NORTHERN TECHNOLOGIES INTERNATIONAL CORP

1. INTERIM FINANCIAL INFORMATION

In the opinion of management, the accompanying unaudited consolidated financial statements contain all necessary adjustments, which are of a normal recurring nature, and present fairly the consolidated financial position of Northern Technologies International Corporation and its subsidiaries (the Company) as of February 28, 2026 and August 31, 2025 and the results of the Company’s operations for the three and six months ended February 28, 2026 and 2025, the changes in stockholders’ equity for the three and six months ended February 28, 2026 and 2025, and the Company’s cash flows for the six months ended February 28, 2026 and 2025, in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP).

These consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s annual report on Form 10-K for the fiscal year ended August 31, 2025. These consolidated financial statements also should be read in conjunction with the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section appearing in this report.

Operating results for the three and six months ended February 28, 2026 are not necessarily indicative of the results that may be expected for the full fiscal year ending August 31, 2026.

The Company identified immaterial prior period classification errors related to the presentation of borrowings and repayments under its revolving line of credit in its consolidated statements of cash flows and classification of selling expenses and general and administrative expenses in its consolidated statements of operations. For the six months ended February 28, 2025, the Company had previously presented net proceeds of $1,063,056 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 $16,900,943 and gross repayments of $15,837,887 under its line of credit. For the three and six months ended February 28, 2025, $338,214 was reclassified from general and administrative expenses to selling expenses. These changes had no impact on the Company’s total cash flows, financial position, or results of operations for the three and six months ended February 28, 2025.

The Company has evaluated events occurring after the date of these consolidated financial statements through the date April 9, 2026 for events requiring disclosure in these consolidated financial statements.

2. NEW SIGNIFICANT ACCOUNTING POLICIES

For the three and six months ended February 28, 2026, there have been no new significant accounting policies from those disclosed in the Company’s annual report on Form 10-K for the fiscal year ended August 31, 2025.

3. ACCOUNTING PRONOUNCEMENTS

Recently Issued Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board (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.

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:

5. PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of the following:

Depreciation expense was $250,618 and $498,808 for the three and six months ended February 28, 2026, respectively, compared to $251,230 and $518,385 for the three and six months ended February 28, 2025, respectively.

6. INTANGIBLE ASSETS, NET

Intangible assets, net consisted of the following:

Amortization expense related to intangible assets was $232,930 and $465,772 for the three and six months ended February 28, 2026, respectively, compared to $158,374 and $306,094 for the three and six months ended February 28, 2025, respectively.

As of February 28, 2026, future amortization expense related to intangible assets for each of the next five fiscal years and thereafter is estimated as follows:

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:

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 the Company with a senior secured revolving line of credit (the Credit Facility) of up to $12.0 million, which includes a $5.0 million sublimit for standby letters of credit. Borrowings of $11,282,291 and $9,329,021 were outstanding under the Credit Facility as of February 28, 2026 and August 31, 2025, respectively. The Company was in compliance with all debt covenants as of February 28, 2026.

On December 17, 2025, the Company and JPM renewed the Company’s Credit Agreement to extend the maturity date of the Credit Facility from January 5, 2026 to February 5, 2027. On January 30, 2026, the Company and JPM entered into an amendment to the Credit Agreement, which increased the availability under the Credit Facility from $10.0 million to $12.0 million.

The principal amount under the Credit Facility, together with all accrued unpaid interest and other amounts owing thereunder, if any, will be payable in full on the maturity date, unless the Credit Facility is extended or renewed or terminated earlier.

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 6.04% and 6.76% for the six months ended February 28, 2026 and 2025, 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.

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 $1.41 million). The term loans mature in April 2026 and May 2026, respectively, and the Company expects to amend or extend each loan at maturity on substantially the same terms, although there can be no assurance that it will be able to do so. The term loan that matures in April 2026 has an annual interest rate of 2.75% with interest due monthly and principal due at maturity, and the term loan that matures in May 2026 has an annual interest rate of 2.96% with interest due monthly and principal due at maturity. 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 February 28, 2026. The outstanding balance as of February 28, 2026 for both term loans is a total of USD $2,915,919. The outstanding balance as of August 31, 2025 for both term loans was a total of USD $2,804,695.

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, which was registered in November 2025. The outstanding balance as of February 28, 2026 was INR 439.4 lakhs (USD $482,375), of which INR 55.1 lakhs (USD $60,536) was classified as current and INR 384.2 lakhs (USD $421,839) 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 February 28, 2026.

9. STOCKHOLDERS’** EQUITY**

During the six months ended February 28, 2026, the Company’s Board of Directors declared cash dividends on the following dates in the following amounts to the following holders of the Company’s common stock:

During the six months ended February 28, 2025, the Company’s Board of Directors declared cash dividends on the following dates in the following amounts to the following holders of the Company’s common stock:

During the six months ended February 28, 2026 and 2025, the Company repurchasedno shares of its common stock.

