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<SEC-DOCUMENT>0001206774-07-002753.txt : 20071129
<SEC-HEADER>0001206774-07-002753.hdr.sgml : 20071129
<ACCEPTANCE-DATETIME>20071129141123
ACCESSION NUMBER:		0001206774-07-002753
CONFORMED SUBMISSION TYPE:	10KSB
PUBLIC DOCUMENT COUNT:		13
CONFORMED PERIOD OF REPORT:	20070831
FILED AS OF DATE:		20071129
DATE AS OF CHANGE:		20071129

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:		071274256

	BUSINESS ADDRESS:	
		STREET 1:		4201 WOODLAND ROAD
		STREET 2:		PO BOX 69
		CITY:			CIRCLE PINES
		STATE:			MN
		ZIP:			55014
		BUSINESS PHONE:		(763) 225-6601

	MAIL ADDRESS:	
		STREET 1:		4201 WOODLAND ROAD
		STREET 2:		PO BOX 69
		CITY:			CIRCLE PINES
		STATE:			MN
		ZIP:			55014

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	NORTHERN INSTRUMENTS CORP
		DATE OF NAME CHANGE:	19930328
</SEC-HEADER>
<DOCUMENT>
<TYPE>10KSB
<SEQUENCE>1
<FILENAME>northerntech_10ksb.htm
<DESCRIPTION>OPTIONAL FORM FOR ANNUAL AND TRANSITION REPORTS OF SMALL BUSINESS ISSUERS
<TEXT>

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<P align=center><B><FONT face=serif size=4>UNITED STATES <BR></FONT></B><B><FONT face=serif size=4>SECURITIES AND EXCHANGE COMMISSION <BR></FONT></B><B><FONT face=serif size=2>Washington, D.C. 20549
<BR>______________________________<BR><BR></FONT></B><B><FONT face=serif size=5>FORM 10-KSB</FONT></B></P>
<P align=justify><FONT face=serif size=2>(Mark one)<BR></FONT><FONT face=serif size=2><FONT face=Wingdings>x </FONT><B>ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934</B></FONT></P>
<P align=center><B><FONT face=serif size=2>For the fiscal year ended August 31,
2007</FONT></B></P>
<P align=justify><FONT face=serif size=2><FONT face=Wingdings>o
</FONT><B>TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934</B></FONT></P>
<P align=center><FONT face=serif size=2>For the transition period from
________________ to __________________.</FONT></P>
<P align=center><B><FONT face=serif size=2>Commission file number 1-11038
<BR></FONT></B><B><I><FONT face=serif size=2>____________________
<BR><BR></FONT></I></B><B><FONT face=serif size=5>NORTHERN TECHNOLOGIES
INTERNATIONAL CORPORATION <BR></FONT></B><FONT face=serif size=2>(Name of small
business issuer in its charter)</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD noWrap align=center width="50%"><B><FONT face=serif size=2>Delaware</FONT></B></TD>
    <TD noWrap align=center width="49%"><B><FONT face=serif size=2>41-0857886</FONT></B></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="50%"><FONT face=serif size=2>(State or
      other jurisdiction of incorporation or organization)</FONT></TD>
    <TD noWrap align=center width="49%"><FONT face=serif size=2>(I.R.S.
      Employer Identification No.)</FONT></TD></TR>
  <TR>
    <TD width="99%" colSpan=2>&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="50%"><B><FONT face=serif size=2>4201
      Woodland Road<BR><B>P.O. Box 69<BR></B>Circle Pines,
    Minnesota</FONT></B></TD>
    <TD noWrap align=center width="49%"><B><FONT face=serif size=2>55014</FONT></B></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="50%"><FONT face=serif size=2>(Address of
      principal executive offices)</FONT></TD>
    <TD noWrap align=center width="49%"><FONT face=serif size=2>(Zip
      Code)</FONT></TD></TR>
  <TR>
    <TD noWrap align=center width="50%">&nbsp;</TD>
    <TD noWrap align=center width="49%"></TD></TR>
  <TR>
    <TD noWrap align=center width="99%" colSpan=2>
      <P align=center><B><FONT face=serif size=2>(763)
      225-6600<BR></FONT></B><FONT face=serif size=2>(Issuer&#146;s telephone number,
      including area code)</FONT></P>
      <P align=center><FONT face=serif size=2>Securities registered under
      Section 12(b) of the Exchange Act:</FONT></P></TD></TR>
  <TR>
    <TD noWrap align=center width="50%"></TD>
    <TD noWrap align=center width="49%">&nbsp;</TD></TR>
  <TR>
    <TD noWrap align=center width="50%"><FONT size=2>Title of Each
    Class</FONT></TD>
    <TD noWrap align=center width="49%"><FONT size=2>Name of Each Exchange on
      Which Registered</FONT></TD></TR>
  <TR>
    <TD noWrap align=center width="50%"><B><FONT size=2>Common Stock, par
      value $0.02 per share</FONT></B></TD>
    <TD noWrap align=center width="49%"><B><FONT size=2>The American Stock
      Exchange</FONT></B></TD></TR></TABLE><BR>
<P align=center><FONT face=serif size=2>Securities registered under Section
12(g) of the Exchange Act:</FONT></P>
<P align=center><B><FONT face=serif size=2>None</FONT></B></P>
<P align=justify><FONT face=serif 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&nbsp;<FONT face=Wingdings>x</FONT>&nbsp; NO <FONT face=Wingdings>o</FONT></FONT></P>
<P align=justify><FONT face=serif 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 report or any amendment to this report. <FONT face=Wingdings>x</FONT></FONT><B><FONT face=serif size=2></FONT></B></P>
<P align=justify><FONT face=serif size=2>Indicate by check mark whether the
Registrant is a shell company (as defined in Rule 12b-2) of the Exchange Act).
YES <FONT face=Wingdings>o</FONT>&nbsp; NO <FONT face=Wingdings>x</FONT>&nbsp;</FONT></P>
<P align=justify><FONT face=serif size=2>The Registrant&#146;s revenues for the
fiscal year ended August 31, 2007 were $16,829,030.</FONT></P>
<P align=justify><FONT face=serif size=2>As of November 16, 2007, 3,716,611
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 $9.95 per share closing sale price of the Common Stock on that date as
reported on The American Stock Exchange), excluding 1,095,560 outstanding shares
beneficially owned by directors and executive officers, was
$26,079,457.</FONT></P>
<P align=center><B><FONT face=serif size=2>DOCUMENTS INCORPORATED BY
REFERENCE</FONT></B></P>
<P align=justify><FONT face=serif size=2>Part III of this Annual Report on Form
10-KSB incorporates by reference information (to the extent specific sections
are referred to herein) from the registrant&#146;s Proxy Statement for its 2008
Annual Meeting of Stockholders to be held January 24, 2008.</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR>
    <TD width="100%">
      <P align=center><FONT face=serif size=2>Transitional Small Business
      Disclosure Format (check one): YES <FONT face=Wingdings>o</FONT>&nbsp; NO
      <FONT face=Wingdings>x</FONT></FONT></P></TD></TR>
  <TR>
    <TD style="BORDER-BOTTOM: #000000 2pt double" width="100%">&nbsp;</TD></TR></TABLE><BR>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=center><B><FONT face=serif size=2>PART I </FONT></B></P>
<P align=justify><I><FONT face=serif size=2>This Annual Report on Form 10-KSB
contains certain forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, and are subject to the safe harbor created by
those sections. For more information, see &#147;Item 1. Description of Business &#150;
Forward-Looking Statements.&#148; </FONT></I></P>
<P align=justify><I><FONT face=serif size=2>As used in this report, references
to &#147;NTIC,&#148; the &#147;Company,&#148; &#147;we,&#148; &#147;our&#148; or &#147;us,&#148; unless the context otherwise
requires, refer to Northern Technologies International Corporation, its wholly
owned subsidiaries &#150; NTI Facilities, Inc. and Northern Technologies Holding
Company, LLC, and its majority-owned subsidiary &#150; React-NTI, LLC, all of which
are consolidated on NTIC&#146;s financial statements. </FONT></I></P>
<P align=justify><I><FONT face=serif size=2>All trademarks, trade names or
service marks referred to in this report are the property of their respective
owners. </FONT></I></P>
<P align=justify><B><FONT face=serif size=2>Item 1.</FONT></B><B><FONT face=sans-serif size=2> </FONT></B><B><FONT face=serif size=2>DESCRIPTION OF
BUSINESS. </FONT></B></P>
<P align=justify><B><FONT face=serif size=2>Overview </FONT></B></P>
<P align=justify><FONT face=serif size=2>Northern Technologies International
Corporation focuses on developing, marketing and selling proprietary
environmentally responsible materials science based products and technical
services directly and via a network of independent distributors, manufacturers&#146;
representatives and joint ventures in over 50 countries. In fiscal 2007, over
70% of NTIC&#146;s consolidated net sales were derived from the sales of
Zerust<SUP>&#174;</SUP> rust and corrosion inhibiting packaging products and services
to the automotive, electronics, electrical, mechanical, military and retail
consumer markets. During this same period, NTIC also received revenues from
sales of proprietary new technologies, including anti-abrasion ink additives, as
well as bio-based sintered metal mold release agents, bio-solvents,
bio-emollients, bio-cleaners, bio-lubricants and bio-based and biodegradable
plastic packaging.</FONT></P>
<P align=justify><FONT face=serif size=2>NTIC is engaged in extensive scientific
research and development programs in the areas of material science and corrosion
protection. NTIC spent $2,575,325 in fiscal 2007 and $2,043,611 in fiscal 2006
in connection with its research and development activities. These research and
development investments are expected to build on NTIC&#146;s current environmentally
responsible corrosion technologies and provide for a portfolio of new
environmental technology offerings. Specifically, the portfolio includes the
application of new and existing corrosion inhibiting technology to the oil and
gas industry, bioplastic resins and products including biodegradable and
compostable plastics to reduce our carbon footprint and provide environmentally
sound disposal options, and process technology and equipment to convert plastic
waste into energy &#150; diesel, gasoline and mid-distillates. During fiscal 2008,
NTIC expects to invest between $2,800,000 and $3,200,000 in additional research
and development and marketing efforts and resources into these new emerging
businesses, product lines and markets.</FONT></P>
<P align=justify><B><FONT face=serif size=2>Corporate Joint Ventures and Holding
Companies </FONT></B></P>
<P align=justify><FONT face=serif size=2>NTIC participates, either directly or
indirectly through holding companies, in 29 corporate joint venture arrangements
in North America, South America, Europe, Asia and the Middle East. Each of these
joint ventures manufactures, markets and sells finished products generally in
the countries to which it is assigned. NTIC&#146;s 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. While most of NTIC&#146;s joint
ventures currently sell rust and corrosion inhibiting products and custom
packaging systems, NTIC also has joint ventures that manufacture, market and
sell or intend to manufacture, market or sell bio-based additives with both
industrial and personal care applications, machinery that converts waste
plastics back into diesel, gasoline and mid-distillates and electronic sensing
instruments. The Company categorizes its joint ventures into two principal
areas: industrial chemical and non-industrial chemical.</FONT></P>
<P align=center><FONT face=serif size=2>1 </FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><FONT face=serif size=2>NTIC&#146;s industrial chemical corporate
joint ventures currently primarily focus on the manufacturing, marketing and
distribution of Zerust<SUP>&#174;</SUP> industrial corrosion inhibiting packaging
products. Both NTIC and NTIC&#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 industrial chemical corporate joint ventures with the essential additives
(&#147;Masterbatch&#148;) required to make Zerust<SUP>&#174;</SUP> industrial corrosion
inhibiting packaging products functional.</FONT></P>
<P align=justify><FONT face=serif size=2>React-NTI LLC is an industrial chemical
corporate joint venture of NTIC that focuses on the development, manufacturing
and marketing of proprietary lines of bio-based additives with both industrial
and personal care applications. Based on cotton, soy, corn and other renewable
resources, React-NTI products outperform many synthetically derived competing
alternatives. React-NTI&#146;s target markets currently include sintered metal and
sintered metal parts manufactures, ink manufacturers, and personal care and
cosmetics manufacturers. </FONT></P>
<P align=justify><FONT face=serif size=2>NTIC has a 50% ownership interest in
NTI ASEAN, LLC for its corporate joint venture investments in the ASEAN region.
Taiyo Petroleum Gas Co. Ltd., NTIC&#146;s existing joint venture partner in Japan,
owns the remaining 50% ownership interest in NTI ASEAN, LLC. </FONT></P>
<P align=justify><FONT face=serif size=2>NTIC has a 50% ownership interest in
Northern Instruments Corporation LLC for its corporate joint venture investments
in M&#252;tec GmbH in Germany. Taiyo Petroleum Gas Co. Ltd., NTIC&#146;s existing joint
venture partner in Japan, owns the remaining 50% ownership interest in Northern
Instruments Corporation LLC. Northern Instruments Corporation LLC then owns 80%
of M&#252;tec GmbH. M&#252;tec GmbH manufactures proprietary electronic sensing
instruments, which it sells through distribution as well as certain corporate
joint ventures. M&#252;tec GmbH is NTIC&#146;s only non-industrial chemical joint venture.
</FONT></P>
<P align=justify><FONT face=serif size=2>The following table sets forth a list
of NTIC&#146;s corporate joint ventures as of November 16, 2007, indicating which
joint ventures are industrial chemical or non-industrial chemical, the country
in which the joint venture is organized, NTIC&#146;s ownership percentage in each
joint venture and the date of NTIC&#146;s original investment in each joint venture:
</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD noWrap align=left width="82%"></TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"></TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%">&nbsp;<B><FONT face=serif size=2>NTIC</FONT></B> </TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><B><FONT face=serif size=2>Calendar</FONT></B> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="82%"></TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"></TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><B><FONT face=serif size=2>Percent</FONT></B> </TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><B><FONT face=serif size=2>Year
      of</FONT></B> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="82%"></TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"></TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><B><FONT face=serif size=2>(%)</FONT></B> </TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><B><FONT face=serif size=2>Original</FONT></B> </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="82%"><FONT size=+0><B><FONT face=serif size=2>Joint Venture
      Name</FONT></B></FONT> </TD>
    <TD noWrap align=center width="2%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="4%"><FONT size=+0><B><FONT face=serif size=2>Country</FONT></B></FONT> </TD>
    <TD noWrap align=center width="2%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="4%"><FONT size=+0><B><FONT face=serif size=2>Ownership</FONT></B>
      </FONT></TD>
    <TD noWrap align=center width="2%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="4%"><FONT size=+0><B><FONT face=serif size=2>Investment</FONT></B></FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%" bgColor=#c0c0c0 colSpan=7><B><FONT face=serif size=2>INDUSTRIAL CHEMICAL CORPORATE JOINT VENTURES</FONT></B>
    </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="82%" bgColor=#ffffff><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; TAIYONIC LTD.</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#ffffff></TD>
    <TD noWrap align=center width="4%" bgColor=#ffffff><FONT face=serif size=2>Japan</FONT> </TD>
    <TD noWrap align=right width="2%" bgColor=#ffffff></TD>
    <TD noWrap align=center width="4%" bgColor=#ffffff><FONT face=serif size=2>50%</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#ffffff></TD>
    <TD noWrap align=center width="4%" bgColor=#ffffff><FONT face=serif size=2>1987</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="82%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; ACOBAL SAS</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>France</FONT> </TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>50%</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>1990</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="82%" bgColor=#ffffff><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; ZERUST-NIC (TAIWAN) CORP.</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#ffffff></TD>
    <TD noWrap align=center width="4%" bgColor=#ffffff><FONT face=serif size=2>Taiwan*</FONT> </TD>
    <TD noWrap align=right width="2%" bgColor=#ffffff>&nbsp;</TD>
    <TD noWrap align=center width="4%" bgColor=#ffffff><FONT face=serif size=2>25%</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#ffffff></TD>
    <TD noWrap align=center width="4%" bgColor=#ffffff><FONT face=serif size=2>1990</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="82%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; EXCOR GmbH</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>Germany</FONT> </TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>50%</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>1991</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="82%" bgColor=#ffffff><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; ZERUST SINGAPORE PTE. LTD</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#ffffff></TD>
    <TD noWrap align=center width="4%" bgColor=#ffffff><FONT face=serif size=2>Singapore*</FONT> </TD>
    <TD noWrap align=right width="2%" bgColor=#ffffff></TD>
    <TD noWrap align=center width="4%" bgColor=#ffffff><FONT face=serif size=2>50%</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#ffffff></TD>
    <TD noWrap align=center width="4%" bgColor=#ffffff><FONT face=serif size=2>1991</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="82%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; ZERUST AB</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>Sweden</FONT> </TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>50%</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>1991</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="82%" bgColor=#ffffff><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; ZERUST PREVEN&#199;&#195;O DE CORROS&#195;O LTDA.</FONT>
    </TD>
    <TD noWrap align=center width="2%" bgColor=#ffffff></TD>
    <TD noWrap align=center width="4%" bgColor=#ffffff><FONT face=serif size=2>Brazil</FONT> </TD>
    <TD noWrap align=right width="2%" bgColor=#ffffff></TD>
    <TD noWrap align=center width="4%" bgColor=#ffffff><FONT face=serif size=2>50%</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#ffffff></TD>
    <TD noWrap align=center width="4%" bgColor=#ffffff><FONT face=serif size=2>1993</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="82%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; EUROMASCH</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>Austria</FONT> </TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>50%</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>1994</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="82%" bgColor=#ffffff><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; MOSTNIC</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#ffffff></TD>
    <TD noWrap align=center width="4%" bgColor=#ffffff><FONT face=serif size=2>Russia</FONT> </TD>
    <TD noWrap align=right width="2%" bgColor=#ffffff></TD>
    <TD noWrap align=center width="4%" bgColor=#ffffff><FONT face=serif size=2>50%</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#ffffff></TD>
    <TD noWrap align=center width="4%" bgColor=#ffffff><FONT face=serif size=2>1994</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="82%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; KOREA ZERUST CO., LTD.</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>South Korea</FONT> </TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>25%</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>1994</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="82%" bgColor=#ffffff><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; ZERUST OY</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#ffffff></TD>
    <TD noWrap align=center width="4%" bgColor=#ffffff><FONT face=serif size=2>Finland</FONT> </TD>
    <TD noWrap align=right width="2%" bgColor=#ffffff></TD>
    <TD noWrap align=center width="4%" bgColor=#ffffff><FONT face=serif size=2>50%</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#ffffff></TD>
    <TD noWrap align=center width="4%" bgColor=#ffffff><FONT face=serif size=2>1995</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="82%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; ZERUST (U.K.) LTD.</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>United Kingdom</FONT> </TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>50%</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>1997</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="82%" bgColor=#ffffff><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; EXCOR-ZERUST S.R.O.</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#ffffff></TD>
    <TD noWrap align=center width="4%" bgColor=#ffffff><FONT face=serif size=2>Czech Republic</FONT> </TD>
    <TD noWrap align=right width="2%" bgColor=#ffffff></TD>
    <TD noWrap align=center width="4%" bgColor=#ffffff><FONT face=serif size=2>50%</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#ffffff></TD>
    <TD noWrap align=center width="4%" bgColor=#ffffff><FONT face=serif size=2>1997</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="82%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; EXCOR SP. Z.O.O.</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>Poland</FONT> </TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>50%</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>1998</FONT> </TD></TR></TABLE><BR>
<P align=center><FONT face=serif size=2>2</FONT><I><FONT face=serif size=2>
</FONT></I></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE><BR>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD noWrap align=center width="81%"></TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"></TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT size=+0><B><FONT face=serif size=2>NTIC</FONT></B> </FONT></TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT size=+0><B><FONT face=serif size=2>Calendar</FONT></B> </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="81%"></TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"></TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT size=+0><B><FONT face=serif size=2>Percent</FONT></B> </FONT></TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT size=+0><B><FONT face=serif size=2>Year of</FONT></B> </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="81%"></TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"></TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT size=+0><B><FONT face=serif size=2>(%)</FONT></B> </FONT></TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT size=+0><B><FONT face=serif size=2>Original</FONT></B> </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="81%"><FONT size=+0><B><FONT face=serif size=2>Joint Venture
      Name</FONT></B> </FONT></TD>
    <TD noWrap align=center width="2%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="4%"><FONT size=+0><B><FONT face=serif size=2>Country</FONT></B>
      </FONT></TD>
    <TD noWrap align=center width="2%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="4%"><FONT size=+0><B><FONT face=serif size=2>Ownership</FONT></B>
      </FONT></TD>
    <TD noWrap align=center width="2%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="4%"><FONT size=+0><B><FONT face=serif size=2>Investment</FONT></B>
      </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="81%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; SPECIALTY - NTIA CO. LTD.</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>Thailand*</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>25%</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>1998</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="81%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; TIANJIN ZERUST CO.</FONT> </TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2>China*</FONT>
    </TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2>25%</FONT> </TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2>2000</FONT>
  </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="81%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; HARITA-NTI</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>India</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>50%</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>2000</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="81%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; CHONG WAH-NTIA SDN. BHD.</FONT> </TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2>Malaysia*</FONT> </TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2>25%</FONT> </TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2>2000</FONT>
  </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="81%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; NTIA ZERUST PHILIPPINES, INC.</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>Philippines*</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>50%</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>2001</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="81%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; FIBRO NTI JOINT STOCK CO.</FONT> </TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2>Turkey</FONT>
    </TD>
    <TD noWrap align=center width="2%">&nbsp;</TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2>50%</FONT> </TD>
    <TD noWrap align=center width="2%">&nbsp;</TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2>2002</FONT>
  </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="81%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; ZERUST CONSUMER PRODUCTS, LLC</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>United States</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>50%</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>2002</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="81%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; REACT-NTI, LLC***</FONT> </TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2>United
      States</FONT> </TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2>75%</FONT> </TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2>2003</FONT>
  </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="81%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; POLYMER ENERGY LLC</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>United States</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>62.5%</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>2003</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="81%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; ZERUST EXCOR PTY LTD</FONT> </TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2>Australia</FONT> </TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2>50%</FONT> </TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2>2006</FONT>
  </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="81%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; ZERUST - DNEPR</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>Ukraine</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>50%</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>2006</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="81%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; SINGLE POINT ENERGY &amp; ENVIRONMENT CO.
      LTD.</FONT> </TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2>Thailand</FONT>
    </TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2>50%</FONT> </TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2>2006</FONT>
  </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="81%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; NTI-DILMUN MIDDLE EAST FZCO.</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>UAE</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>50%</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>2006</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="81%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; PT. CHEMINDO &#150; NTIA</FONT> </TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2>Indonesia*</FONT> </TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2>25%</FONT> </TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2>2007</FONT>
  </TD></TR>
  <TR>
    <TD align=left width="99%" colSpan=7>&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="87%" bgColor=#c0c0c0 colSpan=3><B><FONT face=serif size=2>NON-INDUSTRIAL CHEMICAL CORPORATE JOINT
      VENTURES</FONT></B> </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="81%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; MUTEC GMBH</FONT> </TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2>Germany**</FONT> </TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2>40%</FONT> </TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2>2002</FONT>
  </TD></TR></TABLE>____________________<BR>&nbsp;<BR>
<TABLE style="TEXT-ALIGN: justify" cellSpacing=0 cellPadding=0 border=0>

