			13.25
Exercised		(21,301	)		9.04
Cancelled		—			—
Outstanding as of May 31, 2024		1,805,675			11,43
Exercisable as of May 31, 2024		1,350,643		$	10.88

The weighted average per share fair value of options granted during the nine months ended May 31, 2024 and 2023 was $4.88 and $4.87, respectively. The weighted average remaining contractual life of the options outstanding as of May 31, 2024 and 2023 was 6.11 years and 6.16 years, respectively.

The Company recognized compensation expense of $343,148 and $1,038,022 and $331,303 and $998,311 during the three and nine months ended May 31, 2024 and 2023, respectively. As of May 31, 2024, there was $1,345,262 of unrecognized compensation expense. The amount is expected to be recognized over a period of 2.25 years.

11. SEGMENT AND GEOGRAPHIC INFORMATION

Segment Information

The Company’s chief operating decision maker is its Chief Executive Officer. The Company’s business is organized into two reportable segments: ZERUST® and Natur-Tec®. The Company has been selling its proprietary ZERUST® rust and corrosion inhibiting products and services to the automotive, electronics, electrical, mechanical, military and retail consumer markets for almost 50 years and, more recently, has targeted and expanded into the oil and gas industry. The Company also sells a portfolio of bio-based and compostable (fully biodegradable) polymer resins and finished products under the Natur-Tec® brand.

The following table sets forth the Company’s net sales for the three and nine months ended May 31, 2024 and 2023 by segment:

	Three Months Ended				Nine Months Ended
	May 31, 2024		May 31, 2023		May 31, 2024		May 31, 2023
ZERUST® net sales	$	14,837,235	$	16,100,674	$	45,461,075	$	45,929,422
Natur-Tec® net sales		5,848,962		4,869,052		16,249,335		13,263,895
Total net sales	$	20,686,197	$	20,969,726	$	61,710,410	$	59,193,317

The following table sets forth the Company’s cost of goods sold for the three and nine months ended May 31, 2024 and 2023 by segment:

Three Months Ended

Nine Months Ended

May 31,
2024

% of
Product
Sales*

May 31,
2023

% of
Product
Sales*

May 31,
2024

% of
Product
Sales*

May 31,
2023

% of
Product
Sales*

Direct cost of goods sold

ZERUST®

8,168,215

55.1

9,116,091

56.6