During the six months ended February 28, 2026 and 2025, the Company issued 11,313 andno shares of common stock upon the settlement of restricted stock units, respectively.

The Company issued 5,198 and 3,527 shares of common stock on September 1, 2025 and 2024, respectively, under the Northern Technologies International Corporation Employee Stock Purchase Plan (the ESPP). The ESPP is compensatory for financial reporting purposes. As of February 28, 2026,42,673 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 and the settlement of restricted stock units using the treasury stock method, if dilutive. For periods in which the Company reports a net loss, potential common shares are excluded from the computation of diluted net income per share because their effect would be anti-dilutive.

The following is a reconciliation of the net income per share computation for the three and six months ended February 28, 2026 and February 28, 2025:

The dilutive impact summarized above relates to periods in which 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 is based on the weighted average number of common shares outstanding during the applicable period. When dilutive, stock options and restricted stock units are included as equivalents using the treasury stock method in computing diluted net income per common share. For the three months ended February 28, 2026, potential common shares were excluded from the computation of diluted net income per common share because the Company reported a net loss for the period and the effect of these shares would have been anti-dilutive. Excluded from the computation of diluted net income per common share for the three and six months ended February 28, 2026 were options outstanding to purchase 477,175 shares of common stock. Excluded from the computation of diluted net income per common share for the three and six months ended February 28, 2025 were options outstanding to purchase 756,661 shares of common stock.

11. STOCK-BASED COMPENSATION

Stock Options

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

The weighted average per share fair value of options granted during the six months ended February 28, 2026 and 2025 was $3.05 and $4.95, respectively. The weighted average remaining contractual life of the options outstanding as of February 28, 2026 and 2025 was 5.74 years and 6.03 years, respectively.

The Company recognized stock option compensation expense of $510,251 and $602,821 during the six months ended February 28, 2026 and 2025, respectively. As of February 28, 2026, there was $1,266,370 of unrecognized stock option compensation expense. The amount is expected to be recognized over a period of 2.5 years.

Restricted Stock Units

Restricted stock units (RSUs) were granted on September 1, 2025 under the 2024 Plan to certain non-employee directors and vest in full on the one-year anniversary of the date of grant. A summary of RSU activity for the six months ended February 28, 2026 is as follows:

RSUs are valued using the closing stock price on the grant date. The Company recognizes the grant date fair value of the RSUs over the vesting term, or one year. The Company recognized RSU stock-based compensation expense of $104,263 and $73,513 during the six months ended February 28, 2026 and 2025, respectively. As of February 28, 2026, there was $106,151 in unrecognized stock-based compensation expense relating to outstanding RSUs, which is expected to be recognized over a period of 0.50 years.

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 intotwo 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 in the Company’s annual report on Form 10-K for the fiscal year ended August 31, 2025. There are no intersegment sales, and no operating segments have been aggregated.

The following table presents the Company’s net sales by segment for the three and six months ended February 28, 2026 and 2025, respectively:

The following table sets forth the Company’s cost of goods sold by segment for the three and six months ended February 28, 2026 and 2025, respectively:

The following table sets forth the Company’s gross profit by segment for the three and six months ended February 28, 2026 and 2025, respectively:

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 the three and six months ended February 28, 2026 and 2025 were as follows:

Net sales by geographic location are based on the location of the customer. No single customer accounted for more than 10% of consolidated revenue.

Fees for services provided to joint ventures by geographic location as a percentage of total fees for services provided to joint ventures during the three and six months ended February 28, 2026 and 2025, respectively, were as follows:

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:

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.

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

13. COMMITMENTS AND CONTINGENCIES

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 February 28, 2026, 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.

14. SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental disclosures of cash flow information consisted of:

15. INCOME TAXES

Income tax expense for the three and six months ended February 28, 2026 was $75,490 and $340,519, respectively, compared to $275,197 and $493,068, respectively, for the three and six months ended February 28, 2025. The expense was largely due to foreign operations. The Company has federal and state tax credit carry forwards, net operating loss carry forwards and foreign tax carry forwards. The Company has recorded a full valuation allowance against the U.S. deferred tax assets as of February 28, 2026 and August 31, 2025.

16. OTHER INCOME–** EMPLOYEE RETENTION CREDIT**

During the three and six months ended February 28, 2025, the Company received $1,139,756 in cash as a result of Employee Retention Credits (ERC), which are refundable tax credits against certain employment taxes initially made available under the Coronavirus Aid, Relief, and Economic Security Act. The ERC was received in cash and 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 during the three and six months ended February 28, 2025. The ERC payments of $1,139,756 are recorded as Other Income in the condensed consolidated statements of operations, while the interest income of $181,529 is recorded separately under Interest Income in the condensed consolidated statements of operations for the three and six months ended February 28, 2025.

No ERC income or related interest income was recognized during the three and six months ended February 28, 2026.

ITEM 2. MANAGEMENT’**S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS