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<SEC-DOCUMENT>0001145443-02-000812.txt : 20021127
<SEC-HEADER>0001145443-02-000812.hdr.sgml : 20021127
<ACCEPTANCE-DATETIME>20021127121524
ACCESSION NUMBER:		0001145443-02-000812
CONFORMED SUBMISSION TYPE:	10KSB
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20020831
FILED AS OF DATE:		20021127

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			NORTHERN TECHNOLOGIES INTERNATIONAL CORP
		CENTRAL INDEX KEY:			0000875582
		STANDARD INDUSTRIAL CLASSIFICATION:	CONVERTED PAPER & PAPERBOARD PRODS (NO CONTAINERS/BOXES) [2670]
		IRS NUMBER:				410857886
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			0831

	FILING VALUES:
		FORM TYPE:		10KSB
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-11038
		FILM NUMBER:		02842634

	BUSINESS ADDRESS:	
		STREET 1:		6680 N HIGHWAY 49
		CITY:			LINO LAKES
		STATE:			MN
		ZIP:			55014
		BUSINESS PHONE:		6127841250

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	NORTHERN INSTRUMENTS CORP
		DATE OF NAME CHANGE:	19930328
</SEC-HEADER>
<DOCUMENT>
<TYPE>10KSB
<SEQUENCE>1
<FILENAME>d11556.htm
<TEXT>
<html>
<head>
<title>NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION FORM 10-KSB 8/31/02</title>
</head>
<body>



<HR WIDTH=100% SIZE=2 NOSHADE>

<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>SECURITIES
AND
EXCHANGE COMMISSION <BR>
Washington,
D.C. 20549 </B></FONT></P>

<HR SIZE=1 NOSHADE WIDTH=35% ALIGN=CENTER>

<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=3><B>FORM 10-KSB</B></FONT></P>

<P ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(Mark one)</FONT></P>


<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=33%><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>[X]</B></FONT></FONT></TD>
<TD ALIGN=CENTER WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN=LEFT WIDTH=37%><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF<BR>THE SECURITIES EXCHANGE ACT OF 1934</B></FONT></FONT></TD>
<TD ALIGN=CENTER WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
</TR>
</TABLE>
<BR>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD ALIGN=LEFT WIDTH=45%><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>For the
Fiscal Year Ended August 31, 2002</B></FONT></FONT></TD>
<TD ALIGN=CENTER WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD ALIGN=RIGHT WIDTH=50%><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Commission File No. 1-11038</B></FONT></FONT></TD>
</TR>
</TABLE>
<BR>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=33%><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">[&nbsp;&nbsp;&nbsp;]</FONT></FONT></TD>
<TD ALIGN=CENTER WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN=LEFT WIDTH=37%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF<BR>THE SECURITIES EXCHANGE ACT OF 1934</FONT></TD>
<TD ALIGN=CENTER WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
</TR>
</TABLE>
<BR>
<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>

<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4><B>NORTHERN
TECHNOLOGIES INTERNATIONAL CORPORATION</B></FONT><BR>
<FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>(Exact name of small
business issuer as specified in its charter)</FONT></P>
</TD>
</TR>
</TABLE>
<BR>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD ALIGN=CENTER WIDTH=33%><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Delaware</B><BR>(State or other jurisdiction of<BR>incorporation or organization) </FONT></FONT></TD>
<TD ALIGN=CENTER WIDTH=34%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD ALIGN=CENTER WIDTH=33%><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>41-0857886</B><BR>
(I.R.S. Employer<BR> Identification No.)</FONT></FONT></TD>
</TR>
</TABLE>
<BR>
<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>

<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF"><FONT SIZE="2"><B>6680 N. Highway 49,
Lino Lakes, Minnesota 55014</B><BR>(Address of principal
executive offices) (Zip code)</FONT></FONT></P>

<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF"><FONT SIZE="2">Registrant&#146;s telephone
number, including area code: <B>(651) 784-1250</B></FONT></FONT></P>

<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Securities registered
pursuant to Section 12(b) of the Act: </FONT></P>

</TD>
</TR>
</TABLE>
<BR>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD ALIGN=CENTER WIDTH=33%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Title of each class </FONT></TD>
<TD ALIGN=CENTER WIDTH=34%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD ALIGN=CENTER WIDTH=33%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Name of each exchange on which registered</FONT></TD>
</TR>
</TABLE>
<BR>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD ALIGN=CENTER WIDTH=33%><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Common Stock, $.02 par value</B></FONT></FONT> </TD>
<TD ALIGN=CENTER WIDTH=34%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD ALIGN=CENTER WIDTH=33%><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>American Stock Exchange</B></FONT></FONT>
</TD>
</TR>
</TABLE>
<BR>
<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>

<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Securities registered
pursuant to Section 12(g) of the Act: </FONT></P>

<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>None.</FONT></H1>
</TD>
</TR>
</TABLE>



<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Check whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. YES |X| NO |_|</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B contained herein, and no disclosure will be
contained, to the best of Registrant&#146;s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. |X|</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The Registrant&#146;s revenues for the fiscal year ended August 31, 2002 were $7,597,130</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">As of November 15, 2002, 3,635,751 shares of Common Stock of the
Registrant were outstanding, and the aggregate market value of the Common Stock
of the Registrant as of that date (based upon the $3.33 per share closing price
of the Common Stock at that date as reported on the American Stock Exchange)
excluding outstanding shares beneficially owned by directors and executive
officers, was approximately $8,361,670.</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Documents incorporated by reference: None.</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Transitional Small Business Disclosure Format (check one): YES |_| NO |X|</FONT></FONT></P>

<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>&nbsp;</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>


<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>PART I</B></FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>This Form 10-KSB contains
certain forward-looking statements. For this purpose, any statements contained
in this Form 10-KSB that are not statements of historical fact may be deemed to
be forward-looking statements. Without limiting the foregoing, words such as
&#147;may,&#148; &#147;will,&#148; &#147;expect,&#148; &#147;believe,&#148;
&#147;anticipate,&#148; &#147;estimate&#148; or &#147;continue&#148; or
comparable terminology are intended to identify forward-looking statements.
These statements by their nature involve substantial risks and uncertainties,
and actual results may differ materially depending on a variety of factors,
including those set forth in the section below entitled &#147;Certain Important
Factors&#148; and in &#147;Management&#146;s Discussion and Analysis of
Financial Condition and Results of Operations&#148; in this Report.</I></FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Item 1. DESCRIPTION OF BUSINESS.</B></FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>(a) Business Development</B></FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Northern Instruments, Inc., a
predecessor to Northern Technologies International Corporation, was incorporated
in the State of Minnesota on August&nbsp;4, 1970. In 1976, Northern Instruments,
Inc. changed its name to Northern Instruments Corporation. In 1978, Northern
Instruments Corporation, a Minnesota corporation, was merged with and into
Northern Instruments Corporation, a newly formed Delaware corporation. In 1993,
Northern Technologies International Corporation, a wholly owned subsidiary, was
merged into Northern Instruments Corporation. As a result of such merger,
Northern Instruments Corporation changed its name to Northern Technologies
International Corporation, hereafter referred to as the &#147;Company.&#148; In
1999, the Company organized Northern Instruments Corporation, LLC, an Ohio
limited liability company (&#147;NIC&#148;); and the instruments operations of
the Company were transferred into NIC. NIC is a wholly owned subsidiary of the
Company. Effective March&nbsp;4, 1999, Special Control Systems, Inc., an Ohio
corporation 100% owned by the Company, was merged into NIC, all operations of
NIC were terminated as of August 31, 2002. The operating results and assets of
NIC are included in the consolidated financial statements of the Company prior
to August 31, 2002. The Company established a wholly owned subsidiary NTI
Facilities, Inc. on January 1, 2000. The operating results and assets of NIC and
NTI Facilities, Inc. are included in the consolidated financial statements of
the Company.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>(b) Business of the Company</B></FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>General</B></FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The Company is a developer,
manufacturer and marketer of materials science based industrial packaging
products and systems. The Company&#146;s corrosion-inhibiting industrial
packaging products and systems, marketed under the name ZERUST<SUP>&reg;</SUP>
(&#147;ZERUST&#148;), are utilized in protective packaging serving a wide
variety of companies in industries such as transportation, fossil fuel power
generation, electronics, on-and-off-road automotive equipment, machinery for
agriculture and metal processing. In a concerted effort to
extend the Company&#146;s technological grasp, however, the Company
engages in scientific research and development programs in the areas
of material science and corrosion protection in new applications.</FONT></FONT></P>


<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>2</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>




<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>International Joint Ventures and European Holding Company</B></FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The Company participates in an
expanding number of international joint venture arrangements that provide for
the manufacturing, marketing and distribution of materials science based
industrial packaging products based upon the Company&#146;s technology. Both the
Company and the Company&#146;s corporate joint venture in Germany, Excor
Korrosionsschutz &#150; Technologien und Produkte GmbH (&#147;Excor&#148;),
through Excor&#146;s wholly owned subsidiary Excor Korrosionsforschung GmbH,
manufacture and supply the proprietary ingredients, called
Masterbatch, that make the Company&#146;s material science based
industrial packaging products  functional, but the actual manufacturing of
the finished product itself takes place in each country in which the Company has
a joint venture or similar relationship. Manufacturing the product in foreign
countries lowers shipping costs and improves on-time delivery to foreign
customers. The international joint venture arrangements allow the Company to
successfully market and sell its products in foreign countries through the
marketing efforts of joint venture partners without the Company having to
develop its own international sales force. The Company&#146;s international
joint venture partners are knowledgeable in the applicable environmental, labor,
tax and other requisite regulations and laws of the respective foreign countries
in which they operate, as well as the local customs and business practices, and
have a vested interest in making each joint venture a success.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The Company participates in
various international corporate joint ventures in countries outside the United
States and in similar non-contractual arrangements in various other countries.
The international joint ventures provide for the manufacturing, marketing, and
distribution of materials science based industrial packaging products. The
Company also has a 50% ownership interest in NTI ASEAN, LLC, for its joint
venture investments in the ASEAN region, other than Japan, South
Korea, and Taiwan where the Company has independent corporate joint
ventures of long standing. Taiyo Petroleum Gas Co. Ltd., the
Company&#146;s existing joint venture partner in Japan, owns
the remaining 50% ownership interest in NTI ASEAN, LLC subject to final
capitalization of NTI ASEAN, LLC. The Company has an ownership interest either
directly or indirectly in joint ventures  in the following
countries:</FONT></FONT></P>

<pre>
<FONT SIZE="2">
<B>Country                       Date of Original Investment</B>
- -------                       ---------------------------

Japan .......................             1987
France ......................             1990
Taiwan ......................             1990
Germany .....................             1991
Singapore* ..................             1991
Sweden ......................             1991
Brazil ......................             1993
Austria .....................             1994
Russia ......................             1994
South Korea .................             1994
Finland .....................             1995
Italy .......................             1996
United Kingdom ..............             1997
Czech Republic ..............             1997
Poland ......................             1998
Thailand* ...................             1998
China* ......................             2000
India .......................             2000
Malaysia* ...................             2000
Philippines* ................             2001
Turkey ......................             2002
</FONT>
</pre>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">*Indirect ownership interest through NTI ASEAN, LLC</FONT></FONT></P>

<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>3</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">In addition to the Company&#146;s
investments in the international corporate joint ventures listed above, the
Company acquired a 50% ownership interest in a European holding company during
fiscal year 1997. It is anticipated that this investment will be used to
establish a joint venture in Holland during fiscal year 2003. During fiscal year
2002, the Company invested $141,500 for a 30% ownership interest in Mutec
Instruments GmbH. This German corporation is a developer and producer of
electronic industrial instrumentation. The German corporation will be
accounted for using the equity method of accounting.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">While the Company is not aware of
any specific potential risk beyond its initial investment and undistributed
earnings of the international joint ventures, there can be no assurance that the
Company will not be subject to lawsuits based on product liability claims or
other claims arising out of the activities of each international joint venture.
To protect against such an occurrence, the Company maintains liability insurance
specifically applicable to its ownership positions in the international joint
venture arrangements in excess of any insurance the joint ventures may maintain.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Products</B></FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The Company operates in the
materials science based industrial packaging products and systems business.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B><I>Materials Science Based
Industrial Packaging Products and Systems</I>.</B> Corrosion negatively affects
products and components in the manufacturing industry. This applies to the
rusting of ferrous metals (iron and steel) and the deterioration by oxidation of
nonferrous metals (aluminum, copper, brass, etc.). In combating corrosion, the
traditional approach has been to apply oils and greases to protect metal parts.
This approach commonly requires specialized application equipment. In addition,
the oils and greases may pose unacceptable health and fire hazards and also may
collect and trap dirt and debris that, in some cases, may actually initiate
corrosion. For the removal of such oils and greases, chemical solvents and
specialized safety equipment may be necessary that typically introduce
additional health and hazardous waste disposal problems.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">ZERUST volatile corrosion
inhibiting (&#147;VCI&#148;) products may entirely eliminate or reduce the use
of oils and greases to inhibit corrosion; for ZERUST formulations contain
proprietary chemical systems that emit a nontoxic vapor that is diffused
throughout an enclosure. Electron scanning microscopy shows that the VCI-rich
atmosphere causes VCI molecules to condense in a microscopic layer on all
surfaces they reach. The corrosion-inhibiting layer is maintained as long as the
metal product to be protected remains within the ZERUST package. Electron
scanning further shows that once the contents are removed from the ZERUST
package, the VCI layer revitalizes from the contents&#146; surfaces within two
hours, leaving a clean, dry and corrosion-free product. This mechanism of
corrosion protection enables the Company&#146;s customers to package and ship
metal parts so that they arrive ready for use. Furthermore, by eliminating
costly greasing and degreasing processes and/or  significantly
reducing the use of oils to inhibit corrosion, ZERUST VCI technology
provides significant savings in labor, material and capital expenditures for
equipment to apply, remove and dispose of oil and grease, as compared to
traditional methods of corrosion prevention.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">In 1980, the Company developed a
means of combining ZERUST VCI systems with polyethylene and polypropylene
resins, and was granted a patent on this process on September 22, 1981.
Subsequently, a line of flexible packaging products in the form of low and high
density polyethylene bags and shroud film, stretch, shrink, skin and bubble
cushioning film, woven scrim and foam sheeting was introduced to United States
industry. This gave packaging engineers an</FONT></FONT></P>

<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>4</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">opportunity to ship and store
ferrous, nonferrous and mixed multi-metal products in a clean, dry and
corrosion-free condition, with an attendant overall savings in total packaging
cost.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The Company subsequently expanded
the ZERUST product line to include a range of rigid plastic products in the form
of profile and corrugated board, thermoformed dunnage trays and bins, injection
and blow molded products and flat netting. The Company also has developed
additives in liquid form to imbue corrugated cardboard, solid fiber and
chipboard packaging materials with VCI corrosion protection properties. During
fiscal year 2002, the company was approved to sell into the military, and began
the process of selling ZERUST products to the consumer markets via a domestic
joint venture.</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B><I>Electronic Sensing Instruments.</I></B></FONT><FONT SIZE="2"> Operations were discontinued in the Company&#146;s electronic sensing instruments business in
fiscal year 2002.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Manufacturing</B></FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The Company produces certain
proprietary materials science based industrial packaging formulations and
products at its facility in Lino Lakes, Minnesota. The Company&#146;s materials
science based industrial packaging end products include flexible and rigid
packaging systems and other products that are produced to customer specification
by selected contractors who are supplied with the necessary active ingredients
by the Company, under a Trade Secrecy Agreement and/or License
Agreement.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The Company is ISO 9001 certified
with respect to the manufacturing of its materials science based industrial
packaging products. The Company believes that the process of ISO 9001
certification serves as an excellent tool for total quality management, enabling
the Company to provide consistency and excellence in its products. Also, because
potential customers may prefer or require manufacturers to have achieved ISO
certification, such ISO certification may provide the Company with certain
competitive advantages.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The Company voluntarily became ISO
14000 certified as of August 2001 with respect to environmental management
standards. The Company believes that the process of ISO 14000 certification
serves as an excellent tool for the Company to continuously improve its
environmental performance. Also, because existing and potential customers may
prefer or require manufacturers to have achieved ISO certification, such ISO
certification may provide the Company with certain competitive advantages in the
future.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Sales and Marketing of Materials Science Based Industrial
Packaging Products</B></FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">In the United States, the Company
markets its materials science based industrial packaging products principally to
industrial users by a direct sales force and through a network of distributors
and sales representatives. The Company&#146;s technical service representatives
work directly with the end users of the Company&#146;s products to analyze their
specific needs and develop systems to meet their technical requirements.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Internationally, the Company has
entered into joint ventures and similar arrangements with foreign partners
(either directly or through NTI ASEAN, LLC). Pursuant to these arrangements, the
Company and/or Excor supply certain proprietary formulations to the foreign
joint venture entities, which in turn provide for the international manufacture
and marketing of ZERUST and others finished products. The Company receives fees
for providing technical support and marketing assistance to the joint ventures
in accordance with the terms of the joint venture arrangements.</FONT></FONT></P>