  <TR>
    <TD vAlign=top noWrap><FONT face=serif size=2>*&nbsp;&nbsp;&nbsp;&nbsp;
      </FONT></TD>
    <TD width="100%"><FONT face=serif size=2>Indirect ownership interest
      through NTI ASEAN, LLC</FONT></TD></TR>
  <TR>
    <TD colSpan=2>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top noWrap><FONT face=serif size=2>**</FONT></TD>
    <TD width="100%"><FONT face=serif size=2>Indirect ownership through
      Northern Instruments Corporation LLC</FONT></TD></TR>
  <TR>
    <TD colSpan=2>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top noWrap><FONT face=serif size=2>***&nbsp;</FONT></TD>
    <TD width="100%"><FONT face=serif size=2>React-NTI LLC is fully
      consolidated on NTIC&#146;s consolidated financial statements (See note 2 to
      NTIC&#146;s consolidated financial statements).</FONT></TD></TR></TABLE>
<P align=justify><FONT face=serif size=2>NTIC&#146;s international rust and corrosion
inhibiting product business has expanded significantly during the past several
fiscal years. NTIC has entered into five new corporate joint venture
arrangements during the past two fiscal years. Total net sales of all of NTIC&#146;s
joint ventures increased 26.0% to $80,551,700 during fiscal 2007 as compared to
$63,959,090 during fiscal 2006 and increased 11.9% during fiscal 2006 compared
to fiscal 2005. The profits of NTIC&#146;s corporate joint ventures are shared,
however, by the respective corporate joint venture owners in accordance with
their respective ownership percentages. In addition, NTIC&#146;s receipt of funds as
a result of sales by its joint ventures are dependent upon NTIC&#146;s receipt of
dividend distributions from the joint ventures and NTIC&#146;s receipt of fees for
technical and other support services that NTIC provides to its joint ventures
based on the revenues of the joint ventures. NTIC typically owns only 50% or
less of its joint venture entities and thus does not control the decisions of
these entities regarding whether to pay dividends and how much in dividends in
any given year. NTIC had equity in income of corporate joint ventures and
holding companies of $3,201,621 in fiscal 2007 compared to $2,713,096 in fiscal
2006. NTIC recognized fee income for such technical and support services of
$4,976,194 in fiscal 2007 compared to $4,695,124 in fiscal 2006. NTIC incurs
direct expenses related to its corporate joint ventures and holding companies.
Such expenses include consulting, travel, technical and marketing services to
existing joint ventures, legal fees incurred in the establishment of new joint
ventures, registration and promotion and legal defense of worldwide trademarks,
and legal fees incurred in connection with the filing of patent applications.
NTIC incurred $4,876,928 in direct joint venture expenses in fiscal 2007 as
compared to $5,481,757 in fiscal 2006. NTIC&#146;s income from its corporate joint
ventures and holding companies was $3,300,887 in fiscal 2007 as compared to
$1,973,065 in fiscal 2006. </FONT></P>
<P align=justify><FONT face=serif size=2>While NTIC is not aware of any specific
potential risk beyond its initial investment in and any undistributed earnings
of each of the corporate joint ventures listed above, there can be no assurance
that NTIC will not be subject to lawsuits based on product liability claims or
other claims arising out of the activities of each joint venture. To mitigate
the ramifications of such an occurrence, NTIC maintains liability insurance
specifically applicable to its ownership positions in the joint venture
arrangements in excess of any insurance the joint ventures may maintain.
</FONT></P>
<P align=center><FONT face=serif size=2>3</FONT><I><FONT face=serif size=2>
</FONT></I></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><B><FONT face=serif size=2>Products </FONT></B></P>
<P align=justify><FONT face=serif size=2>NTIC currently derives revenues from
the following product lines: </FONT></P>
<P align=justify><B><I><FONT face=serif size=2>Corrosion
Prevention</FONT></I></B><B><FONT face=serif size=2>. </FONT></B><FONT face=serif size=2>Over 70% of NTIC&#146;s consolidated net sales for fiscal 2007 were
derived from developing, manufacturing, marketing and selling Zerust<SUP>&#174;</SUP>
rust and corrosion inhibiting packaging products and services. Corrosion not
only damages the appearance of metal products and components but also negatively
impacts their mechanical performance. This applies to the rusting of ferrous
metals (iron and steel) and the deterioration by oxidation of nonferrous metals
(aluminum, copper, brass, etc.).</FONT></P>
<P align=justify><FONT face=serif size=2>NTIC&#146;s Zerust<SUP>&#174;</SUP> packaging
products contain proprietary nontoxic chemical systems (primarily using food
additives) that passivate metal surfaces and thereby inhibit rust and corrosion.
The corrosion-inhibiting protection is maintained as long as the metal products
to be protected remain enclosed within the Zerust<SUP>&#174;</SUP> packaging.
Electron scanning further shows that once the contents are removed from the
Zerust<SUP>&#174;</SUP> package, the Zerust<SUP>&#174;</SUP> protection dissipates from
the contents&#146; surfaces within two hours, leaving a clean, dry and corrosion-free
metal component. This mechanism of corrosion protection enables NTIC&#146;s customers
to easily package metal objects for rust-free shipment or long-term storage.
Furthermore, by eliminating costly greasing and degreasing processes and/or
significantly reducing the use of oils to inhibit corrosion, NTIC&#146;s
Zerust<SUP>&#174;</SUP> technology provides its customers significant savings in
labor, material and capital expenditures for equipment to apply, remove and
dispose of oil and grease, as well as the attendant environmental problems, as
compared to traditional methods of corrosion prevention. </FONT></P>
<P align=justify><FONT face=serif size=2>NTIC developed the first means of
combining corrosion inhibiting chemical systems with polyethylene and
polypropylene resins. Combining Zerust<SUP>&#174;</SUP> chemical systems with
polyethylene and polypropylene resins permitted NTIC to introduce to industry a
line of packaging products in the form of low and high density polyethylene bags
and shroud film, stretch, shrink, skin and bubble cushioning film, woven scrim,
foam sheeting, profile and corrugated board, thermoformed dunnage trays and
bins, injection and blow molded products and flat netting, thereby giving
packaging engineers an 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. Products also include a line
of several diffusers, such as Zerust<SUP>&#174;</SUP> Vapor Capsules, Zerust ICT&#153;
Plastabs<SUP>&#174;</SUP> and Cor-Tabs<SUP>&#174;</SUP>, which protect metal surfaces
within the distance of a certain specified &#147;radius of protection.&#148; This
industrial product line has since been expanded to also include items such as
Zerust<SUP>&#174;</SUP> gun cases and car covers targeted at retail consumers. NTIC
has also developed proprietary corrosion inhibitors for use in the mitigation of
corrosion in capital assets used in the petrochemical and related industries.
</FONT></P>
<P align=justify><FONT face=serif size=2>NTIC has also developed additives in
liquid form to imbue corrugated cardboard, solid fiber and chipboard packaging
materials with corrosion protection properties. Additionally, NTIC provides a
line of metal surface treatment liquids, which are oil, water and bio-solvent
based, marketed under the AXXA&#153; brand name.</FONT></P>
<P align=justify><B><I><FONT face=serif size=2>Bio-Based Chemical
Additives</FONT></I></B><B><FONT face=serif size=2>. </FONT></B><FONT face=serif size=2>NTIC&#146;s React-NTI, LLC joint venture revenues for fiscal 2007 were
primarily derived from the sales of MR-101 and MR-102 anti-abrasion ink
additives to one customer. The ink industry uses these additives to ensure ink
does not &#147;rub off&#148; the pages of magazines and books. As described in more detail
under the heading &#147;Part II. Item 6. Management&#146;s Discussion and Analysis or Plan
of Operation&#151;Recent Development,&#148; during fourth quarter of fiscal 2007, this
customer notified React that it would place future orders for React&#146;s remaining
inventory of ink additives, but that after such inventory was purchased, the
customer would not place any future orders. NTIC anticipates that the loss of
this customer will have a material adverse impact on NTIC&#146;s consolidated net
sales beginning in first quarter of fiscal 2008. However, since the margins on
React&#146;s sales of the ink additives to this customer were extremely small, NTIC
does not expect that the anticipated decrease in net sales by React will have a
material adverse effect on NTIC&#146;s consolidated net income.</FONT></P>
<P align=center><FONT face=serif size=2>4</FONT><I><FONT face=serif size=2>
</FONT></I></P>
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<P align=justify><FONT face=serif size=2>React-NTI&#146;s renewable resource-based
industrial chemical additive sales in fiscal 2007 also came from a patented
sintered metal mold release agent sold under the brand name SERAVAT&#153;. SERAVAT&#153;
significantly increases the &#147;green strength&#148; of powder metal parts as they are
ejected from their molds. The increase in green strength leads to much higher
process yields for the user, especially in stainless steel applications, thereby
significantly lowering their production costs.</FONT></P>
<P align=justify><FONT face=serif size=2>React-NTI&#146;s renewable resource-based
personal care chemical additive sales in fiscal 2007 included Farona&#153; line of
patented micronized cotton and corn powders. End user applications for these
additives included deodorants, pressed powder products and loose powder
products. Sales also were derived from patented EnviroPure&#153; emollient gels that
consist of a soy and canola base petrolatum replacement, as well as EnviroSolve&#153;
soy and canola base solvents that were used, among other applications, as a
successful acetone replacement.</FONT></P>
<P align=justify><B><I><FONT face=serif size=2>Electronic Measuring
Instruments</FONT></I></B><B><FONT face=serif size=2>. </FONT></B><FONT face=serif size=2>NTIC&#146;s M&#252;tec GmbH joint venture develops, manufactures and
sells proprietary electronics components including signal converters,
Input-Output interfaces, bulk goods property measurement instruments, and
process sensor technologies.</FONT></P>
<P align=justify><B><FONT face=serif size=2>Emerging Businesses </FONT></B></P>
<P align=justify><FONT face=serif size=2>NTIC is also in the process of
expanding its technologies into other applications and businesses. NTIC is
undertaking these new businesses either directly or through joint
ventures.</FONT></P>
<P align=justify><B><I><FONT face=serif size=2>Bio-Plastics</FONT></I></B><B><FONT face=serif size=2>. </FONT></B><FONT face=serif size=2>NTIC is beginning to manufacture and sell a broad range of
bio-based and biodegradable (compostable) polymer resin compounds and products
under the Natur-Tec&#153; brand. In recent years, a combination of market drivers
such as higher petroleum prices, a desire to reduce dependence on foreign oil,
increased environmental awareness at the consumer level, and favorable
regulations banning the use of regular plastics, have led to widespread interest
in sustainable, renewable resource based and compostable alternatives to
traditional plastics. The term &#147;bio-plastics&#148; encompasses a broad category of
plastics that are either bio-based (i.e. derived from renewable resources such
as corn or cellulosic/plant material or blends thereof) or are plastics that are
engineered to be fully biodegradable/compostable.</FONT></P>
<P align=justify><FONT face=serif size=2>Natur-Tec&#153; polymer resins are produced
using NTIC&#146;s proprietary and patent pending ReX Process. In this process,
biodegradable polymers, natural polymers made from renewable resources, and
organic and inorganic materials are reactively blended in the presence of
proprietary compatibilizers and polymer modifiers to produce
bio-based/biodegradable polymer resin formulations that exhibit unique and
stable morphology. Natur-Tec&#153; polymer resins are engineered for high
performance, ease of processing and reduced cost, and can be easily processed by
converters using conventional manufacturing processes and equipment. Natur-Tec&#153;
resins are available in several grades tailored for a variety of applications
such as blown-film extrusion, extrusion coating, injection molding and more.
Natur-Tec&#153; biodegradable and compostable polymer resins and all products made
thereof meet all requirements of international standards for compostable
plastics such as ASTM D6400 (U.S.) and EN 13432 (Europe), and are certified as
100% compostable by the Biodegradable Products Institute in the U.S. The
finished products include totally biodegradable compost and trash bags,
agricultural film and other single-use disposable products such as compostable
cutlery, food and consumer goods packaging. In addition, NTIC is developing a
line of renewable resource based resin compounds for durable engineering
plastics applications such as automotive and industrial plastics.</FONT></P>
<P align=center><FONT face=serif size=2>5</FONT><I><FONT face=serif size=2>
</FONT></I></P>
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<P align=justify><B><I><FONT face=serif size=2>Plastics to Fuel Oil Conversion
Technology</FONT></I></B><B><FONT face=serif size=2>. </FONT></B><FONT face=serif size=2>NTIC, through Polymer Energy LLC, a joint venture in which
NTIC has a 62.5% interest has a license to market and develop a patented system
to convert waste plastic material into fuel oil. The increasing use of
disposable plastic packaging has led to ever increasing generation of waste
plastic. Traditional methods of waste plastic disposal such as landfill disposal
or incineration have limitations due to environmental and regulatory concerns.
The Polymer Energy&#153; system offers a viable, economical and environmentally
responsible alternative to traditional methods of disposal of plastic waste. The
Polymer Energy&#153; system uses catalytic pyrolysis to efficiently convert waste
plastics (primarily polyolefins) into fuel oil. The system, developed in Europe,
has won several industry awards, including the 2006 European Environmental Press
Award for innovative waste management solutions. Polymer Energy LLC plans to
sell its first unit in fiscal 2008 and intends to ramp up its manufacturing and
service infrastructure to capitalize on global market opportunities it believes
exists for the Polymer Energy&#153; solution. Polymer Energy LLC does not currently
intend to market and sell its Polymer Energy&#153; solution in the United States due
to extensive U.S. governmental regulation. </FONT></P>
<P align=justify><B><I><FONT face=serif size=2>Oil and Gas Technology.
</FONT></I></B><FONT face=serif size=2>NTIC has also developed proprietary
corrosion inhibiting technologies for use in the mitigation of corrosion in
capital assets used in the process chemical industry and is initially targeting
the sale of these new Zerust<SUP>&#174;</SUP> products to the oil and gas industry
sector. NTIC has concluded successful trials of its solutions with a large oil
company and is pursuing opportunities to market its technology to other
potential customers in the oil and gas industry across several countries through
its joint venture partners and other strategic partners. NTIC believes the sale
of its new Zerust<SUP>&#174;</SUP> products to customers in the oil and gas industry
will involve a long sales cycle, likely including a one- to two-year trial
period with each customer and a slow integration process thereafter. NTIC has
been granted several patents in this area and has several other patents pending
covering these new technologies. NTIC has also expanded the core research and
development team responsible for the development and testing of solutions for
this market segment. In furtherance of NTIC&#146;s efforts to expand in the oil and
gas industry, during fiscal 2007, NTIC invested in a joint venture to develop
operations in the United Arab Emirates in the oil and gas industry. </FONT></P>
<P align=justify><B><FONT face=serif size=2>Manufacturing </FONT></B></P>
<P align=justify><FONT face=serif size=2>NTIC produces its proprietary
Zerust<SUP>&#174;</SUP> additives and products at its facility in Circle Pines,
Minnesota. NTIC&#146;s other products are produced according to NTIC&#146;s specifications
by selected contractors and Company joint ventures under a trade secrecy
agreement and/or a license agreement. </FONT></P>
<P align=justify><FONT face=serif size=2>NTIC is ISO 9001 certified with respect
to the manufacturing of its products and ISO 14000 certified with respect to
environmental management standards. NTIC believes that the process of ISO 9001
certification serves as an excellent total quality management tool, enabling
NTIC to ensure consistency in the performance of its products. NTIC believes
that the process of ISO 14000 certification serves as an excellent tool for NTIC
to continuously improve its environmental performance. In addition, because
potential customers may prefer or require manufacturers to have achieved ISO
certification, such ISO certifications may provide NTIC with certain competitive
advantages. </FONT></P>
<P align=justify><B><FONT face=serif size=2>Sales and Marketing </FONT></B></P>
<P align=justify><FONT face=serif size=2>In the United States, NTIC markets its
products principally to industrial users by a direct sales force and through a
network of independent distributors and manufacturer&#146;s sales representatives.
NTIC&#146;s technical service representatives work directly with the end users of
NTIC&#146;s products to analyze their specific needs and develop systems to meet
their technical requirements. </FONT></P>
<P align=center><FONT face=serif size=2>6</FONT><I><FONT face=serif size=2>
</FONT></I></P>
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<P align=justify><FONT face=serif size=2>Internationally, NTIC has entered into
several joint venture and similar arrangements with foreign partners (either
directly or through a holding company). Pursuant to these arrangements, NTIC
and/or Excor, NTIC&#146;s corporate joint venture in Germany, supply certain
proprietary additives to NTIC&#146;s foreign joint venture entities, which, in turn,
provide for the international manufacture and marketing of Zerust<SUP>&#174;</SUP>
and other finished products. NTIC receives fees for providing technical support
and marketing assistance to its joint ventures in accordance with the terms of
the joint venture arrangements. </FONT></P>
<P align=justify><B><FONT face=serif size=2>Competition </FONT></B></P>
<P align=justify><FONT face=serif size=2>While NTIC is unaware of any third
parties in which NTIC competes on a worldwide basis with respect to its
corrosion prevention products, NTIC does compete with several third parties on a
regional basis. NTIC evaluates competing products on an ongoing basis. Some of
NTIC&#146;s competitors are established companies that may have financial, marketing
and other resources substantially greater than those of NTIC. As a result, they
may be able to adapt more quickly to new or emerging technologies and changes in
customer requirements, or to devote greater resources to the promotion and sale
of their products than NTIC can. NTIC believes its principal competitive factors
with respect to its corrosion prevention products are pricing, product
innovation, quality and reliability, product support and customer service and
reputation. Most of NTIC&#146;s competitors have attempted to commoditize NTIC&#146;s
corrosion prevention packaging products thereby pressuring NTIC to compete at
least in part on the basis of price. Some of these companies may have achieved
significant market acceptance of their competing products and brand recognition.
NTIC, however, believes it has a competitive advantage over most of its
competitors as a result of NTIC&#146;s technical innovation and its value added
service. NTIC attempts to provide its customers with the highest level of
technical service and applications engineering in addition to the
Zerust<SUP>&#174;</SUP> rust and corrosion inhibiting packaging.</FONT></P>
<P align=justify><FONT face=serif size=2>With respect to NTIC&#146;s anti-abrasion
ink additive products, NTIC&#146;s primary competitor has become its former
manufacturer, Shamrock Technologies, Inc. As described in more detail under the
heading &#147;Item </FONT><FONT face=serif size=2>3. Legal Proceedings,&#148; NTIC is
currently involved in litigation with Shamrock.</FONT></P>
<P align=justify><FONT face=serif size=2>With respect to NTIC&#146;s bio-plastics
products, NTIC competes with several established companies that have been
producing and selling such products for a significantly longer time period, have
significant sales and much more substantial financial and other resources than
NTIC. In addition to performance, NTIC competes on the basis of price and
therefore NTIC&#146;s margins on its bio-plastics products are much smaller than its
margins on its Zerust<SUP>&#174;</SUP> products. NTIC also competes on the basis of
supply for the resins used to manufacture NTIC&#146;s bio-plastics products since
there are a limited number of suppliers of such resins and limited capacity of
production. </FONT></P>
<P align=justify><FONT face=serif size=2>With respect to NTIC&#146;s plastics to fuel
oil conversion technology, although NTIC is not currently aware of a large
number of competitors, such competitors could quickly develop and a few have
recently emerged from Asia. </FONT></P>
<P align=justify><FONT face=serif size=2>With respect to NTIC&#146;s corrosion
prevention technology for use in the oil and gas industry, NTIC is not currently
aware of competitors with the same or similar technology. </FONT></P>
<P align=justify><B><FONT face=serif size=2>Customers </FONT></B></P>
<P align=justify><FONT face=serif size=2>A customer of NTIC&#146;s React-NTI, LLC
joint venture accounted for, in the aggregate, approximately 28.0% and 26.6% of
NTIC&#146;s consolidated net sales for the fiscal years ended August 31, 2007 and
2006 respectively, and $132,999 and $207,630 of NTIC&#146;s receivables at August 31,
2007 and 2006, respectively. As described in more detail under the heading &#147;Part
II. Item 6. Management&#146;s Discussion and Analysis or Plan of Operation&#151;Recent
Development,&#148; during the fourth quarter of fiscal 2007, this customer notified
React that it would place future orders for React&#146;s remaining inventory of ink
additives, but that after such inventory was purchased, the customer would not
place any future orders. NTIC anticipates that the loss of this customer will
have a material adverse impact on NTIC&#146;s consolidated net sales beginning in
first quarter of fiscal 2008. However, since the margins on React&#146;s sales of the
ink additives to this customer were extremely small, NTIC does not expect that
the anticipated decrease in net sales by React will have a material adverse
effect on NTIC&#146;s consolidated net income.</FONT></P>
<P align=center><FONT face=serif size=2>7</FONT><I><FONT face=serif size=2>
</FONT></I></P>
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<P align=justify><B><FONT face=serif size=2>Research and Development
</FONT></B></P>
<P align=justify><FONT face=serif size=2>NTIC&#146;s research and development
activities are directed at improving existing products, developing new products
and improving quality assurance through improved testing of NTIC&#146;s products.
NTIC&#146;s joint venture in Germany, Excor, has established a wholly owned
subsidiary, Excor Korrosionsforschung GmbH, to conduct research into new fields
of corrosion inhibiting packaging and the applications engineering of such
products in conjunction with NTIC&#146;s domestic research and development operation.
NTIC&#146;s internal research and development activities are conducted at its
facilities located in Circle Pines, Minnesota; Beachwood, Ohio; Dresden,
Germany; Chennai, India and various international locations under the direction
of internationally known scientists and research institutes under exclusive
contract to NTIC with respect to the subject of their respective research
efforts. NTIC&#146;s research and development activities in Minnesota, Ohio, Germany
and India, along with NTIC&#146;s research and development efforts conducted with the
expert consulting support of Dr. Ramani Narayan and former support of Dr.
Sunggyu Lee, frequently result in the development of intellectual property
rights for NTIC. NTIC spent $2,575,325 in fiscal 2007 and $2,043,611 in fiscal
2006 in connection with its research and development activities. NTIC
anticipates that it will spend between $2,800,000 and $3,200,000 in fiscal 2008
on research and development activities. These fees are accounted for in the
&#147;Expenses incurred in support of corporate joint ventures&#148; section of NTIC&#146;s
consolidated statements of income. </FONT></P>
<P align=justify><B><FONT face=serif size=2>Intellectual Property Rights
</FONT></B></P>
<P align=justify><FONT face=serif size=2>NTIC&#146;s success depends and will
continue to depend in part upon its ability to maintain patent and trademark
protection for its products and processes, to preserve its proprietary
information and trade secrets and to operate without infringing the proprietary
rights of third parties. NTIC&#146;s policy is to attempt to protect its technology
by, among other things, filing patent applications and trademark applications
and vigorously preserving the trade secrets covering its technology and other
intellectual property rights. </FONT></P>
<P align=justify><FONT face=serif size=2>In 1979, NTIC developed and patented
the first polyolefin (plastic) based industrial corrosion inhibiting packing
material in the world. The U.S. patent granted under this patent application
became the most important intellectual property right in NTIC&#146;s history. This
patent expired in 2000. NTIC has since filed for twelve letters patents in the
U.S. covering various corrosion inhibiting technologies, systems and
applications since the expiration of the initial patent. NTIC owns several
patents in these areas. These patents as well as patent applications have been
extended to the countries of strategic relevance to NTIC including, but not
limited to, the Patent Cooperation Treaty. In addition, NTIC&#146;s joint venture in
Germany, EXCOR GmbH, owns several patents in the area covering various corrosion
inhibiting technologies and also applied for new patent applications for
proprietary new corrosion inhibiting technologies, to which NTIC and its other
joint ventures worldwide have rights. NTIC is also seeking additional patent
protection covering various host materials into which its corrosion inhibiting
additives and other protective features can be incorporated, proprietary new
process technologies, and chemical formulations outside the area of corrosion
protection. NTIC owns several patents outside the area of corrosion protection
both in the U.S. and in countries of strategic relevance to NTIC including, but
not limited to, the Patent Cooperation Treaty. </FONT></P>
<P align=center><FONT face=serif size=2>8</FONT><I><FONT face=serif size=2>
</FONT></I></P>
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<P align=justify><FONT face=serif size=2>In addition to seeking patent
protection, NTIC maintains an extensive portfolio of trademarks in all countries
where NTIC has joint venture presence. NTIC continuously pursues new trademark
applications of strategic interest worldwide. NTIC owns the following U.S.
registered trademarks: NTI&#174;, NTI &amp; Globe Design, ZERUST&#174;, EXCOR&#174;, COR TAB&#174;,
PLASTABS&#174;, MATCH-TECH&#174;, COR/SCI&#174;, NIC&#174;. NTIC also has a registered trademark on
the use of the Color Yellow with respect to corrosion inhibiting packaging. In
addition, NTIC has applied for the following new trademarks in the U.S.:
NATUR-TEC&#153;, NATUR-TEC &amp; Design&#153;, Polymer Energy&#153;, Polymer Energy Logo&#153;,
ICT&#153;, Z-CIS&#153;. Furthermore, NTI&#174;, ZERUST&#174;, The ZERUST People&#174;, EXCOR&#174;, the Color
Yellow&#174;, NTI ASEAN&#174;, MATCH-TECH&#174;, COR/SCI&#174;, Polymer Energy&#174; and Polymer Energy
Logo&#174; as well as other marks have been registered in the European Union with
several new applications pending.</FONT></P>
<P align=justify><FONT face=serif size=2>NTIC requires its employees,
consultants and advisors having access to its confidential information,
including trade secrets, to execute confidentiality agreements upon commencement
of their employment or consulting relationships with NTIC. These agreements
generally provide that all confidential information NTIC develops or makes known
to the individual during the course of the individual&#146;s employment or consulting
relationship with NTIC must be kept confidential by the individual and not
disclosed to any third parties. NTIC also requires all of its employees and
consultants who perform research and development for NTIC to execute agreements
that generally provide that all inventions developed by these individuals during
their employment by or service arrangement with NTIC will fall under NTIC&#146;s
proprietary intellectual property rights. </FONT></P>
<P align=justify><B><FONT face=serif size=2>Backlog </FONT></B></P>
<P align=justify><FONT face=serif size=2>NTIC had order backlog of $445,000 as
of August 31, 2007 compared to $321,000 as of August 31, 2006. These are orders
that are held by NTIC 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></P>
<P align=justify><B><FONT face=serif size=2>Availability of Raw Materials
</FONT></B></P>
<P align=justify><FONT face=serif size=2>NTIC does not carry excess quantities
of raw materials or purchased parts because of widespread availability for such
materials and parts from various suppliers. </FONT></P>
<P align=justify><B><FONT face=serif size=2>Employees </FONT></B></P>
<P align=justify><FONT face=serif size=2>As of August 31, 2007, NTIC had 48
full-time employees located in the United States, consisting of 14 in
administration, 13 in sales and marketing, 14 in research and development and
lab, six in production and one responsible for international coordination. There
are no unions representing NTIC&#146;s employees and NTIC believes that its relations
with employees are good. </FONT></P>
<P align=justify><B><FONT face=serif size=2>Forward-Looking Statements
</FONT></B></P>
<P align=justify><FONT face=serif size=2>This report contains or incorporates by
reference not only historical information, but also forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, and are subject
to the safe harbor created by those sections. In addition, NTIC or others on its
behalf may make forward-looking statements from time to time in oral
presentations, including telephone conferences and/or web casts open to the
public, in press releases or reports, on NTIC&#146;s Internet web sites or otherwise.
All statements other than statements of historical facts included in this report
that address activities, events or developments that NTIC expects, believes or
anticipates will or may occur in the future are forward-looking statements
including, in particular, the statements about NTIC&#146;s plans, objectives,
strategies and prospects regarding, among other things, its financial condition,
results of operations and business. NTIC has identified some of these
forward-looking statements with words like &#147;believe,&#148; &#147;may,&#148; &#147;could,&#148; &#147;might,&#148;
&#147;forecast,&#148; &#147;possible,&#148; &#147;potential,&#148; &#147;project,&#148; &#147;will,&#148; &#147;should,&#148; &#147;expect,&#148;
&#147;intend,&#148; &#147;plan,&#148; &#147;predict,&#148; &#147;anticipate,&#148; &#147;estimate,&#148; &#147;approximate&#148; or
&#147;continue&#148; and other words and terms of similar meaning. These forward-looking
statements may be contained in the notes to NTIC&#146;s consolidated financial
statements and elsewhere in this report, including under the heading &#147;Part II.
Item 6. Management&#146;s Discussion and Analysis or Plan of Operation.&#148;</FONT></P>
<P align=center><FONT face=serif size=2>9</FONT><I><FONT face=serif size=2>
</FONT></I></P>
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<P align=justify><FONT face=serif size=2>NTIC wishes to caution readers not to
place undue reliance on any forward-looking statement that speaks only as of the
date made and to recognize that forward-looking statements are predictions of
future results, which may not occur as anticipated. Actual results could differ
materially from those anticipated in the forward-looking statements and from
historical results, due to the risks and uncertainties described under the
heading &#147;Risk Factors&#148; below, as well as others that NTIC may consider
immaterial or does not anticipate at this time. Although NTIC believes that the
expectations reflected in its forward-looking statements are reasonable, NTIC
does not know whether its expectations will prove correct. NTIC&#146;s expectations
reflected in its forward-looking statements can be affected by inaccurate
assumptions NTIC might make or by known or unknown risks and uncertainties,
including those described below under the heading &#147;Risk Factors.&#148; The risks and
uncertainties described under the heading &#147;Risk Factors&#148; below are not exclusive
and further information concerning NTIC and its business, including factors that
potentially could materially affect its financial results or condition, may
emerge from time to time. NTIC assumes no obligation to update forward-looking
statements to reflect actual results or changes in factors or assumptions
affecting such forward-looking statements. NTIC advises you, however, to consult
any further disclosures it may make on related subjects in its Annual Reports on
Form 10-KSB, Quarterly Reports on Form 10-QSB and Current Reports on Form 8-K
that NTIC files with or furnishes to the Securities and Exchange Commission.
</FONT></P>
<P align=justify><B><FONT face=serif size=2>Risk Factors </FONT></B></P>
<P align=justify><FONT face=serif size=2>The following are the most significant
factors known to NTIC that could materially adversely affect its business,
financial condition or operating results. </FONT></P>
<P align=justify><B><I><FONT face=serif size=2>Approximately 28.0% of NTIC&#146;s
consolidated net sales for the fiscal year ended August 31, 2007 were dependent
upon a single customer, which has indicated a desire not to purchase any future
products from NTIC or its subsidiaries. As a result, NTIC&#146;s consolidated net
sales for the fiscal year ending August 31, 2008 and thereafter will be
materially harmed. </FONT></I></B></P>
<P align=justify><FONT face=serif size=2>A customer of NTIC&#146;s React-NTI, LLC
joint venture accounted for, in the aggregate, approximately 28.0% and 26.6% of
NTIC&#146;s consolidated net sales for the fiscal year ended August 31, 2007. As
described in more detail under the heading &#147;Part II. Item 6. Management&#146;s
Discussion and Analysis or Plan of Operation&#151;Recent Development,&#148; during fourth
quarter of fiscal 2007, this customer notified React that it would place future
orders for React&#146;s remaining inventory of ink additives, but that after such
inventory was purchased, the customer would not place any future orders. NTIC
anticipates that the loss of this customer will have a material adverse impact
on NTIC&#146;s consolidated net sales beginning in first quarter of fiscal 2008 and
thereafter. However, since the margins on React&#146;s sales of the ink additives to
this customer were extremely small, NTIC does not expect that the anticipated
decrease in net sales by React will have a material adverse effect on NTIC&#146;s
consolidated net income.</FONT><B><FONT face=serif size=2> </FONT></B><FONT face=serif size=2>No assurance can be provided, however, that the loss of this
customer will not have a material adverse effect on NTIC&#146;s consolidated net
income. </FONT></P>
<P align=center><FONT face=serif size=2>10</FONT><I><FONT face=serif size=2>
</FONT></I></P>
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<P align=justify><B><I><FONT face=serif size=2>The automotive industry in the
United States has experienced contraction in recent years thus resulting in
decreased demand for NTIC&#146;s Zerust<SUP>&#174;</SUP> products in the United States,
which has adversely affected and may continue to adversely affect NTIC&#146;s results
of operations. </FONT></I></B></P>
<P align=justify><FONT face=serif size=2>In fiscal 2007, over 70% of NTIC&#146;s
consolidated net sales were derived from the sales of Zerust<SUP>&#174;</SUP> rust
and corrosion inhibiting packaging products and services. Most of these products
and services were sold to customers in the automotive industry and to a lesser
extent to customers in the electronics, electrical, mechanical, military and
retail consumer markets. Net sales of NTIC&#146;s Zerust<SUP>&#174;</SUP> products
decreased 0.5% to $12,044,241 during fiscal 2007 compared to fiscal 2006
primarily as a result of decreased demand for such products from customers in
the automotive industry in the United States. The automotive industry in the
United States has experienced contraction in recent years and is not expected to
improve in the foreseeable future, which may result in a continued adverse
effect on NTIC&#146;s results of operations. While NTIC intends to increase marketing
efforts of its Zerust<SUP>&#174;</SUP> products and services to customers in other
target industries, no assurance can be provided that NTIC will be successful in
doing so or will recognize increased sales from such new target markets.
</FONT></P>
<P align=justify><B><I><FONT face=serif size=2>NTIC intends to invest additional
research and development and marketing efforts and resources to expand its
existing product lines and the distribution of its products into new target
markets, such as the oil and gas industry. No assurance can be provided,
however, that NTIC&#146;s investments in such new products and markets will be
successful and result in additional revenue. </FONT></I></B></P>
<P align=justify><FONT face=serif size=2>In an effort to increase net sales,
NTIC is expanding its corrosion solution products into new markets, such as the
oil and gas industry, and expanding its product lines to include other products,
such as biodegradable and compostable plastics, plastic recycling technology and
corrosion solutions in the oil and gas industry. During fiscal 2008, NTIC
expects to invest additional research and development and marketing efforts and
resources into these new product lines and markets. NTIC anticipates additional
revenue from these new technologies beginning in fiscal year ending August 31,
2008; however, no assurance can be provided that such new businesses will be
successful or that NTIC will be successful in obtaining such additional revenue.
</FONT></P>
<P align=justify><B><I><FONT face=serif size=2>NTIC&#146;s emerging new businesses
are risky and may not prove to be successful, which could harm NTIC&#146;s operating
results and financial condition. </FONT></I></B></P>
<P align=justify><FONT face=serif size=2>NTIC is in the process of expanding its
technologies into other applications and businesses. NTIC is undertaking these
new businesses either directly or through joint ventures. Such new businesses
are risky and subject to all of the risks inherent in the establishment of a new
business enterprise, including: </FONT></P>
<UL>
  <LI>
  <P align=justify><FONT face=sans-serif size=2></FONT><FONT face=serif size=2>the absence of an operating history; </FONT></P>
  <LI>
  <P align=justify><FONT face=sans-serif size=2></FONT><FONT face=serif size=2>the lack of commercialized products; </FONT></P>
  <LI>
  <P align=justify><FONT face=sans-serif size=2></FONT><FONT face=serif size=2>insufficient capital and other resources; </FONT></P>
  <LI>
  <P align=justify><FONT face=sans-serif size=2></FONT><FONT face=serif size=2>expected substantial and continual losses for such businesses for the
  foreseeable future; </FONT></P>
  <LI>
  <P align=justify><FONT face=sans-serif size=2></FONT><FONT face=serif size=2>the lack of manufacturing experience and limited marketing experience;
  </FONT></P>
  <LI>
  <P align=justify><FONT face=sans-serif size=2></FONT><FONT face=serif size=2>an expected reliance on third parties for the commercialization of some
  of the proposed products;</FONT></P>
  <LI>
  <P align=justify><FONT face=sans-serif size=2></FONT><FONT face=serif size=2>a
  competitive environment characterized by numerous, well-established and
  well-capitalized competitors; and</FONT></P>
  <LI>
  <P align=justify><FONT face=serif size=2>reliance on key
  personnel.</FONT></P></LI></UL>
<P align=center><FONT face=serif size=2>11</FONT><I><FONT face=serif size=2>
</FONT></I></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><B><I><FONT face=serif size=2>Over 20% of NTIC&#146;s consolidated
net sales, including corporate joint venture sales, are generated outside of the
U.S. and NTIC intends to continue to expand its international operations. NTIC&#146;s
international operations require management attention and financial resources
and expose NTIC to difficulties and risks presented by international economic,
political, legal, accounting and business factors. </FONT></I></B></P>
<P align=justify><FONT face=serif size=2>NTIC offers direct on-site technical
support on rust and corrosion issues in over 50 countries, and operates a
marketing, distribution, and technical network through joint ventures in North
America, South America, Europe, Asia and the Middle East. NTIC&#146;s consolidated
net sales, including the corporate joint venture sales, outside the United
States were 20.8% and 20.3% of its total consolidated net sales for fiscal 2007
and 2006, respectively. One of NTIC&#146;s strategic objectives is to expand its
international operations. NTIC has recently entered into joint ventures in
Indonesia, the Ukraine, Thailand and the United Arab Emirates. The expansion of
NTIC&#146;s existing international operations and entry into additional international
markets requires management attention and financial resources. Many of the
countries in which NTIC sells its products directly or indirectly through its
corporate joint ventures, are, to some degree, subject to political, economic
and/or social instability. NTIC&#146;s international operations expose NTIC and its
joint venture partners, representatives, agents and distributors to risks
inherent in operating in foreign jurisdictions. These risks include: </FONT></P>
<UL>
  <LI>
  <P align=justify><FONT face=sans-serif size=2></FONT><FONT face=serif size=2>difficulties in managing and staffing international operations and the
  required infrastructure costs including legal, tax, accounting, information
  technology; </FONT></P>
  <LI>
  <P align=justify><FONT face=sans-serif size=2></FONT><FONT face=serif size=2>the imposition of additional U.S. and foreign governmental controls or
  regulations, new trade restrictions and restrictions on the activities of
  foreign agents, representatives and distributors, the imposition of costly and
  lengthy export licensing requirements and changes in duties and tariffs,
  license obligations and other non-tariff barriers to trade; </FONT></P>
  <LI>
  <P align=justify><FONT face=sans-serif size=2></FONT><FONT face=serif size=2>the imposition of U.S. and/or international sanctions against a
  country, company, person or entity with whom NTIC does business that would
  restrict or prohibit continued business with the sanctioned country, company,
  person or entity; </FONT></P>
  <LI>
  <P align=justify><FONT face=sans-serif size=2></FONT><FONT face=serif size=2>pricing pressure that NTIC or its corporate joint ventures may
  experience internationally; </FONT></P>
  <LI>
  <P align=justify><FONT face=sans-serif size=2></FONT><FONT face=serif size=2>laws and business practices favoring local companies; </FONT></P>
  <LI>
  <P align=justify><FONT face=sans-serif size=2></FONT><FONT face=serif size=2>currency exchange rate fluctuations; </FONT></P>
  <LI>
  <P align=justify><FONT face=sans-serif size=2></FONT><FONT face=serif size=2>longer payment cycles and difficulties in enforcing agreements and
  collecting receivables through certain foreign legal systems; </FONT></P>
  <LI>
  <P align=justify><FONT face=sans-serif size=2></FONT><FONT face=serif size=2>difficulties in enforcing or defending intellectual property rights;
  and </FONT></P>
  <LI>
  <P align=justify><FONT face=sans-serif size=2></FONT><FONT face=serif size=2>multiple, changing and often inconsistent enforcement of laws and
  regulations. </FONT></P></LI></UL>
<P align=justify><FONT face=serif size=2>NTIC cannot assure you that one or more
of the factors listed above will not harm its business. Any material decrease in
NTIC&#146;s international sales could adversely affect NTIC&#146;s operating
results.</FONT></P>
<P align=center><FONT face=serif size=2>12</FONT><I><FONT face=serif size=2>
</FONT></I></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><B><I><FONT face=serif size=2>NTIC&#146;s liquidity and financial
position rely on dividend distributions from its corporate joint ventures, which
if such dividends cease or are reduced could adversely affect NTIC&#146;s liquidity
and financial position. </FONT></I></B></P>
<P align=justify><FONT face=serif size=2>NTIC&#146;s liquidity and financial position
rely on dividend distributions from its corporate joint ventures. During fiscal
2007, NTIC received approximately $1,643,000 in dividends received from its
corporate joint ventures. Because NTIC typically owns only 50% or less of its
joint venture entities, NTIC does not control the decisions of these entities
regarding whether to pay dividends and how much in dividends should be paid in
any given year. Thus, NTIC cannot guarantee that any of its joint ventures will
pay dividends in any given year. The failure of NTIC&#146;s joint ventures to declare
dividends in amounts typically expected by NTIC could adversely affect NTIC&#146;s
liquidity and financial position. </FONT></P>
<P align=justify><B><I><FONT face=serif size=2>Fluctuations in foreign currency
exchange rates could result in declines in NTIC&#146;s reported consolidated net
sales and net income.</FONT></I></B><FONT face=serif size=2> </FONT></P>
<P align=justify><FONT face=serif size=2>Because the functional currency of
NTIC&#146;s foreign operations and investments in its foreign corporate joint
ventures and holding companies is the applicable local currency, NTIC is exposed
to foreign currency exchange rate risk arising from transactions in the normal
course of business since NTIC&#146;s fees for technical support and other services
and dividend distributions from these foreign entities are paid in foreign
currencies. NTIC&#146;s reported consolidated net sales and net income are subject to
fluctuations in foreign exchange rates. NTIC&#146;s principal exchange rate exposure
is with the Euro, the Japanese yen, Korean won and the English pound against the
U.S. dollar. NTIC does not hedge against its foreign currency exchange rate
risk. Since NTIC&#146;s investments in its corporate joint ventures and holding
companies are accounted for using the equity method, any changes in foreign
currency exchange rates would be reflected as a foreign currency translation
adjustment and would not change the equity in income of joint ventures and
holding companies reflected in NTIC&#146;s consolidated statements of income.
</FONT></P>
<P align=justify><B><I><FONT face=serif size=2>NTIC&#146;s compliance with U.S.
generally accepted accounting principles and any changes in such principles
might adversely affect NTIC&#146;s operating results and financial condition. Any
requirement to consolidate NTIC&#146;s corporate joint ventures or subject them to
compliance with the internal control provisions of the Sarbanes-Oxley Act of
2002 could adversely affect NTIC&#146;s operating results and financial condition.
</FONT></I></B></P>
<P align=justify><FONT face=serif size=2>NTIC adopted accounting policy FASB
Interpretation No. 46R (FIN 46R), &#147;</FONT><I><FONT face=serif size=2>Consolidation of Variable Interest Entities</FONT></I><FONT face=serif size=2>, </FONT><I><FONT face=serif size=2>a revision of FIN 46&#148;</FONT></I><FONT face=serif size=2> effective as of February 28, 2005. As a result of FIN 46R,
NTIC consolidated React-NTI LLC, one of its corporate joint ventures that is 75%
owned by NTIC. If the interpretation of FIN 46R were to change and NTIC were
required to fully consolidate the remaining 28 of its corporate joint ventures
or if NTIC&#146;s corporate joint ventures otherwise would be required to be in
compliance with the internal control provisions of the Sarbanes-Oxley Act of
2002, NTIC would incur significant additional costs. NTIC estimates that the
costs for each of its corporate joint ventures to become Sarbanes-Oxley
compliant would range between $150,000 to $500,000 and that annual maintenance
expenses would range from $50,000 to $100,000 per year per corporate joint
venture thereafter. In addition, other accounting pronouncements issued in the
future could have a material cost associated with NTIC&#146;s implementation of such
new accounting pronouncements. </FONT></P>
<P align=justify><B><I><FONT face=serif size=2>One of NTIC&#146;s principal
stockholders beneficially owns 24.9 % of NTIC&#146;s outstanding common stock and is
affiliated with NTIC&#146;s President and Chief Executive Officer and thus may be
able influence matters requiring stockholder approval, including the election of
directors, and could discourage or otherwise impede a transaction in which a
third party wishes to purchase NTIC&#146;s outstanding shares at a premium.
</FONT></I></B></P>
<P align=center><FONT face=serif size=2>13</FONT><I><FONT face=serif size=2>
</FONT></I></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><FONT face=serif size=2>As of November 16, 2007, Inter Alia
Holding Company beneficially owned approximately 24.9%of NTIC&#146;s outstanding
common stock. Inter Alia is an entity owned by, among others, G. Patrick Lynch,
NTIC&#146;s President and Chief Executive Officer and a director, and Philip M.
Lynch, NTIC&#146;s former Chairman of the Board and Chief Executive Officer and
current Chairman Emeritus</FONT><FONT face=serif size=1>. </FONT><FONT face=serif size=2>G. Patrick Lynch is the son of Philip M. Lynch. Messrs. G.P.
Lynch and P.M. Lynch share voting and dispositive power of shares of NTIC&#146;s
common stock held by Inter Alia Holding Company. As a result of his share
ownership through Inter Alia and his position as President and Chief Executive
Officer and a director of NTIC, Mr. G.P. Lynch may be able to influence the
affairs and actions of NTIC, including matters requiring stockholder approval,
such as the election of directors and approval of significant corporate
transactions. The interests of Messrs. G.P. Lynch and Inter Alia may differ from
the interests of NTIC&#146;s other stockholders. This concentration of ownership may
have the effect of delaying, preventing or deterring a change in control of
NTIC, could deprive NTIC&#146;s stockholders of an opportunity to receive a premium
for their common stock as part of a sale or merger of NTIC and may negatively
affect the market price of NTIC&#146;s common stock. Transactions that could be
affected by this concentration of ownership include proxy contests, tender
offers, mergers or other purchases of common stock that could give stockholders
the opportunity to realize a premium over the then-prevailing market price for
shares of NTIC&#146;s common stock. </FONT></P>
<P align=justify><B><I><FONT face=serif size=2>NTIC is currently involved in
litigation over its trademark on the use of the color Yellow in corrosion
inhibiting packaging, the loss of which could adversely affect NTIC&#146;s business.
</FONT></I></B></P>
<P align=justify><FONT face=serif size=2>One of NTIC&#146;s important trademarks for
its business is the trademark for the color Yellow. NTIC is currently involved
in litigation against a competitor over this trademark. NTIC has also in the
past successfully prosecuted infringement claims against other competitors and
third parties for their use of the color Yellow. If NTIC were to lose this
current or any future litigation over its trademark for the color Yellow, NTIC
could be in a more difficult position to enforce its rights to this trademark in
other countries and against other third parties. NTIC believes that the loss of
its trademark for the color Yellow could have an adverse effect on NTIC&#146;s
business. </FONT></P>
<P align=justify><B><I><FONT face=serif size=2>NTIC&#146;s business, properties and
products are subject to governmental regulation and taxes with which compliance
may require NTIC to incur expenses or modify its products or operations and may
expose NTIC to penalties for non-compliance. Governmental regulation may also
adversely affect the demand for some of NTIC&#146;s products and NTIC&#146;s operating
results.</FONT></I></B></P>
<P align=justify><FONT face=serif size=2>NTIC&#146;s business, properties and
products are subject to a wide variety of international, federal, state and
local laws, rules, taxes and regulations relating to the protection of the
environment, natural resources, and worker health and safety and the use,
management, storage, and disposal of hazardous substances, wastes and other
regulated materials. These laws, rules and regulations may affect the way NTIC
conducts its operations, and the failure to comply with these regulations could
lead to fines and other penalties. Because NTIC owns and operates real property,
various environmental laws also may impose liability on NTIC for the costs of
cleaning up and responding to hazardous substances that may have been released
on NTIC&#146;s property, including releases unknown to NTIC. These environmental laws
and regulations also could require NTIC to pay for environmental remediation and
response costs at third-party locations where NTIC disposed of or recycled
hazardous substances. NTIC&#146;s future costs of complying with the various
environmental requirements, as they now exist or may be altered in the future,
could adversely affect NTIC&#146;s financial condition and operating results. NTIC is
also subject to other international, federal and state laws, rules and
regulations, the future non-compliance of which may harm NTIC&#146;s business or may
adversely affect the demand for some of its products. Changes in laws and
regulations, including changes in accounting standards and taxation changes,
including tax rate changes, new tax laws, revised tax law interpretations, also
may adversely affect NTIC&#146;s operating results. </FONT></P>
<P align=center><FONT face=serif size=2>14</FONT><I><FONT face=serif size=2>
</FONT></I></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><B><I><FONT face=serif size=2>NTIC intends to grow its business
through additional joint ventures, alliances and acquisitions, which could be
risky and harm its business. </FONT></I></B></P>
<P align=justify><FONT face=serif size=2>One of NTIC&#146;s growth strategies is to
expand its business by entering into additional joint ventures and alliances and
acquiring businesses, technologies and products that complement or augment
NTIC&#146;s existing products. The benefits of a joint venture, alliance or
acquisition may take more time than expected to develop, and NTIC cannot
guarantee that any future joint ventures, alliances or acquisitions will in fact
produce the intended benefits. In addition, joint ventures, alliances and
acquisitions involve a number of risks, including: </FONT></P>
<UL style="TEXT-ALIGN: justify">
  <LI><FONT face=serif size=2>diversion of management&#146;s
  attention;<BR>&nbsp;</FONT>
  <LI><FONT size=2>difficulties in assimilating the operations and products of
  an acquired business or in realizing projected efficiencies, cost savings and
  revenue synergies;<BR>&nbsp;</FONT>
  <LI><FONT size=2>potential loss of key employees or customers of the acquired
  businesses or adverse effects on existing business relationships with
  suppliers and customers;<BR>&nbsp;</FONT>&nbsp;
  <LI><FONT size=2>adverse impact on overall profitability if acquired
  businesses do not achieve the financial results projected in NTIC&#146;s valuation
  models;<BR>&nbsp;</FONT>
  <LI><FONT size=2>reallocation of amounts of capital from other operating
  initiatives and/or an increase in NTIC&#146;s leverage and debt service
  requirements to pay the acquisition purchase prices, which could in turn
  restrict NTIC&#146;s ability to access additional capital when needed or to pursue
  other important elements of NTIC&#146;s business strategy;<BR>&nbsp;</FONT>
  <LI><FONT size=2>inaccurate assessment of undisclosed, contingent or other
  liabilities or problems and unanticipated costs associated with the
  acquisition; and<BR>&nbsp;</FONT>
  <LI><FONT size=2>incorrect estimates made in the accounting for acquisitions,
  incurrence of non-recurring charges and write-off of significant amounts of
  goodwill that could adversely affect NTIC&#146;s operating results.</FONT></LI></UL>
<P align=justify><FONT face=serif size=2>NTIC&#146;s ability to grow through joint
ventures, alliances and acquisitions will depend, in part, on the availability
of suitable opportunities at an acceptable cost, NTIC&#146;s ability to compete
effectively for these opportunities and the availability of capital to complete
such transactions. </FONT></P>
<P align=justify><B><I><FONT face=serif size=2>NTIC relies on its independent
distributors, manufacturer&#146;s sales representatives and corporate joint ventures
to market and sell its products.</FONT></I></B><FONT face=serif size=2>
</FONT></P>
<P align=justify><FONT face=serif size=2>In addition to its direct sales force,
NTIC relies on its independent distributors, manufacturer&#146;s sales
representatives and corporate joint ventures to market and sell its products in
the United States and internationally. NTIC&#146;s independent distributors,
manufacturer&#146;s sales representatives and joint venture partners might terminate
their relationship with NTIC, or devote insufficient sales efforts to NTIC&#146;s
products. NTIC does not control its independent distributors, manufacturer&#146;s
sales representatives and joint ventures and they may not be successful in
implementing NTIC&#146;s marketing plans. NTIC&#146;s failure to maintain its existing
relationships with its independent distributors, manufacturer&#146;s sales
representatives and joint ventures, or its failure to recruit and retain
additional skilled independent distributors, manufacturer&#146;s sales
representatives and joint venture partners could have an adverse effect on
NTIC&#146;s operations.</FONT></P>
<P align=center><FONT face=serif size=2>15</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><B><I><FONT face=serif size=2>NTIC has very limited staffing
and will continue to be dependent upon key employees.</FONT></I></B></P>
<P align=justify><FONT face=serif size=2>NTIC&#146;s success is dependent upon the
efforts of a small management team and staff. NTIC&#146;s future success will also
depend in large part on its ability to retain these individuals and identify,
attract and retain other highly qualified managerial, technical, sales and
marketing and customer service personnel. Competition for these individuals is
intense, especially in the markets in which NTIC operates. NTIC may not succeed
in identifying, attracting and retaining these personnel. The current
management, other than the President and Chief Executive Officer, do not have
any material stock ownership in NTIC or any contractual obligation to maintain
their employment with us. The loss or interruption of services of any of NTIC&#146;s
key personnel, the inability to identify, attract or retain qualified personnel
in the future, delays in hiring qualified personnel, or any employee slowdowns,
strikes or similar actions could make it difficult for NTIC to manage its
business and meet key objectives, which could harm NTIC&#146;s business, financial
condition and operating results. </FONT></P>
<P align=justify><B><I><FONT face=serif size=2>NTIC relies on its management
information systems for inventory management, distribution and other functions.
If these information systems fail to adequately perform these functions or if
NTIC experiences an interruption in their operation, NTIC&#146;s business and
operating results could be adversely affected.</FONT></I></B><FONT face=serif size=2> </FONT></P>
<P align=justify><FONT face=serif size=2>The efficient operation of NTIC&#146;s
business is dependent on its management information systems. NTIC relies on its
management information systems to effectively manage accounting and financial
functions; manage order entry, order fulfillment and inventory replenishment
processes; and to maintain its research and development data. The failure of
management information systems to perform as anticipated could disrupt NTIC&#146;s
business and product development and could result in decreased sales, causing
NTIC&#146;s business and operating results to suffer. In addition, NTIC&#146;s management
information systems are vulnerable to damage or interruption from natural or
man-made disasters, terrorist attacks and attacks by computer viruses or
hackers, or power loss or computer systems, Internet, telecommunications or data
network failure. Any such interruption could adversely affect NTIC&#146;s business
and operating results. </FONT></P>
<P align=justify><B><I><FONT face=serif size=2>NTIC&#146;s reliance upon patents,
trademark laws, trade secrets and contractual provisions to protect its
proprietary rights may not be sufficient to protect its intellectual property
from others who may sell similar products.</FONT></I></B><FONT face=serif size=2> </FONT></P>
<P align=justify><FONT face=serif size=2>NTIC holds patents relating to various
aspects of its products and believes that proprietary technical know-how is
critical to many of its products. Proprietary rights relating to NTIC&#146;s products
are protected from unauthorized use by third parties only to the extent that
they are covered by valid and enforceable patents or are maintained in
confidence as trade secrets. NTIC cannot be certain that it will be issued any
patents from any pending or future patent applications owned by or licensed to
NTIC or that the claims allowed under any issued patents will be sufficiently
broad to protect its technology. In the absence of patent protection, NTIC may
be vulnerable to competitors who attempt to copy NTIC&#146;s products or gain access
to its trade secrets and know-how. NTIC&#146;s competitors may initiate litigation to
challenge the validity of NTIC&#146;s patents, or they may use their resources to
design comparable products that do not infringe NTIC&#146;s patents. NTIC may incur
substantial costs if its competitors initiate litigation to challenge the
validity of its patents or if it initiates any proceedings to protect its
proprietary rights and if the outcome of any such litigation is unfavorable to
NTIC, its business and operating results could be materially adversely
affected.</FONT></P>
<P align=justify><FONT face=serif size=2>In addition, NTIC relies on trade
secrets and proprietary know-how that it seeks to protect, in part, by
confidentiality agreements with its employees, and consultants. These agreements
may be breached and NTIC may not have adequate remedies for any such breach.
Even if these confidentiality agreements are not breached, NTIC&#146;s trade secrets
may otherwise become known or be independently developed by
competitors.</FONT></P>
<P align=center><FONT face=serif size=2>16</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><B><I><FONT face=serif size=2>If NTIC is unable to continue to
enhance existing products and develop and market new products that respond to
customer needs and achieve market acceptance, NTIC may experience a decrease in
demand for its products, and its business could suffer. </FONT></I></B></P>
<P align=justify><FONT face=serif size=2>One of NTIC&#146;s strategies is to enhance
its existing products and develop and market new products that respond to
customer needs. NTIC may not be able to compete effectively with its competitors
unless NTIC can keep up with existing or new products in the markets in which it
competes. Product development requires significant financial and other
resources. Although in the past NTIC has implemented lean manufacturing and
other productivity improvement initiatives to provide investment funding for new
products, NTIC cannot assure you that it will be able to continue to do so in
the future. Products improvements and new product introductions also require
significant planning, design, development and testing at the technological,
product, and manufacturing process levels and NTIC may not be able to timely
develop product improvements or new products. NTIC&#146;s competitors&#146; new products
may beat NTIC&#146;s products to market, may be more effective or less expensive than
NTIC&#146;s products or render NTIC&#146;s products obsolete. Any new products that NTIC
may develop may not receive market acceptance or otherwise generate any
meaningful net sales or profits for NTIC relative to its expectations, based on,
among other things, existing and anticipated investments in manufacturing
capacity and commitments to fund advertising, marketing, promotional programs,
and research and development.</FONT></P>
<P align=justify><B><I><FONT face=serif size=2>NTIC faces intense competition in
almost all of its product lines, including from competitors that have
substantially greater resources than NTIC does. NTIC cannot assure you it will
be able to compete effectively, which would harm its business and operating
results.</FONT></I></B></P>
<P align=justify><FONT face=serif size=2>NTIC&#146;s products are sold in highly
competitive markets throughout the world. The principal competitive factors in
NTIC&#146;s markets are pricing, product innovation, quality and reliability, product
support and customer service and reputation. NTIC often competes with numerous
manufacturers, many of who have substantially greater financial, marketing, and
other resources than NTIC does. As a result, they may be able to adapt more
quickly to new or emerging technologies and changes in customer requirements, or
to devote greater resources to the promotion and sale of their products than
NTIC can. In addition, competition could increase if new companies enter the
market or if existing competitors expand their product lines or intensify
efforts within existing product lines. NTIC&#146;s current products, products under
development and its ability to develop new and improved products may be
insufficient to enable NTIC to compete effectively with its competitors. NTIC
cannot assure you that it will be able to compete effectively, which would harm
its business and operating results. </FONT></P>
<P align=justify><B><I><FONT face=serif size=2>NTIC is currently involved in
several litigation matters and an audit matter with the U.S. Internal Revenue
Service, which are costly to defend and the resolution of which could have a
material adverse effect on NTIC&#146;s operating results and financial position.
</FONT></I></B></P>
<P align=justify><FONT face=serif size=2>NTIC is party to several litigation
matters and an audit matter with the U.S. Internal Revenue Service as described
in more detail under the heading &#147;&#151;Item 3. Legal Proceedings.&#148; Such litigation
and audit matter are costly and may adversely affect NTIC&#146;s operating results
and financial condition. In addition, the resolution of such matters may also
have a material adverse effect on NTIC&#146;s operating results and financial
condition. </FONT></P>
<P align=center><FONT face=serif size=2>17</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><B><I><FONT face=serif size=2>NTIC is exposed to risks relating
to its evaluation of its internal control over financial reporting as required
by Section 404 of the Sarbanes-Oxley Act. </FONT></I></B></P>
<P align=justify><FONT face=serif size=2>Changing laws, regulations and
standards relating to corporate governance and public disclosure, including the
Sarbanes-Oxley Act of 2002 and related and other recent regulations implemented
by the SEC and The American Stock Exchange, are creating uncertainty for public
companies, increasing legal and financial compliance costs and making some
activities more time consuming. NTIC will be evaluating its internal controls
systems to allow management to report on, and its independent registered public
accounting firm to attest to, NTIC&#146;s internal control over financial reporting.
NTIC will be performing the system and process evaluation and testing (and any
necessary remediation) required to comply with the management certification and
auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. NTIC
cannot be certain as to the timing of completion of its evaluation, testing and
remediation actions or the impact of the same on its operations since there is
presently no precedent available by which to measure compliance adequacy. If
NTIC is not able to implement the requirements of Section 404 in a timely manner
or with adequate compliance, NTIC may be subject to sanctions or investigation
by regulatory authorities, including the SEC or The American Stock Exchange.
This type of action could adversely affect NTIC&#146;s financial results or
investors&#146; confidence in NTIC, and could cause NTIC&#146;s stock price to decline. In
addition, the controls and procedures that NTIC may implement may not comply
with all of the relevant rules and regulations of the SEC and The American Stock
Exchange. If NTIC fails to develop and maintain effective controls and
procedures, it may be unable to provide the required financial information in a
timely and reliable manner. In addition, NTIC&#146;s efforts to comply with Section
404 of the Sarbanes-Oxley Act of 2002 and the related regulations regarding its
assessment of its internal control over financial reporting and its independent
registered public accounting firm&#146;s report on that assessment will require the
commitment of significant financial and managerial resources.</FONT></P>
<P align=justify><B><FONT face=serif size=2>Item 2.</FONT></B><B><FONT face=sans-serif size=2> </FONT></B><B><FONT face=serif size=2>DESCRIPTION OF
PROPERTY. </FONT></B></P>
<P align=justify><FONT face=serif size=2>NTIC&#146;s principal executive offices,
production facilities and domestic research and development operations are
currently located at 4201 Woodland Road, Circle Pines, Minnesota 55014. NTIC
purchased the real estate and 40,000 square feet building in which its new
corporate headquarters is located pursuant to a like-kind exchange transaction
within the meaning of Section 1031 of the Internal Revenue Code of 1986, as
amended, for a purchase price of $1,475,000. To finance the transaction, NTIC
obtained a secured term loan in the principal amount of $1,275,000. The term
loan matures on May 3, 2011, bears interest at a fixed rate of 8.01% and is
payable in 59 monthly installments equal to approximately $10,776 (inclusive of
principal and interest) commencing June 1, 2006. All of the remaining unpaid
principal and accrued interest is due and payable on the maturity date. The loan
is secured by a first lien on the real estate and building. </FONT></P>
<P align=justify><FONT face=serif size=2>Prior to September 6, 2006, NTIC&#146;s
principal executive offices, production facilities and domestic research and
development operations were located at 6680 North Highway 49, Lino Lakes,
Minnesota 55014. NTIC sold the real property and building in which NTIC&#146;s former
Lino Lakes corporate headquarters was located for a purchase price of $870,000
on September 8, 2006. The net book value of the building held for sale was
$95,334 and the closing costs and fees associated with the sale of the property
was $48,371. The gain on sale of the property was $726,295 and is reflected in
NTIC&#146;s fiscal 2007 financial results. </FONT></P>
<P align=justify><FONT face=serif size=2>In fiscal 1999, a subsidiary of NTIC,
NTI Facilities, Inc., acquired a one-third ownership of Omni-Northern Ltd., an
Ohio limited liability company, in contemplation of NTI Facilities, Inc.
entering into a lease agreement with Omni-Northern Ltd. for approximately 50% of
the net rental space in a building owned by Omni-Northern Ltd. Omni-Northern
Ltd. owns and operates a rental property located at 23205 Mercantile Road,
Beachwood, Ohio, comprising approximately two acres of land and a building of
approximately 34,000 square feet. The property has an approximate value of
$2,205,000, based upon the cash-to-mortgage acquisition price of the property
paid in fiscal 2000. NTIC has guaranteed up to $329,082 of the Omni-Northern
Ltd.&#146;s $1,903,571 mortgage obligation with National City Bank, Cleveland, Ohio.
NTI Facilities, Inc. entered into a 15-year lease agreement with Omni-Northern
Ltd. for approximately 17,000 square feet of office, manufacturing, laboratory
and warehouse space, requiring monthly rental payments of $17,500, which are
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 the operating results of Omni-Northern Ltd. Omni-Northern has
leased the remaining 50% of the net rental space to other third parties.
</FONT></P>
<P align=center><FONT face=serif size=2>18</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><B><FONT face=serif size=2>Item 3.</FONT></B><B><FONT face=sans-serif size=2> </FONT></B><B><FONT face=serif size=2>LEGAL PROCEEDINGS.
</FONT></B></P>
<P align=justify><FONT face=serif size=2>In April 2007, REACT-NTI, LLC (&#147;React
LLC&#148;), a company that is 75% owned by NTIC, was served with a summons and
complaint that was filed by Shamrock Technologies, Inc. in state court in New
York. This case has been removed to the Federal District Court for the Southern
District of New York. The lawsuit seeks payment from React LLC of commissions in
the approximate amount of $314,500 owed by React LLC under a license agreement
between React LLC and Shamrock. The complaint alleges breach of the license
agreement by React LLC and seeks damages in an unspecified amount for such
breach as well as damages of approximately $300,000 for the alleged failure of
React LLC to purchase from Shamrock certain inventory manufactured for sale to a
customer. React LLC acknowledges that React has not made payment for product in
the approximate amount of $300,000 to Shamrock as the invoice for this was only
received after Shamrock had already filed its complaint, but denies all of the
claims of breach of the license agreement by it and believes that damages caused
by Shamrock's breach of the License Agreement and tortious conduct exceed any
amounts owing to Shamrock. React LLC formally responded to the complaint after
removal by moving to dismiss or stay because of Shamrock's failure to comply
with alternative dispute resolution procedures contained in the license
agreement. By court order, the matter is presently stayed, and the parties will
attempt mediation. If the mediation is unsuccessful, React LLC will both defend
against Shamrock's allegations and pursue counterclaims against Shamrock for
breach of the license agreement and for tortious interference. Because this
matter is in the early stage, NTIC cannot estimate the possible loss or range of
loss, if any, associated with its resolution. However, there can be no assurance
that the ultimate resolution of the matter will not result in a material adverse
effect on NTIC&#146;s business, financial condition or results of operations.
</FONT></P>
<P align=justify><FONT face=serif size=2>In February 2007, NTIC was named as a
defendant in a lawsuit brought by Evelyna Cantwell and Jack Cantwell,
individually, and also doing business as the principals of Byrd-Walsh
International, LLC, in United States Federal District Court for the Southern
District of Florida against NTIC and its former Chairman of the Board and Chief
Executive Officer and current Chairman Emeritus, Philip M. Lynch. The lawsuit
alleges causes of action for breach of contract, breach of implied contract,
quasi contract, promissory estoppel, equitable estoppel, negligence, wrongful
conversion, fraud, constructive fraud, misappropriation and violation of the
Uniform Trade Secrets Act. The suit seeks unspecified injunctive relief as well
as compensatory and punitive damages in an unspecified amount which, based on
the allegations of the complaint, may be claimed by plaintiffs to be in an
amount in excess of $45 million. Based on the allegations in the complaint and
NTIC&#146;s understanding of relevant facts and circumstances, NTIC believes that the
claims made by the Cantwells and Byrd-Walsh in this lawsuit are without merit
and NTIC intends to vigorously defend against them. Because this matter is in
the early stage, NTIC cannot estimate the possible loss or range of loss, if
any, associated with its resolution. The amounts claimed in this lawsuit are
substantial, however, and, there can be no assurance that the ultimate
resolution of the matter will not result in a material adverse effect on NTIC&#146;s
business, financial condition or results of operations. </FONT></P>
<P align=center><FONT face=serif size=2>19</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><FONT face=serif size=2>NTIC is involved in a legal action in
Finland whereby NTIC sued a Finnish company for trademark infringement. NTIC won
the initial case, but has subsequently lost on appeal. NTIC is currently
appealing the latest court decision. The outcome of the appeal is unknown and
any potential loss cannot be estimated at this time; however, the potential
judgment or settlement resulting from the case could have a material impact on
the financial position or results of operations of NTIC. NTIC has obtained a
$600,000 stand-by letter of credit to potentially fund NTIC&#146;s obligations
related to the courts in Finland against the defendant&#146;s products that were
seized as contraband pending the outcome of the lawsuit. Advances made under the
demand letter of credit will be made at the sole discretion of National City
Bank and will be due and payable on demand. Any outstanding unpaid principal
balance under the demand letter of credit bears interest at an annual rate based
on LIBOR plus 2.25%. Interest is payable in arrears beginning on January 15,
2007 and on the 15th day of each month thereafter and on demand. Because NTIC
believes that it has valid legal grounds for appeal, it has determined that a
loss is not probable at this time as defined by SFAS 5, &#147;Accounting for
Contingencies.&#148; However, there can be no assurance that the ultimate resolution
of the matter will not result in a material adverse effect on NTIC&#146;s business,
financial condition or results of operations. </FONT></P>
<P align=justify><FONT face=serif size=2>In June 2007, the U.S. Internal Revenue
Service concluded its audit of NTIC&#146;s U.S. federal income tax returns for fiscal
2004 and 2005. As a result of such audit, NTIC paid the IRS approximately
$25,000 in additional payroll taxes. NTIC also agreed in principle with the IRS
to adjustments that will result in the additional payment of approximately
$60,000 in income tax and interest. As a result of the audit, the IRS has also
taken the position that NTIC failed to withhold approximately $505,000 of
payroll taxes and individual income taxes on travel and other expense
reimbursements made to Philip M. Lynch, NTIC&#146;s former Chairman of the Board and
Chief Executive Officer and current Chairman Emeritus, and commissions payments
made to Inter Alia Holding Co. under that certain former Manufacturer&#146;s
Representative Agreement dated as of October 1, 1976 and as subsequently amended
thereafter between NTIC and Inter Alia, which agreement has since been
terminated. Inter Alia beneficially owns approximately 24.9% of NTIC&#146;s
outstanding common stock, and Philip M. Lynch, NTIC&#146;s former Chairman of the
Board and Chief Executive Officer and current Chairman Emeritus, and G. Patrick
Lynch, NTIC&#146;s current President and Chief Executive Officer, are shareholders of
Inter Alia. NTIC disagrees with the IRS&#146; position on withholding and is in the
process of appealing the matter. Because NTIC believes that it has valid legal
grounds for appeal, it has determined that a loss is not probable at this time
as defined by SFAS 5, &#147;Accounting for Contingencies.&#148; However, there can be no
assurance that the ultimate resolution of the matter will not result in a
material adverse effect on NTIC&#146;s business, financial condition or results of
operations. </FONT></P>
<P align=justify><FONT face=serif size=2>NTIC is involved in various other legal
actions arising in the normal course of business. Management is of the opinion
that any judgment or settlement resulting from these pending or threatened
actions would not have a material adverse effect on NTIC&#146;s financial position or
consolidated results of operations. </FONT></P>
<P align=justify><B><FONT face=serif size=2>Item 4.</FONT></B><B><FONT face=sans-serif size=2> </FONT></B><B><FONT face=serif size=2>SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS. </FONT></B></P>
<P align=justify><FONT face=serif size=2>No matter was submitted to a vote of
NTIC&#146;s security holders during the fourth quarter of the fiscal year covered by
this report. </FONT></P>
<P align=justify><B><FONT face=serif size=2>Item 4A.</FONT></B><FONT face=serif size=2> </FONT><B><FONT face=serif size=2>EXECUTIVE OFFICERS OF
REGISTRANT.</FONT></B><FONT face=serif size=2> </FONT></P>
<P align=justify><FONT face=serif size=2>The executive officers of NTIC, their
ages and the offices held, as of November 16, 2007, are as follows: </FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD align=right width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=center width="28%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT><STRONG>Name</STRONG></FONT>&nbsp;</TD>
    <TD align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=center width="10%"><FONT face=serif size=2><FONT size=3></FONT><STRONG>Age</STRONG></FONT>&nbsp;</TD>
    <TD align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=center width="58%">&nbsp;<B><FONT face=serif size=2>Position with
    NTIC</FONT></B>&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD align=right width="1%"></TD>
    <TD align=left width="28%" bgColor=#c0c0c0><FONT face=serif size=2>G.
      Patrick Lynch</FONT>&nbsp; </TD>
    <TD align=center width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="10%" bgColor=#c0c0c0><FONT face=serif size=2><FONT style="BACKGROUND-COLOR: #c0c0c0" size=3>&nbsp;</FONT>40</FONT>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="58%" bgColor=#c0c0c0><FONT face=serif size=2>President and Chief Executive Officer</FONT>&nbsp; </TD></TR>
  <TR>
    <TD align=right width="1%"></TD>
    <TD align=left width="28%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=center width="1%" bgColor=#ffffff></TD>
    <TD align=center width="10%" bgColor=#ffffff></TD>
    <TD align=left width="1%" bgColor=#ffffff></TD>
    <TD align=left width="58%" bgColor=#ffffff></TD></TR>
  <TR>
    <TD align=right width="1%"></TD>
    <TD align=left width="28%" bgColor=#c0c0c0><FONT size=2>Dr. Donald A.
      Kubik</FONT>&nbsp;</TD>
    <TD align=center width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="10%" bgColor=#c0c0c0><FONT size=2><FONT style="BACKGROUND-COLOR: #c0c0c0" size=3>&nbsp;</FONT>67</FONT><FONT style="BACKGROUND-COLOR: #c0c0c0" size=3>&nbsp;</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="58%" bgColor=#c0c0c0><FONT size=2>Vice Chairman of
      the Board and Chief Technology Officer</FONT>&nbsp; </TD></TR>
  <TR>
    <TD align=right width="1%"></TD>
    <TD align=left width="28%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=center width="1%" bgColor=#ffffff></TD>
    <TD align=center width="10%" bgColor=#ffffff></TD>
    <TD align=left width="1%" bgColor=#ffffff></TD>
    <TD align=left width="58%" bgColor=#ffffff></TD></TR>
  <TR>
    <TD align=right width="1%"></TD>
    <TD align=left width="28%" bgColor=#c0c0c0><FONT size=2>Matthew C.
      Wolsfeld</FONT>&nbsp; </TD>
    <TD align=center width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="10%" bgColor=#c0c0c0><FONT size=2><FONT style="BACKGROUND-COLOR: #c0c0c0" size=3>&nbsp;</FONT>33</FONT><FONT style="BACKGROUND-COLOR: #c0c0c0" size=3>&nbsp;</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="58%" bgColor=#c0c0c0><FONT size=2>Chief Financial
      Officer and Corporate Secretary</FONT>&nbsp;</TD></TR></TABLE>
<P align=center><FONT face=serif size=2>20</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><FONT face=serif size=2>Mr. G. Patrick Lynch, an employee of
NTIC since 1995, has been President since July 2005 and Chief Executive Officer
since January 2006 and was appointed a director of NTIC in February 2004. From
July 2005 to January 2006, Mr. Lynch served as Chief Operating Officer of NTIC.
Mr. Lynch served as President of North American Operations of NTIC from May 2004
to July 2005. Prior to May 2004, Mr. Lynch held various positions with NTIC,
including Vice President of Strategic Planning, Corporate Secretary and Project
Manager. Mr. Lynch is also an officer and director of Inter Alia Holding
Company, a financial and management consulting firm that is a significant
stockholder of NTIC. Prior to joining NTIC, Mr. 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. Lynch received an M.B.A. degree
from the University of Michigan Business School in Ann Arbor, Michigan. Mr.
Lynch is the son of Philip M. Lynch, a former Chairman of the Board and current
Chairman Emeritus. </FONT></P>
<P align=justify><FONT face=serif size=2>Dr. Donald A. Kubik has been employed
by NTIC since 1978, was appointed Vice Chairman of the Board in September 1999
and Chief Technology Officer in May 2000. Dr. Kubik served as Vice President of
NTIC from 1979 to September 1999 and as Co-Chief Executive Officer of NTIC from
September 1999 to May 2000. Dr. Kubik is responsible for developing the patent
that led to NTIC&#146;s introduction of protective plastic film and paper products
incorporating volatile corrosion inhibitors. Prior to joining NTIC, Dr. Kubik
held a research and development position with Minnesota Mining &amp;
Manufacturing Company (3M).</FONT></P>
<P align=justify><FONT face=serif size=2>Mr. Matthew C. Wolsfeld, an employee of
NTIC since February 2001, has been NTIC&#146;s Chief Financial Officer since November
2001 and Corporate Secretary since November 2004. Mr. Wolsfeld was Controller of
NTIC from May 2001 through November 2001. Prior to joining NTIC, Mr. Wolsfeld
held an auditing position with PricewaterhouseCoopers LLP in Minneapolis,
Minnesota from 1997 to 2001. Mr. Wolsfeld received a B.A. degree in Accounting
from the University of Notre Dame and received his M.B.A. degree at the
University of Minnesota, Carlson School of Business. Mr. Wolsfeld is a Certified
Public Accountant. </FONT></P>
<P align=justify><FONT face=serif size=2>Officers of NTIC, their ages and the
offices held, as of November 16, 2007, are as follows: </FONT></P>
<P align=justify>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD align=right width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=center width="28%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT><STRONG>Name</STRONG></FONT>&nbsp;</TD>
    <TD align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=center width="10%"><FONT face=serif size=2><FONT size=3></FONT><STRONG>Age</STRONG></FONT>&nbsp;</TD>
    <TD align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=center width="58%">&nbsp;<B><FONT face=serif size=2>Position with
    NTIC</FONT></B>&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD align=right width="1%"></TD>
    <TD align=left width="28%" bgColor=#c0c0c0><FONT face=serif size=2>Prof.
      Efim Ya. Lyublinski</FONT>&nbsp; </TD>
    <TD align=center width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="10%" bgColor=#c0c0c0><FONT face=serif size=2><FONT style="BACKGROUND-COLOR: #c0c0c0" size=3>&nbsp;</FONT>70</FONT>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="58%" bgColor=#c0c0c0><FONT face=serif size=2>Vice
      President and Director of New Technologies and Applications
      Engineering</FONT>&nbsp; </TD></TR>
  <TR>
    <TD align=right width="1%"></TD>
    <TD align=left width="28%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=center width="1%" bgColor=#ffffff></TD>
    <TD align=center width="10%" bgColor=#ffffff></TD>
    <TD align=left width="1%" bgColor=#ffffff></TD>
    <TD align=left width="58%" bgColor=#ffffff></TD></TR>
  <TR>
    <TD align=right width="1%"></TD>
    <TD align=left width="28%" bgColor=#c0c0c0><FONT size=2>Vineet R.
      Dalal</FONT><FONT size=3>&nbsp;</FONT></TD>
    <TD align=center width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="10%" bgColor=#c0c0c0><FONT size=2><FONT style="BACKGROUND-COLOR: #c0c0c0" size=3>&nbsp;</FONT>38</FONT><FONT style="BACKGROUND-COLOR: #c0c0c0" size=3>&nbsp;</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="58%" bgColor=#c0c0c0><FONT size=2>Vice President and
      Director Global Market Development</FONT> </TD></TR>
  <TR>
    <TD align=right width="1%"></TD>
    <TD align=left width="28%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=center width="1%" bgColor=#ffffff></TD>
    <TD align=center width="10%" bgColor=#ffffff></TD>
    <TD align=left width="1%" bgColor=#ffffff></TD>
    <TD align=left width="58%" bgColor=#ffffff></TD></TR>
  <TR>
    <TD align=right width="1%"></TD>
    <TD align=left width="28%" bgColor=#c0c0c0><FONT size=2>Gautam
      Ramdas</FONT><FONT size=3>&nbsp;</FONT></TD>
    <TD align=center width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="10%" bgColor=#c0c0c0><FONT size=2><FONT style="BACKGROUND-COLOR: #c0c0c0" size=3>&nbsp;</FONT>34</FONT><FONT style="BACKGROUND-COLOR: #c0c0c0" size=3>&nbsp;</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="58%" bgColor=#c0c0c0><FONT size=2>Vice President and
      Director Global Market Development</FONT><FONT size=3>&nbsp;
  </FONT></TD></TR></TABLE>
<P align=justify><FONT face=serif size=2>Prof. Efim Ya. Lyublinski has been
employed by NTIC since March 2000 in the position of Vice President and Director
of New Technologies and Applications Engineering. Prof. Lyublinski is a Member
of the Russian Academy of Natural Sciences and NACE International the Corrosion
Society. 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, Russia. Prof. Lyublinski also held a
Senior Consulting Position with Osmos Technology, Boston, Massachusetts from
1995 to 1999. Prof. Lyublinski holds 18 patents, is responsible for 64
inventions and has authored 14 books, 148 articles and lectured at more than 100
symposiums, conferences and congresses in the areas of materials science and
corrosion. Prof. Lyublinski received the following awards: in 1997, gold medal
of the International Exhibition of Patents in Brussels (Belgium). From 1975 to
1986 &#150; three gold, three silver and one bronze medal from the Exhibitions of the
Achievements of Russian National Economy. </FONT></P>
<P align=center><FONT face=serif size=2>21</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><FONT face=serif size=2>Mr. Vineet R. Dalal, an employee of
NTIC since 2004, Vice President and Director &#150; Global Market Development since
November 2005. Prior to joining NTIC, Mr. Dalal was a Principal in the Worldwide
Product Development Practice of PRTM, a management consultancy to technology
based companies. In this position, Mr. Dalal consulted to several Fortune 500
companies, in the areas of product strategy, Product Lifecycle Management (PLM)
and technology management. Prior to that, Mr. Dalal held positions in program
management and design engineering at National Semiconductor Corporation in Santa
Clara, California. Mr. Dalal received an M.B.A. degree from the University of
Michigan Business School in Ann Arbor, Michigan. He also holds an M.S. degree in
Electrical and Computer Engineering from Oregon State University, and a B.Eng.
degree in Electronics Engineering from Karnatak University, India. </FONT></P>
<P align=justify><FONT face=serif size=2>Mr. Gautam Ramdas, an employee of NTIC
since 2005, is Vice President and Director &#150; Global Market Development. Prior to
joining NTIC, Mr. Ramdas was a Manager in the Strategic Change group of IBM
Business Consulting Services. In this position, Mr. Ramdas led consulting
engagements at several Fortune 500 companies, in the areas of service strategy,
global supplier relationship management and supply chain streamlining. Mr.
Ramdas held positions in the E-Commerce and Supply Chain strategy groups at
PricewaterhouseCoopers Management Consulting, again providing consulting
services for Fortune 500 clients. Prior to management consulting, Mr. Ramdas
worked as a program manager and design engineer with Kinhill Engineers in
Australia. He has also been involved in the start-up stage of successful small
businesses in the U.S. and in India. Mr. Ramdas received an M.B.A. from the
University of Michigan Business School in Ann Arbor, Michigan. He also holds a
bachelor&#146;s degree in Mechanical Engineering from the College of Engineering,
Guindy (Chennai), India. </FONT></P>
<P align=center><FONT face=serif size=2>22</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=center><B><FONT face=serif size=2>PART II</FONT></B></P>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR>
    <TD vAlign=top noWrap width="2%"><STRONG><FONT face=serif size=2>Item
      5.</FONT></STRONG></TD>
    <TD vAlign=top width="1%"><STRONG><FONT face=Arial size=2>&nbsp;</FONT></STRONG></TD>
    <TD style="TEXT-ALIGN: justify" vAlign=top width="96%"><STRONG><FONT face=serif size=2>MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
      AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY
  SECURITIES</FONT></STRONG></TD></TR></TABLE>
<P align=justify><B><FONT face=serif size=2>Market Information</FONT></B></P>
<P align=justify><FONT face=serif size=2>NTIC&#146;s common stock trades on The
American Stock Exchange under the symbol NTI. The following table sets forth the
high and low sales prices for NTIC&#146;s common stock, as reported by The American
Stock Exchange, for the fiscal quarters indicated: </FONT></P>
<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>

