NORTHERN TECHNOLOGIES INTERNATIONAL CORP Stock Compensation Disclosure

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.

 

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.

 

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.