<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>5</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Competition</B></FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The Company is aware of other
organizations that manufacture and market corrosion inhibiting packaging
products, which compete with the Company&#146;s ZERUST products. The Company
evaluates competing products on an ongoing basis and believes that none of the
competing products on the market at this time are superior to the Company&#146;s
products.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Some of the Company&#146;s
competitors are established companies that may have financial and other
resources greater than those of the Company. Additionally, some of these
companies may have achieved significant market impact and brand recognition. The
Company competes with such companies by providing high quality products and by
attempting to provide the highest level of customer service, including real time
direct technical support and applications engineering.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Significant Customers</B></FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">One customer accounted for
approximately 12% and 10% of net sales for the fiscal years ended August 31,
2002 and 2001, respectively.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Research and Development</B></FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The Company&#146;s research and
development activities are directed at the improvement of existing products, the
development of new products and quality assurance through improved testing of
the Company&#146;s products. The Company&#146;s research and development
expenditures, including engineering and technical support, were $805,796,
$648,129, and $587,434 in fiscal years 2002, 2001, and 2000, respectively. In
1997, the Company&#146;s joint venture in Germany, Excor, established a
wholly-owned subsidiary, Excor Korrosionsforschung GmbH, to conduct research
into new fields of materials science based industrial packaging and the
applications engineering thereof in conjunction with the Company&#146;s domestic
research and development operation. Today the Company&#146;s internal research
and development activities are conducted at its Minnesota headquarters, in
Beachwood, Ohio, in Dresden, Germany; and at various international locations
under the direction of internationally known scientists and research institutes
under exclusive contract to the Company with respect to the subject of their
respective research efforts. The conduct of the research and development
activities outside Minnesota and Germany, like the results of the Company&#146;s
research and development efforts generally, invariably engenders certain
proprietary rights for the Company.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Patents and Trademarks</B></FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The Company is committed to the
timely and continual upgrading of its product line and the introduction of new
products that are developed in-house or via exclusive technology agreements. The
Company&#146;s United States patent relating to its corrosion inhibiting
products expired in 2000. The Company has not renewed or extended such patent
because the Company believes that trade secrets and proprietary (albeit not
patented) know-how are at least as important as patent protection in
establishing and maintaining a competitive advantage; and that mere patent
protection without close technical support and applications engineering will not
serve to keep any given supplier in the forefront of any sophisticated
technology based market.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The Company also has several
registered trademarks in the United States and certain foreign countries. The
registered trademarks in the U.S. are: the logo &#147;NTI,&#148; the word
&#147;ZERUST,&#148; the words &#147;THE ZERUST PEOPLE,&#148; the word
&#147;PLASTABS,&#148; the words &#147;COR TAB,&#148; and the color
&#147;YELLOW&#148; &#147;for anticorrosive plastic film used for packaging
metallic products, for industrial and</FONT></FONT></P>

<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>6</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>

     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">consumer use.&#148; The Company&#146;s
trademarks have a life, subject to periodic maintenance, of 10 to 20 years,
which may be extended.</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Backlog</B></FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The Company had order backlog as
of August 31, 2002 of $218,000. These are orders that are held by the Company
pending release instructions from the customers to be used in just-in-time
production. Customers generally place orders on an &#147;as needed&#148; basis
and expect delivery within a relatively short period of time.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Working Capital and Availability of Materials</B></FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The Company does not carry excess
quantities of raw materials or purchased parts because of widespread
availability thereof from various suppliers. The Company has sufficient working
capital to meet all obligations when due.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Employees</B></FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">As of August 31, 2002, the Company
had 40 full-time direct employees located in the United States, consisting of
six engaged in administration, sixteen in sales and marketing, eight in research
and development, nine in operations and one person responsible for international
coordination. There are no unions representing the Company&#146;s employees and
the Company believes that its relations with employees are good.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Certain Important Factors</B></FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">In addition to the influences
identified above, there are several important factors that could cause the
Company&#146;s actual results to differ materially from those anticipated by the
Company or which are reflected in any forward-looking statements of the Company.
Such factors, which may impact on the success of the Company&#146;s operations
and its ability to achieve its goals, include the following:</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(1) The Company&#146;s ability to
make investments in existing and future joint ventures to generate a positive
rate of return and demonstrate a pattern of growth consistent with past and
current performance; and</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(2) The Company&#146;s ability to continue to enter into international markets in a timely fashion; and</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(3) The Company&#146;s ability to
maintain gross margins at a level consistent with the technological advantages
of its proprietary products.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Disclosure Control Environment</B></FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Within the 90-day period prior to
the filing date of this report, management performed an evaluation, of the
effectiveness of the design and operation of our disclosure controls and
procedures as defined in Exchange Act Rules 13a-14&copy; and 15d-14&copy;. We
performed this evaluation under the supervision of, and with participation from,
our Chairman of the Board &amp; Co-Chief Executive Officer, President &amp;
Co-Chief Executive Officer, and Chief Financial Officer. Based upon that
evaluation we, as well as our Chairman of the Board &amp; Co-Chief Executive
Officer, President &amp; Co-Chief Executive Officer, and Chief Financial
Officer, concluded that our</FONT></FONT></P>

<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>7</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>

     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">disclosure controls and procedures were effective.
There have been no significant changes in our internal controls or in other
factors that could significantly affect internal controls subsequent to the date
we carried out this evaluation, and therefore we believe that our disclosure
controls and procedures remain effective. We intend to periodically evaluate our
disclosure controls and procedures as required by the Exchange Act Rules.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Item 2. DESCRIPTION OF PROPERTY.</B></FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The Company&#146;s primary office,
production facilities and domestic research and development operations are
located at 6680 North Highway 49, Lino Lakes, Minnesota 55014. The Company owns
approximately 3.5 acres at this site and three buildings thereon. The main
building, consisting of approximately 15,300 square feet, is used for office
space, production, research and development and shipping and receiving. A second
building of approximately 7,200 square feet and a third building of
approximately 4,800 square feet are used for warehouse space. In 2002, the
Company sold a 10-acre parcel of land and a warehouse of approximately 18,000
square feet located in Forest Lake, Minnesota, approximately six miles from the
Company&#146;s offices.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">A subsidiary of the Company, NTI
Facilities, Inc., acquired a one-third ownership of Omni-Northern Ltd., an Ohio
limited liability company, in contemplation of entering into a lease (as
described below) for approximately 50% of the net rental space in the building
itself. Omni-Northern Ltd. owns and operates a rental property located at 23205
Mercantile Road, Beachwood, Ohio, comprising approximately 1.989 acres of land
and a building of approximately 33,877 square feet, having an approximate value
of $2,205,000 based upon the cash-to-mortgage acquisition price of the property
paid in fiscal year 2000. The Company has guaranteed up to $339,235 of the
Omni-Northern Ltd.&#145;s $2,035,000 mortgage obligation with National City
Bank, Cleveland, Ohio. NTI Facilities, Inc. has entered into a 15-year lease
agreement for approximately 16,826 square feet of office, manufacturing,
laboratory and warehouse space requiring monthly payments of $16,434, which can
be adjusted annually according to the annual consumer price index through
November 2014. By its ownership in Omni-Northern Ltd., NTI Facilities Inc. is
entitled to one third of operating results of Omni-Northern Ltd. The building is
now fully leased.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Item 3. LEGAL PROCEEDINGS.</B></FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">There is no material pending or
threatened legal, governmental, administrative or other proceeding to which the
Company is a party or of which any of its property is the subject.</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.</B></FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">No matter was submitted to a vote
of security holders during the fourth quarter of the fiscal year covered by this
Report.</FONT></FONT></P>

<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>8</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>





<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>PART II</B></FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Item 5. MARKET FOR THE REGISTRANT&#146;S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.</B></FONT></FONT></P>



     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Effective September 10, 1993, the
Company&#146;s Common Stock commenced trading on, and it continues to trade on,
the American Stock Exchange under the symbol NTI.</FONT></FONT></P>

<pre>
<FONT SIZE="2">
                                                                  <B>Common Stock</B>
                                                                  ------------
                                                               <B>High           Low</B>
                                                               ----           ---
<B>2002:</B>
     Fourth fiscal quarter.............................       $3.760        $3.250
     Third fiscal quarter..............................        4.500         3.650
     Second fiscal quarter.............................        4.700         4.060
     First fiscal quarter..............................        5.000         4.200
<B>2001:</B>
     Fourth fiscal quarter.............................       $5.250        $4.950
     Third fiscal quarter..............................        5.600         4.500
     Second fiscal quarter.............................        6.250         4.688
     First fiscal quarter..............................        8.000         6.375
</FONT>
</pre>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The Company declared Common Stock
cash dividends of $0.16 per share to shareholders of record on December 3, 1999;
and $0.17 per share to shareholders of record on December 1, 2000. The
Company&#146;s Board of Directors will continue to consider the payment of
dividends annually, based on the Company&#146;s net income and operating cash
requirements.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">As of August 31, 2002,
approximately 410 shareholders of record held the Company&#146;s Common Stock.</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Item 6. MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.</B></FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Results of Operations</B></FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B><I>Fiscal Year 2002 Compared to Fiscal Year 2001</I></B></FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Net Sales and Cost of
Sales.</I> The Company had net sales originating in the United States of
$7,594,383 in fiscal year 2002; a decrease of $1,675,336 or 18.1% from net sales
of $9,269,719 in fiscal year 2001. The decrease in net sales was due primarily
to a decrease in the volume of materials science based industrial packaging
products sold to new and existing customers in North America. The decrease in
demand was due to the continued slowdown in the industrial sector that the
Company serves. One existing customer accounted for 12% of sales in fiscal year
2002 and 10% of sales in fiscal year 2001.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Cost of sales decreased as a
percentage of sales to 47.3% in fiscal year 2002 from 49.7% in fiscal year 2001.
The variation in the cost of sales percentage is attributable to the decrease in
the market price for certain raw materials.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Selling Expenses.</I> The
Company&#146;s selling expenses increased by $20,636 or 1.4% to $1,467,527 in
fiscal year 2002 from $1,446,891 in fiscal year 2001. The increase in selling
expenses in fiscal year 2002 was primarily related to a combination of increases
in consulting expense of approximately $48,000, salary and commission and travel
related expenses for sales personnel of</FONT></FONT></P>

<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>9</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>

     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">approximately $66,000, and decreases in
depreciation expense of approximately $32,000, and expenses related to trade
shows of approximately $40,000. As a percentage of sales these costs increased
to 19.3% in fiscal year 2002 from 15.6% in fiscal year 2001 due to the decreased
level of net sales and the overall slight increase in selling expenses in fiscal
year 2002.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>General and Administrative
Expenses.</I> The Company&#146;s general and administrative expenses decreased
by $123,033 or 5.9% to $1,965,657 in fiscal year 2002 from $2,088,690 in fiscal
year 2001. The decrease is attributed to there being no expenses relating to
NIC, which in fiscal year 2001 was $200,000; the wholly owned subsidiary ceased
operations in fiscal year 2002. Additionally, there was a decrease in total
salary expense of approximately $44,000 and a decrease in travel of $40,000.
There were increases in legal fees and information technology expense of
approximately $100,000. As a percentage of sales, general and administrative
expenses increased to 25.9% in fiscal year 2002 from 22.5% in fiscal year 2001.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Research, Engineering, and
Technical Support Expenses.</I> The Company&#146;s research, engineering, and
technical support expenses increased by $157,667 or 24.3% to $805,796 in fiscal
year 2002 from $648,129 in fiscal year 2001. An increase of approximately
$175,000 is attributed to an increase in salary expense related to hiring
additional people in technical support. As a result of the Company&#146;s
international research and development activities, certain proprietary rights to
new technology have been added to the Company. As a percentage of sales,
research, engineering and technical support expenses increased to 10.6% in
fiscal year 2002 from 7.0% in fiscal year 2001 due to the decreased level of net
sales and the increase in spending.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>International Corporate Joint
Ventures and European Holding Company.</I> The Company continues its business
program of establishing corporate joint venture arrangements in international
markets directly, or indirectly through NTI ASEAN, LLC (&#147;NTI ASEAN&#148;).
The Company maintains a 50% ownership interest in NTI ASEAN, with the remaining
50% ownership interest owned by Taiyo Petroleum Gas Co. Ltd., which also owns
the other 50% ownership interest in the Company&#146;s corporate joint venture
located in Japan.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The Company and/or an existing
corporate joint venture manufactures and supplies proprietary ingredients, which
make the finished products functional and enable manufacturing of the finished
products to take place in the foreign countries. The corporate joint ventures
then market the finished products in their respective territories, and the
corporate joint ventures&#146; profits are shared by the respective corporate
joint venture shareholders in accordance with share ownership.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Corporate joint venture sales were
as follows:</FONT></FONT></P>

<pre>
<FONT SIZE="2">
                                                               <B>2002            2001</B>

Direct ownership interest ..............................   $ 24,931,945    $ 21,218,289
Indirect ownership interest (NTI ASEAN) ................      2,072,326       1,938,092
                                                           ------------    ------------
Total ..................................................   $ 27,004,271    $ 23,156,381
                                                           ============    ============
</FONT>
</pre>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The Company receives fees for
technical and other support to the corporate joint ventures based on the
revenues of the individual corporate joint ventures. The Company recognized fee
income for such support in the amounts of $2,234,713 and $2,527,795 for fiscal
years 2002 and 2001, respectively. The decrease in fees for technical and other
support to corporate joint ventures was primarily due to the decrease in fees
related to the international corporate joint venture in Germany.</FONT></FONT></P>

<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>10</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The Company incurred direct
expenses related to corporate joint ventures and the European holding company of
$1,714,131 and $1,981,810 in fiscal years 2002 and 2001, respectively. These
expenses include: technical and marketing services to existing joint ventures,
legal fees regarding the establishment of new joint ventures, registration and
promotion of worldwide trademarks and legal fees incurred in the filing of
patent applications for new technologies to which the Company acquired certain
rights. Additionally in 2001, the Company incurred expenses totaling $314,347
relating to the Joint Venture Conference held in Chennai, India which are
included in Expenses incurred in support of international corporate joint
ventures. This conference is held approximately every three years as a means to
discuss new products and technologies being offered and to evaluate current and
future market and material science strategies for all joint ventures. During
fiscal 2002, the Company began accruing expenses related to the anticipated
joint venture conference that will be held in 2004.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The Company&#146;s investments in
corporate joint ventures and the European holding company are accounted for
using the equity method and resulted in income to the Company of $1,035,053 and
$543,455 for fiscal years 2002 and 2001, respectively.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The Company also has an investment
in a European holding company, which is in the process of being converted into a
new European joint venture in Holland.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Interest Income.</I> The
Company&#146;s interest income decreased to $90,310 in fiscal year 2002 from
$143,452 in fiscal year 2001 due to the decrease in interest rates during fiscal
year 2002.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Income Before Income Taxes.</I>
Income before income taxes decreased $295,270 to $1,412,176 in fiscal year 2002,
compared to the income before income taxes of $1,707,446 in fiscal
year 2001, a net decrease of 17.3%.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Income Taxes.</I> The
Company&#146;s effective income tax rate was 13.1% and 34.3% for fiscal years
2002 and 2001, respectively. The Company&#146;s annual effective income tax rate
for fiscal&nbsp;2002 was lower than the statutory rate primarily due to the
Company&#146;s equity in income of international corporate joint ventures and
European holding company being recognized based on after-tax earnings of these
entities. To the extent joint ventures&#146; undistributed earnings are
distributed to the Company, it does not result in any material additional income
tax liability after the application of foreign tax credits.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Fiscal Year 2001 Compared to Fiscal Year 2000</B></FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Net Sales and Cost of
Sales.</I> The Company had net sales originating in the United States of
$9,269,719 in fiscal year 2001; a decrease of $1,790,310 or 16.2% from net sales
of $11,060,029 in fiscal year 2000. The decrease in net sales was due primarily
to a decrease in the volume of materials science based industrial packaging
products sold to new and existing customers in North America. The decrease was
due to the slowdown in the industrial sector that the Company serves. One
existing customer accounted for 10% of sales in fiscal year 2001 and 14% of
sales in fiscal year 2000.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The cost of sales decreased as a
percentage of sales to 49.7% in fiscal year 2001 from 50.5% in fiscal year 2000.
The variation in the cost of sales percentage is attributable to the decrease in
the market price for certain raw materials.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Selling Expenses.</I> The
Company&#146;s selling expenses increased by $138,276 or 10.6% to $1,446,891 in
fiscal year 2001 from $1,308,615 in fiscal year 2000. The increase in selling
expenses in fiscal year 2001 was primarily related to increases in general
insurance expense and travel-related</FONT></FONT></P>

<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>11</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>

     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">expenses. As a percentage of sales these
costs increased to 15.6% in fiscal year 2001 from 11.8% in fiscal year 2000 due
to the decreased level of net sales and the overall increase in selling expenses
in fiscal year 2001.</FONT></FONT></P>

     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>General and Administrative
Expenses.</I> The Company&#146;s general and administrative expenses decreased
by $9,301 or 0.4% to $2,088,690 in fiscal year 2001 from $2,097,991 in fiscal
year 2000. As a percentage of sales general and administrative expenses
increased to 22.5% in fiscal year 2001 from 19.0% in fiscal year 2000.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Research, Engineering, and
Technical Support Expenses.</I> The Company&#146;s research, engineering, and
technical support expenses increased by $60,695 or 10.3% to $648,129 in fiscal
year 2001 from $587,434 in fiscal year 2000. As a result of the Company&#146;s
international research and development activities certain proprietary rights to
new technology have been added to the Company. As a percentage of sales,
research, engineering and technical support expenses increased to 7.0% in fiscal
year 2001 from 5.3% in fiscal year 2000 due to the decreased level of net sales.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>International Corporate Joint
Ventures and European Holding Company.</I> The Company continues its business
program of establishing corporate joint venture arrangements in international
markets directly or indirectly through NTI ASEAN, LLC (&#147;NTI ASEAN&#148;).
The Company maintains a 50% ownership interest in NTI ASEAN, with the remaining
50% ownership interest owned by Taiyo Petroleum Gas Co. Ltd., which also owns
the other 50% ownership interest in the Company&#146;s corporate joint venture
located in Japan.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The Company and/or an existing
corporate joint venture manufactures and supplies patented and/or proprietary
ingredients, which make the finished products functional and enable
manufacturing of the finished products to take place in the foreign countries.
The corporate joint ventures then market the finished products in their
respective territories, and the corporate joint ventures&#146; profits are
shared by the respective corporate joint venture shareholders in accordance with
share ownership.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Corporate joint venture sales were
as follows:</FONT></FONT></P>

<PRE>
<FONT SIZE="2">
                                                                <B>2001           2000</B>

Direct ownership interest ..............................    $ 21,218,289   $ 23,913,708
Indirect ownership interest (NTI ASEAN) ................       1,938,092      1,288,396
                                                            ------------   ------------
Total ..................................................    $ 23,156,381   $ 25,202,104
                                                            ============   ============
</FONT>
</PRE>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The Company receives fees for
technical and other support to the corporate joint ventures based on the
revenues of the individual corporate joint ventures. The Company recognized fee
income for such support in the amounts of $2,527,795 and $2,749,578 for fiscal
years 2001 and 2000, respectively. The decrease in fees for technical and other
support to corporate joint ventures was primarily due to the decrease in sales
volume at certain of the Company&#146;s corporate joint ventures.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The Company incurred direct
expenses related to corporate joint ventures and the European holding company of
$1,667,463 and $1,312,213 in fiscal years 2001 and 2000, respectively. These
expenses include: technical and marketing services to existing joint ventures,
legal fees regarding the establishment of new joint ventures, registration and
promotion of worldwide trade marks and legal fees incurred in the filing of
patent applications for new technologies to which the Company acquired certain
rights.</FONT></FONT></P>

<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>12</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>

     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The Company incurred expenses
totaling $314,347 relating to the Joint Venture Conference held in Chennai,
India. This conference is held approximately every three years as a means to
discuss new products and technologies being offered and to evaluate current and
future market and material science strategies for all joint ventures.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The Company&#146;s investments in
corporate joint ventures and the European holding company are accounted for
using the equity method and resulted in income to the Company of $543,455 and
$854,032 for fiscal years 2001 and 2000, respectively.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Interest Income.</I> The
Company&#146;s interest income decreased to $143,452 in fiscal year 2001 from
$238,858 in fiscal year 2000 due partially to the interest received in 2000 upon
a full payment of a note from purchase of common stock.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Income Before Income Taxes.</I>
Income before income taxes decreased $2,298,359 to $1,707,446 in fiscal year
2001, compared to  the income before income taxes of $4,005,805 in
fiscal year 2000, a net decrease of 57.4% year to year.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Income Taxes</I>. The
Company&#146;s effective income tax rate was 32.5% and 34.3% for fiscal year
2001 and 2000, respectively. The effective income tax rate for the Company in
fiscal year 2001 was lower than the statutory rate, since the Company&#146;s
equity in income of its international corporate joint ventures and in the
European holding company are recognized based on after-tax earnings of these
entities, resulting in foreign tax credits.&nbsp; Thus, to the extent the
corporate joint ventures&#146; and the foreign company&#146;s undistributed
earnings were distributed to the Company during fiscal years 2001 and 2000, such
distributions did not result in material additional income tax liability after
the application of foreign tax credits.&nbsp; The decrease in the Company&#146;s
effective income tax rate in fiscal year 2001 is primarily due to an increase in
the percentage of equity in income of its international corporate joint ventures
and European holding company to income before income taxes in fiscal year 2001
when compared to fiscal year 2000.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Liquidity and Capital Resources</B></FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">At August 31, 2002, the
Company&#146;s working capital was $6,276,934, including $230,274 in cash and
cash equivalents and $4,008,417 in investments available for sale, compared to
working capital of $5,579,475 including $3,238,283 in cash and cash equivalents
as of August&nbsp;31, 2001.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Net cash provided from operations
has been sufficient to meet liquidity requirements, capital expenditures,
research and development cost, and expansion of operations of the Company&#146;s
international joint ventures. Cash flows provided by operations for the fiscal
year ended August 31, 2002 and 2001 were $1,115,418 and $1,134,997,
respectively. The net cash provided by operations for the fiscal year ended
August 31, 2002 resulted principally from net income, accounts payable, income
tax payable, dividends and depreciation, offset by equity income of
international corporate joint ventures and European holding company and
increases in receivables and accrued liabilities. The net cash flow from
operations for fiscal years 2001, 2000, and 1999 resulted principally from net
income and international joint venture dividends offset by a non-cash component
of net income identified as equity in income of international corporate joint
ventures and European holding company.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Net cash used in investing
activities for the fiscal year ended August 31, 2002 was $3,927,743, which
resulted from the purchase of investments available for sale, increased
investments in international corporate joint ventures, an increase in other
assets and additions to property and equipment partially offset by a partial
return of the Company&#146;s original investment in European holding company and
the proceed from the sale of fixed assets.</FONT></FONT></P>

<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>13</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>

     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Net cash used in financing
activities for the fiscal year ended August 31, 2002 was $195,684, which
resulted from the repurchase of common stock. Net cash used in financing
activities for the fiscal year ended August 31, 2001 was $1,262,005, which
resulted from the repurchase of common stock of $637,032 and dividends paid of
$644,972 offset by proceeds from the exercise of stock options of $19,999.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The Company expects to meet future
liquidity requirements with its existing cash and cash equivalents and from cash
flows of future operating earnings and distributions of earnings and technical
assistance fees from the international corporate joint venture investments.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The Company has no long-term debt
and no material capital lease commitments at August 31, 2002; however, the
Company&#146;s subsidiary has entered into a 15-year lease agreement for 16,826
square feet of office, manufacturing, laboratory, and warehouse space requiring
monthly payments of $16,434, which can be adjusted annually according to the
annual consumer price index through November 2014.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The Company has no postretirement
benefit plan and does not anticipate establishing any postretirement benefit
program.</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Inflation in the U.S. historically has had little effect on the Company.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Critical Accounting Policies</B></FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The preparation of the
consolidated financial statements in conformity with accounting principles
generally accepted in the United States of America requires the Company to make
not only estimates and judgments that affect the reported amounts of assets and
liabilities and expenses, but also related disclosures. The Company bases the
estimates on historical experience, knowledge of economic and market factors and
various other assumptions that it believes to be reasonable under the
circumstances. Actual results may differ materially from these estimates if the
assumptions or conditions turn out to be incorrect. The Company believes the
following critical accounting policies are affected by significant estimates,
assumptions and judgments used in the preparation of its consolidated financial
statements:</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Revenue Recognition.</I> In
recognizing revenue in any period, the Company applies the provisions of Staff
Accounting Bulletin 101, <I>Revenue Recognition.</I> The Company recognizes
revenue from the sale of its products when persuasive evidence of an arrangement
exists, the product has been delivered, the fee is fixed and determinable and
collection of the resulting receivable is reasonably assured. A portion of the
gross profit on products shipped to the Company&#146;s international corporate
joint ventures is deferred until such products are sold by the international
corporate joint ventures.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Long-lived Assets.</I> The
Company evaluates the carrying value of long-lived assets, consisting primarily
of property, plant and equipment, whenever certain events or changes in
circumstances indicate that the carrying amount of these assets may not be
recoverable. Such events or circumstances include, but are not limited to, a
prolonged industry downturn, a current-period operating cash flow loss combined
with a history of operating cash flow losses, or significant reductions in
projected future cash flows. In assessing the recoverability of long-lived
assets, the Company compares the carrying value to the undiscounted future cash
flows the assets are expected to generate. If the total of the undiscounted
future cash flows is less than the carrying amount of the assets, the assets
will be written down based on the excess of the carrying amount over the fair
value of the assets. Fair value would generally be determined by calculating the
discounted future cash flows using a discount rate based upon our weighted
average cost of capital. Based upon the estimate of the future undiscounted cash
flows, the Company has not recognized an</FONT></FONT></P>

<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>14</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>

     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">impairment loss for the fiscal year
ended August 31, 2002. Significant judgments and assumptions are required in the
forecast of future operating results used in the preparation of the estimated
future cash flows, including long-term forecasts of overall market conditions.
The Company expects improved operating results in fiscal 2003 and beyond.
Changes in these estimates could have a material adverse effect on the
assessment of the long-lived assets, thereby requiring the Company to write down
the assets.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Investments in International
Joint Ventures.</I> The Company accounts for its international joint ventures
using the equity method of accounting for investments, as the Company maintains
between 20% and 50% investments in each of its international joint ventures. The
Company obtains financial statements from each international joint venture on a
quarterly basis and adjusts the carrying value of each individual joint venture
investment quarterly. An adjustment is made to the individual international
joint venture investment, equity in income and foreign currency translation gain
or loss. Dividends received from the international joint venture investments are
recorded as a reduction of the carrying value of the international joint venture
investment. The Company periodically assesses its investments for
other-than-temporary declines in the value of the investments. Indicators of an
other-than-temporary decline in an investment would include, but would not
necessarily be limited to, absence of an ability to recover the carrying amount
of the investment or inability of the investee to sustain an earnings capacity,
which would justify the carrying amount of the investment. A current fair value
of an investment that is less than its carrying amount may indicate a loss in
value of the investment. An other-than-temporary loss would be recorded when
identified.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Inventory.</I> Inventories are
valued at the lower of cost (first-in, first-out basis) or net realizable value.
Reserves are established for the valuation of inventory at the lower of cost or
net realizable value by analyzing market conditions, estimates of future sales
prices, inventory costs and inventory balances.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The Company evaluates inventory
balances for excess quantities and obsolescence on a regular basis by analyzing
backlog, estimated demand, inventory on hand, sales levels and other
information. The Company establishes a reserve against inventory balances for
excess and obsolete inventory based on the analysis.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Income Taxes.</I> The Company
accounts for income taxes in accordance with Statement of Financial Accounting
Standard No. 109 (&#147;SFAS 109&#148;), <I>Accounting for Income Taxes</I>. As
part of the process of preparing its consolidated financial statements, the
Company is required to estimate its income taxes in each of the jurisdictions in
which it operates. This process involves the Company estimating its actual
current tax exposure together with assessing temporary differences resulting
from differing treatment of items for tax and accounting purposes. These
differences result in deferred tax assets and liabilities, which are included
within the Company&#146;s consolidated balance sheet. The Company must then
assess the likelihood that its deferred tax assets will be recovered from future
taxable income and to the extent the Company believes that recovery is not
likely, the Company establishes a valuation allowance. To the extent the Company
establishes a valuation allowance or increases this allowance in a period, an
expense is included within the tax provision in the statement of operations.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Significant management judgment is
required in determining the Company&#146;s provision for income taxes, deferred
tax assets and liabilities and any valuation allowance recorded against the
Company&#146;s net deferred tax assets. The Company assesses the need for a
valuation allowance due to uncertainties related to its ability to utilize some
of its deferred tax assets, primarily consisting of certain net operating losses
carried forward and foreign tax credits, before they expire. This</FONT></FONT></P>

<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>15</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>

     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">assessment is
based on management&#146;s estimates of taxable income by jurisdiction in which
the Company operates and the period over which the Company&#146;s deferred tax
assets will be recoverable. As of August 31, 2002, the Company has not recorded
a valuation allowance related to its deferred tax assets. In the event that
actual results differ from these estimates, or the Company would adjust these
estimates in future periods, the Company may need to establish a valuation
allowance which could materially impact its financial position and results of
operations.</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Recently Issued Accounting Pronouncements</B></FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">In July 2001, the Financial
Accounting Standards Board (FASB) issued Statement of Financial Accounting
Standard (SFAS) No.&nbsp;141, <I>Business Combinations,</I> and SFAS
No.&nbsp;142, <I>Goodwill and Other Intangible Assets</I> (the Statements). The
Company does not currently have any goodwill or intangible assets relating to
business acquisitions. The Company adopted these statements effective September
1, 2002. The Company does not anticipate that the adoption of these statements
will impact its financial position and results of operations.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">In August 2001, the FASB issued
SFAS No. 143, <I>Accounting for Asset Retirement Obligations.</I> SFAS
No.&nbsp;143 requires entities to record the fair value of a liability for an
asset retirement obligation in the period in which it is incurred. When the
liability is initially recorded, the entity capitalizes a cost by increasing the
carrying amount of the related long-lived asset. Over time, the liability is
accreted to its present value each period, and the capitalized cost is
depreciated over the useful life of the related asset. Upon settlement of the
liability, an entity either settles the obligation for its recorded amount or
incurs a gain or loss upon settlement. SFAS No.&nbsp;143 is effective for fiscal
years beginning after June&nbsp;15, 2002. The Company expects to adopt SFAS
No.&nbsp;143 effective September 1, 2002. The Company has not yet determined the
impact of SFAS No.&nbsp;143 on its financial position and results of operations.</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">In September 2001, the FASB issued SFAS No. 144, <I>Accounting for the Impairment or Disposal of Long-lived Assets.</I> SFAS No. 144
replaces SFAS No. 121, <I>Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.</I> The
FASB issued SFAS No. 144 to establish a single accounting model, based on the framework established in SFAS No. 121, as SFAS
No. 121 did not address the accounting for a segment of a business accounted for as a discontinued operation under Accounting
Principle Board Opinion No. 30, <I>Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequent Occurring Events and Transactions.</I> SFAS No. 144 also resolves significant
implementation issues related to SFAS No. 121. The provisions of SFAS No. 144 are effective for fiscal years beginning after
December 15, 2001 and are to be applied prospectively. The Company will adopt SFAS No. 144 effective September 1, 2002. The
Company has not yet determined the impact of SFAS No. 144 on its financial position and results of operations.</FONT></FONT></P>

<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>16</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>






<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Item 7. FINANCIAL STATEMENTS.</B></FONT></FONT></P>


<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>INDEX TO CONSOLIDATED FINANCIAL STATEMENTS</B></FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The following items are included herein:</FONT></FONT></P>



<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="100%">
<TR VALIGN="BOTTOM">
     <TH ALIGN=LEFT COLSPAN="2"><FONT SIZE="1">Financial Statements:</FONT><HR ALIGN=LEFT WIDTH=18% SIZE=1 NOSHADE></TH>
     <TH COLSPAN="1"><FONT SIZE="1">Page</FONT><HR WIDTH=50% SIZE=1 NOSHADE></TH>
     <TH COLSPAN="1"><FONT SIZE="1">&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM">
     <TD COLSPAN="2"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM">
     <TD WIDTH="85%" ALIGN="LEFT"><FONT SIZE="2">Independent Auditors&#146; Report</FONT></TD>
     <TD WIDTH="5%" ALIGN="LEFT"><FONT SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE="2">18&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM">
     <TD COLSPAN="2"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT SIZE="2">Consolidated Balance Sheets as of August 31, 2002 and 2001</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT SIZE="2">19&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM">
     <TD COLSPAN="2"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT SIZE="2">Consolidated Statements of Income for the years ended August 31, 2002, 2001 and 2000</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT SIZE="2">20&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM">
     <TD COLSPAN="2"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT SIZE="2">Consolidated Statements of Stockholders&#146; Equity for the years ended August 31, 2002, 2001 and 2000</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT SIZE="2">21&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM">
     <TD COLSPAN="2"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT SIZE="2">Consolidated Statements of Cash Flows for the years ended August 31, 2002, 2001 and 2000</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT SIZE="2">22&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM">
     <TD COLSPAN="2"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT SIZE="2">Notes to Consolidated Financial Statements</FONT></TD><TD ALIGN="LEFT"><FONT SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT SIZE="2">23&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT SIZE="2"></FONT></TD></TR>
</TABLE>


<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>17</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>






<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>INDEPENDENT AUDITORS&#146; REPORT</B></FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">To the Stockholders and Board of Directors<BR>Northern Technologies
International Corporation<BR>Lino Lakes, Minnesota</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">We have audited the accompanying consolidated balance sheets of
Northern Technologies International Corporation and Subsidiaries (the Company)
as of August&nbsp;31, 2002 and 2001 and the related consolidated statements of
income, stockholders&#146; equity, and cash flows for the years ended August
2002, 2001 and 2000. These consolidated financial statements are the
responsibility of the Company&#146;s management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. 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. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of Northern
Technologies International Corporation and Subsidiaries at August&nbsp;31, 2002
and 2001 and the results of their operations and their cash flows for the years
ended August 31, 2002, 2001 and 2000 in conformity with accounting principles
generally accepted in the United States of America.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Deloitte &amp; Touche LLP</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Minneapolis, Minnesota<BR>November 15, 2002</FONT></FONT></P>


<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>18</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>




<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION<BR>AND SUBSIDIARIES</B></FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>CONSOLIDATED BALANCE SHEETS<BR>AUGUST 31, 2002 AND 2001</B><HR WIDTH=100% SIZE=1 NOSHADE></FONT></FONT></P>


<PRE>
<FONT SIZE="2">
                                                                                      <B>2002            2001</B>
<B>ASSETS</B>
CURRENT ASSETS:
   Cash and cash equivalents ...................................................  $    230,274    $  3,238,283
   Investments available for sale ..............................................     4,008,417              --
   Receivables:
     Trade less allowance for doubtful accounts of $12,477 and
       $25,000, respectively ...................................................     1,009,674         864,319
     Trade, international corporate joint ventures .............................       239,967         193,509
     Technical and other services, international corporate joint ventures ......       625,294         629,816
     Income taxes ..............................................................            --          86,533
   Inventories .................................................................       859,228         913,911
   Prepaid expenses and other ..................................................        85,368          90,886
   Deferred income taxes .......................................................        45,000          80,000
                                                                                  ------------    ------------
           Total current assets ................................................     7,103,221       6,097,257

PROPERTY AND EQUIPMENT, net ....................................................       409,780       1,067,138

OTHER ASSETS:
   Investments in international corporate joint ventures .......................     4,919,600       3,923,883
   Investment in European holding company ......................................        30,812         209,748
   Investment in and note receivable from German corporation ...................       260,225              --
   Deferred income taxes .......................................................       395,000         380,000
   Other .......................................................................       906,880         729,838
                                                                                  ------------    ------------
                                                                                     6,512,517       5,243,469
                                                                                  ------------    ------------
                                                                                  $ 14,025,518    $ 12,407,864
                                                                                  ============    ============

<B>LIABILITIES AND STOCKHOLDERS&#146; EQUITY</B>

CURRENT LIABILITIES:
   Accounts payable ............................................................  $    492,102    $    240,109
   Income taxes ................................................................       173,126              --
   Accrued liabilities:
     Payroll and related benefits ..............................................        97,380          80,811
     Other .....................................................................        63,679         196,862
                                                                                  ------------    ------------
           Total current liabilities ...........................................       826,287         517,782

DEFERRED GROSS PROFIT ..........................................................        25,000          25,000

COMMITMENTS AND CONTINGENCIES (Note 10)