  <TR vAlign=bottom>
    <TD align=left width="77%">&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=center width="11%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT><STRONG>High</STRONG></FONT>&nbsp;</TD>
    <TD align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=center width="10%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT><STRONG>Low</STRONG></FONT>&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="77%" bgColor=#c0c0c0><B><FONT face=serif size=2>Fiscal 2007:</FONT></B>&nbsp; </TD>
    <TD align=left width="11%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="77%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Fourth quarter</FONT> </TD>
    <TD align=right width="11%"><FONT face=serif size=2>$10.15</FONT> </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="10%"><FONT face=serif size=2>$8.01</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="77%" bgColor=#c0c0c0>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Third quarter</FONT> </TD>
    <TD align=right width="11%" bgColor=#c0c0c0><FONT face=serif size=2>9.00</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="10%" bgColor=#c0c0c0><FONT face=serif size=2>7.30</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="77%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Second quarter</FONT> </TD>
    <TD align=right width="11%"><FONT face=serif size=2>10.00</FONT> </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="10%"><FONT face=serif size=2>7.45</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="77%" bgColor=#c0c0c0>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>First quarter</FONT> </TD>
    <TD align=right width="11%" bgColor=#c0c0c0><FONT face=serif size=2>10.49</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="10%" bgColor=#c0c0c0><FONT face=serif size=2>7.44</FONT> </TD></TR>
  <TR>
    <TD width="99%" colSpan=4>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="77%" bgColor=#c0c0c0><B><FONT face=serif size=2>Fiscal 2006:</FONT></B>&nbsp; </TD>
    <TD align=left width="11%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="77%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Fourth quarter</FONT> </TD>
    <TD align=right width="11%"><FONT face=serif size=2>$8.70</FONT> </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="10%"><FONT face=serif size=2>$6.70</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="77%" bgColor=#c0c0c0>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Third quarter</FONT> </TD>
    <TD align=right width="11%" bgColor=#c0c0c0><FONT face=serif size=2>8.32</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="10%" bgColor=#c0c0c0><FONT face=serif size=2>5.98</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="77%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Second quarter</FONT> </TD>
    <TD align=right width="11%"><FONT face=serif size=2>8.41</FONT> </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="10%"><FONT face=serif size=2>5.89</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="77%" bgColor=#c0c0c0>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>First quarter</FONT> </TD>
    <TD align=right width="11%" bgColor=#c0c0c0><FONT face=serif size=2>6.34</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="10%" bgColor=#c0c0c0><FONT face=serif size=2>4.85</FONT> </TD></TR></TABLE></DIV><BR>
<P align=justify><B><FONT face=serif size=2>Dividends </FONT></B></P>
<P align=justify><FONT face=serif size=2>Although NTIC&#146;s Board of Directors
declared a cash dividend to NTIC&#146;s stockholders of record as of December 3, 2004
in the amount of $0.07 per share, NTIC&#146;s Board of Directors has not since
declared or paid a cash dividend on NTIC&#146;s common stock. NTIC&#146;s Board of
Directors will continue to consider the payment of dividends annually, based on
NTIC&#146;s net income and operating cash requirements. </FONT></P>
<P align=justify><B><FONT face=serif size=2>Number of Record Holders
</FONT></B></P>
<P align=justify><FONT face=serif size=2>As of August 31, 2007, there were
approximately 285 record holders of NTIC&#146;s common stock. This does not include
shares held in &#147;street name&#148; or beneficially owned. </FONT></P>
<P align=justify><B><FONT face=serif size=2>Recent Sales of Unregistered Equity
Securities </FONT></B></P>
<P align=justify><FONT face=serif size=2>NTIC did not issue any shares of its
common stock or any other equity securities of NTIC that were not registered
under the Securities Act of 1933, as amended, during the fourth quarter of the
fiscal year covered by this report. </FONT></P>
<P align=justify><B><FONT face=serif size=2>Small Business Issuer Purchases of
Equity Securities</FONT></B><FONT face=serif size=2> </FONT></P>
<P align=justify><FONT face=serif size=2>NTIC did not purchase any shares of its
common stock or any other equity securities of NTIC during the fourth quarter of
the fiscal year covered by this report.</FONT></P>
<P align=center><FONT face=serif size=2>23</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><B><FONT face=serif size=2>Item 6.</FONT></B><B><FONT face=sans-serif size=2> </FONT></B><B><FONT face=serif size=2>MANAGEMENT&#146;S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION. </FONT></B></P>
<P align=justify><FONT face=serif size=2>This Management&#146;s Discussion and
Analysis provides material historical and prospective disclosures intended to
enable investors and other users to assess NTIC&#146;s financial condition and
results of operations. Statements that are not historical are forward-looking
and involve risks and uncertainties discussed under the headings
&#147;Forward-Looking Statements&#148; and &#147;Risk Factors&#148; of Part I, Item 1 entitled
&#147;Business&#148; of this report. The following discussion of the results of the
operations and financial condition of NTIC should be read in conjunction with
NTIC&#146;s consolidated financial statements and the related notes thereto included
under Part II, Item 7 entitled &#147;Financial Statements&#148; of this report.</FONT></P>
<P align=justify><B><FONT face=serif size=2>General Overview </FONT></B></P>
<P align=justify><FONT face=serif size=2>NTIC focuses on developing, marketing
and selling proprietary environmentally responsible materials science based
products and technical services directly and via a network of independent
distributors, manufacturers&#146; representatives and joint ventures in over 50
countries. NTIC manufactures, markets and sells primarily rust and corrosion
inhibiting products and services for automotive, electronics, electrical,
mechanical and military applications, sold under the brand names
Zerust<SUP>&#174;</SUP> and EXCOR<SUP>&#174;</SUP>. NTIC also offers direct, worldwide
on-site technical support on rust and corrosion issues. In North America, NTIC
markets its technical services and Zerust<SUP>&#174;</SUP> products principally to
industrial users by a direct sales force and through a network of independent
distributors and sales representatives. NTIC&#146;s technical service representatives
work directly with the end users of NTIC&#146;s products to analyze their specific
needs and develop systems to meet their technical requirements. In fiscal 2007,
over 70% of NTIC&#146;s consolidated net sales were derived from the sales of
Zerust<SUP>&#174;</SUP> rust and corrosion inhibiting packaging products and services
to the automotive, electronics, electrical, mechanical, military and retail
consumer markets. </FONT></P>
<P align=justify><FONT face=serif size=2>NTIC participates, either directly or
indirectly through holding companies, in 29 corporate joint venture arrangements
in North America, South America, Europe, Asia and the Middle East. Each of these
joint ventures manufactures, markets and sells finished products generally in
the countries to which it is assigned. NTIC&#146;s 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.</FONT></P>
<P align=justify><FONT face=serif size=2>NTIC&#146;s international rust and corrosion
inhibiting product business has expanded significantly during the past several
fiscal years. NTIC has entered into five new corporate joint venture
arrangements during the past two fiscal years and total net sales of all of
NTIC&#146;s joint ventures increased 26.0% to $80,551,700 during fiscal 2007 as
compared to $63,959,090 during fiscal 2006 and increased 11.9% during fiscal
2006 compared to fiscal 2005. The profits of NTIC&#146;s corporate joint ventures are
shared, however, by the respective corporate joint venture owners in accordance
with their respective ownership percentages. In addition, NTIC&#146;s receipt of
funds as a result of sales by its joint ventures are dependent upon NTIC&#146;s
receipt of dividend distributions from the joint ventures and NTIC&#146;s receipt of
fees for technical and other support services that NTIC provides to its joint
ventures based on the revenues of the joint ventures. NTIC typically owns only
50% or less of its joint venture entities and thus does not control the
decisions of these entities regarding whether to pay dividends and how much in
dividends in any given year. NTIC had equity in income of corporate joint
ventures and holding companies of $3,201,621 in fiscal 2007 compared to
$2,713,096 in fiscal 2006. NTIC recognized fee income for such technical and
support services of $4,976,194 in fiscal 2007 compared to $4,695,124 in fiscal
2006. NTIC incurs direct expenses related to its corporate joint ventures and
holding companies. Such expenses include consulting, travel, technical and
marketing services to existing joint ventures, legal fees incurred in the
establishment of new joint ventures, registration and promotion and legal
defense of worldwide trademarks, and legal fees incurred in connection with the
filing of patent applications. NTIC incurred $4,876,928 in direct joint venture
expenses in fiscal 2007 as compared to $5,481,757 in fiscal 2006. NTIC&#146;s income
from its corporate joint ventures and holding companies increased 71.3% to
$3,300,887 in fiscal 2007 as compared to fiscal 2006.</FONT></P>
<P align=center><FONT face=serif size=2>24</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><FONT face=serif size=2>While NTIC&#146;s rust and corrosion
inhibiting product business has expanded significantly internationally during
the past several fiscal years, sales of NTIC&#146;s rust and corrosion inhibiting
products in North America have decreased or remained relatively flat during the
past several fiscal years. Net sales of NTIC&#146;s Zerust<SUP>&#174;</SUP> products
decreased 0.5% to $12,044,241 during fiscal 2007 as compared to $12,099,187
during fiscal 2006 and increased 12.5% during fiscal 2006 compared to fiscal
2005. One of the main markets for NTIC&#146;s rust and corrosion inhibiting products
has typically been the automotive industry. While the automotive industry has
been growing worldwide, it has been stagnant or contracting in the United States
and is not expected to improve in the foreseeable future.</FONT></P>
<P align=justify><FONT face=serif size=2>In an effort to increase net sales,
NTIC is in the process of expanding the application of its corrosion inhibiting
technology into the oil and gas industry and its product line to include
biodegradable and compostable plastics and machinery that converts waste
plastics back into diesel, gasoline and mid-distillates. During fiscal 2008,
NTIC expects to invest between $2,800,000 and $3,200,000 in additional research
and development and marketing efforts and resources into these new emerging
businesses, product lines and markets. NTIC anticipates additional revenue from
these new technologies beginning in fiscal year ending August 31, 2008; however,
no assurance can be provided that such new businesses will be successful or that
NTIC will be successful in obtaining such additional revenue. </FONT></P>
<P align=justify><B><FONT face=serif size=2>Recent Development </FONT></B></P>
<P align=justify><FONT face=serif size=2>NTIC&#146;s consolidated financial
statements include the accounts of Northern Technologies International
Corporation, its wholly owned subsidiaries, NTI Facilities, Inc. and Northern
Technologies Holding Company, LLC, and its 75% owned subsidiary React-NTI
LLC.</FONT></P>
<P align=justify><FONT face=serif size=2>React-NTI LLC is an industrial chemical
corporate joint venture of NTIC that focuses on the development, manufacture and
marketing of proprietary lines of bio-based additives with both industrial and
personal care applications. Based on cotton, soy, corn and other renewable
resources, React-NTI products outperform many synthetically derived competing
alternatives. React-NTI&#146;s target market includes NTIC&#146;s existing industrial
customer base, as well as the personal care and cosmetics industry. As of
February 28, 2005, NTIC began fully consolidating this 75% owned subsidiary,
which was previously accounted for using the equity method. React-NTI had
consolidated sales of $4,784,789 and $4,505,777 in fiscal 2007 and fiscal 2006,
respectively.</FONT></P>
<P align=justify><FONT face=serif size=2>React Inc., a 100% owned subsidiary of
React-NTI, had sales of $4,716,620 during fiscal 2007 and $4,454,940 during
fiscal 2006 (the vast majority of the sales of React-NTI noted above). React
Inc. sold proprietary ink additives to one customer during fiscal 2007 and
fiscal 2006. During fourth quarter of fiscal 2007, this customer notified React
Inc. that it would place future orders for React&#146;s remaining inventory of ink
additives, but that after such inventory was purchased, the customer would not
place any future orders with React Inc. Sales by React Inc. to this customer
during fiscal 2007 and fiscal 2006 were pursuant to standard purchase orders and
not pursuant to any agreement between React Inc. and this customer containing
minimum purchase requirements or similar provisions obligating the customer to
purchase future products from React Inc. NTIC anticipates that total sales for
React Inc. will be approximately $250,000 during fiscal 2008 and that the loss
of React&#146;s sole customer will have a material adverse impact on NTIC&#146;s
consolidated net sales. However, since the profit on React&#146;s sales of the ink
additives to this customer was extremely small, NTIC does not expect that the
anticipated decrease in net sales by React will have a material adverse effect
on NTIC&#146;s consolidated net income.</FONT><B><FONT face=serif size=2>
</FONT></B><FONT face=serif size=2></FONT></P>
<P align=center><FONT face=serif size=2>25</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><B><FONT face=serif size=2>Financial Overview </FONT></B></P>
<P align=justify><FONT face=serif size=2>NTIC conducts all foreign transactions
based on the U.S. dollar, except for its investments in various foreign
corporate joint ventures and holding companies. The exchange rate differential
relating to investments in foreign corporate joint ventures and holding
companies is accounted for under the requirements of SFAS No. 52,
</FONT><I><FONT face=serif size=2>Foreign Currency Translation</FONT></I><FONT face=serif size=2>. Since NTIC&#146;s investments in its corporate joint ventures and
holding companies are accounted for using the equity method, any changes in
foreign currency exchange rates would be reflected as a foreign currency
translation adjustment and would not change the equity in income of joint
ventures and holding companies reflected in NTIC&#146;s consolidated statement of
income </FONT></P>
<P align=justify><FONT face=serif size=2>NTIC&#146;s consolidated net sales slightly
increased 1.3% during fiscal 2007 as compared to fiscal 2006 primarily as a
result of an increase in demand of React-NTI products to existing customers
partially offset by a decrease in demand for Zerust<SUP>&#174;</SUP> products. Net
sales of React-NTI products increased $279,012 to $4,784,789 during fiscal 2007
as compared to fiscal 2006. Net sales of Zerust<SUP>&#174;</SUP> products decreased
$54,946 to $12,044,241. As discussed in more detail above under the heading
&#147;&#151;Recent Development,&#148; NTIC anticipates that its net sales will significantly
decrease in fiscal 2008 compared to fiscal 2007 as a result of the loss of a
principal customer of a subsidiary of NTIC&#146;s React-NTI joint venture.
</FONT></P>
<P align=justify><FONT face=serif size=2>Cost of sales as a percentage of net
sales increased to 64.2% in fiscal 2007 as compared to 62.3% for fiscal 2006
primarily as a result of an increase in raw material prices, including in
particular plastic resins.</FONT></P>
<P align=justify><FONT face=serif size=2>NTIC spent $2,575,325 in fiscal 2007
and $2,043,611 in fiscal 2006 in connection with its research and development
activities. NTIC anticipates that it will spend between $2,800,000 and
$3,200,000 in fiscal 2008 on research and development activities related to its
new technologies. These fees are accounted for in the &#147;Expenses incurred in
support of corporate joint ventures&#148; section of NTIC&#146;s consolidated statements
of income. </FONT></P>
<P align=justify><FONT face=serif size=2>Total net sales of all of NTIC&#146;s joint
ventures increased 26.0% to $80,551,700 during fiscal 2007 as compared to
$63,959,090 during fiscal 2006. NTIC&#146;s equity in income of corporate joint
ventures and holding companies increased 18.0% to $3,201,621 in fiscal 2007 as
compared to $2,713,096 in fiscal 2006. NTIC also recognized increased fee income
for such technical and support services in fiscal 2007 as compared to fiscal
2006 as a result of the increase in total net sales of the joint ventures. NTIC
incurred decreased direct expenses related to its corporate joint ventures and
holding companies in fiscal 2007 as compared to fiscal 2006. NTIC&#146;s income from
its corporate joint ventures and holding companies increased 71.3% to $3,300,887
in fiscal 2007 as compared to $1,926,463 in fiscal 2006. </FONT></P>
<P align=justify><FONT face=serif size=2>NTIC&#146;s working capital was $3,788,777
at August 31, 2007, including $244,499 in cash and cash equivalents.
Additionally, as of August 31, 2007, NTIC did not have any borrowings under its
$1,500,000 revolving credit facility. Subsequent to August 31, 2007, NTIC
borrowed funds under the revolving credit facility bringing the outstanding
balance as of November 16, 2007 to $484,000.</FONT><B><FONT face=serif size=2>
</FONT></B><FONT face=serif size=2>The revolving credit facility expires on
January 31, 2008. NTIC intends to renew or replace this facility on or prior to
the January 31, 2008 maturity date. </FONT></P>
<P align=justify><FONT face=serif size=2>NTIC elected not to pay a cash dividend
to its stockholders in fiscal 2007 or thus far in fiscal 2008 in order to
preserve cash and make investments in future operations. NTIC expects to meet
its future liquidity requirements during at least the next twelve months by
using its existing cash and cash equivalents, forecasted cash flows from future
operations, distributions of earnings and technical assistance fees to NTIC from
its joint venture investments and funds available through existing or
anticipated financing arrangements. </FONT></P>
<P align=center><FONT face=serif size=2>26</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><B><FONT face=serif size=2>Results of Operations
</FONT></B></P>
<P align=justify><B><I><FONT face=serif size=2>Fiscal Year 2007 Compared to
Fiscal Year 2006 </FONT></I></B></P>
<P align=justify><FONT face=serif size=2>The following table sets forth NTIC&#146;s
consolidated results of operations for fiscal 2007 and fiscal 2006. These
results of operations exclude the impact of NTIC&#146;s activities with its joint
ventures, other than React-NTIC LLC. As explained in more detail in note 2 to
NTIC&#146;s consolidated financial statements, the results of React-NTIC LLC are
included in NTIC&#146;s consolidated results of operations and thus included in the
table below. </FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD align=left width="27%">&nbsp; </TD>
    <TD align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align=center width="11%"><FONT face=serif size=2><FONT size=3></FONT><STRONG>Fiscal</STRONG></FONT>&nbsp;</TD>
    <TD align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align=center width="11%"><FONT face=serif size=2><FONT size=3></FONT><STRONG>% of</STRONG></FONT>&nbsp;</TD>
    <TD align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align=center width="11%"><FONT face=serif size=2><FONT size=3></FONT><STRONG>Fiscal</STRONG></FONT>&nbsp;</TD>
    <TD align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align=center width="11%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT><STRONG>% of</STRONG></FONT>&nbsp;</TD>
    <TD align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align=center width="11%" colSpan=2><FONT face=serif size=2><FONT size=3></FONT><STRONG>$</STRONG></FONT>&nbsp;</TD>
    <TD align=center width="2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align=center width="11%" colSpan=2>&nbsp; <B><FONT face=serif size=2>%</FONT></B>&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="27%">&nbsp; </TD>
    <TD align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=center width="11%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT><STRONG>2007</STRONG></FONT>&nbsp;</TD>
    <TD align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=center width="11%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT><STRONG>Net
      Sales</STRONG></FONT>&nbsp;</TD>
    <TD align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=center width="11%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT><STRONG>2006</STRONG></FONT>&nbsp;</TD>
    <TD align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=center width="11%"><FONT size=+0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT><STRONG>Net Sales</STRONG></FONT>&nbsp;</FONT></TD>
    <TD align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=center width="11%" colSpan=2><FONT face=serif size=2><FONT size=3>&nbsp;</FONT><STRONG>Change</STRONG></FONT>&nbsp;</TD>
    <TD align=center width="2%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=center width="11%" colSpan=2><FONT face=serif size=2><FONT size=3>&nbsp;</FONT><STRONG>Change</STRONG></FONT>&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="27%" bgColor=#c0c0c0><FONT face=serif size=2>Net
      sales</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="11%" bgColor=#c0c0c0><FONT face=serif size=2>$16,829,030</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="11%" bgColor=#c0c0c0><FONT face=serif size=2>100.0%</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="11%" bgColor=#c0c0c0><FONT face=serif size=2>$16,604,964</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="11%" bgColor=#c0c0c0><FONT face=serif size=2>100.0%</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="10%" bgColor=#c0c0c0><FONT face=serif size=2>$224,066</FONT> </TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="2%" bgColor=#c0c0c0></TD>
    <TD align=right width="9%" bgColor=#c0c0c0><FONT face=serif size=2>1.3%</FONT> </TD>
    <TD align=right width="2%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="27%"><FONT face=serif size=2>Cost of
      sales</FONT>&nbsp; </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="11%"><FONT face=serif size=2>$10,799,180</FONT> </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="11%"><FONT face=serif size=2>64.2%</FONT> </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="11%"><FONT face=serif size=2>$10,346,437</FONT> </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="11%"><FONT face=serif size=2>62.3%</FONT> </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="10%"><FONT face=serif size=2>$452,743</FONT> </TD>
    <TD align=left width="1%"></TD>
    <TD align=left width="2%"></TD>
    <TD align=right width="9%"><FONT face=serif size=2>4.4%</FONT> </TD>
    <TD align=right width="2%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="27%" bgColor=#c0c0c0><FONT face=serif size=2>Selling
      expenses</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="11%" bgColor=#c0c0c0><FONT face=serif size=2>$3,214,170</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="11%" bgColor=#c0c0c0><FONT face=serif size=2>19.1%</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="11%" bgColor=#c0c0c0><FONT face=serif size=2>$3,075,072</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="11%" bgColor=#c0c0c0><FONT face=serif size=2>18.5%</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="10%" bgColor=#c0c0c0><FONT face=serif size=2>$139,098</FONT> </TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="2%" bgColor=#c0c0c0></TD>
    <TD align=right width="9%" bgColor=#c0c0c0><FONT face=serif size=2>4.5%</FONT> </TD>
    <TD align=right width="2%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="27%"><FONT face=serif size=2>General and
      administrative expenses</FONT> </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="11%"><FONT face=serif size=2>$3,083,314</FONT> </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="11%"><FONT face=serif size=2>18.3%</FONT> </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="11%"><FONT face=serif size=2>$2,795,194</FONT> </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="11%"><FONT face=serif size=2>16.8%</FONT> </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="10%"><FONT face=serif size=2>$288,120</FONT> </TD>
    <TD align=left width="1%"></TD>
    <TD align=left width="2%"></TD>
    <TD align=right width="9%"><FONT face=serif size=2>10.3%</FONT> </TD>
    <TD align=right width="2%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="27%" bgColor=#c0c0c0><FONT face=serif size=2>Lab and
      technical support expenses</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="11%" bgColor=#c0c0c0><FONT face=serif size=2>$229,988</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="11%" bgColor=#c0c0c0><FONT face=serif size=2>1.4%</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="11%" bgColor=#c0c0c0><FONT face=serif size=2>$296,676</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="11%" bgColor=#c0c0c0><FONT face=serif size=2>1.8%</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="10%" bgColor=#c0c0c0><FONT face=serif size=2>($66,688</FONT> </TD>
    <TD align=left width="1%" bgColor=#c0c0c0><FONT size=2>)</FONT>&nbsp;</TD>
    <TD align=left width="2%" bgColor=#c0c0c0></TD>
    <TD align=right width="9%" bgColor=#c0c0c0><FONT face=serif size=2>(22.5%</FONT> </TD>
    <TD align=right width="2%" bgColor=#c0c0c0><FONT size=2>)</FONT>&nbsp;</TD></TR></TABLE><BR>
<P align=justify><I><FONT face=serif size=2>Net Sales</FONT></I><FONT face=serif size=2>. NTIC&#146;s consolidated net sales slightly increased 1.3% during fiscal
2007 as compared to fiscal 2006 primarily as a result of an increase in demand
of React-NTI products to existing customers partially offset by a decrease in
demand for Zerust<SUP>&#174;</SUP> products. Net sales of React-NTI products
increased $279,012, or 6.2%, to $4,784,789 during fiscal 2007 as compared to
fiscal 2006. Net sales of Zerust<SUP>&#174;</SUP> products decreased $54,946 to
$12,044,241. As discussed in more detail above under the heading &#147;&#151;Recent
Development,&#148; NTIC anticipates that its net sales will significantly decrease in
fiscal 2008 compared to fiscal 2007 as a result of the loss of a principal
customer of a subsidiary of NTIC&#146;s React-NTI joint venture. </FONT></P>
<P align=justify><I><FONT face=serif size=2>Cost of Sales</FONT></I><FONT face=serif size=2>. Cost of sales slightly increased 4.4% in fiscal 2007
compared to fiscal 2006 and cost of sales as a percentage of net sales also
increased slightly to 64.2% in fiscal 2007 compared to 62.3% in fiscal 2006
primarily as a result of an increase in raw material prices, primarily plastic
resins.</FONT></P>
<P align=justify><I><FONT face=serif size=2>Selling Expenses</FONT></I><FONT face=serif size=2>. NTIC&#146;s selling expenses increased 4.5% in fiscal 2007
compared in fiscal 2006 primarily as a result of increases in (i) promotional
materials expense of $40,000, (ii) lab supplies and testing of $55,000, and
(iii) selling expense related to the sale of React products of $70,000. These
increases were partially offset by a decrease in commissions to salespeople and
manufacturer&#146;s representatives totaling $76,000. As a percentage of net sales,
selling expenses increased slightly to 19.1% in fiscal 2007 compared to 18.5% in
fiscal 2006, primarily as a result of the increased spending as described above
and NTIC&#146;s increased efforts to diversify its product lines and expand the
distribution of its new product lines into new industry markets. </FONT><B><FONT face=serif size=2></FONT></B></P>
<P align=justify><I><FONT face=serif size=2>General and Administrative
Expenses</FONT></I><FONT face=serif size=2>. NTIC&#146;s general and administrative
expenses increased 10.3% in fiscal 2007 compared to fiscal 2006 primarily as a
result of increases in (i) information technology expenses of $30,000, (ii)
insurance expense of $23,000, (iii) legal expenses of $75,000, (iv) audit and
tax expense of $51,000, and (v) depreciation expense of $88,000. These increases
were partially offset by a decrease in travel of $29,000. As a percentage of net
sales, general and administrative expenses increased slightly to 18.3% in fiscal
2007 compared to 16.8% in fiscal 2006, primarily as a result of the increased
spending as described above and NTIC&#146;s increased efforts to support the
diversification of its product lines and the expansion of the distribution of
its new product lines into new industry markets. </FONT></P>
<P align=justify><I><FONT face=serif size=2>Lab and Technical Support
Expenses</FONT></I><FONT face=serif size=2>. NTIC&#146;s lab and technical support
expenses decreased 22.5% in fiscal 2007 compared to fiscal 2006 primarily a
result of decreases in (i) salary and wages of $31,000 and (ii) lab supplies and
testing of $39,000. As a percentage of net sales, lab and technical support
expenses decreased to 1.4% in fiscal 2007 compared to 1.8% in fiscal 2006
primarily as a result of the decreased expenses described above. </FONT><B><FONT face=serif size=2></FONT></B></P>
<P align=center><FONT face=serif size=2>27</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><I><FONT face=serif size=2>International Corporate Joint
Ventures and Holding Companies</FONT></I><FONT face=serif size=2>. Net sales of
NTIC&#146;s corporate joint ventures in fiscal 2007 and fiscal 2006, excluding
React-NTI LLC, were as follows: </FONT></P>
<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="90%" border=0>

