NTIC filing — read by section

Item 8. Financial Statements and Supplementary Data

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 

 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS 

 The following items are included herein:

 Page 

 Report of Independent Registered Public Accounting Firm (PCAOB Firm ID # 23 )

 56 
 
 Consolidated Balance Sheets as of August 31, 2025 and 2024 

 57 
 
 Consolidated Statements of Operations for the years ended August 31, 2025 and 2024 

 58 
 
 Consolidated Statements of Comprehensive Income for the years ended August 31, 2025 and 2024 

 59 
 
 Consolidated Statements of Equity for the years ended August 31, 2025 and 2024 

 60 
 
 Consolidated Statements of Cash Flows for the years ended August 31, 2025 and 2024 

 61 
 
 Notes to Consolidated Financial Statements 

 62 - 83 
 
 55

 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 

 To the shareholders and the board of directors of Northern Technologies International Corporation and Subsidiaries:

 Opinion on the Financial Statements 

 We have audited the accompanying consolidated balance sheets of Northern Technologies International Corporation and Subsidiaries (the "Company") as of August 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income, equity, and cash flows, for each of the two years in the period ended August 31, 2025, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of August 31, 2025 and 2024, and the results of its operations and its cash flows for each of the two years in the period ended August 31, 2025, in conformity with accounting principles generally accepted in the United States of America.

 Basis for Opinion 

 These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

 Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

 Critical Audit Matters 

 Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

 /s/ Baker Tilly US, LLP 

 We have served as the Company's auditor since 2004.

 Minneapolis, Minnesota 

 November 20, 2025

 56

 NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION 

 AND SUBSIDIARIES 

 CONSOLIDATED BALANCE SHEETS - AUGUST 31, 2025 AND 2024 

 August 31, 2025 

 August 31, 2024 

 ASSETS 

 CURRENT ASSETS:

 Cash and cash equivalents

 $ 
 7,250,523 
 
 $ 
 4,952,184 
 
 Receivables:

 Trade, less allowance for credit losses of $ 235,000 and $ 310,000 as of August 31, 2025 and 2024

 18,443,230 
 
 19,187,079 
 
 Fees for services provided to joint ventures

 1,077,552 
 
 1,235,016 
 
 Income taxes

 340,002 
 
 392,293 
 
 Inventories, net

 15,525,230 
 
 14,390,844 
 
 Prepaid expenses

 1,706,279 
 
 1,421,803 
 
 Total current assets

 $ 
 44,342,816 
 
 $ 
 41,579,219 
 
 PROPERTY AND EQUIPMENT, NET

 15,183,918 
 
 16,265,653 
 
 OTHER ASSETS:

 Investments in joint ventures

 28,611,777 
 
 25,397,287 
 
 Deferred income tax, net

 503,575 
 
 544,464 
 
 Intangible assets, net

 8,827,768 
 
 5,682,945 
 
 Goodwill

 4,782,376 
 
 4,782,376 
 
 Operating lease right of use assets

 493,050 
 
 424,558 
 
 Total other assets

 43,218,546 
 
 36,831,630 
 
 Total assets

 $ 
 102,745,280 
 
 $ 
 94,676,502 
 
 LIABILITIES AND EQUITY 

 CURRENT LIABILITIES:

 Line of credit

 $ 
 9,329,021 
 
 $ 
 4,291,608 
 
 Term loan, current portion

 2,860,256 
 
 2,820,835 
 
 Accounts payable

 8,044,196 
 
 6,393,355 
 
 Income taxes payable

 414,304 
 
 327,781 
 
 Accrued liabilities:

 Payroll and related benefits

 1,844,817 
 
 3,163,372 
 
 Other

 1,066,761 
 
 574,876 
 
 Current portion of operating leases

 344,739 
 
 325,116 
 
 Total current liabilities

 23,904,094 
 
 17,896,943 
 
 LONG-TERM LIABILITIES:

 Deferred income tax, net

 1,513,166 
 
 1,504,796 
 
 Term loans, noncurrent portion

 466,984 
 
 — 
 
 Operating leases, less current portion

 148,311 
 
 99,442 
 
 Total long-term liabilities

 $ 
 2,128,461 
 
 $ 
 1,604,238 
 
 COMMITMENTS AND CONTINGENCIES (Note 16)

 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; issued and outstanding 9,475,490 and 9,466,976 , as of August 31, 2025 and 2024, respectively

 189,510 
 
 189,340 
 
 Additional paid-in capital

 25,056,976 
 
 23,615,564 
 
 Retained earnings

 52,273,469 
 
 53,771,211 
 
 Accumulated other comprehensive loss

 ( 5,371,201 
 ) 
 
 ( 6,382,124 
 ) 
 
 Stockholders’ equity

 72,148,754 
 
 71,193,991 
 
 Non-controlling interests

 4,563,971 
 
 3,981,330 
 
 Total equity

 76,712,725 
 
 75,175,321 
 
 Total liabilities and equity

 $ 
 102,745,280 
 
 $ 
 94,676,502 
 
 See notes to consolidated financial statements.

 57

 NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION 

 AND SUBSIDIARIES 

 CONSOLIDATED STATEMENTS OF OPERATIONS 

 YEARS ENDED AUGUST 31, 2025 AND 2024 

 2025 

 2024 

 NET SALES:

 Net sales

 $ 
 84,234,474 
 
 $ 
 85,059,517 
 
 Cost of goods sold

 52,557,919 
 
 51,273,155 
 
 Gross profit

 31,676,555 
 
 33,786,362 
 
 JOINT VENTURE OPERATIONS:

 Equity in income from joint ventures

 3,539,056 
 
 4,223,296 
 
 Fees for services provided to joint ventures

 5,006,151 
 
 5,251,782 
 
 Total joint venture operations

 8,545,207 
 
 9,475,078 
 
 OPERATING EXPENSES:

 Selling expenses

 17,820,196 
 
 16,413,672 
 
 General and administrative expenses

 14,792,988 
 
 14,176,494 
 
 Research and development expenses

 5,038,281 
 
 4,802,791 
 
 Total operating expenses

 37,651,465 
 
 35,392,957 
 
 OPERATING INCOME

 2,570,297 
 
 7,868,483 
 
 INTEREST INCOME

 308,054 
 
 118,827 
 
 INTEREST EXPENSE

 ( 599,927 
 ) 
 
 ( 340,129 
 ) 
 
 OTHER INCOME

 1,139,756 
 
 — 
 
 OTHER EXPENSE

 ( 386,785 
 ) 
 
 — 
 
 INCOME BEFORE INCOME TAX EXPENSE

 3,031,395 
 
 7,647,181 
 
 INCOME TAX EXPENSE

 2,045,002 
 
 1,325,797 
 
 NET INCOME

 986,393 
 
 6,321,384 
 
 NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTERESTS

 968,774 
 
 912,302 
 
 NET INCOME ATTRIBUTABLE TO NTIC

 $ 
 17,619 
 
 $ 
 5,409,082 
 
 NET INCOME ATTRIBUTABLE TO NTIC PER COMMON SHARE:

 Basic

 $ 
 0.00 
 
 $ 
 0.57 
 
 Diluted

 $ 
 0.00 
 
 $ 
 0.55 
 
 WEIGHTED AVERAGE COMMON SHARES ASSUMED OUTSTANDING:

 Basic

 9,476,085 
 
 9,434,020 
 
 Diluted

 9,639,676 
 
 9,833,450 
 
 CASH DIVIDENDS DECLARED PER COMMON SHARE

 $ 
 0.16 
 
 $ 
 0.28 
 
 See notes to consolidated financial statements.

 58

 NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION 

 AND SUBSIDIARIES 

 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 

 YEARS ENDED AUGUST 31, 2025 AND 2024 

 2025 

 2024 

 NET INCOME

 $ 
 986,393 
 
 $ 
 6,321,384 
 
 OTHER COMPREHENSIVE INCOME – FOREIGN CURRENCY TRANSLATION ADJUSTMENT, (NET OF TAX)

 904,790 
 
 422,859 
 
 COMPREHENSIVE INCOME

 1,891,183 
 
 6,744,243 
 
 LESS: COMPREHENSIVE INCOME ATTRIBUTABLE TO NON-CONTROLLING INTERESTS, (NET OF TAX)

 ( 862,641 
 ) 
 
 ( 893,882 
 ) 
 
 COMPREHENSIVE INCOME ATTRIBUTABLE TO NTIC

 $ 
 1,028,542 
 
 $ 
 5,850,361 
 
 See notes to consolidated financial statements.

 59

 NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION 

 AND SUBSIDIARIES 

 CONSOLIDATED STATEMENTS OF EQUITY 

 YEARS ENDED AUGUST 31, 2025 AND 2024 

 STOCKHOLDERS’ EQUITY 

 Accumulated 

 Additional 

 Other 

 Non- 

 Common Stock 

 Paid-in 

 Retained 

 Comprehensive 

 Controlling 

 Total 

 Shares 

 Amount 

 Capital 

 Earnings 

 Income (Loss) 

 Interests 

 Equity 

 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 options exercised

 36,094 
 
 722 
 
 167,797 
 
 — 
 
 — 
 
 — 
 
 168,519 
 
 Stock issued for employee stock purchase plan

 6,780 
 
 136 
 
 79,831 
 
 — 
 
 — 
 
 — 
 
 79,967 
 
 Stock option expense

 — 
 
 — 
 
 1,381,169 
 
 — 
 
 — 
 
 — 
 
 1,381,169 
 
 Dividends paid to stockholders

 — 
 
 — 
 
 — 
 
 ( 2,642,298 
 ) 
 
 — 
 
 — 
 
 ( 2,642,298 
 ) 
 
 Dividend received by non-controlling interest

 — 
 
 — 
 
 — 
 
 — 
 
 — 
 
 ( 1,255,076 
 ) 
 
 ( 1,255,076 
 ) 
 
 Net income

 — 
 
 — 
 
 — 
 
 5,409,082 
 
 — 
 
 912,302 
 
 6,321,384 
 
 Other comprehensive income (loss)

 — 
 
 — 
 
 — 
 
 — 
 
 441,279 
 
 ( 18,420 
 ) 
 
 422,859 
 
 BALANCE AT AUGUST 31, 2024

 9,466,976 
 
 $ 
 189,340 
 
 $ 
 23,615,564 
 
 $ 
 53,771,211 
 
 $ 
 ( 6,382,124 
 ) 
 