STOCKHOLDERS&#146; EQUITY:
   Preferred stock, no par value; authorized 10,000 shares; none issued
   Common stock, $.02 par value per share; authorized 10,000,000 shares; issued
     and outstanding 3,644,551 and 3,689,551 shares, respectively ..............        72,891          73,791
   Additional paid-in capital ..................................................     4,228,682       4,318,682
   Retained earnings ...........................................................     9,322,258       8,199,866
   Accumulated other comprehensive loss ........................................      (449,600)       (727,257)
                                                                                  ------------    ------------
           Total stockholders&#146; equity ..........................................    13,174,231      11,865,082
                                                                                  ------------    ------------
                                                                                  $ 14,025,518    $ 12,407,864
                                                                                  ============    ============
</FONT>
</PRE>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">See notes to consolidated financial statements.</FONT></FONT></P>

<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>19</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION<BR>AND SUBSIDIARIES</B></FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>CONSOLIDATED STATEMENTS OF INCOME <BR>YEARS ENDED AUGUST 31, 2002, 2001 AND 2000</B><HR WIDTH=100% SIZE=1 NOSHADE></FONT></FONT></P>

<PRE>
<FONT SIZE="2">
                                                             <B>2002           2001           2000</B>

SALES ORIGINATING IN NORTH AMERICA ....................  $ 7,594,383    $ 9,269,719    $ 11,060,029

COST OF GOODS SOLD ....................................    3,589,172      4,611,455       5,590,439
                                                         -----------    -----------    ------------

GROSS PROFIT ..........................................    4,005,211      4,658,264       5,469,590

OPERATING EXPENSES:
   Selling ............................................    1,467,527      1,446,891       1,308,615
   General and administrative .........................    1,965,657      2,088,690       2,097,991
   Research, engineering, and technical support .......      805,796        648,129         587,434
                                                         -----------    -----------    ------------
                                                           4,238,980      4,183,710       3,994,040
                                                         -----------    -----------    ------------

OPERATING INCOME (LOSS) ...............................     (233,769)       474,554       1,475,550

INTERNATIONAL CORPORATE JOINT VENTURES AND
     EUROPEAN HOLDING COMPANY:
   Equity in income of international corporate joint
     ventures and European holding company ............    1,035,053        543,455         854,032
   Fees for technical and other services provided to
     international corporate joint ventures ...........    2,234,713      2,527,795       2,749,578
   Expenses incurred in support of international
     corporate joint ventures .........................   (1,714,131)    (1,981,810)     (1,312,213)
                                                         -----------    -----------    ------------
                                                           1,555,635      1,089,440       2,291,397

INTEREST INCOME .......................................       90,310        143,452         238,858
                                                         -----------    -----------    ------------

INCOME BEFORE INCOME TAXES ............................    1,412,176      1,707,446       4,005,805

INCOME TAXES ..........................................      185,000        555,000       1,375,000
                                                         -----------    -----------    ------------

NET INCOME ............................................  $ 1,227,176    $ 1,152,446    $  2,630,805
                                                         ===========    ===========    ============

NET INCOME PER SHARE:
   Basic ..............................................  $      0.34    $      0.31    $       0.68
                                                         ===========    ===========    ============
   Diluted ............................................  $      0.34    $      0.31    $       0.68
                                                         ===========    ===========    ============

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
   Basic ..............................................    3,665,961      3,761,211       3,857,964
                                                         ===========    ===========    ============
   Diluted ............................................    3,665,961      3,763,363       3,869,075
                                                         ===========    ===========    ============
</FONT>
</PRE>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">See notes to consolidated financial statements.</FONT></FONT></P>

<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>20</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>



<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION<BR>AND SUBSIDIARIES</B></FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>CONSOLIDATED STATEMENTS OF STOCKHOLDERS&#146; EQUITY<BR>AUGUST 31, 2002, 2001 AND 2000</B><HR WIDTH=100% SIZE=1 NOSHADE></FONT></FONT></P>


<PRE>
<FONT SIZE="1">
<B>                                                                                              Notes and
                                                                                               Related
                                                                                               Interest
                                                                                              Receivable
                                                                                 Accumulated     from
                                      Common Stock      Additional                  Other     Purchase of      Total</B>
                                  --------------------    <B>Paid-in    Retained   Comprehensive   Common     Stockholders&#146;
                                   Shares       Amount    Capital    Earnings   (Income) Loss    Stock        Equity</B>

BALANCE AT AUGUST 31, 1999 .....  3,865,103    $77,302  $4,613,806  $6,481,550    $(318,561)   $(129,807)   $10,724,290

   Repurchase of common stock ..    (74,874)    (1,498)   (149,748)   (400,137)          --           --       (551,383)
   Stock options exercised .....     12,889        258      68,492          --           --           --         68,750
   Payment received on note
     receivable ................         --         --          --          --           --      129,807        129,807
   Dividends on common stock -
     $.16 per share ............         --         --          --    (618,932)          --           --       (618,932)
   Comprehensive income, 2000:
     Foreign currency
       translation adjustment ..                                            --     (275,533)                   (275,533)
     Net income ................                                     2,630,805           --                   2,630,805
                                                                                                            -----------
       Comprehensive
         income, 2000 ..........                                                                              2,355,272
                                  ---------    -------  ----------  ----------    ---------    ---------    -----------

BALANCE AT AUGUST 31, 2000 .....  3,803,118     76,062   4,532,550   8,093,286     (594,094)          --     12,107,804

   Repurchase of common stock ..   (116,900)    (2,338)   (233,800)   (400,894)          --           --       (637,032)
   Stock options exercised .....      3,333         67      19,932          --           --           --         19,999
   Dividends on common stock -
     $.17 per share ............         --         --          --    (644,972)          --           --       (644,972)
   Comprehensive income, 2001:
     Foreign currency
       translation adjustment ..                                            --     (133,163)                   (133,163)
     Net income ................                                     1,152,446           --                   1,152,446
                                                                                                            -----------
       Comprehensive
         income, 2001 ..........                                                                              1,019,283
                                  ---------    -------  ----------  ----------    ---------    ---------    -----------

BALANCE AT AUGUST 31, 2001 .....  3,689,551     73,791   4,318,682   8,199,866     (727,257)          --     11,865,082

   Repurchase of common stock ..    (45,000)      (900)    (90,000)   (104,784)          --           --       (195,684)
   Comprehensive income, 2002:
     Foreign currency
       translation adjustment ..                                            --      277,657                     277,657
     Net income ................                                     1,227,176           --                   1,227,176
                                                                                                            -----------
       Comprehensive
         income, 2002 ..........                                                                              1,504,833
                                  ---------    -------  ----------  ----------    ---------    ---------    -----------

BALANCE AT AUGUST 31, 2002 .....  3,644,551    $72,891  $4,228,682  $9,322,258    $(449,600)   $      --    $13,174,231
                                  =========    =======  ==========  ==========    =========    =========    ===========
</FONT>
</PRE>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">See notes to consolidated financial statements.</FONT></FONT></P>


<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>21</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION<BR>AND SUBSIDIARIES</B></FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>STATEMENTS OF CASH FLOWS<BR>YEARS ENDED AUGUST 31, 2002, 2001 AND 2000</B><HR WIDTH=100% SIZE=1 NOSHADE></FONT></FONT></P>


<PRE>
<FONT SIZE="2">
<B>                                                                           2002           2001           2000</B>

CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income .......................................................  $ 1,227,176    $ 1,152,446    $ 2,630,805
   Adjustments to reconcile net income to net cash provided
       by operating activities:
     Depreciation ...................................................      194,329        265,309        198,264
     Gain on disposal of fixed assets ...............................      (12,032)            --             --
     Investment impairment loss .....................................           --        150,000             --
     Equity in income of international corporate joint ventures
       and European holding company .................................   (1,035,053)      (543,455)      (854,032)
     Dividends received from international corporate
       joint ventures ...............................................      453,049        308,252        273,119
     Deferred income taxes ..........................................       20,000         70,000       (150,000)
     Deferred gross profit ..........................................           --        (25,000)       (10,000)
     Changes in assets and liabilities:
       Receivables:
         Trade receivables ..........................................     (145,355)       285,239        329,088
         Trade receivables, international corporate joint ventures ..      (46,458)        47,197        (14,816)
         Technical and other services receivables international
           corporate joint ventures .................................        4,522        (21,680)      (134,583)
         Income taxes ...............................................       86,533        (86,533)            --
       Inventories ..................................................       54,683         15,750         83,864
       Prepaid expenses and other ...................................        5,518        (39,820)       (14,058)
       Accounts payable .............................................      251,993         18,873         71,908
       Income taxes .................................................      173,126       (313,806)         6,618
       Accrued liabilities ..........................................     (116,613)      (147,775)       204,656
                                                                       -----------    -----------    -----------
           Net cash provided by operating activities ................    1,115,418      1,134,997      2,620,833

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of investments available for sale ......................   (4,008,417)            --             --
   Additions to property ............................................     (193,253)      (113,258)      (302,224)
   Proceeds from the sale of property and equipment .................      668,314             --             --
   Investments in international corporate joint ventures ............     (136,056)      (185,301)      (101,083)
   Proceeds from partial return of Investment in European
     holding company ................................................      178,936             --             --
   Investment in and note receivable from German corporation ........     (260,225)            --             --
   Increase in other assets .........................................     (177,042)      (176,207)      (155,920)
   Payment on note receivable from purchase of common stock .........           --             --        129,807
                                                                       -----------    -----------    -----------
           Net cash used in investing activities ....................   (3,927,743)      (474,766)      (429,420)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Dividends paid ...................................................           --       (644,972)      (618,932)
   Repurchase of common stock .......................................     (195,684)      (637,032)      (551,383)
   Issuance of common stock .........................................           --         19,999         68,750
                                                                       -----------    -----------    -----------
           Net cash used in financing activities ....................     (195,684)    (1,262,005)    (1,101,565)
                                                                       -----------    -----------    -----------

NET (DECREASE) INCREASE IN CASH AND
   CASH EQUIVALENTS .................................................   (3,008,009)      (601,774)     1,089,848

CASH AND CASH EQUIVALENTS AT BEGINNING
   OF YEAR ..........................................................    3,238,283      3,840,057      2,750,209
                                                                       -----------    -----------    -----------

CASH AND CASH EQUIVALENTS AT END OF YEAR ............................  $   230,274    $ 3,238,283    $ 3,840,057
                                                                       ===========    ===========    ===========
</FONT>
</PRE>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">See notes to consolidated financial statements.</FONT></FONT></P>


<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>22</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>




<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION<BR>AND SUBSIDIARIES</B></FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>YEARS ENDED AUGUST 31, 2001, 2000,
AND 1999</B><HR WIDTH=100% SIZE=1 NOSHADE></FONT></FONT></P>





<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Business Operations</I> &#151;
Northern Technologies International Corporation and Subsidiaries (the Company)
are engaged in the development, manufacture, and marketing of proprietary
material science based industrial packaging products and electronic sensing
instruments.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Consolidation &#151;</I> The
consolidated financial statements include the accounts of Northern Technologies
International Corporation and its wholly owned subsidiaries. All significant
intercompany transactions have been eliminated.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Sales Originating in North
America</I> &#151; The Company considers sales originating in North America to
be all sales shipped from the Company&#146;s facilities located in Minnesota and
Ohio. There are no sales from the international corporate joint ventures
included in the amount as the Company&#146;s investments in international
corporate joint ventures are accounted for using the equity method.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Cash Equivalents</I> &#151; The
Company considers investments with an original maturity of three months or less
to be cash equivalents.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Investments Available for Sale
&#151;</I> The Company accounts for securities available for sale in accordance
with Statement of Financial Accounting Standards No. 115, <I>Accounting for
Certain Investments in Debt and Equity Securities</I> (&#147;SFAS No.
115&#148;). SFAS No. 115 requires that available-for-sale securities be carried
at fair value, with unrealized gains and losses reported as other comprehensive
income within shareholders&#146; investment, net of applicable income taxes.
Realized gains and losses and decline in value deemed to be other-than-temporary
on available-for-sale securities are included in other income. Fair value of the
securities is based upon the quoted market price on the last business day of the
fiscal year. The cost basis for realized gains and losses on available-for-sale
securities is determined on a specific identification basis. At August 31, 2002,
the Company&#146;s securities available for sale consisted of commercial paper,
corporate debt, certificate&#146;s of deposit and discount notes with a cost
value of $4,008,417 which approximates fair value.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Inventories</I> &#151;
Inventories are recorded at the lower of cost (first-in, first-out basis) or
market.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Property and Depreciation</I>
&#151; 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:</FONT></FONT></P>

<PRE>
<FONT SIZE="2">
Buildings and improvements ..................   5-20 years
Machinery and equipment .....................   3-10 years
</FONT>
</PRE>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Investments in International
Corporate Joint Ventures</I> &#151; Investments in international corporate joint
ventures are accounted for using the equity method. Intercompany profits on
inventories held by the international corporate joint ventures which were
purchased from the Company have been eliminated based on the Company&#146;s
ownership percentage in each international corporate joint venture.</FONT></FONT></P>

<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>23</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>

     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Investment in European Holding
Company &#151;</I> Investment in European holding company is accounted for using
the equity method.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Recoverability of Long-Lived
Assets &#151;</I> 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. Should the
sum of the expected undiscounted future net cash flows be less than the carrying
value, the Company would determine whether an impairment loss should be
recognized. An impairment loss would be measured by comparing the amount by
which the carrying value exceeds the fair value of the asset. As of August 31,
2002, the Company did not consider any of its assets impaired.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Income Taxes</I> &#151; The
Company utilizes the liability method of accounting for income taxes as set
forth in Statement of Financial Accounting Standards (SFAS) No. 109,
<I>Accounting for Income Taxes</I>. SFAS No. 109 requires an asset and liability
approach to financial accounting and reporting for income taxes. Deferred income
tax assets and liabilities are computed annually for differences between the
financial statement and tax basis of assets and liabilities that will result in
taxable or deductible amounts in the future, based on enacted tax laws and rates
applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. Income tax expense is
the tax payable or refundable for the period plus or minus the change during the
period in deferred tax assets and liabilities.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Foreign Currency Translation
(Accumulated Other Comprehensive Loss) &#151;</I> The functional currency of the
international corporate joint ventures and the foreign company is the applicable
local currency. The translation of the applicable foreign currencies into U.S.
dollars is performed for balance sheet accounts using current 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 accumulated other comprehensive loss.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Revenue Recognition &#151;</I>
In recognizing revenue in any period, the Company applies the provisions of
Staff Accounting Bulletin 101, <I>Revenue Recognition.</I> The Company
recognizes revenue from the sale of its products when persuasive evidence of an
arrangement exists, the product has been delivered, the fee is fixed and
determinable and collection of the resulting receivable is reasonably assured. A
portion of the gross profit on products shipped to the Company&#146;s
international corporate joint ventures is deferred until such products are sold
by the international corporate joint ventures.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Shipping and Handling</I>
&#151; During fiscal year 2001, the Company adopted Emerging Issues Task Force
(EITF) 00-10, <I>Accounting for Shipping and Handling Costs</I>. EITF
00-10 requires all amounts billed to customers in a sales transaction related to
shipping and handling to be classified as sales. The Company records costs
related to shipping and handling in cost of goods sold. Prior period sales and
cost of goods sold have been adjusted for this change, which had no effect on
previously reported net income.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Research and Development</I>
&#151; Research and development expenditures are expensed as incurred. Total
research and development expenses were $805,796, $648,129, and $587,434 for the
fiscal years ended August&nbsp;31, 2002, 2001 and 2000, respectively.</FONT></FONT></P>


<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>24</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>

     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Fees for Technical and Other
Services Provided to International Corporate Joint Ventures &#151;</I> Fees for
technical and other services to international corporate joint ventures are
recognized at the time the service is provided.</FONT></FONT></P>

     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Stock-Based Compensation &#151;</I>
The Company has adopted SFAS No. 123, <I>Accounting for Stock-Based
Compensation</I>. This statement defines a fair value-based method of accounting
for an employee stock option or similar equity instrument and encourages all
entities to adopt that method of accounting for all of their employee stock
compensation plans. However, the statement also allows an entity to continue to
measure compensation cost for those plans using the intrinsic value-based method
of accounting prescribed by Accounting Principles Board (APB) Opinion
No.&nbsp;25, <I>Accounting for Stock Issued to Employees</I>. Under the fair
value-based method, compensation cost is measured at the grant date based on the
value of the award and is recognized over the service period, which is usually
the vesting period. Under the intrinsic value-based method, compensation cost is
the excess, if any, of the quoted market price of the stock at the grant date or
other measurement date over the amount an employee must pay to acquire the
stock. The Company accounts for stock options grants and awards to employees in
accordance with APB Opinion No.&nbsp;25 and related interpretations.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Net Income Per Share &#151;</I>
Basic net income per 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. Diluted net income per share is computed by dividing net income by the
weighted average common and common equivalent shares outstanding. For the fiscal
years ended August 31, 2002, 2001 and 2000, the assumed exercise of stock
options increased the weighted average common and common equivalent shares
outstanding by 0, 2,152, and 11,111 shares, respectively. Options to purchase
128,896, 68,649, and 15,489 shares of common stock as of August 31, 2002, 2001
and 2000, respectively, were not included in the computations of diluted net
income per share because the options&#146; exercise prices were greater than the
average market price of the Company&#146;s common stock during the respective
periods.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Use of Estimates</I> &#151; The
preparation of the financial statements in conformity with accounting principles
generally accepted in the United States of America (generally accepted
accounting principles) 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 financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Fair Value Disclosure of
Financial Instruments</I> &#151; Cash and cash equivalents, receivables, and
current liabilities are carried at amounts which reasonably approximate their
fair value due to their short-term nature.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Reclassifications</I> &#151;
Certain reclassifications have been made to the fiscal year 2001 and 2000
financial statements to conform to the presentation used in the fiscal year 2002
financial statements. The reclassifications had no effect on stockholders&#146;
equity or net income as previously reported.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Derivative Instruments and
Hedging Activities</I> &#151; Effective September 1, 2001, the Company adopted
SFAS No.&nbsp;133, <I>Accounting for Derivative Instruments and Hedging
Activities</I>, as amended by SFAS No.&nbsp;138, <I>Accounting for Certain
Derivative Instruments and Certain Hedging Activities</I>. SFAS
No.&nbsp;133 establishes accounting and reporting standards for derivative
instruments and for hedging activities. It requires that all derivatives,
including those embedded in other contracts, be</FONT></FONT></P>

<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>25</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>

     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">recognized as either assets or
liabilities and that those financial instruments be measured at fair value. The
accounting for changes in the fair value of derivatives depends on their
intended use and designation. Management has reviewed the requirements of SFAS
No.&nbsp;133 and has determined that they have no freestanding or embedded
derivatives. All contracts that contain provisions meeting the definition of a
derivative also meet the requirements of, and have been designated as, normal
purchases and sales. The Company&#146;s policy is to not use freestanding
derivatives and to not enter into contracts with terms that cannot be designated
as normal purchases or sales.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Recently Issued Accounting
Pronouncements &#151;</I> In July 2001, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standard (SFAS) No.&nbsp;141,
<I>Business Combinations,</I> and SFAS No.&nbsp;142, <I>Goodwill and Other
Intangible Assets</I> (the Statements). The Company does not currently have any
goodwill or intangible assets relating to business acquisitions. The Company
adopted these statements effective September 1, 2002. The Company does not
anticipate that the adoption of these statements will impact its financial
position and results of operations.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">In August 2001, the FASB issued
SFAS No. 143, <I>Accounting for Asset Retirement Obligations.</I> SFAS
No.&nbsp;143 requires entities to record the fair value of a liability for an
asset retirement obligation in the period in which it is incurred. When the
liability is initially recorded, the entity capitalizes a cost by increasing the
carrying amount of the related long-lived asset. Over time, the liability is
accreted to its present value each period, and the capitalized cost is
depreciated over the useful life of the related asset. Upon settlement of the
liability, an entity either settles the obligation for its recorded amount or
incurs a gain or loss upon settlement. SFAS No.&nbsp;143 is effective for fiscal
years beginning after June&nbsp;15, 2002. The Company expects to adopt SFAS
No.&nbsp;143 effective September 1, 2002. The Company has not yet determined the
impact of SFAS No.&nbsp;143 on its financial position and results of operations.</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">In September 2001, the FASB issued SFAS No. 144, <I>Accounting for the Impairment or Disposal of Long-lived Assets.</I> SFAS No. 144
replaces SFAS No. 121, <I>Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.</I> The
FASB issued SFAS No. 144 to establish a single accounting model, based on the framework established in SFAS No. 121, as SFAS
No. 121 did not address the accounting for a segment of a business accounted for as a discontinued operation under Accounting
Principle Board Opinion No. 30, <I>Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequent Occurring Events and Transactions.</I> SFAS No. 144 also resolves significant
implementation issues related to SFAS No. 121. The provisions of SFAS No. 144 are effective for fiscal years beginning after
December 15, 2001 and are to be applied prospectively. The Company will adopt SFAS No. 144 effective September 1, 2002. The
Company has not yet determined the impact of SFAS No. 144 on its financial position and results of operations.</FONT></FONT></P>


<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>26</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>





<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2. INVENTORIES</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Inventories at August 31 consist
of the following:</FONT></FONT></P>

<PRE><FONT SIZE="2">
<B>                                                       2002               2001</B>

Production materials .....................           $249,596           $396,793
Work-in-process ..........................              1,737             27,071
Finished goods ...........................            607,895            490,047
                                                     --------           --------
                                                     $859,228           $913,911
                                                     ========           ========
</FONT></PRE>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">3. PROPERTY AND EQUIPMENT</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Property and equipment at August 31
consist of the following:</FONT></FONT></P>

<PRE><FONT SIZE="2">
<B>                                                        2002              2001</B>

Land .......................................        $   29,097        $  246,097
Buildings and improvements .................           521,480         1,165,542
Machinery and equipment ....................           693,245         1,180,823
                                                    ----------        ----------
                                                     1,243,822         2,592,462
Less accumulated depreciation ..............           834,042         1,525,324
                                                    ----------        ----------
                                                    $  409,780        $1,067,138
                                                    ==========        ==========
</FONT></PRE>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">4. INVESTMENTS</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>International Joint Ventures</I>
&#151; The Company participates in various international corporate joint
ventures in countries outside the United States and in similar noncontractual
arrangements in various other countries. The international joint ventures
provide for the manufacturing, marketing, and distributing of material science
based industrial packaging products. The Company also has a 50% ownership
interest in NTI ASEAN, LLC for its joint venture investments in the ASEAN
region, which does not encompass investments in corporate joint ventures in
other Asian countries outside the ASEAN region, such as Japan, South Korea or
Taiwan. An existing joint venture partner owns the remaining 50% ownership
interest in NTI ASEAN, LLC. The Company has an ownership interest, either
directly or indirectly, in international corporate joint ventures in the
following countries:</FONT></FONT></P>



<PRE><FONT SIZE="2">
<B>                                                                       Date of
Country                                                               Investment</B>

Japan ...........................................................        1987
France ..........................................................        1990
Taiwan ..........................................................        1990
Germany .........................................................        1991
Singapore* ......................................................        1991
Sweden ..........................................................        1991
Brazil ..........................................................        1993
Austria .........................................................        1994
Russia ..........................................................        1994
South Korea .....................................................        1994
Finland .........................................................        1995
Italy ...........................................................        1996
United Kingdom ..................................................        1997
Czech Republic ..................................................        1997
Poland ..........................................................        1998
Thailand* .......................................................        1998
China* ..........................................................        2000
India ...........................................................        2000
Malaysia* .......................................................        2000
Philippines* ....................................................        2001
Turkey ..........................................................        2002
</FONT></PRE>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">* Indirect ownership interest
through NTI ASEAN, LLC.</FONT></FONT></P>

<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>27</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>

     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Fees earned from the international
corporate joint ventures under licenses and technical and other support
agreements were $2,234,713, $2,527,795, and $2,749,578, for the fiscal years
ended August&nbsp;31, 2002, 2001 and 2000, respectively.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The Company incurred expenses
associated with the performance of its services for its international corporate
joint ventures of $1,714,131, $1,981,810, and $1,312,213, for the fiscal years
ended August&nbsp;31, 2002, 2001 and 2000, respectively. These expenses were
incurred primarily in conjunction with the performance of the technical services
to existing international corporate joint ventures, travel, and legal fees
regarding the development of new joint ventures.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Composite financial information
from the audited and unaudited financial statements of the Company&#146;s
international joint ventures carried on the equity basis is summarized as
follows:</FONT></FONT></P>

<PRE><FONT SIZE="2">
<B>                                                                         August 31</B>
                                                                 -------------------------
<B>                                                                     2002          2001</B>

Current assets ...............................................   $13,053,513   $10,015,717
Total assets .................................................    16,462,161    12,936,105
Current liabilities ..........................................     6,198,701     4,610,403
Noncurrent liabilities .......................................       245,895        67,978
Joint ventures&#146; equity .......................................    10,017,521     8,257,724
Northern Technologies International Corporation&#146;s
 share of international corporate joint ventures&#146; equity .....     4,919,600     3,923,883

<B>                                                            Years Ended August 31</B>
                                                   ---------------------------------------
                                                       <B>2002          2001          2000</B>

Sales* .........................................   $24,931,945   $21,218,289   $23,913,708
Gross profit ...................................    11,447,114    10,762,703    12,448,148
Net income .....................................     2,042,812       912,865     1,810,885
Northern Technologies International
 Corporation&#146;s share of equity in income
 of international corporate joint ventures .....     1,035,053       530,348       857,687
</FONT></PRE>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">* Excludes sales of NTI ASEAN,
LLC&#146;s individual joint ventures.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>European Holding Company</I>
&#151; During the fiscal year 1997 the Company invested $254,639 for a 50%
ownership interest in a European holding company. In fiscal year 2002, the
European holding company paid out dividends of $190,434 to the Company for a
partial return of its investment. It is anticipated that the European holding
company will use its remaining funds (approximately $32,000 at August 31, 2002)
to invest in a joint venture in Holland during fiscal year 2003.</FONT></FONT></P>

<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>28</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>

     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Investment in and Note
Receivable from German Corporation</I> &#151; During fiscal year 2002, the
Company invested $141,500 for a 30% ownership interest in Mutec Instruments
GmbH. This German corporation is a developer and producer of electronic
industrial instrumentation. The German corporation will be accounted for using
the equity method of accounting. In addition, on June 30, 2002, the Company
entered into a promissory note with Mutec Instruments GmbH for EURO$125,000 (see
Note 8).</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">5. STOCKHOLDERS&#146; EQUITY</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">During fiscal years 2002, 2001,
and 2000, the Company acquired and retired 45,000, 116,900, and 74,874 shares of
common stock for $195,684, $637,032, and $551,383, respectively.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">During fiscal year 1999 the
Company issued 3,200 shares of common stock in return for services provided. The
value of the common stock issued, $22,050, was expensed and determined based on
the market value of the Company&#146;s common stock.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">A note receivable of $129,807
(including accrued interest of $4,432) resulting from the exercise of warrants
was presented as a reduction of stockholders&#146; equity prior to fiscal year
2000. The note receivable had an interest rate of 11% and was due on demand. The
note receivable and all interest were paid in full in fiscal year 2000.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">During fiscal years 2000 and 1994
the Company&#146;s Board of Directors and shareholders approved stock option
plans (the Plans) providing for the granting of options to purchase 450,000
shares of common stock in total. Under the Plans, incentive stock options and
nonqualified stock options could be granted to directors, officers, non-officer
employees, and others. The options have a term of five years and become
exercisable ratably over a three- or four-year period beginning on the first
annual anniversary date of the grant. Options are granted at prices equal to the
market value of the stock on the date of grant.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">A summary of the status of the
Company&#146;s stock options for the years ended August 31 is as follows:</FONT></FONT></P>

<PRE>
<FONT SIZE="2">
<B>                                               2002                    2001                     2000</B>
                                        --------------------   ---------------------   ----------------------
<B>                                                   Wgtd Avg                Wgtd Avg                 Wgtd Avg
                                        Shares    Exer Price    Shares    Exer Price    Shares     Exer Price</B>

Outstanding at beginning of year .....   85,562     $ 6.60       94,562     $ 6.57       80,796      $ 6.83
Granted ..............................   58,000       4.70       14,000       6.39       47,655        6.89
Exercised ............................        0       0.00       (3,333)      6.00      (12,889)       5.33
Canceled .............................  (14,666)      5.73      (19,667)      6.45      (21,000)       9.02
                                        -------                --------                --------

Outstanding at end of year ...........  128,896     $ 5.84       85,562     $ 6.60       94,562      $ 6.57
                                        =======                ========                ========

Options exercisable at year-end ......   50,015     $ 6.81       40,796     $ 6.50       19,718      $ 6.07
                                        =======                ========                ========
</FONT>
</PRE>

<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>29</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>




<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The following table summarizes information
about stock options outstanding at August 31, 2002:</FONT></FONT></P>


<PRE>
<FONT SIZE="2">
<B>                                       Options Outstanding</B>
                        ----------------------------------------------
<B>                                            Weighted                                Options Exercisable
                                             Average</B>                         --------------------------------
<B>                                            Remaining       Weighted                              Weighted
       Range of                            Contractual       Average                               Average
       Exercise              Number           Life          Exercise              Number          Exercise
        Prices            Outstanding        (Years)          Price            Exercisable          Price</B>

$4.56 - $7.00 ........       127,321          3.06           $  5.78               48,440          $  6.68
$10.63 ...............         1,575          0.29             10.63                1,575            10.63
                           ---------                                            ---------
$4.56 - $10.63 .......       128,896          3.03              5.84               50,015             6.81
                           =========                                            =========
</FONT>
</PRE>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">If compensation cost for the
Company&#146;s Plan had been determined based on the fair value at the grant
date for awards in the fiscal years ended August&nbsp;31, consistent with the
provisions of SFAS No.&nbsp;123, the Company&#146;s net income would have
changed to the pro forma amounts indicated below:</FONT></FONT></P>

<PRE>
<FONT SIZE="2">
<B>                                                          2002         2001         2000</B>

Net income, as reported ............................   $1,227,176   $1,152,446   $2,630,805
Net income, pro forma ..............................    1,169,886    1,088,384    2,558,094

Basic net income per common share, as reported .....   $     0.34   $     0.31   $     0.68
Basic net income per common share, pro forma .......         0.32         0.29         0.66

Diluted net income per share, as reported ..........         0.34         0.31         0.68
Diluted net income per share, pro forma ............         0.32         0.29         0.66
</FONT>
</PRE>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">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:</FONT></FONT></P>

<PRE>
<FONT SIZE="2">
<B>                                                     2002           2001           2000</B>

Dividend yield ..................................      2.0%           2.0%           2.0%
Expected volatility .............................     43.9%          45.9%          46.6%
Expected life of option .........................  5 years        5 years        5 years
Average risk-free interest rate .................     4.37%          5.67%          5.79%
Average fair value of options on grant date .....   $ 1.76         $ 2.59         $ 2.84
</FONT>
</PRE>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">6. SEGMENT INFORMATION</FONT></FONT></P>



<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The Company is engaged in the
development, manufacture, and marketing of proprietary materials science based
industrial packaging products and electronic sensing instruments. The
Company&#146;s electronic sensing business was terminated in fiscal year 2002.
Further disclosure regarding the two businesses is not presented, as management
uses the consolidated information to allocate resources and evaluate
performance.</FONT></FONT></P>

<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>30</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>





     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Sales by geographic location as a
percentage of total sales were as follows:</FONT></FONT></P>

<PRE>
<FONT SIZE="2">
<B>                                                              2002   2001   2000</B>

U.S.A. to unaffiliated customers ..........................    74%    72%    74%
Outside the U.S.A. to:
  International corporate joint ventures in which the
    Company is a shareholder directly and indirectly ......     8      7      6
  Unaffiliated customers ..................................    18     21     20
                                                              ---    ---    ---
                                                              100%   100%   100%
                                                              ===    ===    ===
</FONT>
</PRE>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">One customer accounted for
approximately 12% and 10% of net sales for the fiscal years ended
August&nbsp;31, 2001 and 2000, respectively. No single customer accounted for
more than 10% of net sales for the fiscal year ended August&nbsp;31, 1999.</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">7. RETIREMENT PLAN</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The Company has a 401(k) employee
savings plan. Employees who meet certain age and service requirements may elect
to contribute up to 7% of their salaries. The Company contributes the lesser of
50% of the participant&#146;s contributions or 3.5% of the employee&#146;s
salary. The Company recognized expense for the savings plan of $39,400, $42,000,
and $37,000 for the fiscal years ended August&nbsp;31, 2002, 2001 and 2000,
respectively.</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">8. RELATED-PARTY TRANSACTIONS</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The Company paid reimbursement for
travel and related expenses of $240,000, $249,000, and $378,000 for the fiscal
years ended August 31, 2002, 2001, and 2000, respectively, to a financial and
management consulting firm, Inter Alia, which owns 25.1% of the Company&#146;s
outstanding common shares, and of which the Company&#146;s Co-Chief Executive
Officer and Chairman of the Board and the Company&#146;s other Co-Chief
Executive Officer and President are officers and directors. The management
consulting firm earned commissions of approximately $66,420, $52,544, and
$42,590 for the fiscal years ended August 31, 2002, 2001, and 2000,
respectively, on the net proceeds of sales of the Company&#146;s product. In
addition, the Company has paid all life insurance premiums related to all
policies that insure the related parties of which the Company&#146;s Co-Chief
Executive Officer and Chairman of the Board and the Company&#146;s other
Co-Chief Executive Officer and President are officers and directors, for which
the Company is the beneficiary.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">On May 31, 2002, the Company
entered into a promissory note with Atagencer LLC, a limited liability
corporation that is principally owned by Dr. Mehmet Gencer, a member of the
Company&#146;s Board of Directors, in the amount of $50,000 at a rate of 2% per
annum. The note is due to the Company five years from the date of issuance<I>.</I>
The note was obtained by Atagencer LLC to obtain a 25% share in Fibro NTI
Joint Stock Company in Turkey, of which NTIC is a 50% owner. Additionally, Dr.
Mehmet Gencer provided consulting services to the Company during fiscal 2002 and
2001 for which the Company paid $79,000 and $45,000, respectively.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">On June 30, 2002, the Company
entered into a promissory note with Mutec Instruments GmbH for EURO$125,000 at a
rate of 6.55% per annum. The note is due to the Company ten years from the date
of the note<I>.</I> NTIC currently owns 30% of the company. The promissory note
will be used by the company to obtain capital equipment and finance operations.</FONT></FONT></P>

<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>31</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">9. INCOME TAXES</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The provisions for income taxes
for the fiscal years ended August&nbsp;31 consist of the following:</FONT></FONT></P>

<PRE>
<FONT SIZE="2">
<B>                                          2002          2001            2000</B>

Current:
 Federal .........................      $137,000      $445,000       $1,395,000
 State ...........................        28,000        40,000          130,000
                                        --------      --------       ----------
                                         165,000       485,000        1,525,000

Deferred:
 Federal .........................        19,000        60,000         (140,000)
 State ...........................         1,000        10,000          (10,000)
                                        --------      --------       ----------
                                          20,000        70,000         (150,000)
                                        --------      --------       ----------
                                        $185,000      $555,000       $1,375,000
                                        ========      ========       ==========
</FONT>
</PRE>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Reconciliations of the expected federal
income tax at the statutory rate with the provisions for income taxes for the
three fiscal years ended August 31 are as follows:</FONT></FONT></P>

<PRE>
<FONT SIZE="2">
<B>                                                            2002         2001         2000</B>

Tax computed at statutory rates ......................   $ 480,000    $ 600,000    $1,400,000
State income tax, net of federal benefit .............      20,000       30,000       100,000
Equity in income of international joint ventures .....    (352,000)    (185,000)     (290,000)
Other ................................................      37,000      110,000       165,000
                                                         ---------    ---------    ----------
                                                         $ 185,000    $ 555,000    $1,375,000
                                                         =========    =========    ==========
</FONT>
</PRE>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The Company has not recognized a
deferred tax liability relating to investments in international corporate joint
ventures and European holding company that are essentially permanent in duration
of $1,395,388 and $1,148,000 at August&nbsp;31, 2002 and 2001, respectively. If
some or all of the undistributed earnings of the international corporate joint
ventures and European holding company are remitted to the Company in the future,
income taxes, if any, after the application of foreign tax credits will be
provided at that time.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The tax effect of the temporary
differences and tax carryforwards comprising the net deferred taxes shown on the
balance sheets at August&nbsp;31 are as follows:</FONT></FONT></P>