  <TR vAlign=bottom>
    <TD align=left width="68%">&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=center width="15%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT><STRONG>Fiscal 2007</STRONG></FONT>&nbsp;</TD>
    <TD align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=center width="15%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT><STRONG>Fiscal 2006</STRONG></FONT>&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="68%" bgColor=#c0c0c0><FONT face=serif size=2>Industrial chemical</FONT>&nbsp; </TD>
    <TD align=right width="15%" bgColor=#c0c0c0><FONT face=serif size=2>$78,601,707</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="15%" bgColor=#c0c0c0><FONT face=serif size=2>$62,266,618</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="68%"><FONT face=serif size=2>Non-industrial
      chemical</FONT>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="15%"><FONT face=serif size=2>1,949,993</FONT> </TD>
    <TD align=right width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="15%"><FONT face=serif size=2>1,692,472</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="68%" bgColor=#c0c0c0><FONT face=serif size=2>Total</FONT>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="15%" bgColor=#c0c0c0><FONT face=serif size=2>$80,551,700</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="15%" bgColor=#c0c0c0><FONT face=serif size=2>$63,959,090</FONT>
</TD></TR></TABLE></DIV><BR>
<P align=justify><FONT face=serif size=2>NTIC had equity in income of corporate
joint ventures and holding companies of $3,201,621 in fiscal 2007 compared to
$2,713,096 in fiscal 2006. The increase in equity in income was due to the
significant increase in sales and profitability from the corporate joint
ventures as a whole due to global product demand. </FONT></P>
<P align=justify><FONT face=serif size=2>NTIC receives fees for technical and
other support services it provides to its corporate joint ventures based on the
revenues of the individual corporate joint ventures. NTIC recognized fee income
for such support of $4,976,194 in fiscal 2007 compared to $4,695,124 in fiscal
2006. The increase in fees for technical and other support to its corporate
joint ventures was due to the significant increase in total net sales of the
corporate joint ventures and the weakening of the United States
dollar.</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD align=left width="48%">&nbsp; </TD>
    <TD align=left width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align=center width="11%">&nbsp; <B><FONT face=serif size=2>Fiscal</FONT></B>&nbsp;</TD>
    <TD align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align=center width="11%"><FONT face=serif size=2><FONT size=3></FONT><STRONG>Fiscal</STRONG></FONT>&nbsp;</TD>
    <TD align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align=center width="13%" colSpan=2><FONT face=serif size=2><FONT size=3></FONT><STRONG>$</STRONG></FONT>&nbsp;</TD>
    <TD align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align=center width="13%"><FONT face=serif size=2><FONT size=3></FONT><STRONG>%</STRONG></FONT>&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="48%">&nbsp; </TD>
    <TD align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=center width="11%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT><STRONG>2007</STRONG></FONT>&nbsp;</TD>
    <TD align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=center width="11%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT><STRONG>2006</STRONG></FONT>&nbsp;</TD>
    <TD align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=center width="13%" colSpan=2>&nbsp;<B><FONT face=serif size=2>Change</FONT></B>&nbsp;</TD>
    <TD align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=center width="13%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT><STRONG>Change</STRONG></FONT>&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="48%" bgColor=#c0c0c0><FONT face=serif size=2>Total
      net sales of corporate joint ventures,</FONT>&nbsp; </TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="11%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="11%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="12%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="13%" bgColor=#c0c0c0>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="48%" bgColor=#c0c0c0><FONT face=serif size=2>excluding React-NTI LLC</FONT>&nbsp; </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="11%" bgColor=#c0c0c0><FONT face=serif size=2>$80,551,700</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="11%" bgColor=#c0c0c0><FONT face=serif size=2>$63,959,090</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="12%" bgColor=#c0c0c0><FONT face=serif size=2>$16,592,610</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="13%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>26.0%</FONT>&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="48%"><FONT face=serif size=2>NTIC&#146;s fee income for
      technical and other</FONT>&nbsp; </TD>
    <TD align=left width="1%"></TD>
    <TD align=left width="11%">&nbsp; </TD>
    <TD align=left width="1%"></TD>
    <TD align=left width="11%">&nbsp; </TD>
    <TD align=left width="1%"></TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="1%"></TD>
    <TD align=left width="1%"></TD>
    <TD align=left width="13%">&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="48%"><FONT face=serif size=2>support
      services</FONT>&nbsp; </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="11%"><FONT face=serif size=2>$4,976,194</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="11%"><FONT face=serif size=2>$4,695,124</FONT> </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="12%"><FONT face=serif size=2>$281,070</FONT> </TD>
    <TD align=right width="1%"></TD>
    <TD align=center width="1%"></TD>
    <TD align=center width="13%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>6.0%</FONT>&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="48%" bgColor=#c0c0c0><FONT face=serif size=2>NTIC&#146;s
      direct expenses incurred related to</FONT>&nbsp; </TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="11%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="11%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="12%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="13%" bgColor=#c0c0c0>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="48%" bgColor=#c0c0c0><FONT face=serif size=2>corporate joint ventures and holding companies</FONT>&nbsp; </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="11%" bgColor=#c0c0c0><FONT face=serif size=2>$4,876,928</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="11%" bgColor=#c0c0c0><FONT face=serif size=2>$5,481,757</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="12%" bgColor=#c0c0c0><FONT face=serif size=2>$(604,829</FONT> </TD>
    <TD align=left width="1%" bgColor=#c0c0c0><FONT size=2>)</FONT> </TD>
    <TD align=center width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="13%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>(11.0)%</FONT>&nbsp;</TD></TR></TABLE><BR>
<P align=justify><FONT face=serif size=2>NTIC sponsors a worldwide corporate
joint venture conference approximately every two to four years in which all of
its corporate joint ventures are invited to participate. The most recent
conference was in August 2005 and the next corporate joint venture conference is
scheduled to be held in 2008. NTIC defers a portion of its technical and other
support fees received from its corporate joint ventures in each accounting
period leading up to the conference, reflecting that NTIC has not fully earned
the payments received during that period. There was $96,000 of deferred income
recorded in fiscal 2007 bringing the total deferred accrual for the conference
to $192,000 at August 31, 2007. The costs associated with these joint venture
conferences are offset against the deferral as incurred, generally in the period
in which the conference is held and immediately before. </FONT></P>
<P align=justify><FONT face=serif size=2>NTIC incurred direct expenses related
to its corporate joint ventures and the holding companies of $4,876,928 in
fiscal 2007 compared to $5,481,757 in fiscal 2006. These expenses include:
product and business development, consulting, travel, establishment of a reserve
on a note receivable, technical and marketing services to existing joint
ventures, legal fees regarding the establishment of new joint ventures,
registration and promotion and legal defense of worldwide trademarks and legal
fees incurred in the filing of patent applications for new technologies to which
NTIC acquired certain rights. The decrease in direct expenses incurred relating
to NTIC&#146;s corporate joint ventures and holding companies in fiscal 2007 compared
to in fiscal 2006 was attributable to decreases of (i) loan forgiveness of
$571,000, (ii) consulting expense of $43,000, (iii) legal expense of $64,000,
partially offset by increases in (i) expenses related to employee relocation of
$32,000, (ii) travel and related expenses of $83,000, (iii) lab supplies and
testing of $30,000, and (iv) insurance and group health benefits of $39,000.
</FONT></P>
<P align=center><FONT face=serif size=2>28</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><I><FONT face=serif size=2>Interest Income</FONT></I><FONT face=serif size=2>. NTIC&#146;s interest income decreased to $4,165 in fiscal 2007
compared to $34,251 for fiscal 2006 primarily as a result of lower average
invested cash balances and fewer notes receivable in fiscal 2007. </FONT></P>
<P align=justify><I><FONT face=serif size=2>Interest Expense</FONT></I><FONT face=serif size=2>. NTIC&#146;s interest expense increased to $164,372 in fiscal 2007
compared to $94,751 for fiscal 2006 as a result of higher average outstanding
borrowings under NTIC&#146;s revolving line of credit in fiscal 2007 compared to
fiscal 2006 and the entering into of the term note in May 2006 in connection
with NTIC&#146;s purchase of the real estate and building for its new corporate
headquarters.</FONT></P>
<P align=justify><I><FONT face=serif size=2>Gain on Sale of
Assets</FONT></I><FONT face=serif size=2>. NTIC recognized a gain on the sale of
land, building and equipment that previously served as NTIC&#146;s corporate
headquarters of $726,295 during fiscal 2007. This was a one-time sale and no
additional gain is anticipated to be recognized relating to the building in the
future. NTIC did not recognize any gain on sale of assets during fiscal 2006.
</FONT></P>
<P align=justify><I><FONT face=serif size=2>Income Before Income
Taxes</FONT></I><FONT face=serif size=2>. Income before income taxes increased
to $3,409,408 in fiscal 2007 compared to $1,973,065 in fiscal 2006. </FONT></P>
<P align=justify><I><FONT face=serif size=2>Income Taxes</FONT></I><FONT face=serif size=2>. Income tax expense for fiscal 2007 and fiscal 2006 was
calculated based on management&#146;s estimate of NTIC&#146;s annual effective income tax
rate. NTIC&#146;s annual effective income tax rate for fiscal 2007 was lower than the
statutory rate primarily due to NTIC&#146;s equity in income of corporate joint
ventures being recognized for book purposes based on NTIC&#146;s share of after-tax
earnings of these entities. For tax purposes, to the extent joint ventures&#146;
undistributed earnings are distributed to NTIC, it is not expected to result in
any material additional income tax liability after the application of foreign
tax credits. </FONT></P>
<P align=justify><B><I><FONT face=serif size=2>Fiscal Year 2006 Compared to
Fiscal Year 2005 </FONT></I></B></P>
<P align=justify><FONT face=serif size=2>The following table sets forth NTIC&#146;s
consolidated results of operations for fiscal 2006 and fiscal 2005. These
results of operations exclude the impact of NTIC&#146;s activities with its joint
ventures, other than React-NTIC LLC. As explained in more detail in note 2 to
NTIC&#146;s consolidated financial statements, the results of React-NTIC LLC are
included in NTIC&#146;s consolidated results of operations and thus included in the
table below. </FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD align=left width="31%">&nbsp; </TD>
    <TD align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align=center width="10%"><FONT face=serif size=2><FONT size=3></FONT><STRONG>Fiscal</STRONG></FONT>&nbsp;</TD>
    <TD align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align=center width="11%"><FONT face=serif size=2><FONT size=3></FONT><STRONG>% of</STRONG></FONT>&nbsp;</TD>
    <TD align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align=center width="10%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT><STRONG>Fiscal</STRONG></FONT>&nbsp;</TD>
    <TD align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align=center width="11%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT><STRONG>% of</STRONG></FONT>&nbsp; </TD>
    <TD align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align=center width="10%" colSpan=2><FONT face=serif size=2><FONT size=3>&nbsp;</FONT><STRONG>$</STRONG></FONT>&nbsp;</TD>
    <TD align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align=center width="10%" colSpan=2>&nbsp; <B><FONT face=serif size=2>%</FONT></B>&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="31%">&nbsp; </TD>
    <TD align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=center width="10%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT><STRONG>2006</STRONG></FONT>&nbsp;</TD>
    <TD align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=center width="11%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT><STRONG>Net
      Sales</STRONG></FONT>&nbsp;</TD>
    <TD align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=center width="10%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT><STRONG>2005</STRONG></FONT>&nbsp;</TD>
    <TD align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=center width="11%"><FONT size=+0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT><STRONG>Net Sales</STRONG></FONT>&nbsp;</FONT></TD>
    <TD align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=center width="10%" colSpan=2><FONT face=serif size=2><FONT size=3>&nbsp;</FONT><STRONG>Change</STRONG></FONT>&nbsp;</TD>
    <TD align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=center width="10%" colSpan=2><FONT face=serif size=2><FONT size=3>&nbsp;</FONT><STRONG>Change</STRONG></FONT>&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="31%" bgColor=#c0c0c0><FONT face=serif size=2>Net
      sales</FONT>&nbsp; </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="10%" bgColor=#c0c0c0><FONT face=serif size=2>$16,604,964</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="11%" bgColor=#c0c0c0><FONT face=serif size=2>100.0%</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="10%" bgColor=#c0c0c0><FONT face=serif size=2>$14,816,672</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="11%" bgColor=#c0c0c0><FONT face=serif size=2>100.0%</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="9%" bgColor=#c0c0c0><FONT face=serif size=2>$1,788,292</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="9%" bgColor=#c0c0c0><FONT face=serif size=2>12.1%</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="31%"><FONT face=serif size=2>Cost of
      sales</FONT>&nbsp; </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="10%"><FONT face=serif size=2>$10,346,437</FONT> </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="11%"><FONT face=serif size=2>62.3%</FONT> </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="10%"><FONT face=serif size=2>$8,967,155</FONT> </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="11%"><FONT face=serif size=2>60.5%</FONT> </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="9%"><FONT face=serif size=2>$1,379,282</FONT> </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="9%"><FONT face=serif size=2>15.4%</FONT> </TD>
    <TD align=right width="1%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="31%" bgColor=#c0c0c0><FONT face=serif size=2>Selling
      expenses</FONT>&nbsp; </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="10%" bgColor=#c0c0c0><FONT face=serif size=2>$3,075,072</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="11%" bgColor=#c0c0c0><FONT face=serif size=2>18.5%</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="10%" bgColor=#c0c0c0><FONT face=serif size=2>$2,714,740</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="11%" bgColor=#c0c0c0><FONT face=serif size=2>18.3%</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="9%" bgColor=#c0c0c0><FONT face=serif size=2>$360,332</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="9%" bgColor=#c0c0c0><FONT face=serif size=2>13.3%</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="31%"><FONT face=serif size=2>General and
      administrative expenses</FONT>&nbsp; </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="10%"><FONT face=serif size=2>$2,795,194</FONT> </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="11%"><FONT face=serif size=2>16.8%</FONT> </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="10%"><FONT face=serif size=2>$2,364,667</FONT> </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="11%"><FONT face=serif size=2>16.0%</FONT> </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="9%"><FONT face=serif size=2>$430,527</FONT> </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="9%"><FONT face=serif size=2>18.2%</FONT> </TD>
    <TD align=right width="1%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="31%" bgColor=#c0c0c0><FONT face=serif size=2>Lab and
      technical support expenses</FONT>&nbsp; </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="10%" bgColor=#c0c0c0><FONT face=serif size=2>$296,676</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="11%" bgColor=#c0c0c0><FONT face=serif size=2>1.8%</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="10%" bgColor=#c0c0c0><FONT face=serif size=2>$759,662</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="11%" bgColor=#c0c0c0><FONT face=serif size=2>5.1%</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="9%" bgColor=#c0c0c0><FONT face=serif size=2>($462,986</FONT> </TD>
    <TD align=left width="1%" bgColor=#c0c0c0><FONT size=2>)</FONT>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="9%" bgColor=#c0c0c0><FONT face=serif size=2>(60.9%</FONT> </TD>
    <TD align=left width="1%" bgColor=#c0c0c0><FONT size=2>)</FONT>&nbsp;</TD></TR></TABLE><BR>
<P align=justify><I><FONT face=serif size=2>Net Sales</FONT></I><FONT face=serif size=2>. NTIC&#146;s consolidated net sales increased 12.1% in fiscal 2006 compared
to fiscal 2005 primarily as a result of an increase in demand of Zerust<SUP>&#174;
</SUP>products and of React-NTI products to new and existing customers in North
America. Net sales of Zerust<SUP>&#174;</SUP> products increased $1,501,881, or
12.4%, to $12,099,187 and net sales of React-NTI products increased $286,411, or
6.4%, to $4,505,777 in fiscal 2006 as compared to in fiscal 2005.</FONT></P>
<P align=justify><I><FONT face=serif size=2>Cost of Sales</FONT></I><FONT face=serif size=2>. Cost of sales increased 15.4% in fiscal 2006 compared to
fiscal 2005 primarily as a result of the increase in net sales. Cost of sales as
a percentage of net sales also increased slightly to 62.3% in fiscal 2006
compared to 60.5% in fiscal 2005 primarily as a result of an increase in raw
material prices, primarily plastic resins.</FONT></P>
<P align=center><FONT face=serif size=2>29</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><I><FONT face=serif size=2>Selling Expenses</FONT></I><FONT face=serif size=2>. NTIC&#146;s selling expenses increased 13.3% in fiscal 2006
compared in fiscal 2005 primarily as a result of increases in (i) consulting
expense of $145,000, (ii) promotional materials expense of $71,000, (iii) travel
expenses of $38,000, (iv) telecommunications expense of $26,000, (v) auto
expense of $25,000 (vi) salary expense related of $166,000 and (vii) insurance
expense of $23,000. These increases were partially offset by decreases in (i)
selling expense related to the sale of React products of $93,000, and (ii)
commissions to salespeople and manufacturer&#146;s representatives totaling $63,000.
As a percentage of net sales, selling expenses increased slightly to 18.5% in
fiscal 2006 compared to 18.3% in fiscal 2005, primarily as a result of the
increased spending as described above and NTIC&#146;s increased efforts to diversify
its product lines and expand the distribution of its new product lines into new
industry markets.</FONT></P>
<P align=justify><I><FONT face=serif size=2>General and Administrative
Expenses</FONT></I><FONT face=serif size=2>. NTIC&#146;s general and administrative
expenses increased 18.2% in fiscal 2006 compared to in fiscal 2005 primarily as
a result of increases in (i) salaries and wage expense increases of $118,000,
(ii) insurance expense of $132,000, (iii) management bonus of $185,000, (iv)
travel expense of $97,000 (v) general and administrative expense related to the
sale of React products of $154,000. These increases were partially offset by
decreases in (i) legal expense of $68,000 and (ii) directors&#146; fees and expenses
of $113,000, (iii) shipping expense of $32,000 and (iv) telecommunications
expense of $29,000. As a percentage of net sales, general and administrative
expenses increased slightly to 16.8% in fiscal 2006 compared to 16.0% in fiscal
2005, primarily as a result of the increased spending as described above and
NTIC&#146;s increased efforts to support the diversification of its product lines and
the expansion of the distribution of its new product lines into new industry
markets. </FONT></P>
<P align=justify><I><FONT face=serif size=2>Lab and Technical Support
Expenses</FONT></I><FONT face=serif size=2>. NTIC&#146;s lab and technical support
expenses decreased 60.9% in fiscal 2006 compared to in fiscal 2005 primarily due
to the transfer of employees from the lab and technical support area to research
and development associated with corporate joint venture support, which decreased
lab and technical support expenses by $450,000. As a percentage of net sales,
lab and technical support expenses decreased to 1.8% in fiscal 2006 compared to
5.1% in fiscal 2005 primarily as a result of the transfer of employees and
decrease in spending as described above.</FONT></P>
<P align=justify><I><FONT face=serif size=2>International Corporate Joint
Ventures and Holding Companies</FONT></I><FONT face=serif size=2>. Net sales of
NTIC&#146;s corporate joint ventures in fiscal 2006 and fiscal 2005, excluding
React-NTI LLC, were as follows: </FONT></P>
<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="90%" border=0>