 $ 
 3,981,330 
 
 $ 
 75,175,321 
 
 Stock options exercised

 1,127 
 
 23 
 
 ( 23 
 ) 
 
 — 
 
 — 
 
 — 
 
 — 
 
 Stock issued for employee stock purchase plan

 7,383 
 
 147 
 
 81,349 
 
 — 
 
 — 
 
 — 
 
 81,496 
 
 Stock option expense

 — 
 
 — 
 
 1,360,086 
 
 — 
 
 — 
 
 — 
 
 1,360,086 
 
 Dividends paid to stockholders

 — 
 
 — 
 
 — 
 
 ( 1,515,361 
 ) 
 
 — 
 
 — 
 
 ( 1,515,361 
 ) 
 
 Dividend received by non-controlling interest

 — 
 
 — 
 
 — 
 
 — 
 
 — 
 
 ( 280,000 
 ) 
 
 ( 280,000 
 ) 
 
 Net income

 — 
 
 — 
 
 — 
 
 17,619 
 
 — 
 
 968,774 
 
 986,393 
 
 Other comprehensive income (loss)

 — 
 
 — 
 
 — 
 
 — 
 
 1,010,923 
 
 ( 106,133 
 ) 
 
 904,790 
 
 BALANCE AT AUGUST 31, 2025

 9,475,490 
 
 $ 
 189,510 
 
 $ 
 25,056,976 
 
 $ 
 52,273,469 
 
 $ 
 ( 5,371,201 
 ) 
 
 $ 
 4,563,971 
 
 $ 
 76,712,725 
 
 See notes to consolidated financial statements.

 60

 NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION 

 AND SUBSIDIARIES 

 CONSOLIDATED STATEMENTS OF CASH FLOWS 

 FOR THE YEARS ENDED AUGUST 31, 2025 AND 2024 

 2025 

 2024 

 CASH FLOWS FROM OPERATING ACTIVITIES:

 Net income

 $ 
 986,393 
 
 $ 
 6,321,384 
 
 Adjustments to reconcile net income to net cash provided by operating activities:

 Stock-based compensation

 1,360,086 
 
 1,381,169 
 
 Depreciation expense

 979,981 
 
 1,156,364 
 
 Amortization expense

 777,289 
 
 596,700 
 
 Loss on disposal of property and equipment

 77,984 
 
 — 
 
 Change in allowance for credit losses

 ( 75,000 
 ) 
 
 ( 233,539 
 ) 
 
 Equity in income from joint ventures

 ( 3,539,056 
 ) 
 
 ( 4,223,296 
 ) 
 
 Dividends received from joint ventures

 1,566,947 
 
 2,997,164 
 
 Deferred income taxes

 50,984 
 
 ( 336,252 
 ) 
 
 Changes in current assets and liabilities:

 Receivables:

 Trade

 941,732 
 
 ( 3,016,064 
 ) 
 
 Fees for services provided to joint ventures

 157,463 
 
 61,578 
 
 Dividends receivable from joint venture

 — 
 
 1,986,027 
 
 Income taxes

 ( 418 
 ) 
 
 ( 311,731 
 ) 
 
 Inventories, net

 ( 1,277,772 
 ) 
 
 ( 1,333,954 
 ) 
 
 Prepaid expenses and other

 ( 300,058 
 ) 
 
 308,064 
 
 Accounts payable

 1,472,793 
 
 449,009 
 
 Income tax payable

 109,712 
 
 ( 151,720 
 ) 
 
 Accrued liabilities

 ( 846,105 
 ) 
 
 232,290 
 
 Net cash provided by operating activities

 2,442,955 
 
 5,883,193 
 
 CASH FLOWS FROM INVESTING ACTIVITIES:

 Purchases of property and equipment

 ( 1,526,437 
 ) 
 
 ( 1,917,842 
 ) 
 
 Proceeds from sale of property and equipment

 20,000 
 
 — 
 
 Investments in patents and capitalized software costs

 ( 2,423,886 
 ) 
 
 ( 1,500,386 
 ) 
 
 Net cash used in investing activities

 ( 3,930,323 
 ) 
 
 ( 3,418,228 
 ) 
 
 CASH FLOWS FROM FINANCING ACTIVITIES:

 Dividend received by non-controlling interest 
 
 ( 280,000 
 ) 
 
 ( 1,255,076 
 ) 
 
 Repayments of line of credit 
 
 ( 26,950,508 
 ) 
 
 ( 36,980,700 
 ) 
 
 Proceeds from issuance of long-term debt

 538,090 
 
 — 
 
 Proceeds from line of credit

 31,987,921 
 
 37,672,308 
 
 Dividends paid on NTIC common stock

 ( 1,515,361 
 ) 
 
 ( 2,642,298 
 ) 
 
 Proceeds from employee stock purchase plan

 81,496 
 
 79,967 
 
 Proceeds from exercise of stock options

 — 
 
 168,519 
 
 Net cash provided by (used in) financing activities

 3,861,638 
 
 ( 2,957,280 
 ) 
 
 EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

 ( 75,931 
 ) 
 
 38,326 
 
 NET INCREASE IN CASH AND CASH EQUIVALENTS

 2,298,339 
 
 ( 453,989 
 ) 
 
 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

 4,952,184 
 
 5,406,173 
 
 CASH AND CASH EQUIVALENTS AT END OF YEAR

 $ 
 7,250,523 
 
 $ 
 4,952,184 
 
 See notes to consolidated financial statements.

 61

 NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION 

 AND SUBSIDIARIES 

 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

 YEARS ENDED AUGUST 31, 2025 AND 2024 

 1. 

 NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES 

 Nature of Business – Northern Technologies International Corporation and its Subsidiaries (collectively, the Company) develop and market proprietary environmentally beneficial products and services in over 65 countries either directly or via a network of subsidiaries, joint ventures, independent distributors, and agents. The Company’s primary business is corrosion prevention marketed mainly under the ZERUST® brand. The Company has been selling its proprietary ZERUST® products and services to the automotive, general industrial, mechanical, mining, agricultural, and retail consumer markets for over 50 years and, more recently, has also expanded into the oil and gas industry. Additionally, the Company markets and sells a portfolio of proprietary bio-based and certified compostable (fully biodegradable) polymer resin compounds and finished products under the Natur-Tec® brand. These sustainable packaging products are intended to reduce the Company’s customers’ carbon footprint and provide environmentally sound waste disposal options. The Company’s two operating and reportable segments are ZERUST® and Natur-Tec®.

 The Company participates, either directly or indirectly, in 15 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 the Company’s joint ventures exclusively sell rust and corrosion inhibiting products, some of the joint ventures also sell the Company’s Natur-Tec® resin compounds and finished products. The profits of joint ventures are shared by the respective joint venture owners in accordance with their respective ownership percentages. The Company typically owns 50 % or less of its joint venture entities and does not control the decisions of these entities, including dividend declaration or amount in any given year.

 Principles of Consolidation – NTIC evaluates its voting and variable interests in entities on a qualitative and quantitative basis. NTIC consolidates entities in which it concludes it has the power to direct the activities that most significantly impact an entity’s economic success and has the obligation to absorb losses or the right to receive benefits that could be significant to the entity. The consolidated financial statements include the accounts of Northern Technologies International Corporation, its wholly owned subsidiaries, Northern Technologies Holding Company, LLC, NTIC (Shanghai) Co., Ltd. (NTIC China), ZERUST-EXCOR MEXICO, S. de R.L. de C.V (Zerust Mexico), NTIC Europe GmbH (NTI Europe), and HNTI Limited (Zerust India), NTIC’s majority-owned subsidiary in India, Natur-Tec India Private Limited (Natur-Tec India), NTIC’s majority-owned subsidiary in Brazil, Zerust Prevenção de Corrosão S.A. (Zerust Brazil), NTIC’s majority-owned subsidiary in Sri Lanka, Natur Tec Lanka (Pvt) Ltd (Natur Tec Lanka), and NTIC’s majority-owned holding company, NTI Asean LLC (NTI Asean), and its wholly owned subsidiary in UAE, Zerust Integrity Solutions Trading LLC (ZIS UAE), and its wholly owned subsidiaries Zerust Singapore Pte Ltd (Zerust Singapore), Zerust Vietnam Co. Ltd (Zerust Vietnam) and Zerust Taiwan Co. Ltd (Zerust Taiwan). NTIC’s consolidated financial statements do not include the accounts of any of its joint ventures.

 Non-Controlling Interests – The Company owns 75 % of Natur-Tec India, 75 % of Natur Tec Lanka, 85 % of Zerust Brazil, 60 % of NTI Asean, Zerust Singapore Pte Ltd, Zerust Vietnam Co Ltd and Zerust Taiwan Co Ltd. The remaining ownership of the consolidated entities are accounted for as non-controlling interests and reported as part of equity in the consolidated financial statements. The Company allocates gains and losses to the non-controlling interest even when such allocation results in a deficit balance, reducing the losses attributed to the controlling interest. Changes in ownership interests are treated as equity transactions if the Company maintains control.

 Use of Estimates – The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 62

 Reclassifications - Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reported results of operations. An adjustment has been made to the Consolidated Balance Sheet as of August 31, 2024 and the Consolidated Statements of Cash Flows for the year ended August 31, 2024 to reclassify joint venture trade receivables within trade receivables.

 In addition, the Company identified an immaterial prior period classification error related to the presentation of borrowings and repayments under its revolving line of credit in its consolidated statements of cash flows. For the fiscal year ended August 31, 2024, the Company had previously presented net proceeds of $ 691,608 as a single line item in the consolidated statements of cash flows. In accordance with Accounting Standards Codification 230, Statement of Cash Flows , the Company has updated the prior period presentation to separately report gross borrowings of $ 37,672,308 and gross repayments of $ 36,980,700 under its line of credit. This change had no impact on the Company’s total cash flows, financial position, or results of operations for the fiscal year ended August 31, 2024.

 Net Sales – The Company includes net sales to its joint ventures and net sales to unaffiliated customers on its consolidated statements of operations. There are no sales originating from the Company’s joint ventures to unaffiliated customers included in the amount, as the Company’s investments in its joint ventures are accounted for using the equity method.

 When determining recognition of revenue arrangements the Company performs the following five steps: (1) identify the contracts with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when or as the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods it transfers to, or services it performs for, the customer.