<PRE>
<FONT SIZE="2">
<B>                                                            2002         2001</B>

Current:
 Allowance for doubtful accounts .....................    $  5,000     $ 10,000
 Inventory costs .....................................      20,000       45,000
 Prepaid expenses and other ..........................     (12,000)     (10,000)
 Accrued expenses ....................................      23,000       25,000
 Deferred gross profit ...............................       9,000       10,000
                                                          --------     --------
           Total current .............................    $ 45,000     $ 80,000
                                                          ========     ========

Noncurrent:
 Excess of book over tax depreciation ................    $ 71,000     $ 90,000
 Asset valuation reserves ............................     324,000      290,000
                                                          --------     --------
           Total noncurrent ..........................    $395,000     $380,000
                                                          ========     ========
</FONT>
</PRE>

<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>32</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10. COMMITMENTS AND CONTINGENCIES</FONT></FONT></P>



<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">During the current fiscal year, a
subsidiary of the Company acquired a one-third ownership in an Ohio limited
liability company (the LLC). The LLC owns and operates a rental property located
in Beachwood, Ohio, acquired at a cost of $2,205,000 in fiscal 2000. As of
August&nbsp;31, 2002, the Company has guaranteed up to $339,235 of the
LLC&#146;s $2,035,000 mortgage obligation. The Company&#146;s subsidiary has
entered into a 15-year lease agreement for 16,826 square feet of office,
manufacturing, laboratory, and warehouse space requiring monthly payments of
$16,434, which can be adjusted annually according to the annual consumer price
index through November 2014. Total rent expense under the lease was
approximately $149,500 and $160,000 for the years ended August 31, 2002 and
2001, respectively. By its ownership in the LLC, the Company&#146;s subsidiary
is entitled to one-third of the LLC&#146;s operating results, which are
accounted for on the equity method. The rental property is now fully leased.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The Company is involved in various
legal actions arising in the normal course of business. Management is of the
opinion that any judgment or settlement resulting from pending or threatened
litigation would not have a material adverse effect on the financial position or
results of operations of the Company.</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11. STATEMENTS OF CASH FLOWS</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Supplemental disclosures of cash
flow information for the three fiscal years ended August 31 consist of:</FONT></FONT></P>

<PRE>
<FONT SIZE="2">
<B>                                                                   2002         2001         2000</B>

Cash paid during the year for income taxes ..................   $ (61,594)   $ 740,551    $1,361,000
Increase (decrease) in the Company&#146;s investment in
 international corporate joint ventures and accumulated
 other comprehensive loss due to changes in
 exchange rates .............................................     277,657     (133,163)     (275,533)
</FONT>
</PRE>

<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>33</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">12. QUARTERLY INFORMATION (UNAUDITED)</FONT></FONT></P>

<PRE>
<FONT SIZE="2">
<B>                                                            Quarter Ended</B>
                                       ------------------------------------------------------
<B>                                       November 30   February 28       May 31      August 31</B>

Fiscal year 2002:
   Net sales .......................   $ 2,099,189   $ 1,564,085    $ 2,003,500   $ 1,927,609
   Gross profit ....................     1,188,467       765,674      1,002,782     1,048,288
   Income before income taxes ......       657,562       (67,267)       435,999       385,882
   Income taxes ....................       170,000       (90,000)        60,000        45,000
   Net income ......................       487,562        22,733        375,999       340,882

Net income per share:
   Basic ...........................   $      0.13   $      0.01    $      0.10   $      0.09
   Diluted .........................   $      0.13   $      0.01    $      0.10   $      0.09

Weighted average common shares
 assumed outstanding:
   Basic ...........................     3,670,870     3,669,273      3,667,747     3,653,471
   Diluted .........................     3,670,870     3,669,273      3,667,747     3,653,471

<B>                                                            Quarter Ended</B>
                                       ------------------------------------------------------
<B>                                       November 30   February 28       May 31      August 31</B>

Fiscal year 2001:
   Net sales .......................   $ 2,505,707   $ 2,090,355    $ 2,376,424   $ 2,297,233
   Gross profit ....................     1,211,902     1,028,857      1,248,971     1,168,534
   Income before income taxes ......       654,526       243,120        506,414       303,386
   Income taxes ....................       200,000       100,000        170,000        85,000
   Net income ......................       454,526       143,120        336,414       218,386

Net income per share:
   Basic ...........................   $      0.12   $      0.04    $      0.09   $      0.06
   Diluted .........................          0.12          0.04           0.09          0.06

Weighted average common shares
 assumed outstanding:
   Basic ...........................     3,796,715     3,787,831      3,742,269     3,719,529
   Diluted .........................     3,804,058     3,788,434      3,742,356     3,719,566
</FONT>
</PRE>



<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">During the fourth quarter of
fiscal year 2001, the Company recorded an impairment loss of $150,000 relating
to the Company&#146;s investment in a privately held company.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">During the fourth quarter of
fiscal year 2000, the Company adjusted the carrying value of inventory as a
result of a complete annual physical count and valuation. This annual counting
and pricing was more comprehensive than that which had been conducted on an
interim basis. As a result, the increased cost of sales by approximately
$300,000 in the fourth quarter of fiscal year 2000. It is not practicable to
determine the periods of the fiscal year to which this adjustment relates.</FONT></FONT></P>


<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>34</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>



<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.</B></FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">None.</FONT></FONT></P>


<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>PART III</B></FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.</B></FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>A. Directors of the Registrant</B></FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The following table sets forth
certain information as of November 15, 2002, which has been furnished to the
Company by the directors named below.</FONT></FONT></P>


<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="100%">
<TR VALIGN="TOP">
     <TH><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><U>Name</U></FONT></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><U>Age</U></FONT></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><U>Principal Occupation</U></FONT></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><U>Director Since</U></FONT></FONT></TH></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD WIDTH="22%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Philip M. Lynch</FONT></TD>
     <TD WIDTH="15%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">66</FONT></TD>
     <TD WIDTH="48%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Co-Chief Executive Officer and Chairman of the Board of the Company and Executive Vice President of Inter Alia Holding Company</FONT></TD>
     <TD WIDTH="15%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1979</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Dr. Donald A. Kubik</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">62</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Vice Chairman and Chief Technology Officer of the Company</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1995</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Richard G. Lareau</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">74</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Partner of Oppenheimer Wolff &amp; Donnelly LLP</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1980</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Prof. Milan R. Vukcevich</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">65</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Chief Scientist Research and Development of Bicron Saint-Gobain Industrial Ceramics</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1995</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Haruhiko Rikuta</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">37</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Corporate Officer of Taiyonic Limited and President of NTI ASEAN, LLC</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1997</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Mrs. Ursula Kiel-Dixon</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">49</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Director, Head of Corporate Department Foreign Organization of ThyssenKrupp A.G.</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2001</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Prof. Aradhna Krishna</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">41</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Professor of Marketing, University of Michigan Business School</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2001</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Mark J. Stone</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">43</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">President, Petrus International, Inc.</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2001</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Stephan C. Taylor</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">55</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">President and Co-founder of Taylor Packaging and Manager of Zerust (U.K.) Ltd.</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2001</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Dr. Mehmet A. Gencer</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">50</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Founder and President of Atagencer LLC and IMET Corporation, Akron, Ohio</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2002</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
</TABLE>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Mr. Lynch has been Executive Vice President of Inter Alia Holding Company, a financial and management consulting firm, for
more than six years. Mr. Lynch is a member of the Board of Directors of Fosbel S.A., Headquartered in Brussels, Belgium
(operating in North America, South America, Asia and in 17 Western and three Eastern European countries). Fosbel S.A. is
itself a</FONT></FONT></P>

<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>35</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">joint venture between Glaverbel S.A., (Bruxelles), a leading Belgian glass manufacturing company and an affiliate of
Asahi Glass Co., Ltd., and Cinven Limited, an English Financial Institution. Mr. Lynch is also a member of the Board of
Directors of Agra Tagger AG. in Austria and EDR Inc. in Cleveland, Ohio.</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Dr. Kubik has been employed by the
Company since 1978, and was named Vice Chairman in September 1999. Dr. Kubik
served as Vice President of the Company from 1979 to September 1999 at which
time Dr. Kubik was appointed Vice Chairman. Additionally he served as Co-Chief
Executive Officer of the Company from September 1999 to May 2000. In May 2000,
Dr. Kubik was made Chief Technology Officer of the Company and is a member of
the Executive Committee. During his employment as Chief Technology Officer with
the Company, Dr. Kubik has been responsible for developing the patent that led
to the Company&#146;s introduction of protective plastic film and paper products
incorporating volatile corrosion inhibitors. Prior to joining the Company, Dr.
Kubik held a research and development position with Minnesota Mining &amp;
Manufacturing (3M).</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Mr. Lareau has been a partner at the law firm of Oppenheimer Wolff &amp; Donnelly LLP for more than six years. Mr. Lareau also
serves as a trustee of Mesabi Trust, a New York Stock Exchange listed royalty trust.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Prof. Vukcevich is a professor of
Material Sciences at the University of Arizona. He is recently retired from his
position as Chief Scientist Research and Development of Bicron Saint-Gobain
Industrial Ceramics. At GE Lighting, which employed Prof. Vukcevich from 1973 to
1995, he held various positions including Chief Scientist, Manager of
Metallurgical Engineering and Coordinator of International Research and
Development in Materials Science.</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Mr. Rikuta, a citizen of Japan, has been President of Taiyo Petroleum Gas Co. Ltd. since July 2001. Prior to that he was the
manager of the ZERUST Department of the company, from February 1993 to 2001. From August 1991 to January 1993, Mr. Rikuta
served as a Sales Representative of the Company. Mr. Rikuta received a B.A. degree in Economics from Seijo University in
Tokyo, Japan in March 1989. In May 1991, Mr. Rikuta received a B.A. degree in International Relations from the University of
Wisconsin in Milwaukee, Wisconsin. Taiyo Petroleum Gas Co. Ltd maintains a 50% ownership interest in NTI ASEAN, and also owns
a 50% and 25% interest in the Company&#146;s corporate joint venture located in Japan and Korea respectively.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Mrs. Ursula Kiel-Dixon, a German
citizen, has been Director, Head of Corporate Department Foreign Organization
with ThyssenKrupp A.G., Germany, since November 1999. Previously,
Mrs.&nbsp;Kiel-Dixon served as Head of Department, Sales and M&amp;A Strategy
with ThyssenKrupp Stainless GmbH, Germany, from October 1997 until October 1999,
and as Director, Marketing for ThyssenKrupp Nirosta GmbH, from April 1997 to
September 1997. From 1991 to 1997 Mrs.&nbsp;Kiel-Dixon was Deputy Head of
Controlling Department with Fried. Krupp A.G. Hoesch &#150; Krupp.
Mrs.&nbsp;Kiel-Dixon holds an M.A. in Economics from State University of New
York at Stony Brook, NY.</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Prof. Aradhna Krishna has been Professor of Marketing at University of Michigan Business School since 2000 and Associate
Professor of Marketing at the same institution from 1998 until 2000. Prof. Aradhna Krishna was an Associate Professor of
Marketing at Columbia University from 1993 to 1998. She is serving on the Editorial Board of Journal of Marketing Research
and Marketing Letters and has been consultant on project sponsored among others by Nielsen, Benetton and Sun Services. Prof.
Krishna holds a Ph.D. in Marketing from Graduate School of Business at New York University.</FONT></FONT></P>

<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>36</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Mr. Mark J. Stone has been President of Petrus International, Inc., an international consulting firm, since 1992. Mr. Stone
has advised a variety of Japanese and other multi-national corporations in areas including project finance and international
investment strategy. Mr. Stone was a director of Aqua Design, Inc., an international water desalination company, from 1988 -
1996. Mr. Stone was Director, Marketing &amp; Business Development of Toray Marketing &amp; Sales (America) Inc. from 1986 to 1992.
From 1980 - 1986 Mr. Stone was employed by Mitsui &amp; Co. (U.S.A.), Inc. where he founded and was Treasurer of Hydro Management
Resources, a Mitsui subsidiary which finances, owns, and operates water treatment projects. Mr. Stone holds an A.B. from
Harvard University.</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Mr. Stephen C. Taylor, a citizen of the U.K., has been managing Taylor Packaging, and Zerust U.K. Ltd., the Company&#146;s joint
venture in the U.K. In 1973, Mr. Taylor founded, together with his father, Taylor Packaging and has assumed various
managerial positions since. Mr. Taylor graduated in Education from Bede College, University of Durham, England. Taylor
Packaging maintains a 50% ownership interest in the Company&#146;s corporate joint venture located in the U.K.</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Dr. Mehmet A. Gencer has been the President and founder of IMET Corporation, Akron, Ohio since 1997. Dr. Gencer was with BF
Goodrich Company from 1984 though 1999. While with BF Goodrich Co. he held the positions of Director of Emerging
Technologies, Associate Director of Technology and New Business Development, Senior R&amp;D Manager, Environmental Technology
Research Manager and Biotechnology Group Senior R&amp;D Engineer. Dr. Gencer obtained his Doctor of Philosophy in Chemical
Engineering from Drexel University, Masters of Science in Chemical Engineering from University of Pennsylvania, and Bachelor
of Science in Chemical Engineering from Ege University. Dr. Mehmet A. Gencer has been providing consulting services to the
Company since May 2000. Atagencer LLC, a limited liability corporation that is principally owned by Dr. Mehmet Gencer
maintains a 25% ownership interest in the Company&#146;s corporate joint venture located in Turkey.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>B. Executive Officers of the Registrant</B></FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The executive officers of the
Company, their ages and the offices held, as of November 15, 2002, are as
follows:</FONT></FONT></P>


<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="100%">
<TR VALIGN="TOP">
     <TH><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><U>Name</U></FONT></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><U>Age</U></FONT></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><U>Position in the Company</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></FONT></TH></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD WIDTH="22%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Philip M. Lynch</FONT></TD>
     <TD WIDTH="15%" ALIGN="center"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">66</FONT></TD>
     <TD WIDTH="35%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Chairman of the Board and Co-Chief Executive Officer*</FONT></TD>
     <TD WIDTH="28%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">G. Patrick Lynch</FONT></TD>
     <TD ALIGN="center"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">35</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">President and Co-Chief Executive Officer*</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Dr. Donald A. Kubik</FONT></TD>
     <TD ALIGN="center"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">62</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Vice Chairman, Chief Technology Officer*</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Matthew C. Wolsfeld</FONT></TD>
     <TD ALIGN="center"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">28</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Chief Financial Officer*</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Elsie F. Gilles</FONT></TD>
     <TD ALIGN="center"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">61</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Treasurer</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Irina V. Roytman</FONT></TD>
     <TD ALIGN="center"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">37</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Vice President and Coordinator for Eastern Europe</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Prof. Efim Ya. Lyublinski</FONT></TD>
     <TD ALIGN="center"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">65</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Vice President and Director of Applications Engineering</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Dr. Yelena L. Shanina</FONT></TD>
     <TD ALIGN="center"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">54</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Vice President and Director of Technical Coordination</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
</TABLE>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">*Members of the Executive Committee</FONT></FONT></P>

<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>37</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Mr. Philip M. Lynch has been Executive Vice President of Inter Alia Holding Company for more than five years. Mr. Lynch is
the father of Mr. G. Patrick Lynch. Refer to &#147;Directors of the Registrant&#148; for a more detailed discussion.</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Mr. G. Patrick Lynch, an employee of the Company since 1995, has been President and Co-Chief Executive Officer since May
2000. Mr. G. Patrick Lynch was Vice President of Strategic Planning, Corporate Secretary and a member of the Executive
Committee, which served as Co-Chief Executive Officer from September 1999 to May 2000. Mr. G. Patrick Lynch is also an
officer and director of Inter Alia Holding Company. Prior to joining the Company, Mr. G. Patrick Lynch held positions in
sales management for Fuji Electric Co., Ltd. in Tokyo, Japan, and programming project management for BMW AG in Munich,
Germany. Mr. G. Patrick Lynch received an M.B.A. degree from the University of Michigan Business School in Ann Arbor,
Michigan. Mr. G. Patrick Lynch is the son of Mr. Philip M. Lynch.</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Dr. Donald A. Kubik has been employed by the Company since 1978. Refer to &#147;Directors of the Registrant&#148; for a more detailed
discussion.</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Mr. Matthew C. Wolsfeld, an employee of the company since February 2001, has been appointed Chief Financial Officer as of
November 9, 2001. Mr. Matthew Wolsfeld was Controller of the Company from May 2001 through November 2001. Prior to joining
the Company, Mr. Matthew C. Wolsfeld held an auditing position with PricewaterhouseCoopers LLP in Minneapolis, Minnesota. Mr.
Matthew C. Wolsfeld received a B.A. degree in Accounting from the University of Notre Dame and is currently obtaining his
M.B.A. degree at the University of Minnesota, Carlson School of Business. Mr. Matthew C. Wolsfeld is a Certified Public
Accountant.</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Ms. Elsie F. Gilles has been employed by the Company since 1985, serving in a variety of capacities in the areas of accounting
and personnel. Ms. Gilles has been the Treasurer of the Company since November 20, 2000.</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Ms. Irina V. Roytman has been employed by the Company since September 1994 serving in a variety of capacities in the area of
international business development. She has been Vice President and Coordinator for Eastern Europe since July 2000. Ms.
Roytman holds B.S. in engineering from the Technical University of St. Petersburg in Russia.</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Prof. Efim Ya. Lyublinski has been employed by the Company since March 2000 in the position of Vice President and Director of
Applications Engineering. Prof. Lyublinski is a Member of the Russian Academy of Natural Sciences. From 1984 to 1999 Prof.
Lyublinski was Head of Laboratory of Complex Methods of Corrosion Protection at the Central Research Institute of Structural
Materials (&#147;Prometey&#148;), St. Petersburg. Prof Lyublinski also held a Senior Consulting Position with Osmos Technology, Boston,
Massachusssetts from 1995 to 1999. Prof. Lyublinski holds 14 patents, 64 inventions and has authored 8 books, 6 booklets, 140
articles and 75 contributions to various conferences in the areas of materials science and corrosion.</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Dr. Yelena L. Shanina has been employed by the Company since April 2002 in the position of Vice President and Director of
Technical Coordination. Dr. Shanina is a graduate of Moscow State University, Chemical Faculty specializing in chemical
kinetics. After graduating, Dr. Shanina worked as a Senior researcher of the Institute of Biochemical Physics of the Russian
Academy of Sciences. Dr. Shanina holds more than 30 articles in her field. From 1998 until April 2002 Dr. Shanina also was
responsible for an applications engineering for NTI&#146;s Joint Venture in the Russian Federation, MostNIC, providing hands-on
technical support to MostNIC&#146;s customers with respect to the chemistry and proper use of the NTI industrial packaging
formulations developed within the</FONT></FONT></P>

<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>38</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">NTI Federation, both at our Excor Technical Center in Dresden, Germany, and stemming from
the U.S. and Japan.</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>C. Compliance with Section 16(a) of the Exchange Act</B></FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Section 16(a) of the Securities
Exchange Act of 1934, as amended, requires the Company&#146;s directors and
executive officers and all persons who beneficially own more than 10% of the
outstanding shares of the Company&#146;s Common Stock to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of the Company&#146;s Common Stock. Executive officers,
directors and greater than 10% beneficial owners are also required to furnish
the Company with copies of all Section 16(a) forms they file. To the
Company&#146;s knowledge, based upon a review of the copies of such reports
furnished to the Company and written representations that no other reports were
required, during the year ended August 31, 2002, none of the Company&#146;s
directors or officers or beneficial owners of greater than 10% of the
Company&#146;s Common Stock failed to file on a timely basis the forms required
by Section 16 of the Exchange Act.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Item 10. EXECUTIVE COMPENSATION.</B></FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>A. Compensation of Directors</B></FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B><I>Directors
Fees.</I></B><FONT FACE="Times New Roman, Times, Serif"></FONT><FONT FACE="Times New Roman, Times, Serif"> Each person who was a non-employee director received an
annual retainer of $10,000 in fiscal 2002 for services rendered as a director of
the Company. Each non-employee director of the Company further received $1,000
for each Board meeting and Strategic Planning meeting and $500 for each
Committee (e.g. Audit and Compensation) meeting attended. The Chairman of the
Board does not receive any Board or committee meeting fee. The Company pays the
premium on a group insurance policy for the Chairman of the Board.</FONT></FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B><I>Automatic Option Grants to
Non-Employee Directors.</I></B><FONT FACE="Times New Roman, Times, Serif"></FONT><FONT FACE="Times New Roman, Times, Serif"> Pursuant to the Company&#146;s 1994 and
2000 Stock Incentive Plan (the &#147;Plan&#148;), each non-employee director of
the Company is automatically granted a non-qualified option to purchase 2,000
shares of Common Stock (a &#147;Director Option&#148;) on the first day of each
fiscal year in respect of their past year&#146;s services as a non-employee
director of the Company. Non-employee directors who are elected or appointed to
the Board following the first day of the Company&#146;s fiscal year receive
pro-rata portion of 2,000 shares of Common Stock calculated by dividing the
number of months remaining in the fiscal year at the time of election or
appointment divided by twelve, which options are granted at the end of the
relevant fiscal year.</FONT></FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">On September 1, 1997, Messrs.
Dworkin, Hahn, Lareau, Lynch and Vukcevich each received a Director Option to
purchase 2,000 shares of Common Stock at an exercise price of $12.00 per share;
however, these options were returned and cancelled in fiscal 2000.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">On November 19, 1997, Mr. Rikuta
received a Director Option to purchase 1,575 shares of Common Stock at an
exercise price of $10.625 per share.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">On September 1, 1998, Messrs.
Dworkin, Hahn, Lareau, Lynch, Rikuta and Vukcevich each received a Director
Option to purchase 2,000 shares of Common Stock at an exercise price of $6.25
per share, and on September 1, 1999, the same individuals each received a
Director Option to purchase 2,000 shares of Common Stock at an exercise price of
$6.5625 per share. Subsequently, Mr. Lynch returned his September 1, 1999
Director Option to purchase 2,000 shares to the Option Plan. All of such
Director Options granted vest in equal one-third installments over a three-year
period.</FONT></FONT></P>

<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>39</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>

     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">On November 17, 2000, the Board of
Directors approved the automatic option grants as of September 1, 2000 to
Messrs. Dworkin, Lareau, Lynch, Rikuta, and Vukcevich each received a Director
Option to purchase 2,000 shares of Common Stock at an exercise price of $6.75.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">On February 9, 2001, Messrs.
Keil-Dixon, Krishna, Taylor, and Stone each received a Director Option to
purchase 1,000 shares of Common Stock at an exercise price of $5.50 per share.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">On November 9, 2001, the Board of
Directors approved the automatic option grants as of September 1, 2001 to
Messrs. Lareau, Lynch, Rikuta, Vukcevich, Kiel-Dixon, Krishna, Stone, and Taylor
each received a Director Option to purchase 2,000 shares of Common Stock at an
exercise price of $5.00.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">On November 15, 2002, the Board of
Directors approved the automatic option grants as of September 1, 2002 to
Messrs. Lareau, Lynch, Rikuta, Vukcevich, Kiel-Dixon, Krishna, Stone, Taylor and
Gencer each received a Director Option to purchase 2,000 shares of Common Stock
at an exercise price of $3.34.</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>B. Summary of Cash and Certain Other Compensation Paid to Executive Officers</B></FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The following table provides
summary information concerning cash and non-cash compensation paid or accrued by
the Company to or on behalf of the Company&#146;s Co-Chief Executive Officers
and the most highly compensated executive officers of the Company whose cash and
non-cash salary and bonus exceeded $100,000 in the fiscal year ended August 31,
2002 (the &#147;Named Executive Officers&#148;).</FONT></FONT></P>



<PRE>
<FONT SIZE="2">
<B>                                        Summary Compensation Table

                                                                            Long-Term
                                                  Annual Compensation     Compensation</B>
                                                 ---------------------    ------------
<B>                                                                           Securities
                                                                Bonus      Underlying           All Other
       Name and Principal Position     Year      Salary ($)     ($)(1)     Options (#)     Compensation ($)(2)</B>
       ---------------------------     ----      ----------     ------     -----------     -------------------

Philip M. Lynch (4)                    2002             0            0            0                  0(3)
<I>Chairman of the Board and Co-Chief</I>     2001             0            0            0                  0(3)
<I>Executive Officer</I>                      2000             0            0            0                  0(3)

Donald A. Kubik (4)                    2002       200,000            0            0              5,500
<I>Vice Chairman</I>                          2001       200,000       20,000            0              5,250
                                       2000       200,000            0            0              5,000

G. Patrick Lynch (4)                   2002       110,000            0            0              3,850(3)
<I>President and Co-Chief</I>                 2001       103,054       20,000            0              3,606(3)
<I>Executive Officer</I>                      2000        95,000            0        3,000              3,325(3)
</FONT>
</PRE>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><HR SIZE=1 align="left" NOSHADE width="15%">(1) On November 17, 2000 the Board
of Directors approved bonuses to be paid in fiscal year 2001 related for the
services performed in the fiscal year 2000 for Mr. Kubik and G. Lynch in the
amount of $20,000 each, for which an accrual was made in the fiscal year 2000.</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(2) Compensation hereunder consists of contributions to the 401(k) plans of the Named Executive Officers.</FONT></FONT></P>

<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>40</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(3) Does not include any commissions payable to Inter Alia Holding Company, an entity of which Mr. Philip Lynch and Mr. G.
Patrick Lynch are officers and directors, under a certain Manufacturer&#146;s Representative Agreement. See &#147;Item 12 - Certain
Relationships and Related Party Transactions.&#148;</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(4) Denotes the individual as a member of the Executive Committee.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>C. Option Grants and Exercises.</B></FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">There were no options to purchase
common stock granted during the year ended August 31, 2002 to any Named
Executive Officers of the Company.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The following table provides
information for the year ended August 31, 2002 as to the individual exercising
of options and the potential realizable value of the options held by the Named
Executive Officers as of August 31, 2002.</FONT></FONT></P>

<PRE>
<FONT SIZE="2">
<B>                                Aggregated Option Exercises in Fiscal 2002 and
                                      Fiscal 2002 Year-End Option Values

                                                                                        Value of Unexercised
                                                        Number of Unexercised           In-the-Money Options
                                                    Options at August 31, 2002(#)    at August 31, 2002 (1) ($)</B>
                                                    -----------------------------    --------------------------

<B>                  Shares Acquired       Value
       Name       on Exercise (#)    Realized ($)   Exercisable    Unexercisable    Exercisable    Unexercisable</B>
       ----       ---------------    ------------   -----------    -------------    -----------    -------------

Philip M. Lynch          0                0            3,334           2,666             0               0
Donald A. Kubik          0                0            2,667               0             0               0
G. Patrick Lynch         0                0            2,000           1,000             0               0
</FONT>
</PRE>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><HR SIZE=1 align="left" NOSHADE width="15%">(1) Value is calculated as the
excess of the fair market value of the Common Stock on August 31, 2002 over the
exercise price of the options. On August 31, 2002, the fair market value of the
Common Stock was $3.34 per share.</FONT></FONT></P>

<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>41</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>




<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.</B></FONT></FONT></P>



     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The following table sets forth
information regarding the beneficial ownership of the Common Stock of the
Company as of November 15, 2002, unless other noted, (a) by each stockholder who
is known by the Company to own beneficially more than 5% of the outstanding
Common Stock, (b) by each director, (c) by each Named Executive Officer, and (d)
by all executive officers and directors of the Company as a group.</FONT></FONT></P>

<PRE>
<FONT SIZE="2">
<B>                                                              Shares of Common Stock
                                                              Beneficially Owned (1)</B>
                                                 --------------------------------------------------
<B>Name                                                   Amount              Percent of Class (2)</B>
- ----                                                   ------              --------------------

Inter Alia Holding Company ....................        911,668  (3)               25.1%
Dr. Donald A. Kubik ...........................        114,008  (4)                3.2
Richard G. Lareau .............................         31,668  (5)                *
Haruhiko Rikuta ...............................         22,244  (6)                *
Mark Stone ....................................         11,000  (7)                *
Prof. Milan R. Vukcevich ......................          8,599  (8)                *
Elsie F. Gilles ...............................          6,200  (9)                *
G. Patrick Lynch ..............................          4,700  (10)               *
Dr. Mehmet Gencer .............................          4,667  (11)               *
Irina Roytman .................................          3,650  (12)               *
Philip M. Lynch ...............................          3,335  (13)               *
Ursula Kiel-Dixon .............................          1,000  (14)               *
Aradhna Krishna ...............................          1,000  (15)               *
Stephan Taylor ................................          1,000  (16)               *
Matthew C. Wolsfeld ...........................             --                     *
Prof. Efim Ya. Lyublinski .....................             --                     *
Dr. Yelena L. Shanina .........................             --                     *

Directors and executive officers
as a group (17 persons) .......................      1,124,739  (17)              31.0
</FONT>
</PRE>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><HR SIZE=1 align="left" NOSHADE width="15%">* Less than 1%.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(1) Shares not outstanding but
deemed beneficially owned by virtue of the right of a person or member of a
group to acquire them within 60 days are treated as outstanding only when
determining the amount and percent owned by such person or group. Unless
otherwise noted, all of the shares owned or held by individuals or entities
possessing sole voting and investment power with respect to such shares.</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(2) Based on 3,635,751 shares of Common Stock outstanding as of November 15, 2002.</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(3) Includes 911,668 shares held of record by Inter Alia Holding Company, a financial and management consulting firm of which
Mr. Philip M. Lynch, the Chairman of the Board of Directors and the Co-Chief Executive Officer of the Company, and Mr. G.
Patrick Lynch, President and the Co-Chief Executive Officer of the Company are officers and directors.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(4) Includes 2,667 shares of Common Stock, which may be acquired
within 60 days pursuant to the exercise of options.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(5) Includes 4,668 shares of Common Stock, which may be acquired within
60 days pursuant to the exercise of options.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(6) Includes 3,335 shares of
Common Stock, which may be acquired within 60 days pursuant to the exercise of
options.</FONT></FONT></P>

<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>42</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>

     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(7) Includes 10,000 shares held
jointly with his wife Margery Stone, and includes 1,000 shares of Common Stock,
which may be acquired within 60 days pursuant to the exercise of options.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(8) Includes 657 shares held
jointly with his wife Michelle Vukcevich, and includes 3,335 shares of Common
Stock, which may be acquired within 60 days pursuant to the exercise of options.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(9) Includes 3,000 shares of Common Stock, which may be acquired
within 60 days pursuant to the exercise of options.</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(10) Includes 3,000 shares of Common Stock, which may be acquired within 60 days pursuant to the exercise of options. Does not
include 911,688 shares held of record or beneficially owned by Inter Alia Holding Company, of which Mr. G. Patrick Lynch is
an officer and director.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(11) Includes 667 shares of Common Stock, which may be acquired
within 60 days pursuant to the exercise of options.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(12) Includes 350 shares held
jointly with her husband Alexander Roytman, and includes 3,000 shares of Common
Stock, which may be acquired within 60 days pursuant to the exercise of options.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(13) Does not include 911,668
shares held of record or beneficially owned by Inter Alia Holding Company, of
which Mr. Philip M. Lynch is an officer and director. Includes 1,334 shares of
Common Stock, which may be acquired within 60 days pursuant to the exercise of
options.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(14) Includes 1,000 shares of Common Stock, which may be
acquired within 60 days pursuant to the exercise of options.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(15) Includes 1,000 shares of Common Stock, which may be acquired
within 60 days pursuant to the exercise of options.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(16) Includes 1,000 shares of Common Stock, which may be
acquired within 60 days pursuant to the exercise of options.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(17) Includes (i) 911,668 shares
held of record by Inter Alia Holding Company, a financial and management
consulting firm of which Mr. Philip M. Lynch, the Chairman of the Board of
Directors and the Co-Chief Executive Officer of the Company, and Mr. G. Patrick
Lynch, President and the Co-Chief Executive Officer of the Company are officers
and directors, and (ii) options to purchase 9,666 shares which are held by
officers and directors of the Company which are exercisable within 60 days.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Item 12. CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS.</B></FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">On October 1, 1976, the Company
entered into a Manufacturer&#146;s Representative Agreement with The Saxxon
Organization, Incorporated (the &#147;Agreement&#148;). The Agreement has no
expiration date and may be terminated by either party upon 60 days written
notice. Effective January 9, 1980, the Agreement was assigned to Inter Alia
Holding Company, a financial and management consulting firm of which Philip M.
Lynch, the Chairman of the Board of Directors of the Company, is an officer and
director. Under the Agreement, Inter Alia Holding Company (or the
&#147;Representative&#148;) is entitled to commissions from the Company on the
net proceeds of sales of the Company&#146;s product generated by Inter Alia
Holding Company. The Representative acts as an independent manufacturer&#146;s
representative of the Company. It has a non-exclusive worldwide right to offer
for sale and solicit orders for the Company&#146;s products in accordance with
prices determined by the Company. The Representative is responsible for all of
its own operating expenses with no entitlement for reimbursement from the
Company for this activity. The Representative has not affected any sales within
the United States. The Representative has developed sales outside the United
States, which resulted in commissions of approximately $66,419, $52,544, and
$42,590, for</FONT></FONT></P>

<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>43</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>

     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">the fiscal years ended August 31, 2002, 2001 and 2000,
respectively. In light of the Company&#146;s own domestic sales effort and its
distributor network within the United States, the Company does not anticipate
the Representative developing any sales within the United States. Additionally,
the Company&#146;s expanding international joint venture program may also limit
opportunities abroad for the Representative. Thus, the Company does not
anticipate that the Representative will develop any significant sales volume for
the Company in the future.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">On August&nbsp;31, 1984, Inter
Alia Holding Company purchased 119,083 shares of the Common Stock and paid
therefore by signing a promissory note. The promissory note (the
&#147;Note&#148;) had a face value of $125,375 and bore interest at 11% per
year. The Note was originally due on December&nbsp;31, 1992, subsequently
adjusted to a demand note. The balance of the Note, including accrued interest
of $132,826, amounted to $258,201 as of August&nbsp;31, 2000 and was paid on the
same day.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The Company paid reimbursement for
travel and related Company expenses of $240,000, $249,000, and $378,000 for the
year ended August 31, 2002, 2001 and 2000, respectively, to Inter Alia Holding
Company of which the Company&#146;s Co-Chief Executive Officer and Chairman of
the Board is and officer and director. Such reimbursements of travel and related
expenses were not related to the functions of Inter Alia Holding Company as
representative, but rather were paid in respect of the conduct of business for
and on behalf of the Company. Mr. G. Patrick Lynch, President and Co-Chief
Executive Officer of the Company is also an officer and director of Inter Alia
Holding Company.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">On May 31, 2002, the Company
entered into a promissory note with Atagencer LLC, a limited liability
corporation that is principally owned by Dr. Mehmet Gencer, a member of the
Company&#146;s Board of Directors, in the amount of $50,000 at a rate of 2% per
annum. The note is due to the Company five years from the date of issuance<I>.</I>
The note was obtained by Atagencer LLC to obtain a 25% share in Fibro NTI
Joint Stock Company, of which NTIC is a 50% owner. Additionally, Dr. Mehmet
Gencer provided consulting services to the Company during fiscal 2002 and 2001
for which the Company paid $79,000 and $45,000, respectively.</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">On June 30, 2002, the Company
entered into a promissory note with Mutec Instruments GmbH for EURO$125,000 at a
rate of 6.55% per annum. The note is due to the Company ten years from the date
of the note<I>.</I> NTIC currently owns 30% of the company. The promissory note
will be used by the company to obtain capital equipment and finance operations.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Item 13. EXHIBITS AND REPORTS ON FORM 8-K.</B></FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>(a) Exhibits</B></FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Reference is made to the Exhibit
Index hereinafter contained, at page 45 of this Report.</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">A copy of any exhibits listed or referred to herein will be furnished at a reasonable cost to any person who is a stockholder
upon receipt from any such person of a written request for any such exhibit. Such request should be sent to: Mr. Matthew
Wolsfeld, 6680 N. Highway 49, Lino Lakes, Minnesota 55014 Attn: Stockholder Information.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The following is a list of each
management contract or compensatory plan or arrangement required to be filed as
an exhibit to this Annual Report on Form 10-KSB pursuant to Item 13(a):</FONT></FONT></P>