  <TR vAlign=bottom>
    <TD align=left width="68%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=center width="15%"><FONT face=serif size=2><FONT size=3></FONT><STRONG>Fiscal
      2006</STRONG></FONT>&nbsp;</TD>
    <TD align=center width="2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=center width="15%"><FONT face=serif size=2><FONT size=3></FONT><STRONG>Fiscal
      2005</STRONG></FONT>&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="68%" bgColor=#c0c0c0><FONT face=serif size=2>Industrial chemical</FONT>&nbsp; </TD>
    <TD align=right width="15%" bgColor=#c0c0c0><FONT face=serif size=2>$62,266,618</FONT> </TD>
    <TD align=left width="2%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD align=right width="15%" bgColor=#c0c0c0><FONT face=serif size=2>$55,606,933</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="68%"><FONT face=serif size=2>Non-industrial
      chemical</FONT>&nbsp; </TD>
    <TD align=right width="15%"><FONT face=serif size=2>1,342,472</FONT> </TD>
    <TD align=left width="2%">&nbsp; </TD>
    <TD align=right width="15%"><FONT face=serif size=2>1,210,121</FONT>
</TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="68%" bgColor=#c0c0c0><FONT face=serif size=2>Business consulting</FONT>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="15%" bgColor=#c0c0c0><FONT face=serif size=2>350,000</FONT> </TD>
    <TD align=left width="2%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="15%" bgColor=#c0c0c0><FONT face=serif size=2>350,000</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="68%"><FONT face=serif size=2>Total</FONT>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="15%"><FONT face=serif size=2>$63,959,090</FONT> </TD>
    <TD align=left width="2%">&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="15%"><FONT face=serif size=2>$57,167,054</FONT>
</TD></TR></TABLE></DIV><BR>
<P align=justify><FONT face=serif size=2>NTIC had equity in income of corporate
joint ventures and holding companies of $2,713,096 in fiscal 2006 compared to
$1,968,777 in fiscal 2005. The increase in equity in income was due to the
significant increase in profitability from the corporate joint ventures as a
whole. </FONT></P>
<P align=justify><FONT face=serif size=2>NTIC receives fees for technical and
other support services it provides to its corporate joint ventures based on the
revenues of the individual corporate joint ventures. NTIC recognized fee income
for such support of $4,695,124 in fiscal 2006 compared to $4,136,913 in fiscal
2005. The increase in fees for technical and other support to its corporate
joint ventures was due to the significant increase in total net sales of the
corporate joint ventures. </FONT></P>
<P align=center><FONT face=serif size=2>30</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE><BR>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD noWrap align=left width="77%">&nbsp; </TD>
    <TD noWrap align=center width="4%">&nbsp;<B><FONT face=serif size=2>Fiscal</FONT></B> </TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT><STRONG>Fiscal</STRONG></FONT> </TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%">&nbsp;<B><FONT face=serif size=2>$</FONT></B> </TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT><STRONG>%</STRONG></FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="77%">&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="4%">&nbsp;<B><FONT face=serif size=2>2006</FONT></B> </TD>
    <TD noWrap align=center width="2%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT><STRONG>2005</STRONG></FONT> </TD>
    <TD noWrap align=center width="2%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT><STRONG>Change</STRONG></FONT> </TD>
    <TD noWrap align=center width="2%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT><STRONG>Change</STRONG></FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="77%" bgColor=#c0c0c0><FONT face=serif size=2>Total net sales of corporate joint ventures,</FONT>&nbsp; </TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="77%" bgColor=#c0c0c0><FONT face=serif size=2>excluding React-NTI LLC</FONT>&nbsp; </TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT style="BACKGROUND-COLOR: #c0c0c0" size=3>&nbsp;</FONT>$63,959,090</FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT style="BACKGROUND-COLOR: #c0c0c0" size=3>&nbsp;</FONT>$57,167,054</FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT style="BACKGROUND-COLOR: #c0c0c0" size=3>&nbsp;</FONT>$6,792,036</FONT> </TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>11.9%</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="77%"><FONT face=serif size=2>NTIC&#146;s fee
      income for technical and other</FONT>&nbsp; </TD>
    <TD noWrap align=left width="4%">&nbsp; </TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=left width="4%">&nbsp;</TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=left width="4%">&nbsp; </TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=center width="4%"></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="77%"><FONT face=serif size=2>support
      services</FONT>&nbsp; </TD>
    <TD noWrap align=right width="4%"><FONT face=serif size=2>$4,695,124</FONT></TD>
    <TD noWrap align=right width="2%"></TD>
    <TD noWrap align=right width="4%"><FONT face=serif size=2>$4,136,913</FONT> </TD>
    <TD noWrap align=right width="2%"></TD>
    <TD noWrap align=right width="4%"><FONT face=serif size=2>$558,211</FONT>
    </TD>
    <TD noWrap align=right width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2>13.5%</FONT>
  </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="77%" bgColor=#c0c0c0><FONT face=serif size=2>NTIC&#146;s direct expenses incurred related to</FONT>&nbsp; </TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="77%" bgColor=#c0c0c0><FONT face=serif size=2>corporate joint ventures and holding companies</FONT>&nbsp; </TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>$5,481,757</FONT> </TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>$4,977,375</FONT> </TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>$504,382</FONT> </TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2>10.1%</FONT> </TD></TR></TABLE><BR>
<P align=justify><FONT face=serif size=2>NTIC sponsors a worldwide corporate
joint venture conference approximately every two to four years in which all of
its corporate joint ventures are invited to participate. The most recent
conference was in August 2005 and the next corporate joint venture conference is
scheduled to be held in 2008. NTIC defers a portion of its technical and other
support fees received from its corporate joint ventures in each accounting
period leading up to the conference, reflecting that NTIC has not fully earned
the payments received during that period. There was $96,000 of deferred income
recorded within other accrued liabilities at August 31, 2006. The costs
associated with these joint venture conferences are offset against the deferral
as incurred, generally in the period in which the conference is held and
immediately before. </FONT></P>
<P align=justify><FONT face=serif size=2>NTIC incurred direct expenses related
to its corporate joint ventures and the holding companies of $5,481,757 in
fiscal 2006 compared to $4,977,375 in fiscal 2005. These expenses include:
product and business development, consulting, travel, establishment of a reserve
on a note receivable, technical and marketing services to existing joint
ventures, legal fees regarding the establishment of new joint ventures,
registration and promotion and legal defense of worldwide trademarks and legal
fees incurred in the filing of patent applications for new technologies to which
NTIC acquired certain rights. The increase in direct expenses incurred relating
to NTIC&#146;s corporate joint ventures and holding companies in fiscal 2006 compared
to in fiscal 2005 was attributable to increases in (i) expenses related to the
transfer of employees from the lab and technical support area to research and
development associated with corporate joint venture support of $450,000 (ii)
amortization expense of $81,000 and (iii) establishment of a reserve for a note
receivable of $571,000. These increases were partially offset by decreases in
(i) legal fees of $33,000, (ii) insurance expense of $128,000, (iii) travel
expenses of $91,000, (iv) loan forgiveness of $96,000 and (v) consulting fees of
$271,000. As a percentage of net sales, direct expenses incurred relating to
NTIC&#146;s corporate joint ventures and holding companies decreased in fiscal 2006
compared to in fiscal 2005, primarily as a result of the increase in net sales
and changes in spending as described above.</FONT></P>
<P align=justify><I><FONT face=serif size=2>Interest Income</FONT></I><FONT face=serif size=2>. NTIC&#146;s interest income decreased to $34,251 in fiscal 2006
compared to $96,282 for fiscal 2005 primarily as a result of lower average
invested cash balances and fewer notes receivable in fiscal 2006. </FONT></P>
<P align=justify><I><FONT face=serif size=2>Interest Expense</FONT></I><FONT face=serif size=2>. NTIC&#146;s interest expense increased to $94,751 in fiscal 2006
compared to $36,090 for fiscal 2005 as a result of higher average outstanding
borrowings under NTIC&#146;s revolving line of credit in fiscal 2006 compared to in
fiscal 2005 and the entering into of a term note in May 2005 in connection with
NTIC&#146;s purchase of the real estate and building for its new corporate
headquarters. </FONT></P>
<P align=justify><I><FONT face=serif size=2>Income Before Income
Taxes</FONT></I><FONT face=serif size=2>. Income before income taxes increased
to $1,973,065 in fiscal 2006 compared to $1,209,281 in fiscal 2005. </FONT></P>
<P align=justify><I><FONT face=serif size=2>Income Taxes</FONT></I><FONT face=serif size=2>. Income tax expense for fiscal 2006 and fiscal 2005 was
calculated based on management&#146;s estimate of NTIC&#146;s annual effective income tax
rate. NTIC&#146;s annual effective income tax rate for fiscal 2006 is lower than the
statutory rate primarily due to NTIC&#146;s equity in income of corporate joint
ventures being recognized for book purposes based on NTIC&#146;s share of after-tax
earnings of these entities. For tax purposes, to the extent joint ventures&#146;
undistributed earnings are distributed to NTIC, it is not <FONT face=serif size=2>expected to result in any material additional income tax liability after
the application of foreign tax credits.&nbsp;</FONT>&nbsp;</FONT></P>
<P align=center><FONT face=serif size=2>31</FONT><I><FONT face=serif size=2>
</FONT></I></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><B><FONT face=serif size=2>Liquidity and Capital Resources
</FONT></B></P>
<P align=justify><I><FONT face=serif size=2>Sources of Cash and Working
Capital</FONT></I><FONT face=serif size=2>. As of August 31, 2007, NTIC&#146;s
working capital was $3,788,777, including $244,499 in cash and cash equivalents,
compared to working capital of $2,221,334, including $299,117 in cash and cash
equivalents, as of August 31, 2006.</FONT></P>
<P align=justify><FONT face=serif size=2>NTIC has a revolving credit facility
that expires on January 31, 2008 that it expects to renew. Outstanding amounts
under the revolving credit facility bear interest at an annual rate based on
LIBOR plus 2.25%. As of August 31, 2007, the interest rate was 7.97%. Amounts
borrowed under the facility are collateralized by a lien on substantially all of
NTIC&#146;s assets, excluding its corporate joint venture interests, intellectual
property rights and its Circle Pines headquarters. The credit documents contain
other terms and provisions, including representations, covenants and conditions,
customary for transactions of this type. Significant financial covenants include
minimum fixed charge coverage ratio of 1.0 to 1.0. Other covenants include a
prohibition on any merger or consolidation without prior consent of the lender
and restrictions on future credit extensions and non-equity investments and the
incurrence of additional indebtedness without the lender&#146;s prior consent. NTIC
is in compliance with all covenants under the revolving credit facility. The
facility contains customary events of default, including nonpayment of principal
or other amounts when due; breach of covenants; inaccuracy of representations
and warranties; cross-default and/or cross-acceleration to other indebtedness;
non-compliance with laws; certain voluntary and involuntary bankruptcy events;
judgments entered against NTIC; and a sale of material assets. If an event of
default occurs and is continuing, the lender may, among other things, terminate
its obligations thereunder and require NTIC to repay all amounts thereunder. As
of August 31, 2007, there was no amount outstanding under the facility. However,
subsequently, NTIC borrowed on the facility and had $484,000 in borrowings
outstanding under the facility as of November 16, 2007. NTIC has the right to
prepay the facility at any time without premium or penalty. The line of credit
is subject to a borrowing base calculation and at August 31, 2007, NTIC had
$1,500,000 available. </FONT></P>
<P align=justify><FONT face=serif size=2>NTIC believes that a combination of its
existing cash and cash equivalents, funds available through existing or
anticipated financing arrangements and forecasted cash flows, will continue to
be adequate to fund its operations, capital expenditures, debt repayments and
any stock repurchases for at least the next twelve months. In an effort to
increase net sales, NTIC is in the process of expanding the application of its
corrosion inhibiting technology into the oil and gas industry and its product
line to include biodegradable and compostable plastics and machinery that
converts waste plastics back into diesel, gasoline and mid-distillates. During
fiscal 2008, NTIC expects to invest additional research and development and
marketing efforts and resources into these new emerging businesses, product
lines and markets. In order to take advantage of such new product and market
opportunities to expand its business and increase its revenues, NTIC may decide
to finance such opportunities by increasing borrowings under its line of credit
or raising additional financing through the issuance of debt or equity
securities. There is no assurance that any financing transaction will be
available on terms acceptable to NTIC or at all, or that any financing
transaction will not be dilutive to NTIC&#146;s current stockholders. </FONT></P>
<P align=justify><I><FONT face=serif size=2>Uses of Cash and Cash
Flows</FONT></I><FONT face=serif size=2>. Cash flows used in operations during
fiscal 2007 was $717,358, which resulted principally from equity income of
corporate joint ventures, decreases in accounts payable, increases in
inventories, gain on sale of assets being offset by net income, depreciation and
amortization expense, and decreases in trade receivables. Cash flows provided by
operations during fiscal 2006 was $855,467, which resulted principally from net
income after excluding the effect of depreciation and amortization expense and
the write-off of a certain note receivable, as well as an increase in accrued
<FONT face=serif size=2>liabilities and a decrease in inventories, all offset by
equity income of corporate joint ventures, trade excluding corporate joint
ventures and an increase in prepaid expenses.</FONT>&nbsp;</FONT></P>
<P align=center><FONT face=serif size=2>32</FONT><I><FONT face=serif size=2>
</FONT></I></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><FONT face=serif size=2>Net cash provided by investing
activities during fiscal 2007 was $1,502,939, which resulted from proceeds from
the sale of assets, cash received from loans and deposits and dividends received
from corporate joint ventures, offset by additions to property and equipment and
investments in joint ventures. NTIC received back its required deposit of
$445,469 from the courts in Finland and replaced it with a standby letter of
credit. Net cash used in investing activities during fiscal 2006 was $1,669,020,
which resulted from additions to property and equipment and industrial patents,
offset by dividends received from corporate joint ventures and cash received on
loans.</FONT></P>
<P align=justify><FONT face=serif size=2>Net cash used in financing activities
during fiscal 2007 was $840,199, which resulted primarily from the repayments of
the line of credit and bank overdrafts offset by the exercise of stock options.
Net cash provided by financing activities during fiscal 2006 was $785,212, which
resulted primarily from borrowings on a term loan, the exercise of stock options
and bank overdrafts, offset by the payoff of the note payable and repayments on
the line of credit.</FONT></P>
<P align=justify><I><FONT face=serif size=2>Capital Expenditures and
Commitments</FONT></I><FONT face=serif size=2>. NTIC had no material lease
commitments as of August 31, 2007, except a lease agreement entered into by NTI
Facilities, Inc., a subsidiary of NTIC, for approximately 16,994 square feet of
office, manufacturing, laboratory and warehouse space in Beachwood, Ohio,
requiring monthly payments of $17,500, which are adjusted annually according to
the annual consumer price index, through November 2014.</FONT></P>
<P align=justify><FONT face=serif size=2>NTIC recently moved its corporate
headquarters. NTIC purchased the real estate and 40,000 square feet building in
which its new corporate headquarters is located pursuant to a like-kind exchange
transaction within the meaning of Section 1031 of the Internal Revenue Code of
1986, as amended, for a purchase price of $1,475,000. To finance the
transaction, NTIC obtained a secured term loan in the principal amount of
$1,275,000. The term loan matures on May 1, 2011, bears interest at a fixed rate
of 8.01% and is payable in 59 monthly installments equal to approximately
$10,776 (inclusive of principal and interest) commencing June 1, 2006. All of
the remaining unpaid principal and accrued interest is due and payable on the
May 1, 2011 maturity date. The loan is secured by a first lien on the real
estate and building. </FONT></P>
<P align=justify><FONT face=serif size=2>NTIC sold the real property and
building in which NTIC&#146;s former Lino Lakes corporate headquarters was located
for a purchase price of $870,000 on September 8, 2006. The net book value of the
building held for sale was $89,636 and the closing costs and fees associated
with the sale of the property was $46,571. The gain on sale of the property was
$726,295. </FONT></P>
<P align=justify><FONT face=serif size=2>NTIC has no postretirement benefit plan
and does not anticipate establishing any postretirement benefit program.
</FONT></P>
<P align=justify><B><FONT face=serif size=2>Off-Balance Sheet
Arrangements</FONT></B></P>
<P align=justify><FONT face=serif size=2>NTIC does not have any relationships
with unconsolidated entities or financial partnerships, such as entities often
referred to as structured finance or special purpose entities, which would have
been established for the purpose of facilitating off-balance sheet financial
arrangements. As such, NTIC is not materially exposed to any financing,
liquidity, market or credit risk that could arise if NTIC had engaged in such
arrangements. </FONT></P>
<P align=justify><FONT face=serif size=2>In fiscal 1999, a subsidiary of NTIC,
NTI Facilities, Inc., acquired a one-third ownership of Omni-Northern Ltd.,
which owns and operates a rental property located at 23205 Mercantile Road,
Beachwood, Ohio. The property has an approximate value of $2,205,000, based upon
the cash-to-mortgage acquisition price of the property paid in fiscal 2000. NTIC
has guaranteed up to $329,082 of Omni-Northern Ltd.&#146;s $1,903,571 mortgage
obligation with National City Bank, Cleveland, Ohio. The building is fully
leased at present. </FONT></P>
<P align=center><FONT face=serif size=2>33</FONT><I><FONT face=serif size=2>
</FONT></I></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><B><FONT face=serif size=2>Inflation and Seasonality
</FONT></B></P>
<P align=justify><FONT face=serif size=2>Inflation in the U.S. and abroad has
historically had little effect on NTIC. NTIC&#146;s business has not historically
been seasonal. </FONT></P>
<P align=justify><B><FONT face=serif size=2>Market Risk </FONT></B></P>
<P align=justify><FONT face=serif size=2>NTIC is exposed to some market risk
stemming from changes in foreign currency exchange rates, commodity prices and
interest rates.</FONT></P>
<P align=justify><FONT face=serif size=2>NTIC is exposed to foreign currency
exchange rate risk arising from its investments in its foreign corporate joint
ventures and holding companies since NTIC&#146;s fees for technical support and other
services and dividend distributions from these foreign entities are paid in
foreign currencies. NTIC&#146;s principal exchange rate exposure is with the Euro,
the Japanese yen, Korean won and the English pound against the U.S. dollar. NTIC
does not hedge against its foreign currency exchange rate risk. Since NTIC&#146;s
investments in its corporate joint ventures and holding companies are accounted
for using the equity method, any changes in foreign currency exchange rates
would be reflected as a foreign currency translation adjustment and would not
change the equity in income of joint ventures and holding companies reflected in
NTIC&#146;s consolidated statement of income.</FONT></P>
<P align=justify><FONT face=serif size=2>Some raw materials used in NTIC&#146;s
products are exposed to commodity price changes. The primary commodity price
exposures are with a variety of plastic resins.</FONT></P>
<P align=justify><FONT face=serif size=2>NTIC&#146;s revolving credit facility bears
interest at a rate based on LIBOR and thus may subject NTIC to some market risk
on interest rates. There was no outstanding balance under this facility as of
August 31, 2007.</FONT></P>
<P align=justify><B><FONT face=serif size=2>Related Party Transactions
</FONT></B></P>
<P align=justify><FONT face=serif size=2>See note 17 to NTIC&#146;s consolidated
financial statements for related party transaction disclosure. </FONT></P>
<P align=justify><B><FONT face=serif size=2>Critical Accounting Policies
</FONT></B></P>
<P align=justify><FONT face=serif size=2>The preparation of NTIC&#146;s consolidated
financial statements requires management to make estimates and judgments that
affect the reported amount of assets, liabilities, revenues and expenses, and
related disclosure of contingent assets and liabilities. The Securities and
Exchange Commission has defined a company&#146;s most critical accounting policies as
those that are most important to the portrayal of its financial condition and
results of operations, and which require the company to make its most difficult
and subjective judgments, often as a result of the need to make estimates of
matters that are inherently uncertain. Based on this definition, NTIC has
identified the following critical accounting policies. Although NTIC believes
that its estimates and assumptions are reasonable, they are based upon
information available when they are made. Actual results may differ
significantly from these estimates under different assumptions or conditions.
</FONT></P>
<P align=center><FONT face=serif size=2>34</FONT><I><FONT face=serif size=2>
</FONT></I></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><B><I><FONT face=serif size=2>Investments in Corporate Joint
Ventures</FONT></I></B><B><FONT face=serif size=2> </FONT></B></P>
<P align=justify><FONT face=serif size=2>NTIC&#146;s investments in corporate joint
ventures are accounted for using the equity method, except for React-NTI LLC
which has been fully consolidated, due to the adoption of FIN 46R. Periodically,
NTIC evaluates the investments for any impairment and assesses the future cash
flow projections to determine if there are any going concern issues. If an
investment were determined to be impaired, then a reserve would be created to
reflect the impairment on the financial results of NTIC. NTIC&#146;s evaluation of
its investments in corporate joint ventures requires NTIC to make assumptions
about future cash flows of its corporate joint ventures. These assumptions
require significant judgment and actual results may differ from assumed or
estimated amounts. NTIC&#146;s investments in corporate joint ventures were
$13,602,842 and $10,772,102 as of August 31, 2007 and 2006, respectively.
</FONT></P>
<P align=justify><B><I><FONT face=serif size=2>Principles of
Consolidation</FONT></I></B></P>
<P align=justify><FONT face=serif size=2>The consolidated financial statements
include the accounts of Northern Technologies International Corporation, its
wholly owned subsidiaries, NTI Facilities, Inc. and Northern Technologies
Holding Company, LLC, and its 75% owned subsidiary, React-NTI LLC. All
significant intercompany transactions and balances have been eliminated in
consolidation. </FONT></P>
<P align=justify><B><I><FONT face=serif size=2>Accounts and Notes
Receivable</FONT></I></B></P>
<P align=justify><FONT face=serif size=2>NTIC values accounts and notes
receivable, net of an allowance for doubtful accounts. Each quarter, NTIC
prepares an analysis of its ability to collect outstanding receivables that
provides a basis for an allowance estimate for doubtful accounts. In doing so,
NTIC evaluates the age of its receivables, past collection history, current
financial conditions of key customers, and economic conditions. Based on this
evaluation, NTIC establishes a reserve for specific accounts and notes
receivable that it believes are uncollectible, as well as an estimate of
uncollectible receivables not specifically known. A deterioration in the
financial condition of any key customer or a significant slowdown in the economy
could have a material negative impact on NTIC&#146;s ability to collect a portion or
all of the accounts and notes receivable. NTIC believes that an analysis of
historical trends and its current knowledge of potential collection problems
provide NTIC with sufficient information to establish a reasonable estimate for
an allowance for doubtful accounts. However, since NTIC cannot predict with
certainty future changes in the financial stability of its customers, NTIC&#146;s
actual future losses from uncollectible accounts may differ from its estimates.
In the event NTIC determined that a smaller or larger uncollectible accounts
reserve is appropriate, NTIC would record a credit or charge to selling expense
in the period that it made such a determination. Accounts receivable have been
reduced by an allowance for uncollectible accounts of $30,000 and $10,000 at
August 31, 2007 and August 31, 2006, respectively. </FONT></P>
<P align=justify><B><I><FONT face=serif size=2>Revenue
Recognition</FONT></I></B><B><FONT face=serif size=2> </FONT></B></P>
<P align=justify><FONT face=serif size=2>In recognizing revenue, NTIC applies
the provisions of the Securities and Exchange Commission Staff Accounting
Bulletin No. 104, Revenue Recognition. NTIC recognizes revenue from the sale of
its products when persuasive evidence of an arrangement exists, the product has
been delivered, the price is fixed and determinable and collection of the
resulting receivable is reasonably assured. These criteria are met at the time
of shipment when risk of loss and title pass to the customer or
distributor.</FONT></P>
<P align=justify><B><I><FONT face=serif size=2>Foreign Currency Translation
(Accumulated Other Comprehensive Income)</FONT></I></B></P>
<P align=justify><FONT face=serif size=2>The functional currency of each
international corporate joint venture is the applicable local currency. The
translation of the applicable foreign currencies into U.S. dollars is performed
for balance sheet accounts using 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 income. </FONT></P>
<P align=center><FONT face=serif size=2>35</FONT><I><FONT face=serif size=2>
</FONT></I></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><B><I><FONT face=serif size=2>Stock-Based
Compensation</FONT></I></B></P>
<P align=justify><FONT face=serif size=2>In December 2004, FASB published FASB
Statement No. 123 (revised 2004), <I>Share-Based Payment</I>. FAS 123(R)
requires that the compensation cost relating to share-based payment
transactions, including grants of employee stock options, be recognized in
financial statements. That cost will be measured based on the fair value of the
equity or liability instruments issued. FAS 123(R) covers a wide range of
share-based compensation arrangements including stock options, restricted share
plans, performance-based awards, share appreciation rights, and employee share
purchase plans. FAS 123(R) is a replacement of FASB Statement No. 123,
<I>Accounting for Stock-Based Compensation</I>, and supersedes APB Opinion No.
25, <I>Accounting for Stock Issued to Employees</I>, and its related
interpretive guidance. The effect of FAS 123(R) is to require entities to
measure the cost of employee services received in exchange for stock options
based on the grant-date fair value of the award, and to recognize the cost over
the period the employee is required to provide services for the award. FAS
123(R) permits entities to use any option-pricing model that meets the fair
value objective in FAS 123(R). NTIC implemented FAS 123(R) on September 1, 2006,
using the modified prospective transition method. </FONT></P>
<P align=justify><B><FONT face=serif size=2>Recent Accounting Pronouncements
</FONT></B></P>
<P align=justify><FONT face=serif size=2>See note 2 to NTIC&#146;s consolidated
financial statements for a discussion of recent accounting
pronouncements.</FONT></P>
<P align=center><FONT face=serif size=2>36</FONT><I><FONT face=serif size=2>
</FONT></I></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><B><FONT face=serif size=2>Item 7.</FONT></B><B><FONT face=sans-serif size=2> </FONT></B><B><FONT face=serif size=2>FINANCIAL
STATEMENTS. </FONT></B></P>
<P align=center><B><FONT face=serif size=2>INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS </FONT></B></P>
<P align=justify><FONT face=serif size=2>The following items are included
herein: </FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="1%"><FONT face=serif size=2>Financial Statements</FONT><FONT face=serif size=2>:</FONT></TD>
    <TD noWrap align=left width="96%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="2%"><FONT face=serif size=2><FONT size=3>&nbsp;
      </FONT>Page</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="97%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>Report of Independent Registered Public Accounting
      Firm</FONT>&nbsp; </TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=2>38</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="97%" colSpan=2><FONT face=serif size=2>Consolidated Balance Sheets as of August 31, 2007 and
2006</FONT></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=2>39</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="97%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>Consolidated Statements of Income for the years ended
      August 31, 2007 and 2006</FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=2>40</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="97%" colSpan=2><FONT face=serif size=2>Consolidated Statements of Stockholders&#146; Equity for the years ended
      August 31, 2007 and 2006</FONT>&nbsp; </TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=2>41</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="97%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>Consolidated Statements of Cash Flows for the years
      ended August 31, 2007 and 2006</FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=2>42</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="97%" colSpan=2><FONT face=serif size=2>Notes
      to Consolidated Financial Statements</FONT></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=2>43-58</FONT>
  </TD></TR></TABLE><BR>
<P align=center><FONT face=serif size=2>37</FONT><I><FONT face=serif size=2>
</FONT></I></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=center><B><FONT face=serif size=2>REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM </FONT></B></P>
<P align=justify><FONT face=serif size=2>To the Shareholders, Audit Committee
and Board of Directors <BR>Northern Technologies International Corporation and
Subsidiaries </FONT></P>
<P align=justify><FONT face=serif size=2>We have audited the accompanying
consolidated balance sheets of Northern Technologies International Corporation
and Subsidiaries as of August 31, 2007 and 2006, and the related consolidated
statements of income, stockholders' equity and cash flows for the years then
ended. These consolidated financial statements are the responsibility of the
company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. </FONT></P>
<P align=justify><FONT face=serif size=2>We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). 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. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial reporting.
Our audits included consideration of its internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company&#146;s internal control over financial reporting.
Accordingly, we express no such opinion. 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 consolidated financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion. </FONT></P>
<P align=justify><FONT face=serif size=2>In our opinion, the consolidated
financial statements referred to above present fairly, in all material respects,
the financial position of Northern Technologies International Corporation and
Subsidiaries as of August 31, 2007 and 2006 and the results of their operations
and their cash flows for the years then ended, in conformity with accounting
principles generally accepted in the United States of America. </FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="50%" border=0>

  <TR vAlign=bottom>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="1%"><FONT face=serif size=2>/s/ Virchow, Krause &amp; Company,
      LLP</FONT> </TD>
    <TD noWrap align=left width="99%">&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%" colSpan=2><FONT face=serif size=2>Minneapolis, Minnesota</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%" colSpan=2><FONT face=serif size=2>November 15, 2007</FONT>&nbsp; </TD></TR></TABLE><BR>
<P align=center><FONT face=serif size=2>38 </FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE><BR>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD noWrap align=left width="100%"><FONT face=serif><B><FONT face=serif size=4>NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION</FONT></B>&nbsp;
      </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%"><FONT face=serif><B><FONT face=serif size=4>AND SUBSIDIARIES</FONT></B>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="100%"><FONT face=serif><B><FONT face=serif size=2>CONSOLIDATED
      BALANCE SHEETS - AUGUST 31, 2007 AND 2006</FONT></B>&nbsp;
  </FONT></TD></TR></TABLE><BR>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD noWrap align=left width="90%"><FONT face=serif size=2>&nbsp;
</FONT></TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2>&nbsp;<STRONG>August 31,</STRONG>&nbsp;</FONT></TD>
    <TD noWrap align=center width="2%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp; </FONT></TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2>&nbsp;<STRONG>August 31,</STRONG>&nbsp;</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%"><FONT face=serif size=2>&nbsp;
</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=center width="4%"><FONT face=serif size=2>&nbsp;<B>2007</B>&nbsp;</FONT></TD>
    <TD noWrap align=center width="2%"></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=center width="4%"><FONT face=serif size=2>&nbsp;<B>2006</B>&nbsp;</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" bgColor=#c0c0c0><FONT face=serif size=2><B>ASSETS</B>&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2></FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2></FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CURRENT ASSETS:&nbsp;<FONT size=3>
      </FONT></FONT></TD>
    <TD noWrap align=left width="4%"><FONT face=serif size=2></FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=left width="4%"><FONT face=serif size=2>&nbsp;
  </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash
      and cash equivalents&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>$244,499 </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>$299,117 </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Receivables:&nbsp;&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=left width="4%"><FONT face=serif size=2></FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=left width="4%"><FONT face=serif size=2>&nbsp;</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Trade
      excluding corporate joint ventures, less allowance for
      doubtful&nbsp;&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2></FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2></FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;accounts
      of $30,000 &amp; $10,000 at August 31, 2007 &amp; 2006,
      respectively&nbsp;&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>1,622,420 </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>1,772,568 </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Trade
      corporate joint ventures&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=right width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>642,518 </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=right width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>598,162 </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Technical
      and other services, corporate joint ventures&nbsp;<FONT size=3>
      </FONT></FONT></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp;&nbsp;</FONT>1,514,139 </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>1,357,754 </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income
      taxes&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=right width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp;</FONT>29,755 </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=right width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>333,819 </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories&nbsp;&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp;</FONT>1,636,073 </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>1,377,953 </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid
      expenses&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=right width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp;&nbsp; </FONT>184,407 </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=right width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>233,648 </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred
      income taxes&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>562,000
      </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>237,088
      </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
      current assets&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>6,435,811
      </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>6,210,109
      </FONT></TD></TR>
  <TR>
    <TD width="100%" colSpan=4>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PROPERTY AND EQUIPMENT,
      net&nbsp;&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>3,792,461 </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>3,430,573 </FONT></TD></TR>
  <TR>
    <TD width="100%" colSpan=4>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;OTHER ASSETS:&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;</FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2></FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investments
      in corporate joint ventures:&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=left width="4%"><FONT face=serif size=2></FONT></TD>
    <TD noWrap align=left width="2%"><FONT face=serif size=2>&nbsp;</FONT></TD>
    <TD noWrap align=left width="4%"><FONT face=serif size=2>&nbsp;
  </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Industrial
      chemical&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>13,180,576 </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>10,397,463 </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Industrial
      non-chemical&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=right width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>422,266 </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=right width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>374,639</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred
      income taxes&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>779,500 </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>628,197 </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notes
      receivable and foreign deposit&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=right width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>- </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=right width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>497,179 </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Note
      from employee&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>32,187 </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>56,679 </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Industrial
      patents and trademarks, net&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=right width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>983,206 </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=right width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>996,592 </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Goodwill&nbsp;&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>304,000 </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>304,000 </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other&nbsp;&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>366,749
      </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>375,199
      </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" bgColor=#c0c0c0><FONT face=serif size=2></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>16,068,484 </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>13,629,948 </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%"><FONT face=serif size=2>&nbsp;
</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=right width="4%"><FONT face=serif size=2>$26,296,756 </FONT></TD>
    <TD noWrap align=right width="2%"></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=right width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>$23,270,630
      </FONT></TD></TR>
  <TR>
    <TD width="100%" colSpan=4>&nbsp;&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" bgColor=#c0c0c0><FONT face=serif size=2><B>LIABILITIES AND STOCKHOLDERS&#146; EQUITY</B>&nbsp;<FONT size=3>
      </FONT></FONT></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2></FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2></FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CURRENT LIABILITIES:&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=left width="4%"><FONT face=serif size=2></FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=left width="4%"><FONT face=serif size=2>&nbsp;
  </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bank
      overdrafts&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>$- </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>$328,804 </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Borrowings
      made on line of credit&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=right width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>- </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=right width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>610,000 </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current
      portion of note payable&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>29,319 </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>27,310 </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts
      payable&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=right width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>1,337,443 </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=right width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>1,775,926 </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued
      liabilities:&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2></FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2></FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Payroll
      and related benefits&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=right width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>1,025,858 </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#ffffff></TD>
    <TD noWrap align=right width="4%" bgColor=#ffffff><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>1,056,556 </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred
      joint venture royalties&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>192,000 </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>96,000 </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other&nbsp;&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>62,414
    </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>94,179
    </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
      current liabilities&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>2,647,034 </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>3,988,775 </FONT></TD></TR>
  <TR>
    <TD width="100%" colSpan=4>&nbsp;&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOTE PAYABLE, NET OF CURRENT
      PORTION&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>1,211,528 </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>1,240,848 </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MINORITY INTEREST&nbsp;<FONT size=3>
      </FONT></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>36,133
    </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>55,254
    </FONT></TD></TR>
  <TR>
    <TD width="100%" colSpan=4>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;STOCKHOLDERS&#146; EQUITY:&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif>&nbsp;</FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2></FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Preferred
      stock, no par value; authorized 10,000 shares; none issued
      and&nbsp;&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=left width="4%"><FONT face=serif>&nbsp;</FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=left width="4%"><FONT face=serif size=2>&nbsp;
  </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;outstanding&nbsp;&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=right width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>- </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=right width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>- </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common
      stock, $0.02 par value per share; authorized 10,000,000&nbsp;<FONT size=3>
      </FONT></FONT></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif>&nbsp;</FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2></FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares;
      issued and outstanding 3,683,016 and 3,618,993,
      respectively&nbsp;&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>73,660 </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>72,380 </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additional
      paid-in capital&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=right width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>4,755,146 </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=right width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>4,272,635 </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Retained
      earnings&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>16,118,982 </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>12,895,574 </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accumulated
      other comprehensive income&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>1,454,273
      </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>745,164
      </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
      stockholders&#146; equity&nbsp;<FONT size=3> </FONT></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>22,402,061 </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>17,985,753 </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%"><FONT face=serif size=2>&nbsp;
</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=right width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>$26,296,756
      </FONT></TD>
    <TD noWrap align=right width="2%"></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=right width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>$23,270,630
      </FONT></TD></TR></TABLE><BR>
<P align=justify><FONT face=serif size=2>See notes to consolidated financial
statements. </FONT></P>
<P align=center><FONT face=serif size=2>39 </FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE><BR>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD noWrap align=left width="100%"><FONT face=serif><B><FONT face=serif size=4>NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION</FONT></B>&nbsp;
      </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%"><FONT face=serif><B><FONT face=serif size=4>AND SUBSIDIARIES</FONT></B>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%"><FONT face=serif><B><FONT face=serif size=2>CONSOLIDATED STATEMENTS OF INCOME</FONT></B>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="100%"><FONT face=serif><B><FONT face=serif size=2>YEARS ENDED
      AUGUST 31, 2007 AND 2006</FONT></B>&nbsp; </FONT></TD></TR></TABLE><BR>
<TABLE style="FONT-SIZE: 12pt; LINE-HEIGHT: 14pt" cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD noWrap align=left width="89%"><FONT face=serif size=2>&nbsp;
</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=center width="4%" colSpan=2><FONT face=serif size=2>&nbsp;<STRONG>2007</STRONG> </FONT></TD>
    <TD noWrap align=center width="2%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=center width="4%" colSpan=2><FONT face=serif size=2>&nbsp;<STRONG>2006</STRONG>
</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>NORTH AMERICAN OPERATIONS:&nbsp; </FONT></TD>
    <TD noWrap align=left width="3%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="3%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%"><FONT face=serif size=2>&nbsp; &nbsp;
      &nbsp;Net sales&nbsp; </FONT></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2>$16,829,030
      </FONT></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=right width="2%"></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2>$16,604,964
      </FONT></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>&nbsp;
  </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cost of sales&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>10,799,180 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>10,346,437 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross profit&nbsp; </FONT></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2>6,029,850
    </FONT></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2>6,258,527
    </FONT></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>&nbsp;
  </FONT></TD></TR>
  <TR>
    <TD width="99%" colSpan=6><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating expenses:&nbsp; </FONT></TD>
    <TD noWrap align=left width="3%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="3%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling&nbsp;
      </FONT></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2>3,214,170
    </FONT></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2>3,075,072
    </FONT></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>&nbsp;
  </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General
      and administrative&nbsp; </FONT></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>3,083,314 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>2,795,194 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lab and
      technical support&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="3%"><FONT face=serif size=2>229,988 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="1%"><FONT face=serif size=2>&nbsp;&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="3%"><FONT face=serif size=2>296,676 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="1%"><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>6,527,472 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>6,166,942 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR>
    <TD width="99%" colSpan=6><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NORTH AMERICAN OPERATING (LOSS)
      INCOME&nbsp; </FONT></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>(497,622 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>)&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>91,585 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR>
    <TD width="99%" colSpan=6><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>CORPORATE JOINT VENTURES AND&nbsp; </FONT></TD>
    <TD noWrap align=left width="3%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="3%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;HOLDING COMPANIES:&nbsp; </FONT></TD>
    <TD noWrap align=left width="3%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="3%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#ffffff><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Equity
      in income of industrial chemical corporate&nbsp; </FONT></TD>
    <TD noWrap align=left width="3%" bgColor=#ffffff></TD>
    <TD noWrap align=left width="1%" bgColor=#ffffff><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#ffffff></TD>
    <TD noWrap align=left width="3%" bgColor=#ffffff></TD>
    <TD noWrap align=left width="1%" bgColor=#ffffff><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#ffffff><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;joint
      ventures and holding companies&nbsp; </FONT></TD>
    <TD noWrap align=right width="3%" bgColor=#ffffff><FONT face=serif size=2>3,100,895 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#ffffff><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#ffffff></TD>
    <TD noWrap align=right width="3%" bgColor=#ffffff><FONT face=serif size=2>2,678,901 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#ffffff><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Equity
      in income of industrial non-chemical&nbsp; </FONT></TD>
    <TD noWrap align=left width="3%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="3%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;corporate
      joint ventures and holding companies&nbsp; </FONT></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>100,726 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>34,195 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#ffffff><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fees
      for technical support and other services&nbsp; </FONT></TD>
    <TD noWrap align=left width="3%" bgColor=#ffffff></TD>
    <TD noWrap align=left width="1%" bgColor=#ffffff><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#ffffff></TD>
    <TD noWrap align=left width="3%" bgColor=#ffffff></TD>
    <TD noWrap align=left width="1%" bgColor=#ffffff><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#ffffff><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;provided
      to corporate joint ventures&nbsp; </FONT></TD>
    <TD noWrap align=right width="3%" bgColor=#ffffff><FONT face=serif size=2>4,976,194 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#ffffff><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#ffffff></TD>
    <TD noWrap align=right width="3%" bgColor=#ffffff><FONT face=serif size=2>4,695,124 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#ffffff><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Expenses
      incurred in support of corporate&nbsp; </FONT></TD>
    <TD noWrap align=left width="3%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="3%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;joint
      ventures&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>(4,876,928 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>)&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>(5,481,757 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>)&nbsp; </FONT></TD></TR>
  <TR>
    <TD width="99%" colSpan=6><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>INCOME FROM ALL CORPORATE JOINT&nbsp; </FONT></TD>
    <TD noWrap align=left width="3%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="3%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;VENTURES AND HOLDING COMPANIES&nbsp;
      </FONT></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>3,300,887 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>1,926,463 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR>
    <TD width="99%" colSpan=6><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>INTEREST INCOME&nbsp; </FONT></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>4,165 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>34,251 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%"><FONT face=serif size=2>INTEREST
      EXPENSE&nbsp; </FONT></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2>(164,372
    </FONT></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>)&nbsp;
</FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2>(94,751
    </FONT></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>)&nbsp;
  </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>OTHER INCOME&nbsp; </FONT></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>20,934 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>3,233 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%"><FONT face=serif size=2>GAIN ON SALE OF
      ASSETS&nbsp; </FONT></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2>726,295
    </FONT></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2>- </FONT></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>&nbsp;
  </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>MINORITY INTEREST&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>19,121 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>12,284 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR>
    <TD width="99%" colSpan=6><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>INCOME BEFORE INCOME TAX EXPENSE&nbsp; </FONT></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>3,409,408 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>1,973,065 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR>
    <TD width="99%" colSpan=6><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>INCOME TAX EXPENSE&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>186,000 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>254,000 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp; </FONT></TD></TR>
  <TR>
    <TD width="99%" colSpan=6><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>NET INCOME&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>$3,223,408 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp; </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>$1,719,065 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR>
    <TD width="99%" colSpan=6><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>NET INCOME PER COMMON SHARE:&nbsp; </FONT></TD>
    <TD noWrap align=left width="3%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="3%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic&nbsp;
      </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=right width="3%"><FONT face=serif size=2>$0.88 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=left width="1%"><FONT face=serif size=2>&nbsp;&nbsp; </FONT></TD>
    <TD noWrap align=right width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=right width="3%"><FONT face=serif size=2>$0.48 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=left width="1%"><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diluted&nbsp;
      </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>$0.87 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>$0.47 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR>
    <TD width="99%" colSpan=6><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>WEIGHTED AVERAGE COMMON SHARES&nbsp; </FONT></TD>
    <TD noWrap align=left width="3%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="3%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ASSUMED OUTSTANDING:&nbsp; </FONT></TD>
    <TD noWrap align=left width="3%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="3%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic&nbsp;
      </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=right width="3%"><FONT face=serif size=2>3,661,824 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=left width="1%"><FONT face=serif size=2>&nbsp;&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=right width="3%"><FONT face=serif size=2>3,603,340 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=left width="1%"><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diluted&nbsp;
      </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>3,695,166 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>3,630,677 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp; </TD></TR></TABLE><BR>
<P align=justify><FONT face=serif size=2>See notes to consolidated financial
statements. </FONT><FONT face=serif size=2></FONT></P>
<P align=center><FONT face=serif size=2>40 </FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE><BR>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD noWrap align=left width="100%"><FONT face=serif><B><FONT face=serif size=4>NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION</FONT></B>&nbsp;
      </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%"><FONT face=serif><B><FONT face=serif size=4>AND SUBSIDIARIES</FONT></B>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%"><FONT face=serif><B><FONT face=serif size=2>CONSOLIDATED STATEMENTS OF STOCKHOLDERS&#146; EQUITY</FONT></B>&nbsp;
      </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="100%"><FONT face=serif><B><FONT face=serif size=2>AUGUST 31, 2007
      AND 2006</FONT></B>&nbsp; </FONT></TD></TR></TABLE><BR>
<TABLE style="FONT-SIZE: 12pt; LINE-HEIGHT: 14pt" cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD noWrap align=left width="65%"><FONT face=serif size=2>&nbsp;
</FONT></TD>
    <TD noWrap align=left width="4%"><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=left width="4%"><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=left width="4%"><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=left width="4%"><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2>&nbsp;<STRONG>Accumulated</STRONG> </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=left width="4%"><FONT face=serif size=2>&nbsp;
  </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="65%"><FONT face=serif size=2>&nbsp;
</FONT></TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2>&nbsp;
    </FONT></TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2>&nbsp;
    </FONT></TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2>&nbsp;<STRONG>Additional</STRONG>&nbsp;</FONT></TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2>&nbsp;
    </FONT></TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2>&nbsp;<STRONG>Other</STRONG> </FONT></TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2>&nbsp;<STRONG>Total</STRONG> </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="65%"><FONT face=serif size=2>&nbsp;
</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="10%" colSpan=3><FONT face=serif size=2>&nbsp;<STRONG>Common
      Stock</STRONG>&nbsp;</FONT></TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2>&nbsp;<B>Paid-in</B>&nbsp;</FONT></TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2>&nbsp;<STRONG>Retained</STRONG></FONT></TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2>&nbsp;<STRONG>Comprehensive</STRONG> </FONT></TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2>&nbsp;<STRONG>Stockholders&#146;</STRONG> </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="65%"><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="4%"><FONT face=serif size=2>&nbsp;<STRONG>Shares</STRONG>&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="2%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="4%"><FONT face=serif size=2>&nbsp;<STRONG>Amount</STRONG>&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="2%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="4%"><FONT face=serif size=2>&nbsp;<B>Capital</B>&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="2%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="4%"><FONT face=serif size=2>&nbsp;<STRONG>Earnings</STRONG>
    </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="2%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="4%"><FONT face=serif size=2>&nbsp;<STRONG>Income</STRONG>
</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="2%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="4%"><FONT face=serif size=2>&nbsp;<STRONG>Equity</STRONG>
  </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="65%" bgColor=#c0c0c0><FONT face=serif size=2>BALANCE AT AUGUST 31, 2005, </FONT></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>3,589,993 </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>$71,800 </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>$4,140,095 </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>$11,176,509 </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>$434,477 </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>$15,822,881 </FONT></TD></TR>
  <TR>
    <TD width="99%" colSpan=12>&nbsp;&nbsp;&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="65%" bgColor=#c0c0c0><FONT face=serif size=2>Exercise of stock options </FONT></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>29,000 </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>580 </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>132,540 </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>- </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>- </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>133,120 </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="65%"><FONT face=serif size=2>Comprehensive
      income, 2006: </FONT></TD>
    <TD noWrap align=left width="4%"><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=left width="4%"><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=left width="4%"><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=left width="4%"><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=left width="4%"><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=left width="4%"><FONT face=serif size=2>&nbsp;
  </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="65%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; Foreign currency translation </FONT></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="65%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; adj. </FONT></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>- </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>- </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>- </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>- </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>310,687 </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>310,687 </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="65%" bgColor=#ffffff><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; Net income </FONT></TD>
    <TD noWrap align=right width="4%" bgColor=#ffffff><FONT face=serif size=2>- </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#ffffff></TD>
    <TD noWrap align=right width="4%" bgColor=#ffffff><FONT face=serif size=2>- </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#ffffff></TD>
    <TD noWrap align=right width="4%" bgColor=#ffffff><FONT face=serif size=2>- </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#ffffff></TD>
    <TD noWrap align=right width="4%" bgColor=#ffffff><FONT face=serif size=2>1,719,065 </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#ffffff></TD>
    <TD noWrap align=right width="4%" bgColor=#ffffff><FONT face=serif size=2>- </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#ffffff></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="4%" bgColor=#ffffff><FONT face=serif size=2>1,719,065 </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="65%" bgColor=#c0c0c0><FONT face=serif size=2>Comprehensive income, 2006 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp; </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>2,029,752 </FONT></TD></TR>
  <TR>
    <TD width="99%" colSpan=12>&nbsp;&nbsp;&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="65%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; BALANCE AT AUGUST 31, 2006 </FONT></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>3,618,993 </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>72,380 </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>4,272,635 </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>12,895,574 </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>745,164 </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>17,985,753 </FONT></TD></TR>
  <TR>
    <TD width="99%" colSpan=12><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="65%" bgColor=#c0c0c0><FONT face=serif size=2>Stock issued in lieu of accrued&nbsp; </FONT></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="65%" bgColor=#c0c0c0><FONT face=serif size=2>payroll </FONT></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>37,245 </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>745 </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>297,585 </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>298,330 </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="65%"><FONT face=serif size=2>Exercise of
      stock options </FONT></TD>
    <TD noWrap align=right width="4%"><FONT face=serif size=2>26,778
</FONT></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=2>&nbsp;</FONT></TD>
    <TD noWrap align=right width="4%"><FONT face=serif size=2>535 </FONT></TD>
    <TD noWrap align=right width="2%"></TD>
    <TD noWrap align=right width="4%"><FONT face=serif size=2>125,381
    </FONT></TD>
    <TD noWrap align=right width="2%"></TD>
    <TD noWrap align=right width="4%"><FONT face=serif size=2>- </FONT></TD>
    <TD noWrap align=right width="2%"></TD>
    <TD noWrap align=right width="4%"><FONT face=serif size=2>- </FONT></TD>
    <TD noWrap align=right width="2%"></TD>
    <TD noWrap align=right width="4%"><FONT face=serif size=2>125,916
    </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="65%" bgColor=#c0c0c0><FONT face=serif size=2>Stock option expense </FONT></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>59,545 </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>59,545 </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="65%"><FONT face=serif size=2>Comprehensive
      income, 2007: </FONT></TD>
    <TD noWrap align=left width="4%"><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=left width="4%"><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%"><FONT face=serif size=2>&nbsp;</FONT></TD>
    <TD noWrap align=left width="4%"><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=left width="4%"><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=left width="4%"><FONT face=serif size=2>&nbsp;</FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=left width="4%"><FONT face=serif size=2>&nbsp;
  </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="65%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; Foreign currency translation </FONT></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="65%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; adj. </FONT></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>- </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>- </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>- </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;</FONT></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>- </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;</FONT></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>709,109 </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>709,109 </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="65%" bgColor=#ffffff><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; Net income </FONT></TD>
    <TD noWrap align=right width="4%" bgColor=#ffffff><FONT face=serif size=2>- </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#ffffff></TD>
    <TD noWrap align=right width="4%" bgColor=#ffffff><FONT face=serif size=2>- </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#ffffff></TD>
    <TD noWrap align=right width="4%" bgColor=#ffffff><FONT face=serif size=2>- </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#ffffff></TD>
    <TD noWrap align=right width="4%" bgColor=#ffffff><FONT face=serif size=2>3,223,408 </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#ffffff></TD>
    <TD noWrap align=right width="4%" bgColor=#ffffff><FONT face=serif size=2>- </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#ffffff><FONT face=serif size=2>&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="4%" bgColor=#ffffff><FONT face=serif size=2>3,223,408 </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="65%" bgColor=#c0c0c0><FONT face=serif size=2>Comprehensive income, 2007 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; &nbsp;</FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp; </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>3,932,517 </FONT></TD></TR>
  <TR>
    <TD width="99%" colSpan=12><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="65%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; BALANCE AT AUGUST 31, 2007 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>3,683,016 </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>$73,660 </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>$4,755,146 </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>$16,118,982 </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>$1,454,273 </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>$22,402,061
</FONT></TD></TR></TABLE><BR>
<P align=justify><FONT face=serif size=2>See notes to consolidated financial
statements. </FONT></P>
<P align=center><FONT face=serif size=2>41 </FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE><BR>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD noWrap align=left width="100%"><FONT face=serif><B><FONT face=serif size=4>NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION</FONT></B>&nbsp;
      </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%"><FONT face=serif><B><FONT face=serif size=4>AND SUBSIDIARIES</FONT></B>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%"><FONT face=serif><B><FONT face=serif size=2>CONSOLIDATED STATEMENTS OF CASH FLOWS</FONT></B>&nbsp;
</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="100%"><FONT face=serif><B><FONT face=serif size=2>YEARS ENDED
      AUGUST 31, 2007 and 2006</FONT></B>&nbsp; </FONT></TD></TR></TABLE><BR>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD noWrap align=left width="89%"><FONT face=serif size=2>&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp; </FONT></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="4%" colSpan=2><FONT face=serif size=2><FONT size=3>&nbsp;</FONT><STRONG>2007</STRONG><FONT size=3>&nbsp;&nbsp;
      </FONT></FONT></TD>
    <TD noWrap align=center width="2%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="4%" colSpan=2><FONT face=serif size=2><FONT size=3><FONT size=3>&nbsp;</FONT></FONT><STRONG>2006</STRONG><FONT size=3><FONT size=3>&nbsp;</FONT></FONT></FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>CASH FLOWS FROM OPERATING ACTIVITIES:&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp; </FONT></FONT></TD>
    <TD noWrap align=left width="3%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="3%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%"><FONT face=serif size=2>&nbsp; &nbsp;
      &nbsp;Net income&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp; </FONT></FONT></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>$3,223,408 </FONT></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=right width="2%"></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>$1,719,065 </FONT></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>&nbsp;</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; &nbsp; &nbsp;Adjustments to reconcile net income to net cash
      provided by (used in) operating activities:&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp; </FONT></FONT></TD>
    <TD noWrap align=left width="3%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="3%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Expensing
      of fair value of stock options vested&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp;
      </FONT></FONT></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp; </FONT>59,545 </FONT></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp;</FONT>- </FONT></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>&nbsp;
  </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation
      expense&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp; </FONT></FONT></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp; </FONT>313,719 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp;</FONT>199,011 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization
      expense&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp; </FONT></FONT></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp; </FONT>146,750 </FONT></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>160,381 </FONT></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>&nbsp;
  </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; Gain on sale of
      assets&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp; </FONT></FONT></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp; </FONT>(726,295 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>)<FONT size=3>&nbsp;</FONT></FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>- </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#ffffff><FONT face=serif size=2>&nbsp; &nbsp; &nbsp; &nbsp;&nbsp; &nbsp;Minority
      interest&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp; </FONT></FONT></TD>
    <TD noWrap align=right width="3%" bgColor=#ffffff><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp; </FONT>(19,121 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#ffffff><FONT face=serif size=2>)<FONT size=3>&nbsp;</FONT></FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#ffffff></TD>
    <TD noWrap align=right width="3%" bgColor=#ffffff><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>(12,284 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#ffffff><FONT face=serif size=2>)<FONT size=3>&nbsp;</FONT></FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; Reserve of notes
      receivable&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp; </FONT></FONT></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp; </FONT>- </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>571,179 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%"><FONT face=serif size=2>&nbsp; &nbsp;
      &nbsp; &nbsp; &nbsp; Equity in (income) loss from corporate joint
      ventures:&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp; </FONT></FONT></TD>
    <TD noWrap align=left width="3%"></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=left width="3%"></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>&nbsp;
  </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Industrial
      chemical&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp; </FONT></FONT></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>(3,100,891 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>)<FONT size=3>&nbsp;</FONT></FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>(2,678,901 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>)&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Industrial
      non-chemical&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp; </FONT></FONT></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp; </FONT>(100,726 </FONT></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>)&nbsp;
</FONT></TD>
    <TD noWrap align=left width="2%"><FONT face=serif size=2>&nbsp;</FONT></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>(34,195 </FONT></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>)&nbsp;
  </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; Deferred income
      taxes&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp; </FONT></FONT></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp; </FONT>(476,215 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>)&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>(341,000 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>)&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%"><FONT face=serif size=2>&nbsp; &nbsp;
      &nbsp; &nbsp; &nbsp; Deferred gross profit&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp; </FONT></FONT></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp; </FONT>- </FONT></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>- </FONT></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>&nbsp;
  </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; Deferred joint venture
      royalties&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp; </FONT></FONT></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp; </FONT>96,000 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>21,298 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%"><FONT face=serif size=2>&nbsp; &nbsp;
      &nbsp; &nbsp; &nbsp; Change in current assets and
      liabilities:&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp; </FONT></FONT></TD>
    <TD noWrap align=left width="3%"><FONT face=serif size=2>&nbsp;</FONT></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=left width="3%"></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>&nbsp;
  </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Receivables:&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp; </FONT></FONT></TD>
    <TD noWrap align=left width="3%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="3%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Trade
      excluding corporate joint ventures&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp;
      </FONT></FONT></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp; </FONT>150,148 </FONT></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>218,021 </FONT></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>&nbsp;
  </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Trade
      corporate joint ventures&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp;
      </FONT></FONT></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp; </FONT>(44,356 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>)<FONT size=3>&nbsp;</FONT></FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>(147,319 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>)<FONT size=3>&nbsp;</FONT></FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Technical
      and other services receivables, corporate joint ventures&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp; </FONT></FONT></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>(156,385 </FONT></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>)<FONT size=3>&nbsp;</FONT></FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>(264,066 </FONT></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>)<FONT size=3>&nbsp;</FONT></FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income
      taxes&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp; </FONT></FONT></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp; </FONT>304,064 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>183,200 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      Inventories&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp; </FONT></FONT></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp; </FONT>(258,120 </FONT></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>)<FONT size=3>&nbsp;</FONT></FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>169,816 </FONT></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>&nbsp;
  </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      Prepaid expenses and other&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp;
      </FONT></FONT></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp; </FONT>49,241 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>(84,010 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>)<FONT size=3>&nbsp;</FONT></FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      Employee note receivable&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp;
      </FONT></FONT></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp; </FONT>24,492 </FONT></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>25,437 </FONT></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>&nbsp;
  </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      Accounts payable&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp; </FONT></FONT></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp; </FONT>(438,483 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>)<FONT size=3>&nbsp;</FONT></FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>491,142 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      Accrued liabilities&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp; </FONT></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="3%"><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp;
      </FONT>235,867 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="1%"><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="3%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>658,692
      </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="1%"><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
      cash (used in) provided by operating activities&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp; </FONT></FONT></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp; </FONT>(717,358 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>)<FONT size=3>&nbsp;</FONT></FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>855,467 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR>
    <TD width="99%" colSpan=6><FONT face=serif size=2>&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp; </FONT></FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>CASH FLOWS FROM INVESTING ACTIVITIES:&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp; </FONT></FONT></TD>
    <TD noWrap align=left width="3%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="3%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%"><FONT face=serif size=2>&nbsp; &nbsp;
      &nbsp;Investment in joint ventures:&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp;
      </FONT></FONT></TD>
    <TD noWrap align=left width="3%"></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=left width="3%"></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>&nbsp;
  </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; &nbsp; &nbsp; &nbsp;&nbsp; &nbsp;Industrial
      chemical&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp; </FONT></FONT></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp; </FONT>(563,104 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>)<FONT size=3>&nbsp;</FONT></FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>(25,000 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>)<FONT size=3>&nbsp;</FONT></FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%"><FONT face=serif size=2>&nbsp; &nbsp;
      &nbsp;Proceeds from the sale of assets&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp; </FONT></FONT></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp; </FONT>850,367 </FONT></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>- </FONT></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>&nbsp;
  </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; &nbsp; &nbsp;Dividends received from corporate joint
      ventures&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp; </FONT></FONT></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp; </FONT>1,643,091 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>899,042 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%"><FONT face=serif size=2>&nbsp; &nbsp;
      &nbsp;Cash received on loans made&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp;
      </FONT></FONT></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp; </FONT>497,179 </FONT></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>454,564 </FONT></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>&nbsp;
  </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; &nbsp; &nbsp;Additions to property and
      equipment&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      </FONT></FONT></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp; </FONT>(799,680 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>)<FONT size=3>&nbsp;</FONT></FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>(2,908,938 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>)<FONT size=3>&nbsp;</FONT></FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%"><FONT face=serif size=2>&nbsp; &nbsp;
      &nbsp;Decrease in other assets&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </FONT></FONT></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp; </FONT>8,450 </FONT></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>8,068 </FONT></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>&nbsp;
  </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; &nbsp; &nbsp;Disposals of industrial
      patents&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp; </FONT></FONT></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp; </FONT>- </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>63,211 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%"><FONT face=serif size=2>&nbsp; &nbsp;
      &nbsp;Additions to industrial patents&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp;
      </FONT></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="3%"><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp;
      </FONT>(133,364 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="1%"><FONT face=serif size=2>)<FONT size=3>&nbsp;</FONT></FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="3%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>(159,967
      </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="1%"><FONT face=serif size=2>)<FONT size=3>&nbsp;</FONT></FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
      cash provided by (used in) investing activities&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp; </FONT></FONT></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp; </FONT>1,502,939 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>(1,669,020 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>)<FONT size=3>&nbsp;</FONT></FONT></TD></TR>
  <TR>
    <TD width="99%" colSpan=6><FONT face=serif size=2>&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp; </FONT></FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>CASH FLOWS FROM FINANCING ACTIVITIES:&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp; </FONT></FONT></TD>
    <TD noWrap align=left width="3%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="3%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%"><FONT face=serif size=2>&nbsp; &nbsp;
      &nbsp;Bank overdraft&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp;
</FONT></FONT></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp; </FONT>(328,804 </FONT></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>)<FONT size=3>&nbsp;</FONT></FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>328,804 </FONT></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>&nbsp;
  </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; &nbsp; &nbsp;(Repayment) borrowing of term
      loan&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp; </FONT></FONT></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp; </FONT>(27,311 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>)<FONT size=3>&nbsp;</FONT></FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>1,275,000 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%"><FONT face=serif size=2>&nbsp; &nbsp;
      &nbsp;Repayment of note payable&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp;
      </FONT></FONT></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp; </FONT>- </FONT></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>(561,712 </FONT></TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>)<FONT size=3>&nbsp;</FONT></FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; &nbsp; &nbsp;Net repayments made on line of
      credit&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp; </FONT></FONT></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp; </FONT>(610,000 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>)<FONT size=3>&nbsp;</FONT></FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>(390,000 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>)<FONT size=3>&nbsp;</FONT></FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%"><FONT face=serif size=2>&nbsp; &nbsp;
      &nbsp;Stock options exercised&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp;
      </FONT></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="3%"><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp;
      </FONT>125,916 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="1%"><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="3%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>133,120
      </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="1%"><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
      cash (used in) provided by financing activities&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp; </FONT></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp;
      </FONT>(840,199 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>)<FONT size=3>&nbsp;</FONT></FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>785,212
      </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR>
    <TD width="99%" colSpan=6><FONT face=serif size=2>&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp; </FONT></FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>NET DECREASE IN CASH AND CASH EQUIVALENTS&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp; </FONT></FONT></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp; </FONT>(54,618 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>)<FONT size=3>&nbsp;</FONT></FONT></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>(28,341 </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>)<FONT size=3>&nbsp;</FONT></FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%"><FONT face=serif size=2>CASH AND CASH
      EQUIVALENTS AT BEGINNING OF PERIOD&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp;
      </FONT></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="3%"><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp;
      </FONT>299,117 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="1%"><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=left width="2%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="3%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>327,458
      </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="1%"><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
  <TR>
    <TD width="99%" colSpan=6>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>CASH AND CASH EQUIVALENTS AT END OF PERIOD&nbsp;&nbsp;<FONT size=3>&nbsp;&nbsp; </FONT></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp;
      </FONT>$244,499 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp; </FONT></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>$299,117
      </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;
</FONT></TD></TR></TABLE><BR>
<P align=justify><FONT face=serif size=2>See notes to consolidated financial
statements.</FONT><FONT face=sans-serif size=1> </FONT></P>
<P align=center><FONT face=serif size=2>42 </FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE><BR>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD noWrap align=left width="100%"><FONT face=serif><B><FONT face=serif size=4>NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION</FONT></B>&nbsp;
      </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%"><FONT face=serif><B><FONT face=serif size=4>AND SUBSIDIARIES</FONT></B>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="100%"><FONT face=serif><B><FONT face=serif size=2>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></B>&nbsp;
    </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="100%"><FONT face=serif><B><FONT face=serif size=2>YEARS ENDED
      AUGUST 31, 2007 AND 2006</FONT></B>&nbsp; </FONT></TD></TR></TABLE><BR>
<P align=justify><B><FONT face=serif size=2>1. NATURE OF BUSINESS AND
SIGNIFICANT ACCOUNTING POLICIES </FONT></B></P>
<P align=justify><I><FONT face=serif size=2>Nature of Business </FONT></I><FONT face=serif size=2>&#150; Northern Technologies International Corporation and
Subsidiaries (the Company) develops, manufactures, markets and sells primarily
rust and corrosion protection products and custom packaging systems for
primarily automotive, electronics, electrical, mechanical and military
applications, sold under the brand name Zerust<SUP>&#174;</SUP></FONT><FONT face=serif size=2> and Excor<SUP>&#174;</SUP></FONT><FONT face=serif size=2>. The
Company sells its products, as well as technical services, directly and via a
network of independent distributors, manufacturer sales representatives and
joint ventures in over 50 countries. The Company participates, either directly
or indirectly through holding companies, in 29 corporate joint venture
arrangements in North America, South America, Europe, Asia and the Middle East.
Each of these joint ventures manufactures, markets and sells finished products
generally in the countries to which it is assigned. While most of the Company&#146;s
joint ventures currently sell rust and corrosion inhibiting products and custom
packaging systems, the Company also has joint ventures that manufacture, market
and sell bio-based additives with industrial and personal care applications,
plastic recycling technology and electronic sensing instruments. </FONT></P>
<P align=justify><I><FONT face=serif size=2>Sales Originating in North
America</FONT></I><FONT face=serif size=2> &#150; The Company considers sales
originating in North America to be all sales shipped/invoiced from the Company&#146;s
facilities located in Minnesota and Ohio. There are no sales from the Corporate
Joint Ventures included in the amount, as the Company&#146;s investments in Corporate
Joint Ventures are accounted for using the equity method, except for React-NTI
LLC.</FONT></P>
<P align=justify><I><FONT face=serif size=2>Cash and Cash
Equivalents</FONT></I><FONT face=serif size=2> - The Company includes as cash
and cash equivalents highly liquid, short-term investments with maturity of
three months or less when purchased, which are readily convertible into known
amounts of cash. The Company maintains its cash in high quality financial
institutions. The balances, at times, may exceed federally insured limits.
</FONT></P>
<P align=justify><I><FONT face=serif size=2>Accounts Receivable</FONT></I><FONT face=serif size=2> - The Company reviews customers&#146; credit history before
extending unsecured credit and establishes an allowance for uncollectible
accounts based upon factors surrounding the credit risk of specific customers
and other information. Accounts receivable over 30 days are considered past due
for most customers. The Company does not accrue interest on past due accounts
receivable. If accounts receivable in excess of the provided allowance are
determined uncollectible, they are charged to expense in the year that
determination is made. Accounts receivable are deemed uncollectible based on
NTIC exhausting reasonable efforts to collect. Accounts receivable have been
reduced by an allowance for uncollectible accounts of $30,000 and $10,000 on
August 31, 2007 and 2006, respectively. </FONT></P>
<P align=justify><I><FONT face=serif size=2>Inventories</FONT></I><FONT face=serif size=2> - Inventories are recorded at the lower of cost (first-in,
first-out basis) or market. </FONT></P>
<P align=justify><I><FONT face=serif size=2>Property and
Depreciation</FONT></I><FONT face=serif size=2> - 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></P>
<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="50%" border=0>