 Generally, the Company’s performance obligations are satisfied when the customers take possession of the products, which normally occurs at the shipping point or destination depending on the terms of the contracts. The Company’s services are generally sold based upon quotes or contracts with customers that include a fixed or determinable price, and sales arrangements do not contain any significant financing component for its customers. The Company does not recognize revenue related to product warranties, nor does the Company incur significant contract costs. Customer arrangements do not generate contract assets or liabilities.

 Revenue Recognition – Revenue is measured based on consideration specified in the contract with a customer, adjusted for any applicable estimates of variable consideration and other factors affecting the transaction price, including noncash consideration, consideration paid or payable to customers, and significant financing components. Revenue from all customers is recognized when a performance obligation is satisfied by transferring control of a distinct good or service to a customer.

 Individually promised goods and services in a contract are considered a distinct performance obligation and accounted for separately if the customer can benefit from the individual good or service on its own or with other resources that are readily available to the customer and the good or service is separately identifiable from other promises in the arrangement. When an arrangement includes multiple performance obligations, the consideration is allocated between the performance obligations in proportion to their estimated standalone selling price. Costs related to products delivered are recognized in the period incurred, unless criteria for capitalization of costs are met. Costs of revenues consist primarily of direct labor, manufacturing overhead, materials, and components. The Company does not incur significant upfront costs to obtain a contract. If costs to obtain a contract were to become material, the costs would be recorded as an asset and amortized to expense in a manner consistent with the related recognition of revenue.

 The Company excludes government assessed and imposed taxes on revenue generating transactions that are invoiced to customers from revenue. The Company includes freight billed to customers in revenue. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of goods sold.

 63

 The timing of revenue recognition, billing, and cash collections results in accounts receivable on the consolidated balance sheet.

 Performance Obligations – A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction price is allocated to each distinct performance obligation in proportion to its standalone selling price and recognized as revenue when, or as, the performance obligation is satisfied. The Company’s various performance obligations and the timing or method of revenue recognition are discussed below. The Company’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.

 The Company sells its products to both distributors and end-users. Each unit of product delivered under a customer order represents a distinct and separate performance obligation, as the customer can benefit from each unit on its own or with other resources that are readily available to the customer, and each unit of product is separately identifiable from other products in the arrangement.

 The transaction price for the Company’s products is the invoiced amount. The Company does not have variable consideration in the form of refunds, credits, rebates, price concessions, pricing incentives, or other items impacting transaction price. The purchase order pricing in arrangements with customers is deemed to approximate standalone selling price; therefore, the Company does not need to allocate proceeds on a relative standalone selling price allocation between performance obligations. The Company applies the practical expedient in paragraph 606-10-50-14 and does not disclose information about remaining performance obligations that have original expected durations of one year or less. There are no material obligations that extend beyond one year.

 Revenue is recognized when transfer of control occurs, as defined by the terms in the customer agreement. The Company immediately recognizes incidental items that are immaterial in the context of the contract. The Company has applied the practical expedient in paragraph 606-10-25-16A and does not assess if immaterial items are promised goods or services. The Company has also applied the practical expedient in paragraph 606-10-32-18 regarding the adjustment of the promised amount of consideration for the effects of a significant financing component when the customer pays for that good or service within one year or less, as the Company does not have any significant financing components in its customer arrangements since payment is received at or shortly after the point of sale, generally 30 to 90 days.

 The Company estimates returns based on an analysis of historical experience if the right to return products is granted to its customers. The Company does not record a return asset, as non-conforming products are generally not returned. The Company’s return policy does not vary by geography. The customer has no rotation or price protection rights, and the Company is not under a warranty obligation.

 Sales Commissions – Sales commissions paid to sales representatives are eligible for capitalization, as they are incremental costs that would not have been incurred without entering into a specific sales arrangement and are recoverable through the expected margin on the transaction. The Company has elected to apply the practical expedient provided by ASC 340-40-25-4 and recognize the incremental costs of obtaining contracts as an expense when incurred, as the amortization period of the assets that would have otherwise been recognized is one year or less. The Company records these costs as a selling expense.

 Product Warranty – The Company offers warranties on various products and services. These warranties are assurance type warranties that are not sold on a standalone basis; therefore, they are not considered distinct performance obligations. The Company estimates the costs that may be incurred under its warranties and records a liability in the amount of such costs at the time the revenue is recognized for the product sale.

 International Revenue – The Company markets its products to numerous countries in North America, Europe, Latin America, Asia, and other parts of the world. See Note 12, Segment and Geographic Information, for information regarding revenue disaggregation by geography.

 64

 Trade Receivables – Payment terms for the Company’s unaffiliated customers are determined based on credit risk and vary by customer. The Company typically offers standard payment terms to unaffiliated customers of net 30 days. The Company does not accrue interest on past due accounts receivable. The Company reviews the credit histories of its customers before extending unsecured credit. The Company presents accounts receivable, net of an allowance for credit losses. The allowance for credit losses reflects management’s estimate of amounts that will ultimately not be collected. The Company determines the allowance for credit losses based on historical information, changes in current economic conditions and reasonable and supportable forecasts of future economic conditions. The allowance for credit losses is measured on a collective (pool) basis when trade receivables share similar risk characteristics. Trade receivables that do share similar risk characteristics are evaluated on an individual basis and are also not included in the collective (pool) evaluation.

 Employee Retention Credit (ERC) and Payroll Tax Deferral - On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law providing numerous tax provisions and other stimulus measures, including an employee retention credit (ERC), which is a refundable tax credit against certain employment taxes. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the American Rescue Plan Act of 2021 extended and expanded the availability of the ERC.

 The Company engaged tax advisors of a Big 4 accounting firm which determined the Company qualified for ERCs. The Company then applied for the ERC in fiscal 2023 for the second and third quarters of that year of $ 573,751 and $ 566,006 , respectively. The Company elected to account for the credit as a government grant. U.S. GAAP does not include grant accounting guidance for for-profit entities; therefore, the Company has elected to follow the grant accounting model in International Accounting Standard (IAS) 20, Accounting for Government Grants and Disclosure of Government Assistance. In accordance with IAS 20, the Company cannot recognize any income from the grant until there is reasonable assurance (similar to the “probable” threshold in U.S. GAAP) that any conditions attached to the grant will be met and that the grant will be received. Once it is reasonably assured that the grant conditions will be met and that the grant will be received, grant income is recorded on a systematic basis over the periods in which the Company recognizes the payroll expenses for which the grant is intended to compensate. Income from the grant can be presented as either other income or as a reduction in the expenses for which the grant was intended to compensate.

 During the fiscal year ended August 31, 2025, the Company received $ 1,139,756 in cash as a result of the ERC and this cash was claimed under the suspension test criteria based on the Company’s determination that it met the eligibility requirements. In accordance with the Company’s accounting policy, the ERC payments have been recognized as Other Income in the period in which the cash was received, as the Company determined that all relevant criteria for recognition had been met. The ERC represents a one-time benefit and does not constitute recurring operational revenue.

 Additionally, the Company earned $ 181,529 in interest income related to the ERC payments, which was recorded as Interest Income for the period. The ERC payments of $ 1,139,756 are recorded as Other Income in the consolidated statements of operations, while the interest income of $ 181,529 is recorded separately under Interest Income in the consolidated statements of operations.

 Fees for Services Provided to Joint Ventures – The Company provides services to its joint ventures including consulting, legal, travel, insurance, technical, and marketing services based on licensing or other agreements with its joint ventures. The Company receives fees for the services it provides to its joint ventures. The fees for services received by the Company from its joint ventures are generally based on either a flat fee or a percentage of net sales by the Company’s joint ventures depending on local laws and tax regulations. Under the Company’s agreements with its joint ventures, amounts are earned when product is shipped from joint venture facilities, at which point a sale is deemed to have occurred and results in obligation for the joint venture to pay the royalty and recognition of the fee by the Company. The Company reviews the financial situation of each of its joint ventures to assist in the likelihood of collections on amounts earned. The Company accounts for these fees on a cash basis if uncertainty exists surrounding the collection of such fees.

 Cash and Cash Equivalents – The Company includes as cash and cash equivalents highly liquid, short-term investments with maturity of three months or less when purchased, which are readily convertible into known amounts of cash. The Company maintains its cash in high quality financial institutions. The balances, at times, may exceed federally insured limits.

 65

 Inventories – Inventories are recorded at the lower of cost (first-in, first-out basis) or net realizable value and include a reduction in value based on slow-moving and obsolete inventory, which amounted to $ 422,344 and $ 365,341 in the fiscal years ending August 31, 2025 and 2024, respectively.

 Property and Equipment and Depreciation – Property and equipment are stated at cost. Depreciation is computed using the straight-line method based on the estimated service lives of the various assets as follows:

 Buildings and improvements

 5 - 30 years

 Machinery and equipment

 3 - 10 years

 Investments in Joint Ventures – Investments in the Company’s joint ventures are accounted for using the equity method. Under the equity method, investments are initially recorded at cost and are adjusted for dividends, distributed and undistributed earnings and losses, changes in foreign currency exchange rates, and additional investments. In the event the Company’s share of a joint venture’s cumulative losses exceeds the Company’s investment balance, the balance is reported at zero value until proportionate income exceeds the losses. The Company assesses its joint ventures for impairment on an annual basis as of August 31 of each year as part of its fiscal year end analysis. In addition to the annual review for impairment, the Company reviews the operating results of each joint venture on a quarterly basis in comparison to its historical operating results and its accrual of fees for services provided to joint ventures. If the operating results of a joint venture do not meet financial performance expectations, an additional evaluation is performed on the joint venture. The Company’s evaluation of its investments in joint ventures requires the Company to make assumptions about future cash flows of its joint ventures. These assumptions require significant judgment, and actual results may differ from assumed or estimated amounts. All investments in joint ventures had positive equity as of August 31, 2025 and 2024. The Company considers any of its joint ventures to be significant and discloses entity specific financial information if the joint venture’s income or assets make up more than 20% of the Company’s total assets or income.

 The Company classifies distributions received from its joint ventures based on the nature of the distributions, generally, in operating activities on the consolidated statements of cash flows.

 If the Company is no longer able to exercise significant influence over operating and financial policy of a joint venture previously accounted for under the equity method, it maintains the investment at the carrying value as of the date that significant influence no longer exists and discontinues accruing the proportionate earnings or losses of the investment.