<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>44</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>

     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">A. Form of Incentive Stock Option
Agreement for 1994 Stock Incentive Plan (incorporated by reference to Exhibit
10.1 to the Company&#146;s Annual Report on Form 10-KSB for the fiscal year
ended August 31, 1993).</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">B. Form of Non-Qualified Stock
Option Agreement for 1994 Stock Incentive Plan (incorporated by reference to
Exhibit 10.2 to the Company&#146;s Annual Report on Form 10-KSB for the fiscal
year ended August 31, 1993).</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">C. 1994 Stock Incentive Plan (incorporated by reference to Exhibit 10.3 to the Company&#146;s Annual Report on Form 10-KSB for the
year ended August 31, 1993).</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">D. 2000 Stock Incentive Plan (incorporated by reference to Exhibit 10.4 to the Company&#146;s Annual Report on Form 10-KSB for the
year ended August 31, 2000).</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">E. Form of Incentive for Stock
Option Agreement for 2000 Stock Incentive Plan (incorporated by reference to
Exhibit 10.5 to the Company&#146;s Annual Report on Form 10-KSB for the year
ended August 31, 2000).</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">F. Form of Non-Qualified Stock
Option Agreement for 2000 Stock Incentive Plan (incorporated by reference to
Exhibit 10.6 to the Company&#146;s Annual Report on Form 10-KSB for the year
ended August 31, 2000).</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>(b) Reports on Form 8-K</B></FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The Company did not file any
Current Reports on Form 8-K during the fourth quarter of fiscal 2001.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Item 14. CONTROLS AND PROCEDURES.</B></FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Within the 90-day period prior to
the filing date of this report, management performed an evaluation, of the
effectiveness of the design and operation of our disclosure controls and
procedures as defined in Exchange Act Rules 13a-14&copy; and 15d-14&copy;. We
performed this evaluation under the supervision of, and with participation from,
our Chairman of the Board &amp; Co-Chief Executive Officer, President &amp;
Co-Chief Executive Officer, and Chief Financial Officer. Based upon that
evaluation we, as well as our Chairman of the Board &amp; Co-Chief Executive
Officer, President &amp; Co-Chief Executive Officer, and Chief Financial
Officer, concluded that our disclosure controls and procedures were effective.
There have been no significant changes in our internal controls or in other
factors that could significantly affect internal controls subsequent to the date
we carried out this evaluation, and therefore we believe that our disclosure
controls and procedures remain effective. We intend to periodically evaluate our
disclosure controls and procedures as required by the Exchange Act Rules.</FONT></FONT></P>


<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>45</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>



<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>SIGNATURES</B></FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Pursuant to the requirements of
Section 13 or 15 of the Securities Exchange Act of 1934, the Registrant has duly
caused this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.</FONT></FONT></P>


<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="100%">
<TR valign="top">
<TD>
<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;</FONT></FONT></P></TD>
<TD colspan="2">
<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>NORTHERN TECHNOLOGIES<BR>INTERNATIONAL CORPORATION<BR>&nbsp;</B></FONT></FONT></P></TD></TR>
<TR valign="top">
<TD width="55%">
<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Date: November 15, 2002</FONT></FONT></P></TD>
<TD width="5%">
<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">By: </FONT></FONT></P></TD>
<TD width="40%">
<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">/s/ Philip M. Lynch<HR SIZE=1 NOSHADE width="50%" align="left">Philip M. Lynch<BR>Chairman and Co-Chief Executive<BR>Officer</FONT></FONT></P>
</TD>
</TR>
</TABLE>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Pursuant to the requirements of
the Securities Exchange Act of 1934, this Report has been signed below by the
following persons on behalf of the Registrant on November 15, 2002 in the
capacities indicated.</FONT></FONT></P>


<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="100%">
<TR VALIGN="TOP">
     <TH align="left"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><U>Name</U></FONT></FONT></TH>
     <TH align="left"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><U>Title</U></FONT></FONT></TH></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD WIDTH="26%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">/s/ Philip M. Lynch<HR ALIGN=LEFT WIDTH=75% SIZE=1 NOSHADE></FONT></TD>
     <TD WIDTH="74%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Co-Chief Executive Officer and Chairman of the <BR>Board of Directors (principal executive officer)</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Philip M. Lynch</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">/s/ G. Patrick Lynch<HR ALIGN=LEFT WIDTH=75% SIZE=1 NOSHADE></FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">President and Co-Chief Executive Officer (principal <BR>executive officer)</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">G. Patrick Lynch</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">/s/ Matthew C. Wolsfeld, CPA<HR ALIGN=LEFT WIDTH=75% SIZE=1 NOSHADE></FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Chief Financial Officer (principal financial officer <BR>and principal accounting officer)</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Matthew C. Wolsfeld, CPA</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">/s/ Donald A. Kubik, Ph.D<HR ALIGN=LEFT WIDTH=75% SIZE=1 NOSHADE></FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Chief Technology Officer and Vice Chairman of the <BR>Board of Directors; Director</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Donald A. Kubik, Ph.D</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">/s/ Richard G. Lareau<HR ALIGN=LEFT WIDTH=75% SIZE=1 NOSHADE></FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Director</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Richard G. Lareau</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">/s/ Milan R. Vukcevich, Ph.D<HR ALIGN=LEFT WIDTH=75% SIZE=1 NOSHADE></FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Director</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Milan R. Vukcevich, Ph.D</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">/s/ Haruhiko Rikuta<HR ALIGN=LEFT WIDTH=75% SIZE=1 NOSHADE></FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Director</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Haruhiko Rikuta</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">/s/ Prof. Aradhna Krishna<HR ALIGN=LEFT WIDTH=75% SIZE=1 NOSHADE></FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Director</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Prof. Aradhna Krishna</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">/s/ Mark J. Stone<HR ALIGN=LEFT WIDTH=75% SIZE=1 NOSHADE></FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Director</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Mark J. Stone</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">/s/ Stephan C. Taylor<HR ALIGN=LEFT WIDTH=75% SIZE=1 NOSHADE></FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Director</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Stephan C. Taylor</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">/s/ Dr. Mehmet A. Gencer<HR ALIGN=LEFT WIDTH=75% SIZE=1 NOSHADE></FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Director</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Dr. Mehmet A. Gencer</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
</TABLE>



<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>46</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>




<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>CERTIFICATION</B></FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">I, Philip M. Lynch, certify that:</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">1. I have reviewed this annual report on Form 10-KSB of Northern Technologies International Corporation;</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2. Based on my knowledge, this annual report does not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by
this annual report;</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this annual report.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">4. The registrant&#146;s other certifying officer and I are
responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(a) designed such disclosure
controls and procedures to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this
annual report is being prepared;</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(b) evaluated the effectiveness of
the registrant&#146;s disclosure controls and procedures as of a date within 90
days prior to the filing date of this annual report (the &#147;Evaluation
Date&#148;); and</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">5. The registrant&#146;s other certifying officer and I have
disclosed, based on our most recent evaluation, to the registrant&#146;s
auditors and the audit committee of registrant&#146;s board of directors (or
persons performing the equivalent function):</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(a) all significant deficiencies
in the design or operation of internal controls which could adversely affect the
registrant&#146;s ability to record, process, summarize and report financial
data and have identified for the registrant&#146;s auditors any material
weaknesses in internal controls; and</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant&#146;s internal controls; and</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">6. The registrant&#146;s other certifying officer and I have
indicated in this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.</FONT></FONT></P>


<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="100%">
<TR valign="top">
<TD width="55%">
<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Date: November 15, 2002</FONT></FONT></P></TD>
<TD width="5%">
<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;</FONT></FONT></P></TD>
<TD width="40%">
<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">/s/ Philip M. Lynch<HR SIZE=1 NOSHADE width="50%" align="left">Philip M. Lynch<BR>Co-Chief Executive Officer and Chairman <BR>of the Board of Directors</FONT></FONT></P>
</TD>
</TR>
</TABLE>


<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>47</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">I, G. Patrick Lynch certify that:</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">1. I have reviewed this annual report on Form 10-KSB of Northern Technologies International Corporation;</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2. Based on my knowledge, this annual report does not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by
this annual report;</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this annual report.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">4. The registrant&#146;s other certifying officer and I are
responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(a) designed such disclosure
controls and procedures to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this
annual report is being prepared;</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(b) evaluated the effectiveness of
the registrant&#146;s disclosure controls and procedures as of a date within 90
days prior to the filing date of this annual report (the &#147;Evaluation
Date&#148;); and</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">5. The registrant&#146;s other certifying officer and I have
disclosed, based on our most recent evaluation, to the registrant&#146;s
auditors and the audit committee of registrant&#146;s board of directors (or
persons performing the equivalent function):</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(a) all significant deficiencies
in the design or operation of internal controls which could adversely affect the
registrant&#146;s ability to record, process, summarize and report financial
data and have identified for the registrant&#146;s auditors any material
weaknesses in internal controls; and</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant&#146;s internal controls; and</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">6. The registrant&#146;s other certifying officer and I have
indicated in this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.</FONT></FONT></P>



<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="100%">
<TR valign="top">
<TD width="55%">
<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Date: November 15, 2002</FONT></FONT></P></TD>
<TD width="5%">
<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;</FONT></FONT></P></TD>
<TD width="40%">
<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">/s/ G. Patrick Lynch<HR SIZE=1 NOSHADE width="50%" align="left">G. Patrick Lynch<BR>President and Co-Chief Executive Officer</FONT></FONT></P>
</TD>
</TR>
</TABLE>


<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>48</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>






<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">I, Matthew C. Wolsfeld certify that:</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">1. I have reviewed this annual report on Form 10-KSB of Northern Technologies International Corporation;</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2. Based on my knowledge, this annual report does not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by
this annual report;</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this annual report.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">4. The registrant&#146;s other certifying officer and I are
responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(a) designed such disclosure
controls and procedures to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this
annual report is being prepared;</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(b) evaluated the effectiveness of
the registrant&#146;s disclosure controls and procedures as of a date within 90
days prior to the filing date of this annual report (the &#147;Evaluation
Date&#148;); and</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">5. The registrant&#146;s other certifying officer and I have
disclosed, based on our most recent evaluation, to the registrant&#146;s
auditors and the audit committee of registrant&#146;s board of directors (or
persons performing the equivalent function):</FONT></FONT></P>


     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(a) all significant deficiencies
in the design or operation of internal controls which could adversely affect the
registrant&#146;s ability to record, process, summarize and report financial
data and have identified for the registrant&#146;s auditors any material
weaknesses in internal controls; and</FONT></FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant&#146;s internal controls; and</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">6. The registrant&#146;s other certifying officer and I have
indicated in this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.</FONT></FONT></P>


<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="100%">
<TR valign="top">
<TD width="55%">
<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Date: November 15, 2002</FONT></FONT></P></TD>
<TD width="5%">
<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;</FONT></FONT></P></TD>
<TD width="40%">
<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">/s/ Matthew C. Wolsfeld, CPA<HR SIZE=1 NOSHADE width="50%" align="left">Matthew C. Wolsfeld, CPA<BR>Chief Financial Officer</FONT></FONT></P>
</TD>
</TR>
</TABLE>


<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>49</FONT></FONT><HR SIZE=2 NOSHADE></center></p>
<PAGE>











<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION<BR>EXHIBIT INDEX TO ANNUAL REPORT ON FORM 10-KSB<BR>FOR THE YEAR ENDED AUGUST 31, 2002</B></FONT></FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="10" BORDER="0" WIDTH="100%">
<TR VALIGN="TOP">
     <TH><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><U>Item No.</U></FONT></FONT></TH>
     <TH align="left"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><U>Item</U></FONT></FONT></TH>
     <TH align="left"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><U>Method of Filing</U></FONT></FONT></TH></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD WIDTH="5%" ALIGN="center"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;3.1</FONT></TD>
     <TD WIDTH="25%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Certificate of Incorporation</FONT></TD>
     <TD WIDTH="45%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Incorporated by reference to Exhibit 3.1 contained in the Registration Statement on Form 10 (File No. 0-19331).</FONT></TD>
     <TD WIDTH="25%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="center"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;3.2</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Bylaws</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Incorporated by reference to Exhibit 3.2 contained in the Registration Statement on Form 10 (File No. 0-19331).</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="center"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">10.1</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Form of Incentive Stock Option Agreement for 1994 Stock Incentive Plan</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Incorporated by reference to Exhibit 10.1 to the Company&#146;s Annual Report on Form 10-KSB for the fiscal year ended August 31, 1993.</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="center"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">10.2</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Form of Non-Qualified Stock Option Agreement for 1994 Stock Incentive Plan</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Incorporated by reference to Exhibit 10.2 to the Company&#146;s Annual Report on Form 10-KSB for the fiscal year ended August 31, 1993.</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="center"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">10.3</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1994 Stock Incentive Plan</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Incorporated by reference to Exhibit 10.3 to the Company&#146;s Annual Report on Form 10-KSB for the year ended August 31, 1993.</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="center"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">10.4</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2000 Stock Incentive Plan</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Incorporated by reference to Exhibit 10.4 to the Company&#146;s Annual Report on Form 10-KSB for the year ended August 31, 2000.</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="center"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">10.5</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Form of Incentive Stock Option Agreement for 2000 Stock Incentive Plan</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Incorporated by reference to Exhibit 10.5 to the Company&#146;s Annual Report on Form 10-KSB for the year ended August 31, 2000.</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="center"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">10.6</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Form of Non-Qualified Stock Option Agreement for 2000 Stock Incentive Plan</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Incorporated by reference to Exhibit 10.6 to the Company&#146;s Annual Report on Form 10-KSB for the year ended August 31, 2000.</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="center"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">21.1</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Subsidiaries of the Registrant</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Filed herewith electronically.</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="center"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">23.1</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Independent Auditors&#146; Consent</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Filed herewith electronically.</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="center"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">24.1</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Certification of Financial Statements</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Filed herewith electronically.</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
</TABLE>

<p>
<center><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE=2>50</FONT></FONT><HR SIZE=2 NOSHADE></center></p>


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<FILENAME>ex21-1.htm
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<title>NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION EXHIBIT 21.1 8/31/02</title>
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<P ALIGN="right"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Exhibit 21.1</B></FONT></FONT></P>


<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>SUBSIDIARIES OF THE REGISTRANT</B></FONT></FONT></P>


<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="100%">
<TR VALIGN="BOTTOM">
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>Name of Subsidiary</U></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE="2">State or Other<BR>Jurisdiction of<BR>Incorporation or<BR><U>Organization</U></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>Ownership Interest</U></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Names Under Which<BR>Subsidiary Does<BR><U>Business</U></FONT></TH></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD WIDTH="25%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">NTI Facilities, Inc.</FONT></TD>
     <TD WIDTH="25%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Ohio</FONT></TD>
     <TD WIDTH="25%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">100</FONT></TD>
     <TD WIDTH="25%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Same</FONT></TD></TR>
</TABLE>

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<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>4
<FILENAME>ex23-1.htm
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<title>NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION EXHIBIT 23.1 8/31/02</title>
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<P ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Exhibit 23.1</B></FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>INDEPENDENT AUDITORS&#146; CONSENT</B></FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">We consent to the incorporation by reference in Registration
Statements No.&nbsp;333-33931 and No.&nbsp;333-32596 of Northern Technologies
International Corporation on Form S-8 of our report dated November
15,&nbsp;2002, appearing in the Annual Report on Form 10-KSB of Northern
Technologies International Corporation for the fiscal year ended August&nbsp;31,
2002.</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">/s/ Deloitte &amp; Touche LLP</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Minneapolis, Minnesota<BR>November 27, 2002</FONT></FONT></P>

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<TYPE>EX-24
<SEQUENCE>5
<FILENAME>ex24-1.htm
<TEXT>
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<title>NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION EXHIBIT 24.1 8/31/02</title>
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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Exhibit 24.1</B></FONT></FONT></P>

<P ALIGN="center"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</B></FONT></FONT></P>



<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">In connection with the Annual
Report of Northern Technologies International Corporation (the
&#147;Company&#148;) on Form 10-KSB for the period ending August 31, 2002 as
filed with the Securities and Exchange Commission on the date hereof (the
&#147;Report&#148;). I, Matthew C. Wolsfeld, Chief Financial Officer, Philip M.
Lynch, Chairman of the Board and Co-Chief Executive Officer, and G. Patrick
Lynch, President and Co-Chief Executive Officer of the company, certify,
pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:</FONT></FONT></P>


<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(1) The Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and<BR>&nbsp;<BR>(2) The information
contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.</FONT></FONT></P>



<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="100%">
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">/s/ Matthew C. Wolsfeld, CPA<HR ALIGN=LEFT WIDTH=75% SIZE=1 NOSHADE></FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Chief Financial Officer (principal financial officer <BR>and principal accounting officer)</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Matthew C. Wolsfeld, CPA</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD WIDTH="26%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">/s/ Philip M. Lynch<HR ALIGN=LEFT WIDTH=75% SIZE=1 NOSHADE></FONT></TD>
     <TD WIDTH="74%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Co-Chief Executive Officer and Chairman of the <BR>Board of Directors (principal executive officer)</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Philip M. Lynch</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">/s/ G. Patrick Lynch<HR ALIGN=LEFT WIDTH=75% SIZE=1 NOSHADE></FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">President and Co-Chief Executive Officer (principal <BR>executive officer)</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">G. Patrick Lynch</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
</TABLE>



<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Lino Lakes, Minnesota<BR>November 15, 2002</FONT></FONT></P>

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