  <TR vAlign=bottom>
    <TD noWrap align=left width="96%" bgColor=#c0c0c0><FONT face=serif size=2>Buildings and improvements</FONT>&nbsp; </TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>5-30 years<FONT size=3>&nbsp; </FONT></FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="96%"><FONT face=serif size=2>Machinery and
      equipment</FONT>&nbsp; </TD>
    <TD noWrap align=right width="3%"><FONT size=2><FONT face=serif>3-10
      </FONT>years</FONT>&nbsp; </TD></TR></TABLE></DIV><BR>
<P align=justify><I><FONT face=serif size=2>Investments in Corporate Joint
Ventures</FONT></I><FONT face=serif size=2> - Investments in Corporate Joint
Ventures are accounted for using the equity method, except React-NTI LLC.
Periodically, the Company evaluates the investments <FONT face=serif size=2>for
any impairment and assesses the future cash flow projections to determine if
there are any going concern issues. If an investment were determined to be
impaired then a reserve would be created to reflect the impairment on the
financial results of the Company.&nbsp;</FONT>&nbsp;</FONT></P>
<P align=center><FONT face=serif size=2>43 </FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><I><FONT face=serif size=2>Recoverability of Long-Lived
Assets</FONT></I><FONT face=serif size=2> - 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 are
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. For the
years ended August 31, 2007 and 2006, the Company did not record any impairment
charges. </FONT></P>
<P align=justify><I><FONT face=serif size=2>Principles of
Consolidation</FONT></I><FONT face=serif size=2> - The consolidated financial
statements include the accounts of Northern Technologies International
Corporation, its wholly owned subsidiaries, NTI Facilities, Inc. and Northern
Technologies Holding Company, LLC, and its 75% owned subsidiary React-NTI LLC.
All significant intercompany transactions and balances have been eliminated in
consolidation. </FONT></P>
<P align=justify><I><FONT face=serif size=2>Income Taxes</FONT></I><FONT face=serif size=2> - The Company utilizes the liability method of accounting for
income taxes as set forth in Statement of Financial Accounting Standards (SFAS)
No. 109, Accounting for Income Taxes. 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></P>
<P align=justify><I><FONT face=serif size=2>Foreign Currency Translation
(Accumulated Other Comprehensive Income)</FONT></I><FONT face=serif size=2> -
The functional currency of each international corporate joint venture is the
applicable local currency. The translation of the applicable foreign currencies
into U.S. dollars is performed for balance sheet accounts using 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 income. </FONT></P>
<P align=justify><I><FONT face=serif size=2>Revenue Recognition</FONT></I><FONT face=serif size=2> - In recognizing revenue, the Company applies the provisions
of the Securities and Exchange Commission Staff Accounting Bulletin 104, Revenue
Recognition. 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.</FONT><I><FONT face=serif size=2> </FONT></I></P>
<P align=justify><I><FONT face=serif size=2>Shipping and
Handling</FONT></I><FONT face=serif size=2> - The Company records all amounts
billed to customers in a sales transaction related to shipping and handling as
sales. The Company records costs related to shipping and handling in cost of
sales. </FONT></P>
<P align=justify><I><FONT face=serif size=2>Research and Development -
</FONT></I><FONT face=serif size=2>The Company expenses all costs related to
product research and development as incurred. The Company spent $2,575,325 in
fiscal 2007 and $2,043,611 in fiscal 2006 in connection with its research and
development activities. These fees are accounted for in the &#147;Expenses incurred
in support of corporate joint ventures&#148; section of the income statement.
</FONT></P>
<P align=center><FONT face=serif size=2>44 </FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>

<P align=justify><FONT face=serif size=2><i>Fair Value</i> - The carrying value of cash, short-term accounts receivable, inventories, other current assets, trade accounts
payables, and other current liabilities approximate fair value because of the short maturity of those instruments.
The fair values of the Company&#146;s long-term debt approximate their carrying values based upon current market
rates of interest.</FONT></P>

<P align=justify><I><FONT face=serif size=2>Use of Estimates</FONT></I><FONT face=serif size=2> - The preparation of the financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates. </FONT></P>
<P align=justify><B><FONT face=serif size=2>2. RECENTLY ISSUED ACCOUNTING
PRONOUNCEMENTS </FONT></B></P>
<P align=justify><FONT face=serif size=2>In June 2006, the FASB issued FASB
Interpretation 48, &#147;Accounting for Uncertainty in Income Taxes &#151; an
interpretation of SFAS No. 109,&#148; (&#147;FIN 48&#148;). FIN 48 clarifies the accounting for
uncertainty in income taxes recognized in a company&#146;s financial statements in
accordance with SFAS 109, &#147;Accounting for Income Taxes.&#148; This Interpretation
prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to be
taken in a tax return. The Interpretation also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. FIN 48 is required to be adopted by the
Company on September 1, 2007. The Company is currently evaluating the impact of
its adoption of FIN 48 and has not yet determined the effect on its earnings or
financial position. </FONT></P>
<P align=justify><FONT face=serif size=2>In February 2007, the FASB issued SFAS
No. 159, &#147;The Fair Value Option for Financial Assets and
Financial</FONT><I><FONT face=serif size=2> </FONT></I><FONT face=serif size=2>Liabilities - Including an amendment of FASB Statement No. 115&#148; (&#147;SFAS
No. 159&#148;). SFAS No. 159 permits entities to elect to measure many financial
instruments and certain other items at fair value. Upon adoption of SFAS No.
159, an entity may elect the fair value option for eligible items that exist at
the adoption date. Subsequent to the initial adoption, the election of the fair
value option may only be made at initial recognition of the asset or liability
or upon a re-measurement event that gives rise to new-basis accounting. The
decision about whether to elect the fair value option is applied on an
instrument-by-instrument basis, is irrevocable and is applied only to an entire
instrument and not only to specified risks, cash flows or portions of that
instrument. SFAS No. 159 does not affect any existing accounting literature that
requires certain assets and liabilities to be carried at fair value nor does it
eliminate disclosure requirements included in other accounting standards. SFAS
No. 159 is effective for fiscal years beginning after November 15, 2007. The
Company believes the adoption of SFAS No. 159 will not have an impact on its
consolidated financial statements. </FONT></P>
<P align=justify><B><FONT face=serif size=2>3. STOCK-BASED COMPENSATION
</FONT></B></P>
<P align=justify><FONT face=serif size=2>In December 2004, FASB published SFAS
No. 123 (revised 2004), </FONT><I><FONT face=serif size=2>Share-Based
Payment</FONT></I><FONT face=serif size=2>. SFAS 123(R) requires that the
compensation cost relating to share-based payment transactions, including grants
of employee stock options, be recognized in financial statements. That cost will
be measured based on the fair value of the equity or liability instruments
issued. SFAS 123(R) covers a wide range of share-based compensation arrangements
including stock options, restricted share plans, performance-based awards, share
appreciation rights, and employee share purchase plans. SFAS 123(R) is a
replacement of FASB Statement No. 123, </FONT><I><FONT face=serif size=2>Accounting for Stock-Based Compensation</FONT></I><FONT face=serif size=2>, and supersedes APB Opinion No. 25, </FONT><I><FONT face=serif size=2>Accounting for Stock Issued to Employees</FONT></I><FONT face=serif size=2>, and its related interpretive guidance. The effect of the Statement is
to require entities to measure the cost of employee services received in
exchange for stock options based on the grant-date fair value of the award, and
to recognize the cost over the period the employee is required to provide
services for the award. Compensation cost under SFAS 123(R) is recognized
ratably using the straight-line attribution method over the expected vesting
period, which is considered to be the requisite service period. In addition,
pursuant to SFAS 123(R), we are required to estimate the amount of expected
forfeitures when calculating the compensation costs, instead of accounting for
forfeitures as incurred, which was our previous method. All of our options
previously awarded were classified as equity instruments and continue to
maintain their equity classification under SFAS 123(R). SFAS 123(R) permits
entities to use any option-pricing model that meets the fair value <FONT face=serif size=2>objective in the Statement. The Company implemented SFAS
123(R) on September 1, 2006, using the modified prospective transition
method.&nbsp;</FONT>&nbsp;</FONT></P>
<P align=center><FONT face=serif size=2>45 </FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><FONT face=serif size=2>The Company granted options to purchase
15,167 shares of its common stock during fiscal 2007. The fair value of option
grants is determined at date of grant, using the Black-Scholes option pricing
model with the assumptions listed below. The volatility factor used in the
Black-Scholes option pricing model is based on historical stock price
fluctuations and risk free interest rate are based on U.S. treasury rates
appropriate for expected term. Based on these valuations, the Company recognized
compensation expense of $59,545 during fiscal 2007, related to the options that
vested during such time period, which reduced after tax net income per share by
$0.02 for the fiscal year. As of August 31, 2007, the total compensation cost
for nonvested options not yet recognized in the Company&#146;s statements of income
was $65,856, net of estimated forfeitures. Stock-based compensation expense of
$54,867 and $10,989 are expected to be recognized during fiscal 2008 and 2009,
respectively. Future option grants will impact the compensation expense
recognized. </FONT></P>
<P align=justify><FONT face=serif 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></P>
<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="50%" border=0>

  <TR vAlign=bottom>
    <TD noWrap align=left width="89%">&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>August 31,
      2007</FONT> </TD>
    <TD noWrap align=center width="2%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="4%"><FONT face=serif size=2><FONT size=3></FONT>August 31,
      2006</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>Dividend yield</FONT>&nbsp; </TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3></FONT>2.00%</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>2.00%</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%"><FONT face=serif size=2>Expected
      volatility</FONT>&nbsp; </TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>42.9%</FONT> </TD>
    <TD noWrap align=center width="2%">&nbsp;</TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>42.8%</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0><FONT face=serif size=2>Expected life of option</FONT>&nbsp; </TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0>&nbsp;<FONT face=serif size=2>5 years</FONT> </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="4%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>5 years</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%"><FONT face=serif size=2>Average
      risk-free interest rate</FONT>&nbsp; </TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>4.68%</FONT> </TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="4%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>4.45%</FONT> </TD></TR></TABLE></DIV><BR>
<P align=justify><FONT face=serif size=2>Dividend yield and expected volatility
are estimated using historical amounts that are anticipated to be consistent
with current values. Expected life of option is based on the life of the option
agreements. </FONT></P>
<P align=justify><FONT face=serif size=2>Had compensation cost for stock options
been determined based on the fair value methodology prescribed by SFAS 123(R),
the Company&#146;s net income and net income per common share for fiscal 2006 would
have been reduced to the pro forma amounts indicated below: </FONT></P>
<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="50%" border=0>

  <TR vAlign=bottom>
    <TD noWrap align=left width="94%">&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="3%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>August 31,
      2006</FONT>&nbsp; </TD>
    <TD noWrap align=center width="3%">&nbsp;&nbsp;&nbsp;&nbsp;
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="94%" bgColor=#c0c0c0><FONT face=serif size=2>Net income:</FONT>&nbsp; </TD>
    <TD noWrap align=left width="3%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="3%" bgColor=#ffffff>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="94%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>As reported</FONT>&nbsp; </TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2>$1,719,065</FONT> </TD>
    <TD noWrap align=right width="3%" bgColor=#ffffff></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="94%" bgColor=#c0c0c0>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Pro
      forma</FONT>&nbsp; </TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>$1,683,432</FONT> </TD>
    <TD noWrap align=right width="3%" bgColor=#ffffff></TD></TR>
  <TR>
    <TD width="97%" colSpan=2>&nbsp; </TD>
    <TD width="3%" bgColor=#ffffff></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="94%" bgColor=#c0c0c0><FONT face=serif size=2>Basic net income per common share</FONT>&nbsp; </TD>
    <TD noWrap align=left width="3%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="3%" bgColor=#ffffff></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="94%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>As reported</FONT>&nbsp; </TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2>$0.48</FONT> </TD>
    <TD noWrap align=right width="3%" bgColor=#ffffff></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="94%" bgColor=#c0c0c0>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Pro
      forma</FONT>&nbsp; </TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>$0.47</FONT> </TD>
    <TD noWrap align=right width="3%" bgColor=#ffffff></TD></TR>
  <TR>
    <TD width="97%" colSpan=2>&nbsp; </TD>
    <TD width="3%" bgColor=#ffffff></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="94%" bgColor=#c0c0c0><FONT face=serif size=2>Diluted net income per share</FONT>&nbsp; </TD>
    <TD noWrap align=left width="3%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="3%" bgColor=#ffffff></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="94%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>As reported</FONT>&nbsp; </TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2>$0.47</FONT> </TD>
    <TD noWrap align=right width="3%" bgColor=#ffffff></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="94%" bgColor=#c0c0c0>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Pro
      forma</FONT>&nbsp; </TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>$0.46</FONT> </TD>
    <TD noWrap align=right width="3%" bgColor=#ffffff></TD></TR>
  <TR>
    <TD width="97%" bgColor=#ffffff colSpan=2>&nbsp; </TD>
    <TD width="3%" bgColor=#ffffff></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="94%" bgColor=#c0c0c0><FONT face=serif size=2>Stock-based compensation, net:</FONT>&nbsp; </TD>
    <TD noWrap align=left width="3%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="3%" bgColor=#ffffff></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="94%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>As reported</FONT>&nbsp; </TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2>$0</FONT> </TD>
    <TD noWrap align=right width="3%" bgColor=#ffffff></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="94%" bgColor=#c0c0c0>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Pro
      forma</FONT>&nbsp; </TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>$35,633</FONT> </TD>
    <TD noWrap align=right width="3%" bgColor=#ffffff></TD></TR></TABLE></DIV><BR>
<P align=center><FONT face=serif size=2>46 </FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><B><FONT face=serif size=2>4. INVENTORIES </FONT></B></P>
<P align=justify><FONT face=serif size=2>Inventories consisted of the following:
</FONT></P>
<DIV align=center>
<TABLE style="FONT-SIZE: 12pt; LINE-HEIGHT: 14pt; BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="95%" border=0>

  <TR vAlign=bottom>
    <TD align=left width="87%"></TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%"><FONT face=serif size=2>August 31, 2007</FONT></TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%"><FONT face=serif size=2>August 31, 2006</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%" bgColor=#c0c0c0><FONT face=serif size=2>Production materials</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2></FONT></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>$183,658</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2></FONT></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>$353,516</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%"><FONT face=serif size=2>Finished
goods</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="5%"><FONT face=serif size=2>1,452,415</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="5%"><FONT face=serif size=2>1,024,437</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>$1,636,073</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>$1,377,953</FONT></TD></TR></TABLE></DIV><BR>
<P align=justify><B><FONT face=serif size=2>5. PROPERTY AND EQUIPMENT
</FONT></B></P>
<P align=justify><FONT face=serif size=2>Property and equipment consisted of the
following: </FONT></P>
<DIV align=center>
<TABLE style="FONT-SIZE: 12pt; LINE-HEIGHT: 14pt; BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="95%" border=0>

  <TR vAlign=bottom>
    <TD align=left width="79%"></TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="9%" colSpan=2><FONT face=serif size=2>August 31, 2007</FONT></TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="9%" colSpan=2><FONT face=serif size=2>August 31, 2006</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="79%" bgColor=#c0c0c0><FONT face=serif size=2>Land</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2></FONT></TD>
    <TD align=right width="8%" bgColor=#c0c0c0><FONT face=serif size=2>$310,365</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD align=right width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD align=right width="8%" bgColor=#c0c0c0><FONT face=serif size=2>$29,097</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0>&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="79%"><FONT face=serif size=2>Buildings and
      improvements</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="8%"><FONT face=serif size=2>3,048,103</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="8%"><FONT face=serif size=2>3,420,596</FONT></TD>
    <TD align=left width="1%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="79%" bgColor=#c0c0c0><FONT face=serif size=2>Machinery and equipment</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="8%" bgColor=#c0c0c0><FONT face=serif size=2>1,274,707</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="8%" bgColor=#c0c0c0><FONT face=serif size=2>1,024,024</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="79%"></TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="8%"><FONT face=serif size=2>4,633,175</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="8%"><FONT face=serif size=2>4,473,717</FONT></TD>
    <TD align=left width="1%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="79%" bgColor=#c0c0c0><FONT face=serif size=2>Less
      accumulated depreciation</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="8%" bgColor=#c0c0c0><FONT face=serif size=2>(840,714</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>)</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="8%" bgColor=#c0c0c0><FONT face=serif size=2>(1,043,144</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>)</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="79%"></TD>
    <TD align=right width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=serif size=2>$3,792,461</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp;</TD>
    <TD align=right width="1%"><FONT face=serif size=2></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=serif size=2>$3,430,573</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%"></TD></TR></TABLE></DIV><BR>
<P align=justify><FONT face=serif size=2>NTIC recognized a gain on the sale of
land, building and equipment that previously served as its corporate
headquarters of $726,295 during fiscal 2007. This was a one-time sale and no
additional gain is anticipated to be recognized relating to the building in the
future as the entire sale was received in cash and NTIC does not have any
continued interest in the property sold. </FONT></P>
<P align=justify><B><FONT face=serif size=2>6. INDUSTRIAL PATENTS AND
TRADEMARKS, NET </FONT></B></P>
<P align=justify><FONT face=serif size=2>Industrial patents and trademarks, net
consisted of the following: </FONT></P>
<DIV align=center>
<TABLE style="FONT-SIZE: 12pt; LINE-HEIGHT: 14pt; BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="95%" border=0>

  <TR vAlign=bottom>
    <TD align=left width="79%"></TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="9%" colSpan=2><FONT face=serif size=2>August 31, 2007</FONT></TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="9%" colSpan=2><FONT face=serif size=2>August 31, 2006</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="79%" bgColor=#c0c0c0><FONT face=serif size=2>Patents
      and trademarks</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD align=right width="8%" bgColor=#c0c0c0><FONT face=serif size=2>$1,412,209</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD align=right width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD align=right width="8%" bgColor=#c0c0c0><FONT face=serif size=2>$1,278,845</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0>&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="79%"><FONT face=serif size=2>Less accumulated
      amortization</FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="8%"><FONT face=serif size=2>(429,003</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=left width="1%"><FONT face=serif size=2>)</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="8%"><FONT face=serif size=2>(282,253</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=left width="1%"><FONT face=serif size=2>)</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="79%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%" bgColor=#c0c0c0><FONT face=serif size=2>$983,206</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD align=right width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%" bgColor=#c0c0c0><FONT face=serif size=2>$996,592</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%" bgColor=#c0c0c0></TD></TR></TABLE></DIV><BR>
<P align=justify><FONT face=serif size=2>Patent and tradema</FONT><FONT face=serif size=2>rk costs are amortized over seven years once it is filed and
approved. Amortization expense was $146,750 and $160,381, for the years ended
August 31, 2007 and 2006, respectively. Amortization expense is estimated to
approximate $140,000 in each of the next five fiscal years. </FONT></P>
<P align=justify><B><FONT face=serif size=2>7. NOTES RECEIVABLE AND FOREIGN
DEPOSITS </FONT></B></P>
<P align=justify><FONT face=serif size=2>Notes receivable and foreign deposits
consisted of the following: </FONT></P>
<DIV align=center>
<TABLE style="FONT-SIZE: 12pt; LINE-HEIGHT: 14pt; BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="95%" border=0>

  <TR vAlign=bottom>
    <TD align=left width="88%" bgColor=#ffffff></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%" bgColor=#ffffff><FONT face=serif size=2>August 31, 2007</FONT></TD>
    <TD noWrap align=center width="1%" bgColor=#ffffff>&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%" bgColor=#ffffff><FONT face=serif size=2>August 31, 2006</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="88%" bgColor=#c0c0c0><FONT face=serif size=2>Notes
      receivable from corporate joint venture partners</FONT></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>-</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2></FONT></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>$51,710</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="88%"><FONT face=serif size=2>Foreign
    deposits</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="5%"><FONT face=serif size=2>-</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="5%"><FONT face=serif size=2>445,469</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="88%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>-</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>$497,179</FONT></TD></TR></TABLE></DIV><BR>
<P align=center><FONT face=serif size=2>47</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><B><FONT face=serif size=2>8. INVESTMENTS IN CORPORATE JOINT
VENTURES </FONT></B></P>
<P align=justify><FONT face=serif size=2>Composite financial information from
the audited and unaudited financial statements of the Company&#146;s joint ventures
carried on the equity basis is summarized as follows: </FONT></P>
<DIV align=center>
<TABLE style="FONT-SIZE: 12pt; LINE-HEIGHT: 14pt; BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="95%" border=0>