 Investments are considered to be impaired when a decline in fair value is judged to be other-than-temporary. Fair value is calculated based on publicly available market information or other estimates determined by management. The Company employs a systematic methodology on a quarterly basis that considers available quantitative and qualitative evidence in evaluating potential impairment of our investments. If the cost of an investment exceeds its fair value, the Company evaluates, among other factors, general market conditions, credit quality, the duration and extent to which the fair value is less than cost, and for equity securities, the Company’s intent and ability to hold, or plans to sell, the investment. The Company also considers specific adverse conditions related to the financial health of and business outlook for the investee, including industry and sector performance, changes in technology, and operational and financing cash flow factors. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded to other income (expense), and a new cost basis in the investment is established. The Company determined that there was no impairment of investments in joint ventures as of August 31, 2025.

 Recoverability of Long-Lived Assets – The Company reviews its long-lived assets whenever events or changes in circumstances indicate the carrying amount of the assets may not be recoverable. The Company determines potential impairment by comparing the carrying value of the assets with expected net cash flows expected to be provided by operating activities of the business or related products. If the sum of the expected undiscounted future net cash flows is less than the carrying value, the Company evaluates whether an impairment loss should be recognized. An impairment loss is measured by comparing the amount by which the carrying value exceeds the fair value of the asset. When evaluating assets for impairment, the Company groups long-lived assets with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. The Company determined that there were no indications that the carrying value of long-lived assets was not recoverable as of August 31, 2025.

 66

 Patents and Trademarks – Patents and trademarks, including acquisition costs, are stated at cost, less accumulated amortization. Amortization is computed using the straight-line method over the estimated useful lives of the respective assets. Upon retirement, the cost of assets disposed and the related accumulated amortization are removed from the accounts, and any resulting gain or loss is credited or charged to operations.

 The Company estimates the useful life of patents to be 17 years and customer relationships to be 15 years. This estimate is based on a combination of factors, including the expected duration of patent protection, technological obsolescence, and market conditions. Amortization of intangible assets is recorded using the straight-line method over their estimated useful lives.

 Capitalization of Software Costs – Software developed or obtained for internal use, including direct development costs, is stated at cost, less accumulated amortization. Costs incurred during the preliminary project stage, as well as maintenance and training costs, are expensed as incurred. Capitalized software costs include external direct costs of materials and services and payroll costs for employees directly associated with software development. Amortization is computed using the straight-line method over the estimated useful life of the software, which is estimated to be ten years. Upon retirement, the cost of assets disposed and the related accumulated amortization are removed from the accounts, and any resulting gain or loss is credited or charged to operations . 

 Goodwill - Goodwill represents the excess purchase price over the fair value of tangible net assets acquired in acquisitions after amounts have been allocated to intangible assets. Goodwill is tested for impairment annually (at August 31), or more frequently when events or changes in circumstances indicate that the asset might be impaired. Examples of such events or circumstances include, but are not limited to, a significant adverse change in legal or business climate, an adverse regulatory action or unanticipated competition.

 The Company assesses qualitative factors to determine whether the existence of events or circumstances would indicate that it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If after assessing the totality of events or circumstances, the Company were to determine that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, then the Company would perform a quantitative test that compares the fair value to its carrying value to determine the amount of any impairment. The Company has determined there was no goodwill impairment during the years ended August 31, 2025 and 2024.

 Income Taxes – The Company utilizes the asset and liability method of accounting for income taxes, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements. Deferred income tax assets and liabilities are determined based on the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in operations in the period that includes the enactment date.

 The Company records net deferred tax assets to the extent the Company believes these assets will more likely than not be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. In the event the Company determines that it would be able to realize its deferred assets in the future in excess of their net recorded amount, the Company makes an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

 The Company records uncertain tax positions on the basis of a two-step process whereby the Company determines whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position and those tax positions that meet the more-likely-than-not recognition threshold. The Company recognizes the largest amount of tax benefit that is greater than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

 Foreign Currency Translation (Accumulated Other Comprehensive Income (Loss)) – The functional currency of NTIC China, Zerust Brazil, Natur-Tec India, Natur Tec Lanka, Zerust Mexico, Zerust India, Zerust Singapore, Zerust Vietnam, Zerust Taiwan, NTI Europe, and each unconsolidated international joint venture is the applicable local currency. The translation of the applicable foreign currencies into U.S. dollars is performed for balance sheet accounts using exchange rates in effect at the balance sheet date and for revenue and expense accounts using an average monthly exchange rate. Translation gains or losses are reported as an element of other comprehensive income (loss).

 67

 The Company (excluding NTIC China, Zerust Brazil, Natur-Tec India, Natur Tec Lanka, Zerust India, Zerust Singapore, Zerust Vietnam, Zerust Taiwan, NTI Asean, Zerust Mexico, NTI Europe, and NTIC’s joint ventures) conducts all foreign transactions based on the U.S. dollar. Since investments in joint ventures are accounted for using the equity method, any changes in foreign currency exchange rates are reflected as a foreign currency translation adjustment and do not change the equity in income from joint ventures reflected in the Company’s consolidated statements of operations.

 Fair Value of Financial Instruments – The carrying value of cash and cash equivalents, short-term accounts receivable, notes payable, trade accounts payables, and other accrued expenses approximate fair value because of the short maturity of those instruments.

 Shipping and Handling – The Company records all amounts billed to customers in a sales transaction related to shipping and handling as sales. The Company records costs related to shipping and handling in cost of goods sold.

 Research and Development – The Company expenses all costs related to product research and development as incurred.

 Common Stock – The Company issues authorized but unissued shares of common stock upon the exercise of stock options.

 Stock-Based Compensation – The Company recognizes compensation cost relating to share-based payment transactions, including grants of employee stock options and transactions under the Company’s employee stock purchase plan, in its consolidated financial statements. That cost is measured based on the fair value of the equity or liability instruments issued. The Company measures the cost of employee services received in exchange for stock options and other stock-based awards based on the grant-date fair value of the award and recognizes the cost over the period the employee is required to provide services for the award (generally the vesting term).

 Subsequent Events – The Company has evaluated events occurring after the date of the consolidated financial statements through November 20, 2025 for events requiring disclosure in the consolidated financial statements. 

 2. 

 NEW SIGNIFICANT ACCOUNTING POLICIES 

 In fiscal 2025, the Company adopted Accounting Standards Update (ASU) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures . ASU 2023-07 requires enhanced disclosures about significant segment expenses and other segment items on both an annual and interim basis. The Company has applied the standard retrospectively to all periods presented in the consolidated financial statements. The adoption of ASU 2023-07 did not impact the Company’s determination of reportable segments but resulted in enhanced disclosures related to segment expense information. The adoption resulted in additional disclosures but did not have an impact on the Company's consolidated financial position, results of operations, or cash flows.

 3. 

 ACCOUNTING PRONOUNCEMENTS 

 Recently Issued Accounting Pronouncements 

 In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures . The new guidance is expected to improve income tax disclosures primarily related to the rate reconciliation and income taxes paid information by requiring 1) consistent categories and greater disaggregation of information in the rate reconciliation and 2) income taxes paid disaggregated by jurisdiction. The guidance is effective on a prospective basis, although retrospective application and early adoption is permitted. The Company is evaluating its disclosure approach for ASU 2023-09 and anticipates adopting the standard for the annual period starting September 1, 2025.

 68

 In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses , which requires disaggregation of certain costs in a separate note to the financial statements, such as the amounts of employee compensation, depreciation and intangible asset amortization, included in each relevant expense caption in annual and interim consolidated financial statements. ASU 2024-03 is effective for annual periods beginning after December 15, 2026 and for interim periods beginning after December 15, 2027 on a retrospective or prospective basis, with early adoption permitted. The Company is evaluating the effect that ASU 2024-03 will have on its consolidated financial statement disclosures.

 4. 

 INVENTORIES 

 Inventories consisted of the following:

 August 31, 2025 

 August 31, 2024 

 Production materials

 $ 
 5,059,298 
 
 $ 
 5,513,409 
 
 Finished goods

 10,465,932 
 
 8,877,435 
 
 $ 
 15,525,230 
 
 $ 
 14,390,844 
 
 5. 

 PROPERTY AND EQUIPMENT, NET 

 Property and equipment, net consisted of the following:

 August 31, 2025 

 August 31, 2024 

 Land

 $ 
 1,260,312 
 
 $ 
 1,238,180 
 
 Buildings and improvements

 14,650,361 
 
 14,760,250 
 
 Construction in process

 817,946 
 
 3,086,479 
 
 Machinery and equipment

 9,154,728 
 
 7,276,151 
 
 25,883,347 
 
 26,361,060 
 
 Less accumulated depreciation

 ( 10,699,429 
 ) 
 
 ( 10,095,407 
 ) 
 
 $ 
 15,183,918 
 
 $ 
 16,265,653 
 
 Depreciation expense was $ 979,981 for fiscal 2025 compared to $ 1,156,364 in fiscal 2024. Assets in process includes capitalized software costs incurred until the capitalized software is placed in service. Once placed in service, these costs are reclassed to intangible assets, net in the consolidated balance sheet.

 6. 

 INTANGIBLE ASSETS, NET 

 Intangible assets, net consisted of the following:

 As of August 31, 2025 

 Gross Carrying Amount 

 Accumulated Amortization 

 Net Carrying Amount 

 Patents and trademarks

 $ 
 3,546,542 
 
 $ 
 ( 2,969,571 
 ) 
 
 $ 
 576,971 
 
 Capitalized software

 4,089,695 
 
 ( 493,365 
 ) 
 
 3,596,330 
 
 Customer relationships

 6,347,000 
 
 ( 1,692,533 
 ) 
 
 4,654,467 
 
 Total intangible assets, net

 $ 
 13,983,237 
 
 $ 
 ( 5,155,469 
 ) 
 
 $ 
 8,827,768 
 
 69

 As of August 31, 2024 

 Gross Carrying Amount 

 Accumulated Amortization 

 Net Carrying Amount 

 Patents and trademarks

 $ 
 3,459,877 
 
 $ 
 ( 2,854,532 
 ) 
 
 $ 
 605,345 
 
 Customer relationships

 6,347,000 
 
 ( 1,269,400 
 ) 
 
 5,077,600 
 
 Total intangible assets, net

 $ 
 9,806,877 
 
 $ 
 ( 4,123,932 
 ) 
 
 $ 
 5,682,945 
 
 Amortization expense related to intangible assets was $ 777,289 for fiscal 2025 compared to $ 596,700 for fiscal 2024.

 As of August 31, 2025, future amortization expense related to intangible assets for each of the next five fiscal years and thereafter is estimated as follows:

 Fiscal 2026

 $ 
 869,359 
 
 Fiscal 2027

 834,284 
 
 Fiscal 2028

 834,284 
 
 Fiscal 2029

 834,284 
 
 Fiscal 2030

 834,284 
 
 Thereafter

 4,621,274 
 
 Total

 $ 
 8,827,768 
 
 7. 

 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 ventures in Germany, Excor Korrosionsschutz – Technologien und Produkte GmbH (EXCOR), France, ACOBAL SAS (Acobal), Finland, Zerust OY and all the Company’s other joint ventures are summarized as follows:

 As of August 31, 2025 
 
 TOTAL 
 
 EXCOR 

 Acobal 
 
 Zerust OY 

 Other 

 Current assets

 $ 
 60,062,085 
 
 $ 
 29,870,525 
 
 $ 
 6,971,262 
 
 $ 
 3,029,614 
 
 $ 
 20,190,684 
 
 Total assets

 69,815,251 
 
 36,941,008 
 
 7,900,298 
 
 3,313,909 
 
 21,660,036 
 
 Current liabilities

 11,743,525 
 
 2,391,029 
 
 2,660,430 
 
 719,172 
 
 5,972,894 
 
 Noncurrent liabilities

 336,557 
 
 — 

 — 
 
 — 
 
 336,557 
 
 Joint ventures’ equity

 57,735,169 
 
 34,549,979 
 
 5,239,868 
 
 2,594,737 
 
 15,350,585 
 
 NTIC’s share of joint ventures’ equity

 28,611,777 
 
 17,274,991 
 
 2,619,932 
 
 1,297,358 
 
 7,419,496 
 
 NTIC’s share of joint ventures’ undistributed earnings

 27,667,432 
 
 17,244,086 
 
 2,619,932 
 
 1,277,358 
 
 6,526,056 
 
 70

 Fiscal Year Ended August 31, 2025 

 TOTAL 

 EXCOR 

 Acobal 

 Zerust OY 

 Other 

 Net sales

 $ 
 91,236,272 
 
 $ 
 32,909,789 
 
 $ 
 11,721,152 
 
 $ 
 4,831,258 
 
 $ 
 41,774,073 
 
 Gross profit

 39,460,739 
 
 17,637,075 
 
 4,500,635 
 
 2,976,462 
 
 14,346,567 
 
 Net income

 7,081,482 
 
 3,325,785 
 
 1,418,240 
 
 964,653 
 
 1,372,804 
 
 NTIC’s share of equity in income of joint ventures

 3,539,057 
 
 1,664,532 
 
 708,333 
 
 483,754 
 
 682,436 
 
 NTIC’s dividends received from joint ventures

 1,566,946 
 
 — 

 635,528 
 
 382,613 
 
 548,805 
 
 As of August 31, 2024 

 Total 

 EXCOR 

 OTHER 

 Current assets

 $ 
 56,420,503 
 
 $ 
 26,234,664 
 
 $ 
 30,185,839 
 
 Total assets

 64,183,071 
 
 31,513,288 
 
 32,669,783 
 
 Current liabilities

 12,553,716 
 
 2,221,726 
 
 10,331,990 
 
 Noncurrent liabilities

 323,199 
 
 — 
 
 323,199 
 
 Joint ventures’ equity

 51,306,156 
 
 29,291,562 
 
 22,014,594 
 
 NTIC’s share of joint ventures’ equity

 25,397,287 
 
 14,645,783 
 
 10,751,504 
 
 NTIC’s share of joint ventures’ undistributed earnings

 23,645,685 
 
 14,614,878 
 
 9,030,807 
 
 Fiscal Year Ended August 31, 2024 

 Total 

 EXCOR 

 OTHER 

 Net sales

 $ 
 95,940,014 
 
 $ 
 35,720,889 
 
 $ 
 60,219,125 
 
 Gross profit

 41,247,036 
 
 18,288,258 
 
 22,958,778 
 
 Net income

 8,450,411 
 
 4,599,088 
 
 3,851,323 
 
 NTIC’s share of equity in income of joint ventures

 4,223,296 
 
 2,299,274 
 
 1,924,022 
 
 NTIC’s dividends received from joint ventures

 2,997,164 
 
 1,624,950 
 
 1,372,214 
 
 8. 

 CORPORATE DEBT 

 The Company is party to a Credit Agreement (as amended, the Credit Agreement) with JPMorgan Chase Bank, N.A. (JPM), which provides NTIC with a senior secured revolving line of credit (the Credit Facility) of up to $ 10.0 million. The Credit Facility includes a $ 5.0 million sublimit for standby letters of credit. Borrowings of $ 9,329,021 were outstanding under the Credit Facility as of August 31, 2025. Since NTIC was out of compliance with the fixed charge coverage ratio under the Credit Agreement, NTIC obtained a waiver of the non-compliance from JPM. Based on its current business plan and projections for fiscal 2026, NTIC expects to remain in compliance with the covenant during fiscal 2026, although no assurance can be provided that it will do so.

 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 January 5, 2026 maturity date, unless the Credit Facility is extended or renewed or terminated earlier. The Company is currently in negotiations with the bank to renew the Credit Facility.

 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 2.35 % applied per annum. There is no applicable margin with respect to borrowings using a CB Floating Rate. The weighted average interest rate was 6.61 % and 7.44 % for fiscal 2025 and 2024, respectively.

 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 of 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.

 71

 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 22, 2025 and May 29, 2025, the Company’s wholly owned subsidiary in China, NTIC China, renewed its loan agreements with China Construction Bank Corporation. Each term loan provided NTIC China with a RMB 10,000,000 (USD $ 1.39 million). The term loans mature in April 2026 and May 2026, respectively, unless extended. The term loan that matures in April 2026 has an annual interest rate of 2.75 % with interest due monthly, and the term loan that matures in May 2026 has an annual interest rate of 2.96 % 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 August 31, 2025. The outstanding balance as of August 31, 2025 for both term loans is a total of USD $ 2,804,695 . The outstanding balance as of August 31, 2024 for both term loans was a total of USD $ 2,820,835 .

 On August 30, 2025, the Company’s majority owned subsidiary in India, Natur-Tec India, entered into a Foreign Currency Term Loan Agreement with IDFC FIRST Bank Limited (the Bank). The term loan provides Natur-Tec India with a facility of INR 500 lakhs (USD $ 600,000 ) to finance the purchase of land in Chennai, India. The loan was disbursed on August 30, 2025 for INR 461 lakhs (USD $ 522,545 ) and is repayable in 85 monthly installments to a US dollar account of USD $ 7,899 each beginning October 5, 2025 and continuing through September 5, 2032. Borrowings bear interest at a fixed rate of 6.45 % per annum. The loan is secured by a lien over Natur-Tec India’s cash deposits with the Bank totaling INR 476 lakhs (USD $ 539,731 ), and the related land purchase is expected to be registered in late November 2025. The outstanding balance as of August 31, 2025 was INR 461 lakhs (USD $ 522,545 ), of which INR 61.7 lakhs (USD $ 55,561 ) was classified as current and INR 399.3 lakhs (USD $ 466,984 ) as long-term. The term loan contains customary affirmative and negative covenants applicable to Natur-Tec India, including, among other matters, restrictions on incurring additional indebtedness, creating liens, or changing the nature of its business. Natur-Tec India was in compliance with all covenants as of August 31, 2025.

 9. 

 STOCKHOLDERS ’ EQUITY 

 During fiscal 2025, the Company’s Board of Directors declared cash dividends on the following dates in the following amounts to holders of record of the Company’s common stock as of the following record dates:

 Declaration Date 

 Amount 

 Record Date 

 Payable Date 

 October 16, 2024 

 $ 0.07 

 October 30, 2024 

 November 13, 2024 

 January 15, 2025 

 $ 0.07 

 January 29, 2025 

 February 12, 2025 

 April 16, 2025 

 $ 0.01 

 April 30, 2025 

 May 14, 2025 

 July 16, 2025 

 $ 0.01 

 July 30, 2025 

 August 13, 2025 

 72

 During fiscal 2024, the Company’s Board of Directors declared cash dividends on the following dates in the following amounts to holders of record of the Company’s common stock as of the following record dates:

 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 

 July 17, 2024 

 $ 0.07 
 
 July 31, 2024 

 August 14, 2024 

 During fiscal 2025 and fiscal 2024, the Company repurchased no shares of its common stock.

 During fiscal 2025, the Company granted stock options under the Northern Technologies International Corporation 2024 Stock Incentive Plan (the 2024 Plan) to purchase an aggregate of 245,190 shares of its common stock to various employees and directors. The weighted average per share exercise price of the stock options is $ 13.26 . The exercise price of the stock options is equal to the fair market value of the Company’s common stock on the date of grant. During fiscal 2025, stock options to purchase an aggregate of 12,000 shares of common stock were exercised at a weighted average exercise price of $ 7.43 per share on a net cashless exercise basis, resulting in no net issuance of common stock.

 During fiscal 2025, the Company granted an aggregate of 11,313 restricted stock units under the 2024 Plan to various directors. The grant date fair value of the restricted stock units was $ 13.26 per share, which was equal to the fair market value of the Company’s common stock on the date of grant, September 1, 2024. The restricted stock units generally vest after one year, subject to continued service with the Company on the vesting date.

 During fiscal 2024, the Company granted stock options under the Northern Technologies International Corporation 2019 Stock Incentive Plan (as amended, the 2019 Plan) and the 2024 Plan to purchase an aggregate of 269,844 shares of its common stock to various employees and directors. The weighted average per share exercise price of the stock options is $ 13.25 . The exercise price of the stock options is equal to the fair market value of the Company’s common stock on the date of grant. During fiscal 2024, stock options to purchase an aggregate of 74,309 shares of common stock were exercised at a weighted average exercise price of $ 9.76 per share, resulting in the net issuance of 36,094 shares of common stock since some of the options were exercised on a net cashless exercise basis.

 The Company issued 3,527 and 3,496 shares of common stock on September 1, 2024 and 2023, respectively, under the Northern Technologies International Corporation Employee Stock Purchase Plan (ESPP). The Company issued 3,856 and 3,284 shares of common stock on March 1, 2025 and 2024, respectively, under the ESPP. The ESPP is compensatory for financial reporting purposes. As of August 31, 2025, 47,871 shares of common stock remained available for sale under the ESPP.

 10. 

 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.

 73

 The following is a reconciliation of the net income per share computation for fiscal 2025 and fiscal 2024:

 Numerator: 

 August 31, 2025 

 August 31, 2024 

 Net income attributable to NTIC

 $ 
 17,619 
 
 $ 
 5,409,082 
 
 Denominator: 

 Basic-weighted shares outstanding

 9,476,085 
 
 9,434,020 
 
 Weighted shares assumed upon exercise of stock options

 163,592 
 
 399,430 
 
 Diluted – weighted shares outstanding

 9,639,676 
 
 9,833,450 
 
 Basic net income per share:

 $ 
 0.00 
 
 $ 
 0.57 
 
 Diluted net income per share:

 $ 
 0.00 
 
 $ 
 0.55 
 
 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 the 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 as of August 31, 2025 were options outstanding to purchase 1,833,783 shares of common stock. Excluded from the computation of diluted net income per share as of August 31, 2024 were options outstanding to purchase 305,514 shares of common stock.

 11. 

 STOCK-BASED COMPENSATION 

 Stock Options 

 The Company has four stock-based compensation plans under which stock options or other stock-based awards have been granted: the Northern Technologies International Corporation 2024 Stock Incentive Plan, the Northern Technologies International Corporation Amended and Restated 2019 Stock Incentive Plan, the Northern Technologies International Corporation Amended and Restated 2007 Stock Incentive Plan (the 2007 Plan) and the Northern Technologies International Corporation Employee Stock Purchase Plan. The 2024 Plan replaced the 2019 Plan with respect to future award grants, which had replaced the 2007 Plan with respect to future grants; and, therefore, no further awards may be made under the 2019 Plan or 2007 Plan. The Compensation Committee of the Board of Directors and the Board of Directors administer these plans.

 The 2024 Plan provides for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, stock unit awards, performance awards, and stock bonuses to eligible recipients to enable the Company and its subsidiaries to attract and retain qualified individuals through opportunities for equity participation in the Company and to reward those individuals who contribute to the achievement of the Company’s economic objectives. Subject to adjustment as provided in the 2024 Plan, the maximum number of shares of the Company’s common stock available for issuance under the 2024 Plan is (i) 800,000 shares of the Company’s common stock; plus (ii) the number of shares of the Company’s common stock remaining available for issuance under the 2019 Plan but not subject to outstanding awards under the 2019 Plan as of January 19, 2024; plus (iii) the number of additional shares of the Company’s common stock subject to awards outstanding under the 2019 Plan as of January 19, 2024 but only to the extent that such outstanding awards are forfeited, cancelled, expire, or otherwise terminate without the issuance of such shares of the Company’s common stock after January 19, 2024. Options granted generally have a term of ten years and become exercisable over a one - or three -year period beginning on the one-year anniversary of the date of grant. Options are granted at per share exercise prices equal to the market value of the Company’s common stock on the date of grant. The Company issues new shares upon the exercise of options. As of August 31, 2025, options to purchase an aggregate of 245,190 shares of the Company’s common stock were outstanding under the 2024 Plan and 700,556 shares of the Company’s common stock remained available for grant under the 2024 Plan. As of August 31, 2025, options to purchase an aggregate of 1,387,415 shares of the Company’s common stock were outstanding under the 2019 Plan, and 290,533 shares of the Company’s common stock were outstanding under the 2007 Plan.

 74

 The Company granted options to purchase an aggregate of 245,190 and 269,844 shares of its common stock during fiscal 2025 and 2024, respectively. The fair value of option grants is determined at the date of grant using the Black-Scholes option pricing model with the assumptions listed below. The Company recognized compensation expense of $ 1,211,434 during fiscal 2025 and compensation expense of $ 1,381,169 during fiscal 2024 related to the options that vested during such time period. As of August 31, 2025, the total compensation cost for non-vested options not yet recognized in the Company’s consolidated statements of operations was $ 1,010,384 . Stock-based compensation expense of $ 672,054 is expected during fiscal 2026 and $ 338,330 is expected to be recognized during fiscal 2027, based on outstanding options as of August 31, 2025. Future option grants will impact the compensation expense recognized. Stock-based compensation expense is included in general and administrative expense on the consolidated statements of operations.

 The fair value of each option grant is estimated on the grant date using the Black-Scholes option pricing model with the following assumptions and results for the grants:

 Fiscal Year 2025 

 Fiscal Year 2024 

 Dividend yield

 2.15 
 % 
 
 2.18 
 % 
 
 Expected volatility

 47.4 
 % 
 
 46.1 
 % 
 
 Expected life of option (years)

 5 

 5 

 Weighted average risk-free interest rate

 3.66 
 % 
 
 4.23 
 % 
 
 Stock option activity during the periods indicated was as follows:

 Number of

 Shares (#) 

 Weighted Average

 Exercise Price 

 Aggregate 

 Intrinsic Value 

 Outstanding as of August 31, 2023

 1,557,132 
 
 $ 
 11.08 
 
 Options granted

 269,844 
 
 13.25 
 
 Options exercised

 ( 74,309 
 ) 
 
 9.76 
 
 Options terminated

 — 
 
 — 
 
 Outstanding as of August 31, 2024

 1,752,665 
 
 $ 
 11.47 
 
 Options granted

 245,190 
 
 13.26 
 
 Options exercised

 ( 12,000 
 ) 
 
 7.43 
 
 Options terminated

 ( 62,717 
 ) 
 
 7.43 
 
 Outstanding as of August 31, 2025

 1,923,138 
 
 $ 
 11.86 
 
 $ 
 62,547 
 
 Exercisable as of August 31, 2025

 1,476,274 
 
 $ 
 11.52 
 
 $ 
 62,547 
 
 The weighted average per share fair value of options granted during fiscal 2025 and fiscal 2024 was $ 5.07 and $ 5.04 , respectively. The weighted average remaining contractual life of the options outstanding as of August 31, 2025 and 2024 was 5.74 years and 6.03 years, respectively.

 75

 Restricted Stock Units 

 Restricted stock units were granted under the 2024 Plan on September 1, 2024 to certain non-employee directors during the year ended August 31, 2025 and vest in full on the one-year anniversary of the date of grant. There were no restricted stock units granted or outstanding during the fiscal year ended August 31, 2024. A summary of restricted stock unit activity for the year ended August 31, 2025 is as follows:

 Number of

 Restricted Stock

 Units 

 Weighted Average

 Grant Date

 Fair Value 

 Outstanding as of August 31, 2024

 — 
 
 $ 
 — 
 
 Granted

 11,313 
 
 13.26 
 
 Vested/Settled

 — 
 
 — 
 
 Outstanding as of August 31, 2025

 11,313 
 
 $ 
 13.26 
 
 Restricted stock units are valued using the closing stock price on the grant date. The Company recognizes the grant date fair value of the restricted stock units over the vesting term, or one year. For the year ended August 31, 2025, the Company recognized $ 148,652 in stock-based compensation expense. As of August 31, 2025, there was no unrecognized stock-based compensation expense relating to outstanding restricted stock units.

 12. 

 SEGMENT AND GEOGRAPHIC INFORMATION 

 Segment Information 

 The Company’s chief operating decision maker (CODM) 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, general industrial, mechanical, mining, agricultural, and retail consumer markets for over 50 years and, more recently, has also expanded into the oil and gas industry. The Company also sells a portfolio of proprietary bio-based and compostable (fully biodegradable) polymer resins and finished products under the Natur-Tec® brand.

 The accounting policies of the segments are the same as those described in the summary of significant accounting policies. There are no intersegment sales and no operating segments have been aggregated.

 The following tables present the Company’s net sales by segment:

 Fiscal 2025 

 Fiscal 2024 

 ZERUST® net sales

 $ 
 62,488,397 
 
 $ 
 63,092,575 
 
 Natur-Tec® net sales

 21,746,077 
 
 21,966,942 
 
 Total net sales

 $ 
 84,234,474 
 
 $ 
 85,059,517 
 
 The following table sets forth the Company’s cost of goods sold by segment:

 Fiscal 2025 

 Fiscal 2024 

 Direct cost of goods sold

 ZERUST®

 $ 
 35,535,306 
 
 $ 
 33,623,834 
 
 Natur-Tec®

 13,994,302 
 
 14,148,145 
 
 Indirect cost of goods sold

 3,028,311 
 
 3,501,176 
 
 Total net cost of goods sold

 $ 
 52,557,919 
 
 $ 
 51,273,155 
 
 76

 The following table sets forth the Company’s gross profit by segment:

 Fiscal 2025 

 Fiscal 2024 

 ZERUST® gross profit

 $ 
 26,953,091 
 
 $ 
 29,468,741 
 
 Natur-Tec® gross profit

 7,751,775 
 
 7,818,797 
 
 Total segment gross profit

 34,704,866 
 
 37,287,538 
 
 Indirect cost of goods sold

 ( 3,028,311 
 ) 
 
 ( 3,501,176 
 ) 
 
 Total gross profit

 $ 
 31,676,555 
 
 $ 
 33,786,362 
 
 Total joint venture operations

 8,545,207 
 
 9,475,078 
 
 Selling expenses

 ( 17,820,196 
 ) 
 
 ( 16,413,672 
 ) 
 
 General and administrative expenses

 ( 14,792,988 
 ) 
 
 ( 14,176,494 
 ) 
 
 Research and development expenses

 ( 5,038,281 
 ) 
 
 ( 4,802,791 
 ) 
 
 Interest income

 308,054 
 
 118,827 
 
 Interest expense

 ( 599,927 
 ) 
 
 ( 340,129 
 ) 
 
 Other income

 752,971 
 
 — 
 
 Income before income tax expense

 $ 
 3,031,395 
 
 $ 
 7,647,181 
 
 The Company utilizes product net sales, direct and indirect cost of goods sold, and gross profit for each product in reviewing the financial performance of a product type. Further allocation of Company expenses or assets, aside from amounts presented in the tables above, is not utilized in evaluating product performance, nor does such allocation occur for internal financial reporting. The CODM uses gross profit and considers budget-to-actual variances on a quarterly basis when making decisions about the allocation of operating and capital resources to each segment. The CODM also uses segment gross profit for evaluating pricing strategy to assess the performance of each segment by comparing the results of each segment with one another and in determining the compensation of certain employees. The CODM has ultimate responsibility for enterprise decisions and making resource allocation decisions for the company and the segments. Asset information, including capital expenditures are reviewed by the CODM at the consolidated entity level and not by segment. Refer to total assets on the consolidated balance sheets.

