Northern Technologies International (NTIC) 8-KResults of Operations and Financial Condition

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

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Date of Report (Date of earliest event reported): November 17, 2023

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NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION

(Exact name of registrant as specified in its charter)

(763) 225-6600

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

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

The information appearing below under Item 4.02 is incorporated herein by reference.

(a)       On November 17, 2023, the management and Audit Committee of the Board of Directors of Northern Technologies International Corporation (the “Company” or “NTIC”) determined that the Company’s consolidated financial statements for the three and six months ended February 28, 2023 and three and nine months ended May 31, 2023 require restatement to correct the accounting treatment of employee retention credits (“ERCs”), and disclosures, which ERCs were incorrectly recognized as income during such periods. The change will result in a decrease to net income attributable to NTIC of $474,000 and $466,000 during the three months ended February 28, 2023 and May 31, 2023, respectively, compared to the same prior year periods. The change to net income attributable to NTIC includes the effect of the adjustment on the management bonus accrual. In the course of preparing the Company’s consolidated financial statements for the fiscal year ended August 31, 2023, the Company determined that although the Company believes the collection of the ERCs are still “more likely than not,” the Company is not able to deem the receipt of the ERCs “probable” under U.S. generally accepted accounting practices (“U.S. GAAP”), therefore, requiring the restatement of the Company’s previously issued consolidated financial statements for the three and six months ended February 28, 2023 and three and nine months ended May 31, 2023 and amendments to the Company’s related previously filed quarterly reports on Form 10-Q.

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 ERCs, which are refundable tax credits 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 ERCs.

The Company engaged tax advisors of a Big 4 accounting firm which determined the Company qualified for ERCs. The Company qualified for ERCs based on qualified wages paid in the first and second quarters of 2021 and filed for and recognized $573,751 and $566,006, respectively, of income from the ERCs in the second and third quarters of fiscal 2023. In connection with the preparation of its consolidated financial statements for the fiscal year ended August 31, 2023, the Company concluded that it should have accounted for the ERCs as government grants in accordance with International Accounting Standard (IAS) 20, Accounting for Government Grants and Disclosure of Government Assistance (“IAS 20”) since U.S. GAAP does not provide for the accounting of government grants. Pursuant to IAS 20, the Company cannot recognize any income from the grant until it is “reasonably assured” (similar to the “probable” threshold in U.S. GAAP) that the grant conditions will be met and that the grant will be received, at which time 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. In connection with the preparation of the Company’s consolidated financial statements for the fiscal year ended August 31, 2023, the Company determined that although it believes the collection of the ERCs are still “more likely than not,” the Company is not able to deem the credits “probable,” and, therefore, cannot be reasonably assured that the grant conditions will be met, requiring the restatement of the Company’s previously issued consolidated financial statements for the three and six months ended February 28, 2023 and three and nine months ended May 31, 2023.

As a result of the foregoing, the Company’s management and the Audit Committee of the Board of Directors concluded that the Company’s previously issued consolidated financial statements for the three and six months ended February 28, 2023, which are included in the Company’s quarterly report on Form 10-Q for the quarterly period ended February 28, 2023 (the “Second Quarter Form 10-Q”), and previously issued consolidated financial statements for the three and nine months ended May 31, 2023, which are included in the Company’s quarterly report on Form 10-Q for the quarterly period ended May 31, 2023 (the “Third Quarter Form 10-Q”), which were filed with the Securities and Exchange Commission (“SEC”) on April 13, 2023 and July 13, 2023, respectively, should not be relied upon with respect to the matters described herein. The Company intends to file amendments to its Second Quarter Form 10-Q and its Third Quarter Form 10-Q with the SEC to correct the accounting treatment of the ERCs and related impacts and disclosures.

The Audit Committee of the Board of Directors and management of the Company have discussed the matters disclosed in this current report on Form 8-K with the Company’s independent registered public accounting firm, Baker Tilly US, LLP.

The following tables summarize the effects of the restatements on select consolidated statements of operations, balance sheet and cash flow amounts as reported as of and for the periods stated and are unaudited:

Consolidated Balance Sheet:

Consolidated Statements of Operations:

Consolidated Statements of Comprehensive Income:

Consolidated Statements of Cash Flows:

Consolidated Balance Sheet:

Consolidated Statements of Operations:

Consolidated Statements of Comprehensive Income:

Consolidated Statements of Cash Flows:

In connection with its evaluation of the restatements described above, management of the Company has concluded that a material weakness in the Company’s internal control over financial reporting existed as of February 28, 2023 and May 31, 2023. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The Company did not maintain effective controls over the probability assessment associated with the recognition of income related to the ERCs.

The Company’s management is taking steps to remediate the material weakness in its internal control over financial reporting relating to the probability assessment associated with the recognition of income related to ERCs. These steps will include the preparation of a technical accounting memorandum for any material unusual transactions including careful evaluation of any probability assessments or other areas of judgment involved, such as the ERCs, to determine the correct accounting treatment for such transactions. Management believes the additional control procedures designed, and when implemented, will fully remediate the material weakness.

The Company intends to promptly file an amendment to the Second Quarter Form 10-Q containing restated consolidated financial statements for the three and six months ended February 28, 2023 and an amendment to the Third Quarter Form 10-Q containing restated consolidated financial statements for the three and nine months ended May 31, 2023.

Forward-Looking Statements

This current report on Form 8-K contains not only historical information, but also forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are subject to the safe harbor created by those sections. Such statements include the Company’s ability to remediate the material weakness in its internal control over financial reporting, the Company’s intention to file amendments to its Second Quarter Form 10-Q and its Third Quarter Form 10-Q, and other statements that can be identified by words such as “believes,” “continues,” “expects,” “anticipates,” “intends,” “potential,” “outlook,” “will,” “may,” “would,” “should,” “guidance” or words of similar meaning, and the use of future dates. Such forward-looking statements are based upon the current beliefs and expectations of the Company’s management and are inherently subject to risks and uncertainties that could cause actual results to differ materially from those projected or implied. Such potential risks and uncertainties include, but are not limited to, in no particular order: the risk that the material weakness will not be remediated effectively or on a timely basis or that additional material weaknesses will occur in the future; the health of the U.S. and worldwide economies, including in particular the U.S. automotive industry and its evolution towards electric vehicles; the effect of economic uncertainty, recessionary indicators, inflation, increased interest rates and turmoil in the global credit, financial and banking markets or perception thereof; the effect of supply chain disruptions; the effect of COVID-19; dependence on joint ventures, relationships with joint venture partners and their success, including fees and dividend distributions; risks associated with international operations, exposure to exchange rate fluctuations, tariffs and trade disputes; the effect of economic slowdown and political unrest, including the Russia and Ukraine war and the Israel and Hamas conflict; the level of growth in the Company’s markets; its investments in research and development efforts; acceptance of existing and new products; timing of purchase orders under supply contracts; variability in sales to oil and gas customers and effect on quarterly financial results; increased competition; costs and effects of complying with changes in tax, fiscal, government and other regulatory policies, and rules relating to environmental, health and safety matters; and its reliance on its intellectual property rights and the absence of infringement of the intellectual property rights of others. More detailed information on these and additional factors which could affect the Company’s operating and financial results is described in its filings with the Securities and Exchange Commission, including its annual report on Form 10-K for the fiscal year ended August 31, 2022 and subsequent quarterly reports on Form 10-Q, as amended if appropriate. The Company urges all interested parties to read these reports to gain a better understanding of the many business and other risks that it faces. Additionally, the Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements, which may be made to reflect events or circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.