  <TR vAlign=bottom>
    <TD align=left width="87%"></TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%"><FONT face=serif size=2>August 31, 2007</FONT></TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%"><FONT face=serif size=2>August 31, 2006</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%" bgColor=#c0c0c0><FONT face=serif size=2>Current
      assets</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>$42,767,569</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2></FONT></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>$33,954,156</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%"><FONT face=serif size=2>Total
      assets</FONT>&nbsp; </TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="5%"><FONT face=serif size=2>49,312,491</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="5%"><FONT face=serif size=2>39,030,247</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%" bgColor=#c0c0c0><FONT face=serif size=2>Current
      liabilities</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>14,939,496</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>14,323,903</FONT></TD></TR>
  <TR>
    <TD width="99%" colSpan=5>&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%" bgColor=#c0c0c0><FONT face=serif size=2>Noncurrent liabilities</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>4,971,199</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>1,496,557</FONT></TD></TR>
  <TR>
    <TD width="99%" colSpan=5>&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%" bgColor=#c0c0c0><FONT face=serif size=2>Joint
      ventures&#146; equity</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>29,401,796</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>23,209,788</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%"><FONT face=serif size=2>Northern Technologies
      International Corporation&#146;s share of</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD align=left width="5%"></TD>
    <TD align=left width="1%"></TD>
    <TD align=left width="5%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%"><FONT face=serif size=2>Corporate Joint
      Ventures&#146; equity</FONT></TD>
    <TD align=right width="1%"><FONT face=serif size=2></FONT></TD>
    <TD align=right width="5%"><FONT face=serif size=2>$13,602,842</FONT></TD>
    <TD align=right width="1%"><FONT face=serif size=2></FONT></TD>
    <TD align=right width="5%"><FONT face=serif size=2>$10,772,102</FONT></TD></TR>
  <TR>
    <TD width="99%" colSpan=5>&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%"></TD>
    <TD align=left width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%"><FONT face=serif size=2>August 31, 2007</FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%"><FONT face=serif size=2>August 31, 2006</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%" bgColor=#c0c0c0><FONT face=serif size=2>Net
      sales</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2></FONT></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>$80,551,700</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2></FONT></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>$63,959,090</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%"><FONT face=serif size=2>Gross
      profit</FONT>&nbsp; </TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="5%"><FONT face=serif size=2>37,395,480</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="5%"><FONT face=serif size=2>29,204,129</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%" bgColor=#c0c0c0><FONT face=serif size=2>Net
      income</FONT>&nbsp; </TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>6,439,108</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>5,209,499</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%"><FONT face=serif size=2>Northern Technologies
      International Corporation&#146;s share of equity in</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD align=left width="5%"></TD>
    <TD align=left width="1%"></TD>
    <TD align=left width="5%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%"><FONT face=serif size=2>income of Corporate
      Joint Ventures</FONT></TD>
    <TD align=right width="1%"><FONT face=serif size=2></FONT></TD>
    <TD align=right width="5%"><FONT face=serif size=2>$3,201,621</FONT></TD>
    <TD align=right width="1%"><FONT face=serif size=2></FONT></TD>
    <TD align=right width="5%"><FONT face=serif size=2>$2,713,096</FONT></TD></TR></TABLE></DIV><BR>
<P align=justify><FONT face=serif size=2>The financial statements of the
Company's foreign joint ventures are prepared using accounting principles
accepted in the joint ventures' country of domicile. Amounts related to foreign
joint ventures reported in the above tables and the accompanying financial
statements have been adjusted to approximate US GAAP in all material respects.
</FONT></P>
<P align=justify><FONT face=serif size=2>During fiscal 2007, the Company
invested in corporate joint ventures as follows: </FONT></P>
<P align=justify><FONT face=serif size=2>In November 2006, the Company invested
$81,522, in a new industrial chemical corporate joint venture to develop
operations in the United Arab Emirates in the oil and gas industry. The Company
has a 50% ownership interest in the new entity. The new entity had no operations
prior to the Company&#146;s investment. It is anticipated that this is the first of
two installments towards the Company&#146;s 50% capitalization of an estimated
$200,000 over the next 12 months. It is anticipated that the total
capitalization by all owners of the joint venture will be $400,000. </FONT></P>
<P align=justify><FONT face=serif size=2>In December 2006, the Company invested
$143,000 to establish a new non-industrial chemical joint venture in Thailand.
The Company has a 50% ownership interest in the new entity. The new entity had
no operations prior to the Company&#146;s investment. The total capitalization by
both owners of the joint venture was $286,000.</FONT></P>
<P align=justify><FONT face=serif size=2>In February 2007, the Company invested
$323,843 in its industrial chemical corporate joint venture in India for a
capital intensive expansion. As result of the investment by both the Company and
the other owner, the total increase in capitalization of the joint venture was
$647,686.</FONT></P>
<P align=center><FONT face=serif size=2>48</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><FONT face=serif size=2>In June 2007, the Company invested
$25,000, in addition to the $25,000 previously invested in June 2006 in a new
industrial chemical corporate joint venture to develop operations in Ukraine.
The Company has a 50% ownership interest in the new entity. The new entity had
no operations prior to the Company&#146;s initial investment. As result of the
investment by both the Company and the other owner, the total increase in
capitalization of the joint venture was $100,000.</FONT></P>
<P align=justify><FONT face=serif size=2>The investment in the company's joint
ventures include the company's share of undistributed earnings of $11,771,829
and $8,096,364 at August 31, 2007 and 2006, respectively.</FONT></P>
<P align=justify><B><FONT face=serif size=2>9. GOODWILL</FONT></B></P>
<P align=justify><FONT face=serif size=2>The Company tests goodwill annually for
impairment and in interim periods if certain events occur indicating that the
carrying value of goodwill may be impaired. Goodwill at both August 31, 2007 and
August 31, 2006 was $304,000.</FONT></P>
<P align=justify><B><FONT face=serif size=2>10. CORPORATE DEBT</FONT></B></P>
<P align=justify><FONT face=serif size=2>The Company has a revolving credit
facility of $1,500,000 that expires on January 31, 2008. Outstanding amounts
under the revolving credit facility bear interest at an annual rate based on
LIBOR plus 2.25%. As of August 31, 2007, the interest rate was 7.97% and the
average for the year ended August 31, 2007 and 2006 were 7.60% and 6.98%,
respectively. Amounts borrowed under the facility are collateralized by a lien
on substantially all of the Company&#146;s assets, excluding its corporate joint
venture interests and intellectual property rights. The credit documents contain
other terms and provisions (including representations, covenants and conditions)
customary for transactions of this type. Significant financial covenants include
the maintenance of a minimum fixed charge coverage ratio of 1.0 to 1.0. The
Company is in compliance with all covenants under the revolving credit facility.
Outstanding balances were $0 and $610,000 as of August 31, 2007 and August 31,
2006, respectively.</FONT></P>
<P align=justify><FONT face=serif size=2>The Company originally entered into a
term loan with a principal amount of $1,275,000 that matures on May 1, 2011,
bears interest at a fixed rate of 8.01% and is payable in 59 monthly payments
equal to approximately $10,776 (inclusive of principal and interest). All of the
remaining unpaid principal and accrued interest is due and payable on the
maturity date. The Note is secured by a first lien on the Company&#146;s Circle Pines
facility pursuant to a Mortgage dated as of May 3, 2006 between Northern
Technologies Holding Company LLC and National City Bank and is guaranteed by the
Company. Future minimum payments on the term loan are as follows:</FONT></P>
<TABLE style="FONT-SIZE: 12pt; LINE-HEIGHT: 14pt; BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="20%" border=0>

  <TR vAlign=bottom>
    <TD noWrap align=left width="88%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0><FONT face=serif size=2>Fiscal 2008</FONT></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    </TD>
    <TD noWrap align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>$29,319</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="88%"></TD>
    <TD noWrap align=left width="5%"><FONT face=serif size=2>Fiscal
    2009</FONT></TD>
    <TD noWrap align=right width="1%"><FONT face=serif size=2></FONT></TD>
    <TD noWrap align=right width="5%"><FONT face=serif size=2>$31,411</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="88%"></TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0><FONT face=serif size=2>Fiscal 2010</FONT></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2></FONT></TD>
    <TD noWrap align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>$34,897</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="88%"></TD>
    <TD noWrap align=left width="5%"><FONT face=serif size=2>Fiscal
    2011</FONT></TD>
    <TD noWrap align=right width="1%"><FONT face=serif size=2></FONT></TD>
    <TD noWrap align=right width="5%"><FONT face=serif size=2>$1,145,220</FONT></TD></TR></TABLE><BR>
<P align=center><FONT face=serif size=2>49</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><B><FONT face=serif size=2>11. STOCKHOLDERS&#146;
EQUITY</FONT></B></P>
<P align=justify><FONT face=serif size=2>During fiscal 2007, the Company did not
purchase or retire any shares of its common stock. The following stock options
to purchase shares of common stock were exercised during fiscal 2007:</FONT></P>
<TABLE style="FONT-SIZE: 12pt; LINE-HEIGHT: 14pt; BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="20%" border=0>

  <TR vAlign=bottom>
    <TD noWrap align=center width="88%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    </TD>
    <TD noWrap align=center width="5%"><FONT face=serif size=2>Options</FONT></TD>
    <TD noWrap align=center width="1%">&nbsp;</TD>
    <TD noWrap align=center width="5%"><FONT face=serif size=2>Exercise</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="88%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%"><FONT face=serif size=2>Exercised</FONT></TD>
    <TD noWrap align=center width="1%">&nbsp; &nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%"><FONT face=serif size=2>Price</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=center width="88%"></TD>
    <TD align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=2>22,000</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2></FONT></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>$4.56</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=center width="88%"></TD>
    <TD align=center width="5%"><FONT face=serif size=2>111</FONT></TD>
    <TD align=right width="1%"><FONT face=serif size=2></FONT></TD>
    <TD align=right width="5%"><FONT face=serif size=2>$5.56</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=center width="88%"></TD>
    <TD align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=2>667</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2></FONT></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>$5.75</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=center width="88%"></TD>
    <TD align=center width="5%"><FONT face=serif size=2>2,000</FONT></TD>
    <TD align=right width="1%"><FONT face=serif size=2></FONT></TD>
    <TD align=right width="5%"><FONT face=serif size=2>$5.25</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=center width="88%"></TD>
    <TD align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=2>2,000</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2></FONT></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>$5.30</FONT></TD></TR></TABLE><BR>
<P align=justify><FONT face=serif size=2>The Company did not acquire or retire
any shares of its common stock during fiscal 2006. The following stock options
to purchase shares of common stock were exercised during fiscal
2006:</FONT><B><FONT face=serif size=2> </FONT></B></P>
<TABLE style="FONT-SIZE: 12pt; LINE-HEIGHT: 14pt; BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="20%" border=0>

  <TR vAlign=bottom>
    <TD noWrap align=center width="88%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    </TD>
    <TD noWrap align=center width="5%"><FONT face=serif size=2>Options</FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"><FONT face=serif size=2>Exercise</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="88%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%"><FONT face=serif size=2>Exercised</FONT></TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%"><FONT face=serif size=2>Price</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=center width="88%"></TD>
    <TD align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=2>16,000</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>$4.56</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=center width="88%"></TD>
    <TD align=center width="5%"><FONT face=serif size=2>1,000</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"><FONT face=serif size=2>$5.50</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=center width="88%"></TD>
    <TD align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=2>2,000</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>$5.00</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=center width="88%"></TD>
    <TD align=center width="5%"><FONT face=serif size=2>2,000</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"><FONT face=serif size=2>$3.34</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=center width="88%"></TD>
    <TD align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=2>2,000</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>$5.00</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=center width="88%"></TD>
    <TD align=center width="5%"><FONT face=serif size=2>2,000</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"><FONT face=serif size=2>$3.34</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=center width="88%"></TD>
    <TD align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=2>2,000</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>$5.30</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=center width="88%"></TD>
    <TD align=center width="5%"><FONT face=serif size=2>2,000</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"><FONT face=serif size=2>$5.25</FONT></TD></TR></TABLE><BR>
<P align=justify><B><FONT face=serif size=2>12. TOTAL COMPREHENSIVE INCOME
</FONT></B></P>
<P align=justify><FONT face=serif size=2>The Company&#146;s total comprehensive
income was as follows: </FONT></P>
<TABLE style="FONT-SIZE: 12pt; LINE-HEIGHT: 14pt; BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD align=left width="87%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="11%" colSpan=3><FONT face=serif size=2>Years
      Ended</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"><FONT face=serif size=2>August
      31,</FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"><FONT face=serif size=2>August
      31,</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%"></TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%"><FONT face=serif size=2>2007</FONT></TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%"><FONT face=serif size=2>2006</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%" bgColor=#c0c0c0><FONT face=serif size=2>Net
      income</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>$3,223,408</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>$1,719,065</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%"><FONT face=serif size=2>Other comprehensive
      income &#150; foreign currency translation adjustment</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="5%"><FONT face=serif size=2>709,109</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="5%"><FONT face=serif size=2>310,687</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%" bgColor=#c0c0c0><FONT face=serif size=2>Total
      comprehensive income</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2></FONT></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>$3,932,517</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2></FONT></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>$2,029,752</FONT></TD></TR></TABLE><BR>
<P align=justify><B><FONT face=serif size=2>13. NET INCOME PER COMMON SHARE
</FONT></B></P>
<P align=justify><FONT face=serif size=2>Basic net income per common share is
computed by dividing net income by the weighted average number of common shares
outstanding. Diluted net income per share assumes the exercise of stock options
using the treasury stock method, if dilutive. </FONT></P>
<P align=justify><FONT face=serif size=2>No options to purchase shares of common
stock were excluded from the computation of common share equivalents as of
August 31, 2007 and August 31, 2006, as all stock option exercise prices were
less than the average market price of a share of common stock.</FONT></P>
<P align=justify><B><FONT face=serif size=2>14. STOCK-BASED COMPENSATION
</FONT></B></P>
<P align=justify><FONT face=serif size=2>In January 2007, the Company&#146;s
stockholders approved the Northern Technologies International Corporation 2007
Stock Incentive Plan and the Northern Technologies International Corporation
Employee Stock Purchase Plan. The Compensation Committee of the Board of
Directors administers both of the plans. The 2007 plan replaced the Northern
Technologies International Corporation 2000 Stock Incentive Plan, which was
terminated with respect to future grants, but will continue to govern grants
outstanding under such plan.</FONT></P>
<P align=center><FONT face=serif size=2>50</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><FONT face=serif size=2>The 2007 plan provides for the grant of
incentive stock options, non-statutory stock options, stock appreciation rights,
restricted stock, stock unit awards, performance awards and stock bonuses to
eligible recipients to enable the Company and its subsidiaries to attract and
retain qualified individuals through opportunities for equity participation in
the Company, and to reward those individuals who contribute to the achievement
of the Company&#146;s economic objectives. Up to a total of 400,000 shares of the
Company&#146;s common stock has been reserved for issuance under the 2007 plan,
subject to adjustment as provided in the 2007 plan. Options granted under the
2007 plan generally have a term of five years and become exercisable over a
three- or four-year period beginning on the one-year anniversary date of the
grant. Options are granted at per share exercise prices equal to the market
value of the Company&#146;s common stock on the date of grant. To date, only stock
options have been granted under the 2007 plan. </FONT></P>
<P align=justify><FONT face=serif size=2>In addition to the 2007 Stock Incentive
Plan, the Company also maintains the Northern Technologies International
Corporation Employee Stock Purchase Plan (&#147;ESPP&#148;). The maximum number of shares
of NTIC common stock available for issuance under the ESPP is 100,000 shares,
subject to adjustment as provided in the ESPP. The ESPP provides for six-month
offering periods beginning on September 1 and March 1 of each year. The purchase
price of the shares is 90% of the lower of the fair market value of NTIC common
stock at the beginning or end of the offering period. This discount may not
exceed the maximum discount rate permitted for plans of this type under Section
423 of the Internal Revenue Code of 1986, as amended. The ESPP is compensatory
for financial reporting purposes. </FONT></P>
<P align=justify><FONT face=serif size=2>Stock option activity during the
periods indicated is as follows:</FONT></P>
<TABLE style="FONT-SIZE: 12pt; LINE-HEIGHT: 14pt; BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD align=left width="80%"></TD>
    <TD noWrap align=center width="6%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"><FONT face=serif size=2>Weighted</FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="80%"></TD>
    <TD noWrap align=center width="6%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"><FONT face=serif size=2>Average</FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="80%"></TD>
    <TD noWrap align=center width="7%" colSpan=2><FONT face=serif size=2>Number of</FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"><FONT face=serif size=2>Exercise</FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"><FONT face=serif size=2>Aggregate</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="80%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="7%" colSpan=2><FONT face=serif size=2>Shares (#)</FONT></TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%"><FONT face=serif size=2>Price</FONT></TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%"><FONT face=serif size=2>Intrinsic Value</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="80%" bgColor=#c0c0c0><FONT face=serif size=2>Outstanding at August 31, 2005</FONT></TD>
    <TD align=right width="6%" bgColor=#c0c0c0><FONT face=serif size=2>66,334</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD align=right width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>$4.82</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD align=left width="5%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="80%">&nbsp;<FONT face=serif size=2>Options
      granted</FONT></TD>
    <TD align=right width="6%"><FONT face=serif size=2>70,000</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"><FONT face=serif size=2>5.45</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD align=left width="5%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="80%" bgColor=#c0c0c0>&nbsp;<FONT face=serif size=2>Options exercised</FONT></TD>
    <TD align=right width="6%" bgColor=#c0c0c0><FONT face=serif size=2>(29,000</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>)</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>4.58</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="5%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="80%">&nbsp;<FONT face=serif size=2>Options
      terminated</FONT></TD>
    <TD align=right width="6%"><FONT face=serif size=2>(2,000</FONT></TD>
    <TD align=left width="1%"><FONT face=serif size=2>)</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"><FONT face=serif size=2>6.75</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD align=left width="5%"></TD></TR>
  <TR>
    <TD width="99%" colSpan=7>&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="80%" bgColor=#c0c0c0><FONT face=serif size=2>Outstanding at August 31, 2006</FONT></TD>
    <TD align=right width="6%" bgColor=#c0c0c0><FONT face=serif size=2>105,334</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>$5.27</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="5%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="80%">&nbsp;<FONT face=serif size=2>Options
      granted</FONT></TD>
    <TD align=right width="6%"><FONT face=serif size=2>15,167</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"><FONT face=serif size=2>3.53</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD align=left width="5%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="80%" bgColor=#c0c0c0>&nbsp;<FONT face=serif size=2>Options exercised</FONT></TD>
    <TD align=right width="6%" bgColor=#c0c0c0><FONT face=serif size=2>(26,778</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>)</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>5.35</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="5%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="80%">&nbsp;<FONT face=serif size=2>Options
      terminated</FONT></TD>
    <TD align=right width="6%"><FONT face=serif size=2>(7,556</FONT></TD>
    <TD align=left width="1%"><FONT face=serif size=2>)</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"><FONT face=serif size=2>2.35</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD align=left width="5%"></TD></TR>
  <TR>
    <TD width="99%" colSpan=7>&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="80%" bgColor=#c0c0c0><FONT face=serif size=2>Outstanding at August 31, 2007</FONT></TD>
    <TD align=right width="6%" bgColor=#c0c0c0><FONT face=serif size=2>86,167</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>$5.67</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2></FONT></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>$386,028</FONT></TD></TR>
  <TR>
    <TD width="99%" colSpan=7>&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="80%" bgColor=#c0c0c0><FONT face=serif size=2>Exercisable at August 31, 2005</FONT></TD>
    <TD align=right width="6%" bgColor=#c0c0c0><FONT face=serif size=2>49,669</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>$4.67</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="5%" bgColor=#c0c0c0></TD></TR>
  <TR>
    <TD width="99%" colSpan=7>&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="80%" bgColor=#c0c0c0><FONT face=serif size=2>Exercisable at August 31, 2006</FONT></TD>
    <TD align=right width="6%" bgColor=#c0c0c0><FONT face=serif size=2>27,669</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>$4.74</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="5%" bgColor=#c0c0c0></TD></TR>
  <TR>
    <TD width="99%" colSpan=7>&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="80%" bgColor=#c0c0c0><FONT face=serif size=2>Exercisable at August 31, 2007</FONT></TD>
    <TD align=right width="6%" bgColor=#c0c0c0><FONT face=serif size=2>28,672</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>$5.46</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2></FONT></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>$134,472</FONT></TD></TR>
  <TR>
    <TD width="99%" colSpan=7>&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="80%" bgColor=#c0c0c0><FONT face=serif size=2>Available for future grant at August 31, 2006</FONT></TD>
    <TD align=right width="6%" bgColor=#c0c0c0><FONT face=serif size=2>57,665</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="5%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="5%" bgColor=#c0c0c0></TD></TR>
  <TR>
    <TD align=left width="80%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="6%" bgColor=#ffffff></TD>
    <TD align=left width="1%" bgColor=#ffffff></TD>
    <TD align=left width="1%" bgColor=#ffffff></TD>
    <TD align=left width="5%" bgColor=#ffffff></TD>
    <TD align=left width="1%" bgColor=#ffffff></TD>
    <TD align=left width="5%" bgColor=#ffffff></TD></TR>
  <TR>
    <TD align=left width="80%" bgColor=#c0c0c0><FONT size=2>Available for
      future grant at August 31, 2007</FONT></TD>
    <TD align=right width="6%" bgColor=#c0c0c0><FONT size=2>398,833</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="5%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="5%" bgColor=#c0c0c0></TD></TR></TABLE><BR>
<P align=center><FONT face=serif size=2>51</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><FONT face=serif size=2>The following table summarizes
information about stock options outstanding and exercisable at August 31, 2007:
</FONT></P>
<TABLE style="FONT-SIZE: 12pt; LINE-HEIGHT: 14pt; BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="95%" border=0>

  <TR vAlign=bottom>
    <TD noWrap align=center width="20%"></TD>
    <TD align=center width="1%"></TD>
    <TD noWrap align=center width="19%"><FONT face=serif size=2>Per
      Share</FONT></TD>
    <TD align=center width="1%"></TD>
    <TD noWrap align=center width="19%"><FONT face=serif size=2>Remaining</FONT></TD>
    <TD align=center width="1%"></TD>
    <TD noWrap align=center width="19%"><FONT face=serif size=2>Number
      of</FONT></TD>
    <TD align=center width="1%"></TD>
    <TD noWrap align=center width="19%"><FONT face=serif size=2>Number
      of</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="20%"><FONT face=serif size=2>Option
      Grant</FONT></TD>
    <TD align=center width="1%"></TD>
    <TD noWrap align=center width="19%"><FONT face=serif size=2>Exercise</FONT></TD>
    <TD align=center width="1%"></TD>
    <TD noWrap align=center width="19%"><FONT face=serif size=2>Contractual
      Life</FONT></TD>
    <TD align=center width="1%"></TD>
    <TD noWrap align=center width="19%"><FONT face=serif size=2>Options</FONT></TD>
    <TD align=center width="1%"></TD>
    <TD noWrap align=center width="19%"><FONT face=serif size=2>Options</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-BOTTOM: #000000 1pt double" noWrap align=center width="20%"><FONT face=serif size=2>Date</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt double" align=right width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt double" noWrap align=center width="19%"><FONT face=serif size=2>Prices</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt double" align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt double" noWrap align=center width="19%"><FONT face=serif size=2>(years)</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt double" align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt double" noWrap align=center width="19%"><FONT face=serif size=2>Outstanding (#)</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt double" align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt double" noWrap align=center width="19%"><FONT face=serif size=2>Exercisable (#)</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=center width="20%" bgColor=#c0c0c0><FONT face=serif size=2>9/1/2003</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="19%" bgColor=#c0c0c0><FONT face=serif size=2>$5.30</FONT></TD>
    <TD align=center width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="19%" bgColor=#c0c0c0><FONT face=serif size=2>1.0</FONT></TD>
    <TD align=center width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="19%" bgColor=#c0c0c0><FONT face=serif size=2>2,000</FONT></TD>
    <TD align=center width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="19%" bgColor=#c0c0c0><FONT face=serif size=2>2,000</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=center width="20%"><FONT face=serif size=2>9/1/2004</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=center width="19%"><FONT face=serif size=2>$5.25</FONT></TD>
    <TD align=center width="1%"></TD>
    <TD align=center width="19%"><FONT face=serif size=2>2.0</FONT></TD>
    <TD align=center width="1%"></TD>
    <TD align=center width="19%"><FONT face=serif size=2>4,000</FONT></TD>
    <TD align=center width="1%"></TD>
    <TD align=center width="19%"><FONT face=serif size=2>2,668</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=center width="20%" bgColor=#c0c0c0><FONT face=serif size=2>11/12/2004</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="19%" bgColor=#c0c0c0><FONT face=serif size=2>$6.15</FONT></TD>
    <TD align=center width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="19%" bgColor=#c0c0c0><FONT face=serif size=2>2.2</FONT></TD>
    <TD align=center width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="19%" bgColor=#c0c0c0><FONT face=serif size=2>3,000</FONT></TD>
    <TD align=center width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="19%" bgColor=#c0c0c0><FONT face=serif size=2>2,000</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=center width="20%"><FONT face=serif size=2>9/1/2005</FONT></TD>
    <TD align=right width="1%">&nbsp;</TD>
    <TD align=center width="19%"><FONT face=serif size=2>$5.75</FONT></TD>
    <TD align=center width="1%"></TD>
    <TD align=center width="19%"><FONT face=serif size=2>3.0</FONT></TD>
    <TD align=center width="1%"></TD>
    <TD align=center width="19%"><FONT face=serif size=2>10,000</FONT></TD>
    <TD align=center width="1%"></TD>
    <TD align=center width="19%"><FONT face=serif size=2>3,335</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=center width="20%" bgColor=#c0c0c0><FONT face=serif size=2>11/4/2005</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="19%" bgColor=#c0c0c0><FONT face=serif size=2>$5.38</FONT></TD>
    <TD align=center width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="19%" bgColor=#c0c0c0><FONT face=serif size=2>3.2</FONT></TD>
    <TD align=center width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="19%" bgColor=#c0c0c0><FONT face=serif size=2>56,000</FONT></TD>
    <TD align=center width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="19%" bgColor=#c0c0c0><FONT face=serif size=2>18,669</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=center width="20%"><FONT face=serif size=2>9/1/2006</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=center width="19%"><FONT face=serif size=2>$8.01</FONT></TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="19%"><FONT face=serif size=2>4.0</FONT></TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="19%"><FONT face=serif size=2>10,000</FONT></TD>
    <TD align=center width="1%"></TD>
    <TD align=center width="19%"><FONT face=serif size=2>0</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=center width="20%" bgColor=#c0c0c0><FONT face=serif size=2>1/23/07</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=center width="19%" bgColor=#c0c0c0><FONT face=serif size=2>$7.51</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=center width="1%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=center width="19%" bgColor=#c0c0c0><FONT face=serif size=2>4.4</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=center width="1%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=center width="19%" bgColor=#c0c0c0><FONT face=serif size=2>1,167</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=center width="1%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=center width="19%" bgColor=#c0c0c0><FONT face=serif size=2>0</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="20%"></TD>
    <TD align=left width="1%"></TD>
    <TD align=left width="19%"></TD>
    <TD align=left width="1%"></TD>
    <TD align=left width="19%"></TD>
    <TD align=center width="1%"></TD>
    <TD align=center width="19%"><FONT face=serif size=2>86,167</FONT></TD>
    <TD align=center width="1%"></TD>
    <TD align=center width="19%"><FONT face=serif size=2>28,672</FONT></TD></TR></TABLE><BR>
<P align=justify><FONT face=serif size=2>The weighted average fair value of
options granted during fiscal 2007 and 2006 was $2.95 and $2.00, respectively.
</FONT></P>
<P align=justify><B><FONT face=serif size=2>15. SEGMENT INFORMATION
</FONT></B></P>
<P align=justify><FONT face=serif size=2>Net sales by geographic location as a
percentage of total consolidated net sales were as follows: </FONT></P>
<DIV align=center>
<TABLE style="FONT-SIZE: 12pt; LINE-HEIGHT: 14pt; BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="95%" border=0>

  <TR vAlign=bottom>
    <TD align=left width="88%"></TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%" colSpan=2><FONT face=serif size=2>August 31, 2007</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%" colSpan=2><FONT face=serif size=2>August 31, 2006</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="88%" bgColor=#c0c0c0><FONT face=serif size=2>Inside
      the U.S.A. to unaffiliated customers</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>79.2</FONT></TD>
    <TD align=left width="2%" bgColor=#c0c0c0><FONT face=serif size=2>%</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>79.7</FONT></TD>
    <TD align=left width="2%" bgColor=#c0c0c0><FONT face=serif size=2>%</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="88%"><FONT face=serif size=2>Outside the U.S.A.
      to:</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD align=left width="3%"></TD>
    <TD align=left width="2%"></TD>
    <TD align=left width="1%"></TD>
    <TD align=left width="3%"></TD>
    <TD align=left width="2%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="88%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; Corporate Joint Ventures in which the
      Company is</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="3%" bgColor=#c0c0c0></TD>
    <TD align=left width="2%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="3%" bgColor=#c0c0c0></TD>
    <TD align=left width="2%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="88%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; a
      shareholder directly and indirectly</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>12.8</FONT></TD>
    <TD align=left width="2%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>10.5</FONT></TD>
    <TD align=left width="2%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="88%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; Unaffiliated customers</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="3%"><FONT face=serif size=2>8.0</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=left width="2%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="3%"><FONT face=serif size=2>9.8</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=left width="2%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="88%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>100</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="2%" bgColor=#c0c0c0><FONT face=serif size=2>%</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>100</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="2%" bgColor=#c0c0c0><FONT face=serif size=2>%</FONT></TD></TR></TABLE></DIV><BR>
<P align=justify><FONT face=serif size=2>A customer of NTIC&#146;s React-NTI, LLC
joint venture accounted for, in the aggregate, approximately 28.0% and 26.6% of
NTIC&#146;s consolidated net sales for the fiscal years ended August 31, 2007 and
2006 respectively, and $144,999 and $207,630 of NTIC&#146;s receivables at August 31,
2007 and 2006, respectively. </FONT></P>
<P align=justify><B><FONT face=serif size=2>16. RETIREMENT PLAN</FONT></B></P>
<P align=justify><FONT face=serif 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 15% 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 $100,124 and $103,544, for
the fiscal years ended August 31, 2007 and 2006, respectively. </FONT></P>
<P align=center><FONT face=serif size=2>52</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><B><FONT face=serif size=2>17. RELATED PARTY TRANSACTIONS
</FONT></B></P>
<P align=justify><FONT face=serif size=2>On May 18, 2006, the Company and
Emeritushnic Facilities Company, Inc. (&#147;EFC&#148;), an entity owned by the Company&#146;s
former Chairman of the Board and Chief Executive Officer and current Chairman
Emeritus, Philip M. Lynch, and certain of his family members, excluding G.
Patrick Lynch, the Company&#146;s current President and Chief Executive Officer,
entered into a Consulting Agreement, effective as of May 1, 2006. Pursuant to
the Consulting Agreement, the Company has engaged EFC to perform certain
consulting services to the Company, including maintaining communications and
relations between the Company and its joint venture partners. In consideration
for such services, the Company paid EFC consulting fees totaling $300,000 in
fiscal 2007, and reimbursed EFC for out-of-pocket expenses reasonably incurred
in the course of providing such services in an aggregate amount of $180,000
during fiscal 2007. The Consulting Agreement provides for fees of $25,000 per
month and up to $180,000 in expense reimbursement in a given fiscal year.
Additionally, it may be terminated by either party for any reason upon at least
90 days prior written notice to the other party and may be terminated upon the
occurrence of other certain events, as set forth in the Consulting Agreement.
The Consulting Agreement also contains other standard and customary terms,
including provisions regarding confidentiality, non-competition and
non-solicitation.</FONT></P>
<P align=justify><FONT face=serif size=2>On May 1, 2006, the Company and Inter
Alia Holding Co. (&#147;Inter Alia&#148;) entered into a termination agreement pursuant to
which they mutually agreed to terminate that certain Manufacturer&#146;s
Representative Agreement dated as of October 1, 1976 and as subsequently amended
thereafter. Inter Alia beneficially owns approximately 24.9% of the Company&#146;s
outstanding common stock, and Philip M. Lynch, the Company&#146;s former Chairman of
the Board and Chief Executive Officer and current Chairman Emeritus, and G.
Patrick Lynch, the Company&#146;s current President and Chief Executive Officer, are
shareholders of Inter Alia. Prior to terminating the agreement, the Company
reimbursed Inter Alia for travel and related expenses in the aggregate amount of
$320,000 during fiscal 2006. The Company paid Inter Alia commissions on
royalties paid by corporate joint ventures and net proceeds of sales of the
Company&#146;s products of approximately $65,000 during fiscal 2006. In addition, the
Company paid health insurance premiums of $6,623 during fiscal 2006, related to
policies that insure Philip M. Lynch, the Company&#146;s former Chairman of the Board
and Chief Executive Officer and current Chairman Emeritus.</FONT></P>
<P align=justify><FONT face=serif size=2>The Company made consulting payments to
Bioplastic Polymers LLC which is owned by Dr. Ramani Narayan, a director of the
Company, of $25,000 on each of November 8, 2005, February 1, 2006, May 1, 2006,
August 1, 2006, November 2, 2006, February 1, 2007, May 1, 2007 and August 2007.
The consulting services rendered by Bioplastic Polymers LLC are related to
research and development associated with various new technologies and are
contracted on a quarter to quarter basis cancellable by the Company at
anytime.</FONT></P>
<P align=justify><FONT face=serif size=2>The Company made consulting payments to
Dr. Sunggyu Lee, a director of the Company, of $25,000 on each of November 8,
2005, February 1, 2006, May 1, 2006, August 1, 2006, November 28, 2006 and
February 1, 2007. The consulting services rendered by Dr. Lee related to
research and development associated with various new technologies and are
contracted on a quarter to quarter basis cancellable by the Company at anytime.
In May 2007, the consulting arrangement between the Company and Dr. Lee was
terminated. </FONT></P>
<P align=justify><FONT face=serif size=2>The Company pays rent for its Beachwood
office and lab location to a related party. See Note 19. </FONT></P>
<P align=center><FONT face=serif size=2>53</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><B><FONT face=serif size=2>18. INCOME TAXES</FONT></B></P>
<P align=justify><FONT face=serif size=2>The provision for income taxes for the
fiscal years ended August 31 consist of the following: </FONT></P>
<DIV align=center>
<TABLE style="FONT-SIZE: 12pt; LINE-HEIGHT: 14pt; BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="60%" border=0>

  <TR vAlign=bottom>
    <TD align=left width="87%"></TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%" colSpan=2><FONT face=serif size=2>2007</FONT></TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%" colSpan=2><FONT face=serif size=2>2006</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%" bgColor=#c0c0c0><FONT face=serif size=2>Current:</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="4%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="4%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Federal</FONT></TD>
    <TD align=right width="1%">&nbsp;</TD>
    <TD align=right width="4%"><FONT face=serif size=2>$622,800</FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="1%">&nbsp;</TD>
    <TD align=right width="4%"><FONT face=serif size=2>$560,000</FONT></TD>
    <TD align=left width="1%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; State</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>39,200</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>35,000</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="4%"><FONT face=serif size=2>$662,000</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="4%"><FONT face=serif size=2>$595,000</FONT></TD>
    <TD align=left width="1%"></TD></TR>
  <TR>
    <TD width="99%" colSpan=7>&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%" bgColor=#c0c0c0><FONT face=serif size=2>Deferred:</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="4%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="4%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Federal</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="4%"><FONT face=serif size=2>$(465,600</FONT></TD>
    <TD align=left width="1%"><FONT face=serif size=2>)</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="4%"><FONT face=serif size=2>$(321,000</FONT></TD>
    <TD align=left width="1%"><FONT face=serif size=2>)</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; State</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>(10,400</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>)</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>(20,000</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>)</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%"></TD>
    <TD align=right width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="4%"><FONT face=serif size=2>(476,000</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=left width="1%"><FONT face=serif size=2>)</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="4%"><FONT face=serif size=2>(341,000</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=left width="1%"><FONT face=serif size=2>)</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>$186,000</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>$254,000</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%" bgColor=#c0c0c0></TD></TR></TABLE></DIV><BR>
<P align=justify><FONT face=serif size=2>Reconciliations of the expected federal
income tax at the statutory rate with the provisions for income taxes for the
fiscal years ended August 31 are as follows: </FONT></P>
<TABLE style="FONT-SIZE: 12pt; LINE-HEIGHT: 14pt; BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD align=left width="87%"></TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%" colSpan=2><FONT face=serif size=2>2007</FONT></TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=center width="5%" colSpan=2><FONT face=serif size=2>2006</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%" bgColor=#c0c0c0><FONT face=serif size=2>Tax
      computed at statutory rates</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2></FONT></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>$1,184,000</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2></FONT></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>$689,000</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0>&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%"><FONT face=serif size=2>State income tax, net
      of federal benefit</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="4%"><FONT face=serif size=2>74,000</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="4%"><FONT face=serif size=2>43,400</FONT></TD>
    <TD align=left width="1%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%" bgColor=#c0c0c0><FONT face=serif size=2>Tax
      effect on equity in income of international joint ventures</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>(850,000</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>)</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>(732,000</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>)</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%"><FONT face=serif size=2>Tax effect on dividends
      received from corporate joint ventures</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="4%"><FONT face=serif size=2>409,000</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="4%"><FONT face=serif size=2>229,000</FONT></TD>
    <TD align=left width="1%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%" bgColor=#c0c0c0><FONT face=serif size=2>Foreign
      Tax Credit</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>(776,000</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>)</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>-</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%"><FONT face=serif size=2>Research and
      Development Credit</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="4%"><FONT face=serif size=2>(90,000</FONT></TD>
    <TD align=left width="1%"><FONT face=serif size=2>)</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="4%"><FONT face=serif size=2>(20,000</FONT></TD>
    <TD align=left width="1%"><FONT face=serif size=2>)</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%" bgColor=#c0c0c0><FONT face=serif size=2>Valuation Allowance</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>250,000</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>0</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%"><FONT face=serif size=2>Other</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="4%"><FONT face=serif size=2>(15,000</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=left width="1%"><FONT face=serif size=2>)</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="4%"><FONT face=serif size=2>44,600</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=left width="1%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>$186,000</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>$254,000</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%" bgColor=#c0c0c0></TD></TR></TABLE><BR>
<P align=justify><FONT face=serif size=2>The Company has not recognized a
deferred tax liability relating to cumulative undistributed earnings of Corporate Joint
Ventures and holding companies that are essentially permanent in duration of $4,254,000 and $2,926,000 at August 31, 2007 and 2006, respectively. If some or
all of the undistributed earnings of the Corporate Joint Ventures and holding
companies 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></P>
<P align=justify><FONT face=serif size=2>At August 31, 2007 the Company had
foreign tax credit carryforwards of approximately $1,898,000 which begin to
expire in 2010. The Company established a valuation allowance of $1,898,000 with
respect to the foreign tax credit carryforwards.</FONT></P>
<P align=center><FONT face=serif size=2>54</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><FONT face=serif size=2>The tax effect of the temporary
differences and tax carry forwards comprising the net deferred taxes shown on
the balance sheets at August 31 are as follows: </FONT></P>
<DIV align=center>
<TABLE style="FONT-SIZE: 12pt; LINE-HEIGHT: 14pt; BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="95%" border=0>