 Geographic Information 

 Net sales by geographic location for fiscal 2025 and fiscal 2024 were as follows:

 Fiscal Year Ended August 31, 

 2025 

 2024 

 Inside the U.S. to unaffiliated customers

 $ 
 29,547,889 
 
 $ 
 30,492,665 
 
 Outside the U.S. to:

 Joint ventures in which the Company is a shareholder directly and indirectly

 2,368,099 
 
 2,228,894 
 
 Unaffiliated customers

 52,318,486 
 
 52,337,958 
 
 $ 
 84,234,474 
 
 $ 
 85,059,517 
 
 Net sales by geographic location are based on the location of the customer. No single customer accounted for more than 10% of consolidated revenue.

 77

 Fees for services provided to joint ventures by geographic location as a percentage of total fees for services provided to joint ventures during fiscal 2025 and fiscal 2024, respectively, were as follows:

 Fiscal 2025 

 % of Total

 Fees for

 Services

 Provided to

 Joint

 Ventures 

 Fiscal 2024 

 % of Total

 Fees for

 Services

 Provided to

 Joint

 Ventures 

 Germany

 $ 
 846,281 
 
 16.9 
 % 
 
 $ 
 828,932 
 
 15.8 
 % 
 
 Poland

 840,467 
 
 16.8 
 % 
 
 849,736 
 
 16.2 
 % 
 
 Japan

 647,573 
 
 12.9 
 % 
 
 582,674 
 
 11.1 
 % 
 
 Finland

 411,268 
 
 8.2 
 % 
 
 395,515 
 
 7.5 
 % 
 
 United Kingdom

 404,342 
 
 8.1 
 % 
 
 375,150 
 
 7.1 
 % 
 
 Thailand

 371,175 
 
 7.4 
 % 
 
 332,148 
 
 6.3 
 % 
 
 Sweden

 330,205 
 
 6.6 
 % 
 
 445,560 
 
 8.5 
 % 
 
 France

 320,546 
 
 6.4 
 % 
 
 485,627 
 
 9.2 
 % 
 
 Czech Republic

 303,869 
 
 6.1 
 % 
 
 338,195 
 
 6.4 
 % 
 
 South Korea

 186,669 
 
 3.7 
 % 
 
 258,314 
 
 4.9 
 % 
 
 Indonesia

 137,125 
 
 2.7 
 % 
 
 166,053 
 
 3.2 
 % 
 
 Other

 206,631 
 
 4.2 
 % 
 
 193,877 
 
 3.7 
 % 
 
 $ 
 5,006,151 
 
 100.0 
 % 
 
 $ 
 5,251,782 
 
 100.0 
 % 
 
 Sales to the Company’s joint ventures are included in the foregoing segment and geographic information; however, sales by the Company’s joint ventures to other parties are not included. The foregoing segment and geographic information represents only sales recognized directly by the Company and sold in that geographic territory.

 See Note 7 for additional details on geographical information regarding equity in income from joint ventures.

 The geographical distribution of total property and equipment and net sales, which are based on the geographical location of the customer, is as follows:

 At August 31, 2025 

 At August 31, 2024 

 China

 $ 
 5,355,918 
 
 $ 
 5,627,202 
 
 Other

 1,296,988 
 
 1,217,400 
 
 United States

 8,531,012 
 
 9,421,051 
 
 Total property and equipment

 $ 
 15,183,918 
 
 $ 
 16,265,653 
 
 Fiscal Year Ended

 August 31, 2025 

 Fiscal Year Ended

 August 31, 2024 

 China

 $ 
 16,239,889 
 
 $ 
 14,245,238 
 
 Brazil

 6,570,850 
 
 5,994,372 
 
 India

 22,620,639 
 
 22,189,317 
 
 Other

 9,255,207 
 
 12,137,925 
 
 United States

 29,547,889 
 
 30,492,665 
 
 Total net sales

 $ 
 84,234,474 
 
 $ 
 85,059,517 
 
 Long-lived assets consist of property and equipment. These assets are periodically reviewed to assure the net realizable value from the estimated future production based on forecasted sales exceeds the carrying value of the assets.

 Sales to the Company’s joint ventures are included in the foregoing segment and geographic information; however, sales by the Company’s joint ventures to other parties are not included. The foregoing segment and geographic information represents only sales recognized directly by the Company and sold in that geographic territory.

 78

 All joint venture operations, including equity in income, fees for services and related dividends, are primarily related to ZERUST® products and services.

 13. 

 RETIREMENT PLAN 

 The Company has a 401(k) employee savings plan. Employees who meet certain age and service requirements may elect to contribute up to 15 % of their salaries. The Company typically contributes the lesser of 50 % of the participant’s contributions or 3.5 % of the employee’s salary. The Company recognized expense for the savings plan of $ 339,319 and $ 332,726 for fiscal 2025 and fiscal 2024, respectively.

 14. 

 RELATED PARTY TRANSACTIONS 

 During both fiscal 2025 and fiscal 2024, the Company made consulting payments of $ 144,000 to Bioplastic Polymers LLC, an entity owned by Ramani Narayan, Ph.D., a director of the Company. Dr. Narayan provides certain consulting services to the Company relating to the Natur-Tec® business and bioplastics program.

 15. 

 INCOME TAXES 

 The provision for income taxes for the fiscal years ended August 31, 2025 and 2024 was approximately as follows:

 Fiscal Year Ended August 31, 

 2025 

 2024 

 Current:

 Federal

 $ 
 — 
 
 $ 
 — 
 
 State

 69,000 
 
 48,000 
 
 Foreign

 1,823,000 
 
 1,601,000 
 
 1,892,000 
 
 1,649,000 
 
 Deferred:

 Federal

 — 
 
 — 
 
 State

 — 
 
 — 
 
 Foreign

 153,002 
 
 ( 323,203 
 ) 
 
 153,002 
 
 ( 323,203 
 ) 
 
 $ 
 2,045,002 
 
 $ 
 1,325,797 
 
 Reconciliations of the expected federal income tax at the statutory rate of 21.0 % with the provisions for income taxes for the fiscal years ended August 31, 2025 and 2024 were approximately as follows:

 Fiscal Year Ended August 31, 

 2025 

 2024 

 Tax computed at statutory rates

 $ 
 647,000 
 
 $ 
 1,627,000 
 
 State income tax, net of federal benefit

 120,000 
 
 21,000 
 
 Tax effect on equity in income of international joint ventures

 ( 742,000 
 ) 
 
 ( 887,000 
 ) 
 
 Tax effect of foreign operations

 875,000 
 
 371,000 
 
 Deemed repatriation

 26,000 
 
 4,000 
 
 Foreign tax credit

 — 
 
 ( 321,000 
 ) 
 
 Research and development credit

 ( 138,000 
 ) 
 
 ( 512,000 
 ) 
 
 Valuation allowance

 1,363,000 
 
 1,066,000 
 
 Stock based compensation

 77,002 
 
 175,000 
 
 Non-controlling interest

 ( 62,000 
 ) 
 
 ( 71,000 
 ) 
 
 Prior year true-up

 ( 112,000 
 ) 
 
 ( 146,000 
 ) 
 
 Other

 ( 9,000 
 ) 
 
 ( 1,203 
 ) 
 
 $ 
 2,045,002 
 
 $ 
 1,325,797 
 
 79

 The Company has not provided U.S. income taxes or foreign withholding taxes with respect to its portion of the cumulative undistributed earnings of certain foreign subsidiaries and joint ventures that are essentially permanent in duration. As a result of the 2017 tax law changes, U.S. federal income taxes on dividends received from the Company’s foreign subsidiaries and joint ventures after December 31, 2017 have been generally eliminated. However, the Company continues to be subject to foreign withholding taxes upon repatriation of any undistributed earnings that are not essentially permanent in duration. The Company recorded tax expense of approximately $ 200,000 in fiscal 2025 and a tax benefit of approximately $ 180,000 during fiscal 2024, representing changes in the deferred tax liability for foreign withholding taxes to be paid with respect to the portion of the cumulative undistributed earnings of foreign subsidiaries and joint ventures that the Company determined were not essentially permanent in duration.

 The Company measures deferred tax assets and liabilities using enacted tax rates that will apply in the years in which the temporary differences are expected to be recovered or paid. The tax effect of the temporary differences and tax carryforwards comprising the net deferred taxes shown on the consolidated balance sheets as of August 31, 2025 and 2024 was approximately as follows:

 August 31, 

 2025 

 2024 

 Stock-based compensation

 $ 
 797,000 
 
 $ 
 637,100 
 
 Foreign tax credit carryforward

 2,814,400 
 
 3,844,800 
 
 Capitalized research and experimentation

 2,472,400 
 
 2,037,800 
 
 Other credit and loss carryforward

 6,757,900 
 
 5,974,200 
 
 Capital loss carryforward

 129,900 
 
 — 
 
 Interest expense limitation

 71,300 
 
 — 
 
 Other

 922,400 
 
 965,368 
 
 Total deferred tax assets

 13,965,300 
 
 13,459,268 
 
 Valuation allowance

 ( 13,153,200 
 ) 
 
 ( 12,694,800 
 ) 
 
 Total deferred tax assets after valuation allowance

 812,100 
 
 764,468 
 
 Right-of-use asset

 ( 51,900 
 ) 
 
 ( 64,700 
 ) 
 
 Intangible assets

 ( 1,457,700 
 ) 
 
 ( 1,564,200 
 ) 
 
 Unremitted foreign earnings

 ( 234,600 
 ) 
 
 ( 34,800 
 ) 
 
 Other

 ( 77,491 
 ) 
 
 ( 61,100 
 ) 
 
 Total deferred tax liabilities

 ( 1,821,691 
 ) 
 
 ( 1,724,800 
 ) 
 
 Net deferred tax liabilities

 $ 
 ( 1,009,591 
 ) 
 
 $ 
 ( 960,332 
 ) 
 
 As of August 31, 2025, the Company has foreign tax credit carryforwards of $ 2,814,400 . This amount begins to expire to the extent not utilized by August 31, 2026. In addition, the Company had federal and state tax credit carryforwards of $ 5,575,300 as of August 31, 2025, which begin to expire in fiscal 2026. These federal and state tax credit carryforwards consist primarily of federal and Minnesota research and development credit carryforwards. The Company also has a deferred tax asset of $ 832,700 for federal net operating loss carryforwards and $ 330,100 for state net operating loss carryforwards as of August 31, 2025. The federal net operating loss carryforward has an indefinite carryforward period. The state net operating loss carryforward will begin to expire to the extent not utilized by August 31, 2026. The Company has a deferred tax asset of $ 441,600 for foreign net operating loss carryforwards, which will begin to expire to the extent not utilized by August 31, 2033.

 The Company records a tax valuation allowance to reduce deferred tax assets to the amount expected to be realized when it is more likely than not that some portion or all of its deferred tax assets will not be realized.

 The Company determined based on all available evidence, including historical data and projections of future results, that it is more likely than not that its domestic deferred tax assets will not be realized due to the absence of objectively verifiable sources of taxable income. On the basis of this evaluation, the Company has recorded a valuation allowance of $ 13,153,200 and $ 12,694,800 as of August 31, 2025 and 2024, respectively, to recognize only the portion of the deferred tax assets that is more likely than not to be realized. The net deferred tax asset as of August 31, 2025 and 2024 relates entirely to non-US deferred tax assets which are expected to be realized offset by deferred tax liability for withholding tax on cumulative undistributed earnings in foreign subsidiaries and joint ventures that the Company determined were not essentially permanent. The change in the valuation allowance totaled an increase of $ 458,400 and $ 761,100 for the years ended August 31, 2025 and 2024, respectively.

 80

 The following is a tabular reconciliation of the total amounts of approximated unrecognized tax benefits:

 Fiscal Year Ended August 31, 

 2025 

 2024 

 Gross unrecognized tax benefits – beginning balance

 $ 
 399,300 
 
 $ 
 361,200 
 
 Gross (decreases) increases – prior period tax positions

 ( 17,400 
 ) 
 
 ( 5,400 
 ) 
 
 Gross increases – current period tax positions

 40,000 
 
 43,500 
 
 Gross unrecognized tax benefits – ending balance

 $ 
 421,900 
 
 $ 
 399,300 
 
 The entire amount of unrecognized tax benefits would affect the effective tax rate if recognized. It is not expected that the amount of unrecognized tax benefits will change significantly in the next 12 months.

 The Company recognizes interest related to unrecognized tax benefits and penalties as income tax expense. Accrued interest and penalties are included within the related tax liability line in the consolidated balance sheet. There was no liability for the payment of interest and penalties as of both August 31, 2025 and August 31, 2024.

 The Company is subject to taxation in the United States and various states and foreign jurisdictions. With few exceptions, as of August 31, 2025, the Company is no longer subject to federal, state, local, or foreign examinations by tax authorities for years prior to August 31, 2022.

 On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law, which included various provisions, including the reinstatement of full expensing for qualified business property acquired and placed in service after January 19, 2025. Further, the OBBBA includes other provisions which are not effective for the Company until years ending August 31, 2026 and beyond, including immediate expensing of domestic research and experimental expenditures, modification of the limitation on the business interest deduction, and on the taxation of foreign operations. We do not expect the OBBBA to have a material impact on our consolidated financial statements.

 16. 

 COMMITMENTS AND CONTINGENCIES 

 Other Expense 

 In June 2025, NTIC China received a notice from Ningbo Customs, the customs authority at the Ningbo Port in China, regarding the historical export classification of Natur-Tec masterbatch resin products. Ningbo Customs determined that NTIC China misclassified certain products under a code that qualified for a 13 % value-added tax rebate, and reclassified them under a code that does not qualify for a value-added tax rebate. As a result, NTIC China has been assessed repayment obligations of approximately $ 236,785 and penalties of approximately $ 150,000 .

Management has accrued the full estimated liability of $ 386,785 in fiscal year 2025 within Other Expense. NTIC is evaluating potential avenues to negotiate a reduction in penalties; however, no such reductions have been agreed upon as of the issuance date of these financial statements.

 Operating Leases 

 The Company currently has operating leases for various buildings, equipment and vehicles. These leases are under non-cancelable operating lease agreements with expiration dates between November 30, 2025 and May 31, 2028. The Company has the option to extend certain leases to five or ten -year term(s) and has the right of first refusal on any sale.

 The Company records lease liabilities within current liabilities or long-term liabilities based upon the length of time associated with the lease payments. The Company records its long-term operating leases as right-of-use assets. Upon initial adoption, using the modified retrospective transition approach, no leases with terms less than 12 months have been capitalized to the consolidated balance sheet consistent with ASC 842. Instead, these leases are recognized in the consolidated statement of operations on a straight-line expense throughout the lives of the leases. None of the Company’s leases contain common area maintenance or security agreements.

 81

 The Company has made certain assumptions and judgments when applying ASC 842, the most significant of which is that the Company elected the package of practical expedients available for transition that allow the Company to not reassess whether expired or existing contracts contain leases under the new definition of a lease, lease classification for expired or existing leases and whether previously capitalized initial direct costs would qualify for capitalization under ASC 842. Additionally, the Company did not elect to use hindsight when considering judgments and estimates such as assessments of lessee options to extend or terminate a lease or purchase the underlying asset. The Company has no contingent rent agreements.

 Present Value of Leases 

 August 31, 2025 

 August 31, 2024 

 Right-of-use assets, net

 $ 
 493,050 
 
 $ 
 424,558 
 
 Current portion of lease liability

 344,739 
 
 325,116 
 
 Lease liability, less current portion

 148,311 
 
 99,442 
 
 Total lease liability

 $ 
 493,050 
 
 $ 
 424,558 
 
 The weighted-average remaining lease term was 0.80 years and 1.25 years as of August 31, 2025 and 2024, respectively. The Company’s lease agreements do not provide a readily determinable implicit rate nor is it available to the Company from its lessors. Instead, as of each of August 31, 2025 and 2024, the Company estimates the weighted-average discount rate for its operating leases to be 7.61 %, based on the incremental borrowing rate.

 Future minimum payments as of August 31, 2025 under these long-term operating leases are as follows (in thousands):

 Fiscal 2026

 $ 
 344,739 
 
 Fiscal 2027

 144,193 
 
 Fiscal 2028

 38,018 
 
 Thereafter

 — 
 
 Total future minimum lease payments

 526,950 
 
 Less amount representing interest

 ( 33,900 
 ) 
 
 Present value of obligations under operating leases

 493,050 
 
 Less current portion

 ( 344,739 
 ) 
 
 Long-term operating lease obligations

 $ 
 148,311 
 
 Operating lease cost under these leases was approximately $ 344,739 and $ 340,799 for the years ended August 31, 2025 and 2024, respectively.

 Annual Bonus Plan 

 On August 28, 2025, the Compensation Committee of the Board of Directors of the Company approved the material terms of an annual bonus plan for the Company’s executive officers as well as certain officers and employees for the fiscal year ending August 31, 2026. For fiscal 2026, as in past years, the total amount available under the bonus plan for all plan participants, including executive officers, is dependent upon the Company’s earnings before interest, taxes, and other income (EBITOI), as adjusted to take into account amounts to be paid under the bonus plan and certain other adjustments (Adjusted EBITOI). Each plan participant’s percentage of the overall bonus pool is based upon the number of plan participants, the individual’s annual base salary, and the individual’s position and level of responsibility within the Company. In the case of each of the Company’s executive officer participants, 75 % of the amount of their individual bonus payout will be determined based upon the Company’s actual EBITOI for fiscal 2026 compared to a pre-established target EBITOI for fiscal 2026, and 25 % of the payout will be determined based upon such executive officer’s achievement of certain pre-established individual performance objectives. The payment of bonuses under the plan is discretionary, and bonuses may be paid to executive officer participants in both cash and shares of the Company’s common stock, the exact amount and percentages of which are determined by the Company’s Board of Directors, upon recommendation of the Compensation Committee, after the completion of the Company’s consolidated financial statements for fiscal 2026.

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 On August 26, 2024, the Compensation Committee of the Board of Directors of the Company approved the material terms of an annual bonus plan for the Company’s executive officers as well as certain officers and employees for the fiscal year ending August 31, 2025. $ 1,100,000 was recognized for bonuses for the fiscal year ended August 31, 2025, $ 800,000 of the bonus is comprised of stock options granted to management on September 1, 2024 that will be expensed over three years and $ 300,000 will be paid out in cash and profit sharing subsequent to year end. This is compared to $ 2,200,000 recognized for bonuses for the fiscal year ended August 31, 2024, $ 800,000 of the bonus comprised of stock options granted to management on September 1, 2023 and $ 1,400,000 was paid out in cash and profit sharing subsequent to year end.

 Legal Matters 

 From time to time, the Company is subject to various other claims and legal actions in the ordinary course of its business. The Company records a liability in its consolidated financial statements for costs related to claims, including future legal costs, settlements and judgments, where the Company has assessed that a loss is probable and an amount could be reasonably estimated. If the reasonable estimate of a probable loss is a range, the Company records the most probable estimate of the loss or the minimum amount when no amount within the range is a better estimate than any other amount. The Company discloses a contingent liability even if the liability is not probable or the amount is not estimable, or both, if there is a reasonable possibility that material loss may have been incurred. In the opinion of management, as of August 31, 2025, the amount of liability, if any, with respect to these matters, individually or in the aggregate, will not materially affect the Company’s consolidated results of operations, financial position, or cash flows.

 17. 

 SUPPLEMENTAL CASH FLOW INFORMATION 

 Supplemental disclosures of cash flow information consisted of:

 Fiscal Year Ended

 August 31, 

 2025 

 2024 

 Cash paid for income tax

 $ 
 1,605,283 
 
 $ 
 1,191,538 
 
 Cash paid for interest

 599,927 
 
 340,129 
 
 Cash paid for operating leases

 344,739 
 
 340,799 
 
 18. 

 SUBSEQUENT EVENT 

 On October 15, 2025 , the Company’s Board of Directors declared a cash dividend of $ 0.01 per share of the Company’s common stock, payable on November 12, 2025 to stockholders of record on October 29, 2025 . The declaration of future dividends is not guaranteed and will be determined by the Company’s Board of Directors in light of conditions then existing, including the Company’s earnings, financial condition, cash requirements, restrictions in financing agreements, business conditions, and other factors.

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 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 

 None.
NORTHERN TECHNOLOGIES INTERNATIONAL CORP 10-K

Item 8. Financial Statements and Supplementary Data