  <TR vAlign=bottom>
    <TD align=left width="87%"></TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%" colSpan=2><FONT face=serif size=2>2007</FONT></TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%" colSpan=2><FONT face=serif size=2>2006</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%" bgColor=#c0c0c0><FONT face=serif size=2>Current:</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="4%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="4%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%"><FONT face=serif size=2>Allowance for doubtful
      accounts</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="4%"><FONT face=serif size=2>$7,200</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="4%"><FONT face=serif size=2>$3,600</FONT></TD>
    <TD align=left width="1%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%" bgColor=#c0c0c0><FONT face=serif size=2>Inventory costs</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>5,300</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD align=right width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>16,788</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%"><FONT face=serif size=2>Prepaid expenses and
      other</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="4%"><FONT face=serif size=2>275,700</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="4%"><FONT face=serif size=2>(50,900</FONT></TD>
    <TD align=left width="1%"><FONT face=serif size=2>)</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%" bgColor=#c0c0c0><FONT face=serif size=2>Accrued
      expenses</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>(18,800</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>)</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>41,700</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%"><FONT face=serif size=2>Accrued bonus</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="4%"><FONT face=serif size=2>292,600</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=left width="1%"></TD>
    <TD align=right width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="4%"><FONT face=serif size=2>225,900</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=left width="1%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total
      current</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>$562,000</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>$237,088</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR>
    <TD align=left width="99%" colSpan=7>&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%" bgColor=#c0c0c0><FONT face=serif size=2>Noncurrent:</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="4%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="4%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%"><FONT face=serif size=2>Excess of book over tax
      depreciation</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="4%"><FONT face=serif size=2>$(204,300</FONT></TD>
    <TD align=left width="1%"><FONT face=serif size=2>)</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="4%"><FONT face=serif size=2>$49,000</FONT></TD>
    <TD align=left width="1%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%" bgColor=#c0c0c0><FONT face=serif size=2>Asset
      valuation reserves</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>491,800</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>206,500</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%">
      <P><FONT face=serif size=2>Foreign tax credits, net of a valuation
      </FONT></P></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="4%"><FONT face=serif size=2></FONT></TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="4%"><FONT face=serif size=2></FONT></TD>
    <TD align=left width="1%"></TD></TR>
  <TR>
    <TD align=left width="87%"><FONT size=2>&nbsp;&nbsp; allowance at August
      31, 2007</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="4%"><FONT size=2>0</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="4%"><FONT size=2>250,000</FONT></TD>
    <TD align=left width="1%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%" bgColor=#c0c0c0><FONT face=serif size=2>Federal
      Net Operating Loss</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>138,000</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>68,500</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%"><FONT face=serif size=2>Research and
      Development Credit</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="4%"><FONT face=serif size=2>354,000</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=left width="1%"></TD>
    <TD align=right width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="4%"><FONT face=serif size=2>54,000</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=left width="1%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total
      noncurrent</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>$779,500</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>$628,000</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%" bgColor=#c0c0c0></TD></TR></TABLE></DIV><BR>
<P align=justify><FONT face=serif size=2>The Company has net operating loss
carryforwards for Federal tax purposes of approximately $382,000 that begin to
expire in 2025. </FONT></P>
<P align=justify><FONT face=serif size=2>During fiscal 2007, the Company was
under audit by the Internal Revenue Service for tax years ended August 31, 2004
and 2005. To date, the Company has agreed on a portion of the adjustments and
has included these adjustments in the current year income tax calculation. These
adjustments are not deemed to have a material impact on the Company&#146;s
consolidated financial statements. </FONT></P>
<P align=justify><FONT face=serif size=2>In July 2006, the Financial Accounting
Standards Board (&#147;FASB&#148;) issued FASB Interpretation No. 48,</FONT><I><FONT face=serif size=2> Accounting for Uncertainty in Income Taxes&#150; an interpretation
of FASB Statement No. 109</FONT></I><FONT face=serif size=2> (&#147;FIN
48&#148;)</FONT><I><FONT face=serif size=2>,</FONT></I><FONT face=serif size=2> which
clarifies the accounting for uncertainty in tax positions. FIN 48 requires that
the Company recognize in its consolidated financial statements, the impact of a
tax position, if that position is more likely than not of being sustained on
audit, based on the technical merits of the position. The provisions of FIN 48
are effective as of the beginning of the Company&#146;s 2008 fiscal year, with the
cumulative effect of the change in accounting principle recorded as an
adjustment to opening retained earnings. The Company is currently evaluating the
impact of adopting FIN 48 on its consolidated financial statements. </FONT></P>
<P align=justify><B><FONT face=serif size=2>19. COMMITMENTS AND CONTINGENCIES
</FONT></B></P>
<P align=justify><FONT face=serif size=2>In April 2007, REACT-NTI, LLC (&#147;React
LLC&#148;), a company that is 75% owned by the Company, was served with a summons and
complaint that was filed by Shamrock Technologies, Inc. in state court in New
York. This case has been removed to the Federal District Court for the Southern
District of New York. The lawsuit seeks payment from React LLC of commissions in
the approximate amount of $314,500 owed by React LLC under a license agreement
between React LLC and Shamrock. The complaint alleges breach of the license
agreement by React LLC and seeks damages in an unspecified amount for such
breach as well as damages of approximately $300,000 for the alleged failure of
React LLC to purchase from Shamrock certain inventory manufactured for sale to a
customer. React LLC acknowledges that React has not made payment for product in
the approximate amount of $300,000 to Shamrock as the invoice for this was only
received after Shamrock had already filed its complaint, but denies all of the
claims of breach of the license agreement by it and believes that damages caused
by Shamrock's breach of the License Agreement and tortious conduct exceed any
amounts owing to Shamrock. React LLC formally responded to the complaint after
removal by moving to dismiss or stay because of Shamrock's failure to comply
with alternative dispute resolution procedures contained in the license
agreement. By court order, the matter is presently stayed, and the parties will
attempt mediation. If the mediation is unsuccessful, React LLC will both defend
against Shamrock's allegations and pursue counterclaims against Shamrock for
breach of the license agreement and for tortious interference. Because this
matter is in the early stage, the Company cannot estimate the possible loss or
range of loss, if any, associated with its resolution. However, there can be no
assurance that the ultimate resolution of the matter will not result in a
material adverse effect on the Company&#146;s business, financial condition or
results of operations.</FONT></P>
<P align=center><FONT face=serif size=2>55</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><FONT face=serif size=2>In February 2007, the Company was named
as a defendant in a lawsuit brought by Evelyna Cantwell and Jack Cantwell,
individually, and also doing business as the principals of Byrd-Walsh
International, LLC, in United States Federal District Court for the Southern
District of Florida against the Company and its former Chairman of the Board and
Chief Executive Officer and current Chairman Emeritus, Philip M. Lynch. The
lawsuit alleges causes of action for breach of contract, breach of implied
contract, quasi contract, promissory estoppel, equitable estoppel, negligence,
wrongful conversion, fraud, constructive fraud, misappropriation and violation
of the Uniform Trade Secrets Act. The suit seeks unspecified injunctive relief
as well as compensatory and punitive damages in an unspecified amount which,
based on the allegations of the Complaint, may be claimed by plaintiffs to be in
an amount in excess of $45 million. Based on the allegations in the Complaint
and the Company&#146;s understanding of relevant facts and circumstances, the Company
believes that the claims made by the Cantwells and Byrd-Walsh in this lawsuit
are without merit and the Company intends to vigorously defend against them.
Because this matter is in the early stage, the Company cannot estimate the
possible loss or range of loss, if any, associated with its resolution. The
amounts claimed in this lawsuit are substantial, however, and, there can be no
assurance that the ultimate resolution of the matter will not result in a
material adverse effect on the Company&#146;s business, financial condition or
results of operations. </FONT></P>
<P align=justify><FONT face=serif size=2>The Company is involved in a legal
action in Finland whereby the Company sued a Finnish company for trademark
infringement. The Company won the initial case, but has subsequently lost on
appeal. The Company is currently appealing the latest court decision. The
outcome of the appeal is unknown and any potential loss cannot be estimated at
this time; however, the potential judgment or settlement resulting from the case
could have a material impact on the financial position or results of operations
of the Company. The Company has obtained a $600,000 stand-by letter of credit to
potentially fund the Company&#146;s obligations related to the courts in Finland
against the defendant&#146;s products that were seized as contraband pending the
outcome of the lawsuit. Advances made under the demand letter of credit will be
made at the sole discretion of National City Bank and will be due and payable on
demand. Any outstanding unpaid principal balance under the demand letter of
credit bears interest at an annual rate based on LIBOR plus 2.25%. Interest is
payable in arrears beginning on January 15, 2007 and on the 15th day of each
month thereafter and on demand. Because the Company believes that it has valid
legal grounds for appeal, it has determined that a loss is not probably at this
time as defined by SFAS 5, &#147;Accounting for Contingencies.&#148; However, there can be
no assurance that the ultimate resolution of the matter will not result in a
material adverse effect on the Company&#146;s business, financial condition or
results of operations. </FONT></P>
<P align=justify><FONT face=serif size=2>There are no other legal actions
arising in the ordinary course of business that management is of the opinion
that any judgment or settlement therefrom would have a material adverse effect
on the financial position or results of operations of the Company.</FONT></P>
<P align=center><FONT face=serif size=2>56</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><FONT face=serif size=2>In June 2007, the U.S. Internal Revenue
Service concluded its audit of the Company&#146;s U.S. federal income tax returns for
fiscal 2004 and 2005. As a result of such audit, the Company paid the IRS
approximately $25,000 in additional payroll taxes. The Company also agreed in
principle with the IRS to adjustments that will result in the additional payment
of approximately $60,000 in income tax and interest. As a result of the audit,
the IRS has also taken the position that the Company failed to withhold
approximately $505,000 of payroll taxes and individual income taxes on travel
and other expense reimbursements made to Philip M. Lynch, the Company&#146;s former
Chairman of the Board and Chief Executive Officer and current Chairman Emeritus,
and commissions payments made to Inter Alia Holding Co. under that certain
former Manufacturer&#146;s Representative Agreement dated as of October 1, 1976 and
as subsequently amended thereafter between the Company and Inter Alia, which
agreement has since been terminated. Inter Alia beneficially owns approximately
24.9% of the Company&#146;s outstanding common stock, and Philip M. Lynch, the
Company&#146;s former Chairman of the Board and Chief Executive Officer and current
Chairman Emeritus, and G. Patrick Lynch, the Company&#146;s current President and
Chief Executive Officer, are shareholders of Inter Alia. The Company disagrees
with the IRS&#146; position on withholding and is in the process of appealing the
matter. Because the Company believes that it has valid legal grounds for appeal,
it has determined that a loss is not probable at this time as defined by SFAS 5,
&#147;Accounting for Contingencies.&#148; However, there can be no assurance that the
ultimate resolution of the matter will not result in a material adverse effect
on the Company&#146;s business, financial condition or results of operations.
</FONT></P>
<P align=justify><FONT face=serif size=2>In fiscal 1999, a subsidiary of the
Company, NTI Facilities, Inc., acquired a one-third ownership of Omni-Northern
Ltd., an Ohio limited liability company and entered into a lease agreement with
Omni-Northern Ltd. for approximately 50% of the net rental space in a building
owned by Omni-Northern Ltd. Omni-Northern Ltd. owns and operates a rental
property located at 23205 Mercantile Road, Beachwood, Ohio, comprising
approximately two acres of land and a building of approximately 34,000 square
feet. NTI Facilities consolidates its ownership in Omni-Northern LTD utilizing
the equity method of consolidation. The property has an approximate value of
$2,205,000, based upon the cash-to-mortgage acquisition price of the property
paid in fiscal 2000. The Company has guaranteed up to $329,082 of the
Omni-Northern Ltd.&#146;s $1,903,571 mortgage obligation with National City Bank,
Cleveland, Ohio. NTI Facilities, Inc. entered into a 15-year lease agreement
with Omni-Northern Ltd. for approximately 17,000 square feet of office,
manufacturing, laboratory and warehouse space, requiring monthly rental payments
of $17,500, which are adjusted annually according to the annual consumer price
index, through November 2014. By its ownership interest in Omni-Northern Ltd.,
NTI Facilities Inc. is entitled to one-third of the operating profits (losses)
of Omni-Northern Ltd. Omni-Northern has leased the remaining 50% of the net
rental space to other third parties. </FONT></P>
<P align=justify><FONT face=serif size=2>On November 16, 2007, the Company&#146;s
Board of Directors, upon recommendation of the Compensation Committee, approved
the material terms of an annual bonus plan for executive officers and certain
employees of the Company for fiscal year ending August 31, 2008, the purpose of
which is to align the interests of the Company and its subsidiaries, executive
officers and stockholders by providing an incentive for the achievement of key
corporate and individual performance measures that are critical to the success
of the Company and linking a significant portion of each executive officer&#146;s
annual compensation to the achievement of such measures. The following is a
brief summary of the material terms approved by the Board: </FONT></P>
<UL style="TEXT-ALIGN: justify">
  <LI><FONT face=serif size=2>The total amount available under the bonus plan
  will be up to 25% of the Company&#146;s earnings before interest, taxes and other
  income (EBITOI);</FONT>
  <LI><FONT face=serif size=2>The total amount available under the cash bonus
  plan will be $0 if EBITOI, as adjusted to take into account amounts to be paid
  under the bonus plan, fall below 70% of target EBITOI; and</FONT>
  <LI><FONT face=serif size=2>The payment of bonuses under the plan will be made
  in both cash and stock, the exact amount and percentages of which will be
  determined by the Compensation Committee.</FONT> </LI></UL>
<P align=center><FONT face=serif size=2>57</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><B><FONT face=serif size=2>20. STATEMENTS OF CASH FLOWS
</FONT></B></P>
<P align=justify><FONT face=serif size=2>Supplemental disclosures of cash flow
information for the fiscal years ended August 31, 2007 and 2006 consist of:
</FONT></P>
<TABLE style="FONT-SIZE: 12pt; LINE-HEIGHT: 14pt; BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD align=left width="87%"></TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%"><FONT face=serif size=2>2007</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%" colSpan=2><FONT face=serif size=2>2006</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%" bgColor=#c0c0c0><FONT face=serif size=2>Cash
      received (paid) during the year for income taxes</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>$119,229</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>$(35,305</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>)</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%"><FONT face=serif size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="5%"></TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="4%"></TD>
    <TD align=left width="1%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%" bgColor=#c0c0c0><FONT face=serif size=2>Cash
      paid during the year for interest</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>164,372</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>94,751</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%"><FONT face=serif size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="5%"></TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="4%"></TD>
    <TD align=left width="1%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%" bgColor=#c0c0c0><FONT face=serif size=2>Common
      stock issued in lieu of accrued payroll (37,245 shares)</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>298,330</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>-</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%"><FONT face=serif size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="5%"></TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="4%"></TD>
    <TD align=left width="1%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%" bgColor=#c0c0c0><FONT face=serif size=2>Increase in the Company&#146;s investment in Corporate Joint</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="4%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%" bgColor=#c0c0c0><FONT face=serif size=2>Ventures and accumulated other comprehensive loss due to</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="4%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="87%" bgColor=#c0c0c0><FONT face=serif size=2>changes
      in exchange rates</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>709,109</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>310,687</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD></TR></TABLE><BR>
<P align=justify><B><FONT face=serif size=2>21. QUARTERLY INFORMATION
(UNAUDITED) </FONT></B></P>
<TABLE style="FONT-SIZE: 12pt; LINE-HEIGHT: 14pt; BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD align=left width="75%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="23%" colSpan=9><FONT face=serif size=2>Quarter Ended</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="75%"></TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD noWrap align=center width="5%"><FONT face=serif size=2>November
      30</FONT></TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD noWrap align=center width="5%"><FONT face=serif size=2>February
      28</FONT></TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD noWrap align=center width="5%" colSpan=2><FONT face=serif size=2>May
      31</FONT></TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD noWrap align=center width="5%" colSpan=2><FONT face=serif size=2>August 31</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="75%" bgColor=#c0c0c0><FONT face=serif size=2>Fiscal
      year 2007:</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="5%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="5%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="4%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="4%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="75%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net sales</FONT></TD>
    <TD align=right width="1%">&nbsp;</TD>
    <TD align=right width="5%"><FONT face=serif size=2>$4,617,374</FONT></TD>
    <TD align=right width="1%">&nbsp;</TD>
    <TD align=right width="5%"><FONT face=serif size=2>$3,884,895</FONT></TD>
    <TD align=right width="1%">&nbsp;</TD>
    <TD align=right width="4%"><FONT face=serif size=2>$4,407,798</FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="1%">&nbsp;</TD>
    <TD align=right width="4%"><FONT face=serif size=2>$3,918,963</FONT></TD>
    <TD align=left width="1%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="75%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Gross profit</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>1,672,319</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>1,425,831</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>1,531,786</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>1,399,914</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="75%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Income before income taxes</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"><FONT face=serif size=2>1,122,224</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"><FONT face=serif size=2>596,203</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="4%"><FONT face=serif size=2>718,800</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="4%"><FONT face=serif size=2>972,181</FONT></TD>
    <TD align=left width="1%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="75%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Income taxes</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>132,000</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>148,000</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>91,000</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>(185,000</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>)</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="75%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net income</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"><FONT face=serif size=2>990,224</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"><FONT face=serif size=2>448,203</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="4%"><FONT face=serif size=2>627,800</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="4%"><FONT face=serif size=2>1,157,181</FONT></TD>
    <TD align=left width="1%"></TD></TR>
  <TR>
    <TD width="99%" colSpan=11>&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="75%" bgColor=#c0c0c0><FONT face=serif size=2>Net
      income per share:</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="5%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="5%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="4%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="4%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="75%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Basic</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"><FONT face=serif size=2>$0.27</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"><FONT face=serif size=2>$0.12</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="4%"><FONT face=serif size=2>$0.17</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="4%"><FONT face=serif size=2>$0.32</FONT></TD>
    <TD align=left width="1%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="75%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Diluted</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>$0.27</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>$0.12</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>$0.17</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>$0.31</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR>
    <TD width="99%" colSpan=11>&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="75%" bgColor=#c0c0c0><FONT face=serif size=2>Weighted average common</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="5%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="5%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="4%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="4%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR>
    <TD align=left width="75%" bgColor=#c0c0c0><FONT size=2>shares assumed
      outstanding:</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="5%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="5%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="4%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="4%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="75%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Basic</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"><FONT face=serif size=2>3,624,314</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"><FONT face=serif size=2>3,664,248</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="4%"><FONT face=serif size=2>3,679,016</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="4%"><FONT face=serif size=2>3,679,412</FONT></TD>
    <TD align=left width="1%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="75%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Diluted</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>3,665,677</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>3,690,260</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>3,708,626</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>3,713,366</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR>
    <TD width="99%" colSpan=11>&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="75%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="23%" colSpan=9><FONT face=serif size=2>Quarter Ended</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="75%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"><FONT face=serif size=2>November
      30</FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"><FONT face=serif size=2>February
      28</FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%" colSpan=2><FONT face=serif size=2>May
      31</FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%" colSpan=2><FONT face=serif size=2>August 31</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="75%" bgColor=#c0c0c0><FONT face=serif size=2>Fiscal
      year 2006:</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="5%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="5%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="4%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="4%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="75%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net sales</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"><FONT face=serif size=2>$4,403,630</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"><FONT face=serif size=2>$3,775,693</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="4%"><FONT face=serif size=2>$4,320,371</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="4%"><FONT face=serif size=2>$4,105,270</FONT></TD>
    <TD align=left width="1%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="75%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Gross profit</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>1,674,519</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>1,460,448</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>1,561,011</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>1,562,549</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="75%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Income before income taxes</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"><FONT face=serif size=2>905,985</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"><FONT face=serif size=2>235,730</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="4%"><FONT face=serif size=2>687,963</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="4%"><FONT face=serif size=2>143,387</FONT></TD>
    <TD align=left width="1%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="75%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Income taxes</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>272,000</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>31,000</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>(30,000</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>)</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>(19,000</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>)</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="75%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net income</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"><FONT face=serif size=2>633,985</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"><FONT face=serif size=2>204,730</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="4%"><FONT face=serif size=2>717,963</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="4%"><FONT face=serif size=2>162,387</FONT></TD>
    <TD align=left width="1%"></TD></TR>
  <TR>
    <TD width="99%" colSpan=11>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="75%" bgColor=#c0c0c0><FONT face=serif size=2>Net
      income per share:</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="5%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="5%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="4%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="4%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="75%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Basic</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"><FONT face=serif size=2>$0.18</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"><FONT face=serif size=2>$0.06</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="4%"><FONT face=serif size=2>$0.20</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="4%"><FONT face=serif size=2>$0.04</FONT></TD>
    <TD align=left width="1%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="75%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Diluted</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>$0.18</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>$0.06</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>$0.20</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>$0.04</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR>
    <TD width="99%" colSpan=11>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="75%" bgColor=#c0c0c0><FONT face=serif size=2>Weighted average common</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="5%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="5%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="4%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="4%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR>
    <TD align=left width="75%" bgColor=#c0c0c0><FONT size=2>shares assumed
      outstanding:</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="5%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="5%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="4%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="4%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="75%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Basic</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"><FONT face=serif size=2>3,589,993</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"><FONT face=serif size=2>3,597,815</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="4%"><FONT face=serif size=2>3,610,993</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="4%"><FONT face=serif size=2>3,614,246</FONT></TD>
    <TD align=left width="1%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="75%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Diluted</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>3,607,564</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>3,628,594</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>3,638,795</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>3,647,439</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD></TR></TABLE><BR>
<P align=center><FONT face=serif size=2>58</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><B><FONT face=serif size=2>Item 8.</FONT></B><B><FONT face=sans-serif size=2> </FONT></B><B><FONT face=serif size=2>CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
</FONT></B></P>
<P align=justify><FONT face=serif size=2>None </FONT></P>
<P align=justify><B><FONT face=serif size=2>Item 8A. CONTROLS AND
PROCEDURES.</FONT></B><FONT face=serif size=2> </FONT></P>
<P align=justify><B><FONT face=serif size=2>Evaluation of Disclosure Controls
and Procedures </FONT></B></P>
<P align=justify><FONT face=serif size=2>NTIC maintains disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended) that are designed to reasonably ensure that
information required to be disclosed by NTIC in the reports it files or submits
under the Securities Exchange Act of 1934, as amended, is recorded, processed,
summarized, and reported, within the time periods specified in the Securities
and Exchange Commission&#146;s rules and forms and that such information is
accumulated and communicated to NTIC&#146;s management, including NTIC&#146;s principal
executive and principal financial officers, or persons performing similar
functions, as appropriate to allow timely decisions regarding required
disclosure. In designing and evaluating NTIC&#146;s disclosure controls and
procedures, NTIC recognizes that any controls and procedures, no matter how well
designed and operated can provide only reasonable assurance of achieving the
desired control objectives and NTIC necessarily is required to apply its
judgment in evaluating the cost-benefit relationship of possible controls and
procedures. NTIC&#146;s management evaluated, with the participation of its Chief
Executive Officer and its Chief Financial Officer, the effectiveness of the
design and operation of NTIC&#146;s disclosure controls and procedures as of the end
of the period covered in this report. Based on that evaluation, NTIC&#146;s Chief
Executive Officer and Chief Financial Officer concluded that NTIC&#146;s disclosure
controls and procedures were effective as of the end of such period to provide
reasonable assurance that information required to be disclosed in NTIC&#146;s
Exchange Act reports is recorded, processed, summarized, and reported within the
time periods specified in the SEC&#146;s rules and forms, and that material
information relating to NTIC and its consolidated subsidiaries is made known to
management, including NTIC&#146;s Chief Executive Officer and Chief Financial
Officer, particularly during the period when NTIC&#146;s periodic reports are being
prepared.</FONT></P>
<P align=justify><FONT face=serif size=2>NTIC&#146;s management is aware, however,
that there is a lack of segregation of duties due to the small number of
employees of NTIC dealing with general administrative and financial matters.
However, NTIC&#146;s management has decided that considering the employees involved
and the control procedures in place, risks associated with such lack of
segregation are insignificant and the potential benefits of adding employees to
clearly segregate duties do not at this time justify the expenses associated
with such increases. </FONT></P>
<P align=justify><B><FONT face=serif size=2>Changes in Internal Control over
Financial Reporting </FONT></B></P>
<P align=justify><FONT face=serif size=2>There was no change in NTIC&#146;s internal
control over financial reporting that occurred during the quarter ended August
31, 2007 that has materially affected, or is reasonably likely to materially
affect NTIC&#146;s internal control over financial reporting. </FONT></P>
<P align=center><FONT face=serif size=2>59</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><B><FONT face=serif size=2>Item 8B. OTHER INFORMATION.
</FONT></B></P>
<P align=justify><FONT face=serif size=2>On November 16, 2007, NTIC&#146;s Board of
Directors, upon recommendation of the Compensation Committee of the Board,
approved annual performance bonuses for NTIC&#146;s executive officers, to be paid in
cash and NTIC common stock as follows: </FONT></P>
<TABLE style="PADDING-RIGHT: 9pt; PADDING-LEFT: 9pt; FONT-SIZE: 12pt; LINE-HEIGHT: 14pt; BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-TOP: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid" noWrap align=center width="20%" bgColor=#c0c0c0><B><FONT face=serif size=2>Name of Executive</FONT></B></TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-TOP: #000000 1pt solid" align=left width="69%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-TOP: #000000 1pt solid" noWrap align=center width="5%" bgColor=#c0c0c0><B><FONT face=serif size=2>Cash</FONT></B></TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-TOP: #000000 1pt solid" noWrap align=center width="5%" bgColor=#c0c0c0><B><FONT face=serif size=2>NTIC Common</FONT></B></TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid; BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="20%" bgColor=#c0c0c0><B><FONT face=serif size=2>Officer</FONT></B></TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-BOTTOM: #000000 1pt solid" align=center width="69%" bgColor=#c0c0c0><B><FONT face=serif size=2>Title</FONT></B></TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%" bgColor=#c0c0c0><B><FONT face=serif size=2>Bonus ($)</FONT></B></TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%" bgColor=#c0c0c0><B><FONT face=serif size=2>Stock (Shares) (1)</FONT></B></TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid; BORDER-BOTTOM: #000000 1pt solid" align=left width="20%"><FONT face=serif size=2>G. Patrick Lynch</FONT></TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-BOTTOM: #000000 1pt solid" align=left width="69%"><FONT face=serif size=2>President and Chief
      Executive Officer</FONT></TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-BOTTOM: #000000 1pt solid" align=center width="5%"><FONT face=serif size=2>$61,827</FONT></TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-BOTTOM: #000000 1pt solid" align=center width="5%"><FONT face=serif size=2>6,214</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid; BORDER-BOTTOM: #000000 1pt solid" align=left width="20%"><FONT face=serif size=2>Dr. Donald Kubik</FONT></TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-BOTTOM: #000000 1pt solid" align=left width="69%"><FONT face=serif size=2>Vice Chairman and Chief
      Technology Officer</FONT></TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-BOTTOM: #000000 1pt solid" align=center width="5%"><FONT face=serif size=2>$35,883</FONT></TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-BOTTOM: #000000 1pt solid" align=center width="5%"><FONT face=serif size=2>3,606</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid; BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="20%"><FONT face=serif size=2>Matthew C.
      Wolsfeld</FONT></TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-BOTTOM: #000000 1pt solid" align=left width="69%"><FONT face=serif size=2>Chief Financial Officer and
      Secretary</FONT></TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-BOTTOM: #000000 1pt solid" align=center width="5%"><FONT face=serif size=2>$47,184</FONT></TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-BOTTOM: #000000 1pt solid" align=center width="5%"><FONT face=serif size=2>4,742</FONT></TD></TR></TABLE><BR>
<TABLE cellSpacing=0 cellPadding=0 border=0>

  <TR>
    <TD vAlign=top noWrap><FONT face=serif size=2>(1)</FONT></TD>
    <TD noWrap>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD width="100%">
      <P align=justify><FONT face=serif size=2>Number of shares of NTIC common
      stock were determined based on the dollar amount of the bonus to be paid
      in NTIC common stock divided by $9.98, which represents the closing sale
      price of a share of NTIC common stock on November 16, 2007, as reported by
      The American Stock Exchange.</FONT></P></TD></TR></TABLE>
<P align=center><FONT face=serif size=2>60</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=center><B><FONT face=serif size=2>PART III </FONT></B></P>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR>
    <TD vAlign=top noWrap width="1%"><STRONG><FONT size=2>Item
      9.</FONT></STRONG></TD>
    <TD vAlign=top noWrap width="1%">&nbsp; </TD>
    <TD vAlign=top width="97%">
      <P align=justify><B><FONT face=serif size=2>DIRECTORS, EXECUTIVE OFFICERS,
      PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH
      SECTION 16(a) OF THE </FONT></B><B><FONT face=serif size=2>EXCHANGE ACT.
      </FONT></B></P></TD></TR></TABLE>
<P align=justify><FONT face=serif size=2>The information required under Item 9
of Part III of this report is to be contained under the headings &#147;Proposal One &#150;
Election of Directors &#151; Information About Current Directors and Nominees,&#148;
&#147;Proposal One &#150; Election of Directors &#151; Other Information About Current
Directors and Nominees,&#148; &#147;Corporate Governance &#151; Board of Directors and
Committees of the Board,&#148; &#147;Corporate Governance,&#148; &#147;Other Matters &#150; Section 16(a)
Beneficial Ownership Reporting Compliance&#148; and &#147;Other Matters &#150; Director
Nominations&#148; in NTIC&#146;s definitive proxy statement to be filed with the SEC with
respect to its next annual meeting of stockholders, which involves the election
of directors and is incorporated herein by reference, or, if such proxy
statement is not filed with the SEC within 120 days after the end of the fiscal
year covered by this report, such information will be filed as part of an
amendment to this report not later than the end of the 120-day period.
</FONT></P>
<P align=justify><FONT face=serif size=2>The information concerning NTIC&#146;s
executive officers and officers is included under Item 4A of Part I of this
report under the heading &#147;Executive Officers of Registrant&#148; and is incorporated
herein by reference. </FONT></P>
<P align=justify><FONT face=serif size=2>During the fourth quarter of fiscal
2006, NTIC made no material changes to the procedures by which stockholders may
recommend nominees to NTIC&#146;s Board of Directors, as described in NTIC&#146;s most
recent proxy statement. </FONT></P>
<P align=justify><FONT face=serif size=2>NTIC has adopted a code of ethics that
applies to its principal executive officer, principal financial officer,
principal accounting officer or controller or persons performing similar
functions, as well as other employees and NTIC&#146;s directors and meets the
requirements of the SEC and The American Stock Exchange. A copy of NTIC&#146;s Code
of Ethics is filed as an exhibit to this report. NTIC intends to disclose any
amendments to any waivers from a provision of NTIC&#146;s code of ethics on a Form
8-K filed with the SEC. </FONT></P>
<P align=justify><B><FONT face=serif size=2>Item 10.</FONT></B><B><FONT face=sans-serif size=2> </FONT></B><B><FONT face=serif size=2>EXECUTIVE
COMPENSATION. </FONT></B></P>
<P align=justify><FONT face=serif size=2>The information required under Item 10
of Part III of this report is to be contained under the headings &#147;Director
Compensation&#148; and &#147;Executive Compensation&#148; in NTIC&#146;s definitive proxy statement
to be filed with the SEC with respect to NTIC&#146;s next annual meeting of
stockholders, which involves the election of directors and is incorporated
herein by reference, or, if such proxy statement is not filed with the SEC
within 120 days after the end of the fiscal year covered by this report, such
information will be filed as part of an amendment to this report not later than
the end of the 120-day period. </FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR>
    <TD vAlign=top noWrap width="1%"><STRONG><FONT size=2>Item
      11.</FONT></STRONG></TD>
    <TD vAlign=top noWrap width="1%">&nbsp; </TD>
    <TD vAlign=top width="97%">
      <P align=justify><B><FONT face=serif size=2>SECURITY OWNERSHIP OF CERTAIN
      BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
      </FONT></B></P></TD></TR></TABLE>
<P align=justify><FONT face=serif size=2>The information required under Item 11
of Part III of this report is to be contained under the heading &#147;Security
Ownership of Principal Stockholders and Management&#148; in NTIC&#146;s definitive proxy
statement to be filed with the SEC with respect to NTIC&#146;s next annual meeting of
stockholders, which involves the election of directors and is incorporated
herein by reference, or, if such proxy statement is not filed with the SEC
within 120 days after the end of the fiscal year covered by this report, such
information will be filed as part of an amendment to this report not later than
the end of the 120-day period. </FONT></P>
<P align=center><FONT face=serif size=2>61</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><B><FONT face=serif size=2>Equity Compensation Plan Information
</FONT></B></P>
<P align=justify><FONT face=serif size=2>The following table summarizes
outstanding options under NTIC&#146;s equity compensation plans as of August 31,
2007. NTIC&#146;s equity compensation plans as of August 31, 2007 were the Northern
Technologies International Corporation 2007 Stock Incentive Plan, the Northern
Technologies International Corporation 2000 Stock Incentive Plan, the Northern
Technologies International Corporation 1994 Stock Incentive Plan and the
Northern Technologies International Corporation Employee Stock Purchase Plan. No
future options or other incentive awards will be granted under the Northern
Technologies International Corporation 1994 Stock Incentive Plan and Northern
Technologies International Corporation 2000 Stock Incentive Plan. </FONT></P>
<P align=justify><FONT face=serif size=2>Except as otherwise stated below,
options granted in the future under the Northern Technologies International
Corporation 2007 Stock Incentive Plan are within the discretion of the Board of
Directors and the Compensation Committee of the Board of Directors and therefore
cannot be ascertained at this time.</FONT></P>
<TABLE style="FONT-SIZE: 12pt; LINE-HEIGHT: 14pt; BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD noWrap align=center width="25%"></TD>
    <TD align=center width="1%"></TD>
    <TD noWrap align=center width="24%"><B><FONT face=serif size=2>(a)</FONT></B></TD>
    <TD align=left width="1%"></TD>
    <TD noWrap align=center width="24%"><B><FONT face=serif size=2>(b)</FONT></B></TD>
    <TD align=center width="1%"></TD>
    <TD noWrap align=center width="24%"><B><FONT face=serif size=2>(c)</FONT></B></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="25%"></TD>
    <TD align=left width="1%"></TD>
    <TD noWrap align=center width="24%"></TD>
    <TD align=left width="1%"></TD>
    <TD noWrap align=center width="24%"></TD>
    <TD align=center width="1%"></TD>
    <TD noWrap align=center width="24%"><B><FONT face=serif size=2>Number of
      Securities</FONT></B></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="25%"></TD>
    <TD align=left width="1%"></TD>
    <TD noWrap align=center width="24%"></TD>
    <TD align=left width="1%"></TD>
    <TD noWrap align=center width="24%"></TD>
    <TD align=center width="1%"></TD>
    <TD noWrap align=center width="24%"><B><FONT face=serif size=2>Remaining
      Available for</FONT></B></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="25%"></TD>
    <TD align=center width="1%"></TD>
    <TD noWrap align=center width="24%"><B><FONT face=serif size=2>Number of
      Securities to</FONT></B></TD>
    <TD align=left width="1%"></TD>
    <TD noWrap align=center width="24%"><B><FONT face=serif size=2>Weighted-Average</FONT></B></TD>
    <TD align=center width="1%"></TD>
    <TD noWrap align=center width="24%"><B><FONT face=serif size=2>Future
      Issuance Under</FONT></B></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="25%"></TD>
    <TD align=center width="1%"></TD>
    <TD noWrap align=center width="24%"><B><FONT face=serif size=2>be Issued
      Upon Exercise</FONT></B></TD>
    <TD align=left width="1%"></TD>
    <TD noWrap align=center width="24%"><B><FONT face=serif size=2>Exercise
      Price of</FONT></B></TD>
    <TD align=center width="1%"></TD>
    <TD noWrap align=center width="24%"><B><FONT face=serif size=2>Equity
      Compensation Plans</FONT></B></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="25%"></TD>
    <TD align=center width="1%"></TD>
    <TD noWrap align=center width="24%"><B><FONT face=serif size=2>of
      Outstanding Options,</FONT></B></TD>
    <TD align=left width="1%"></TD>
    <TD noWrap align=center width="24%"><B><FONT face=serif size=2>Outstanding
      Options,</FONT></B></TD>
    <TD align=center width="1%"></TD>
    <TD noWrap align=center width="24%"><B><FONT face=serif size=2>(excluding
      securities</FONT></B></TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="25%"><B><FONT face=serif size=2>Plan Category</FONT></B></TD>
    <TD align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="24%"><B><FONT face=serif size=2>Warrants and Rights</FONT></B></TD>
    <TD align=left width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="24%"><B><FONT face=serif size=2>Warrants and Rights</FONT></B></TD>
    <TD align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="24%"><B><FONT face=serif size=2>reflected in column
    (a))</FONT></B></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="25%" bgColor=#c0c0c0><FONT face=serif size=2>Equity
      compensation plans</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="24%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="24%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD align=left width="24%" bgColor=#c0c0c0>&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="25%" bgColor=#c0c0c0><FONT face=serif size=2>approved by security holders:</FONT></TD>
    <TD align=center width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD align=center width="24%" bgColor=#c0c0c0><FONT face=serif size=2>86,167</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD align=center width="24%" bgColor=#c0c0c0><FONT face=serif size=2>$6.64</FONT></TD>
    <TD align=center width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="24%" bgColor=#c0c0c0><FONT face=serif size=2>494,923</FONT></TD></TR>
  <TR>
    <TD width="100%" colSpan=7>&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="25%" bgColor=#c0c0c0><FONT face=serif size=2>Equity
      compensation plans not</FONT></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="24%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="24%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=left width="24%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="25%" bgColor=#c0c0c0><FONT face=serif size=2>approved by security holders</FONT></TD>
    <TD align=center width="1%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=center width="24%" bgColor=#c0c0c0><FONT face=serif size=2>-</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=left width="1%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=center width="24%" bgColor=#c0c0c0><FONT face=serif size=2>-</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="1%" bgColor=#c0c0c0></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=center width="24%" bgColor=#c0c0c0><FONT face=serif size=2>-</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="25%"><B><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      Total</FONT></B></TD>
    <TD align=center width="1%"></TD>
    <TD align=center width="24%"><FONT face=serif size=2>86,167</FONT></TD>
    <TD align=right width="1%"><FONT face=serif size=2></FONT></TD>
    <TD align=center width="24%"><FONT face=serif size=2>$6.64</FONT></TD>
    <TD align=center width="1%"></TD>
    <TD align=center width="24%"><FONT face=serif size=2>494,923</FONT></TD></TR></TABLE><BR>
<P align=justify><FONT face=serif size=2>Under The American Stock Exchange
rules, NTIC is required to disclose in its annual report the number of
outstanding options and options available for grant under NTIC&#146;s equity
compensation plans as of September 1, 2006 and August 31, 2007. As of September
1, 2006, the number of securities to be issued upon exercise of outstanding
options, warrants and rights were 119,334 shares at a weighted average exercise
price of $5.32. The number of securities remaining available for future issuance
under NTIC&#146;s equity compensation plans (excluding securities to be issued upon
exercise of outstanding options, warrants and rights) was 43,665 shares. This
information as of August 31, 2007 is contained in the table above. NTIC&#146;s only
equity compensation plans under which shares of NTIC common stock may be issued
are the Northern Technologies International Corporation 2007 Stock Incentive
Plan, the Northern Technologies International Corporation 2000 Stock Incentive
Plan, the Northern Technologies International Corporation 1994 Stock Incentive
Plan and the Northern Technologies International Corporation Employee Stock
Purchase Plan. </FONT></P>
<P align=justify><B><FONT face=serif size=2>Item 12.</FONT></B><B><FONT face=sans-serif size=2> </FONT></B><B><FONT face=serif size=2>CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
</FONT></B></P>
<P align=justify><FONT face=serif size=2>The information required under Item 12
of Part III of this report is to be contained under the headings &#147;Related Party
Relationships and Transactions&#148; and &#147;Corporate Governance&#151;Director Independence&#148;
in NTIC&#146;s definitive proxy statement to be filed with the SEC with respect to
NTIC&#146;s next annual meeting of stockholders, which involves the election of
directors and is incorporated herein by reference, or, if such proxy statement
is not filed with the SEC within 120 days after the end of the fiscal year
covered by this report, such information will be filed as part of an amendment
to this report not later than the end of the 120-day period. </FONT></P>
<P align=center><FONT face=serif size=2>62</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><B><FONT face=serif size=2>Item 13.</FONT></B><B><FONT face=sans-serif size=2> </FONT></B><B><FONT face=serif size=2>EXHIBITS.
</FONT></B></P>
<P align=justify><B><FONT face=serif size=2>(a)</FONT></B><B><FONT face=sans-serif size=2> </FONT></B><B><FONT face=serif size=2>Exhibits
</FONT></B></P>
<P align=justify><FONT face=serif size=2>Reference is made to the Exhibit Index
hereinafter contained, at page 66 of this report. </FONT></P>
<P align=justify><FONT face=serif 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, Corporate
Secretary, Northern Technologies International Corporation, 4201 Woodland Road,
P.O. Box 69, Circle Pines, Minnesota 55014 Attn: Stockholder Information.
</FONT></P>
<P align=justify><FONT face=serif 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></P>
<TABLE style="TEXT-ALIGN: justify" cellSpacing=0 cellPadding=0 border=0>

  <TR>
    <TD vAlign=top noWrap>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD vAlign=top noWrap><FONT face=serif size=2>A.</FONT></TD>
    <TD vAlign=top noWrap>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD vAlign=top width="100%"><FONT size=2><FONT face=serif size=2>Northern
      Technologies International Corporation 1994 Stock Incentive Plan
      (incorporated by reference to Exhibit 10.3 to NTIC&#146;s Annual Report on Form
      10-KSB for the fiscal year ended August 31, 1993).</FONT> </FONT></TD></TR>
  <TR>
    <TD vAlign=top noWrap></TD>
    <TD vAlign=top width="100%" colSpan=3>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top noWrap></TD>
    <TD vAlign=top noWrap><FONT face=serif size=2>B.</FONT></TD>
    <TD vAlign=top noWrap></TD>
    <TD vAlign=top width="100%"><FONT size=2><FONT face=serif size=2>Form of
      Incentive Stock Option Agreement for Northern Technologies International
      Corporation 1994 Stock Incentive Plan (incorporated by reference to
      Exhibit 10.1 to NTIC&#146;s Annual Report on Form 10-KSB for the fiscal year
      ended August 31, 1993).</FONT> </FONT></TD></TR>
  <TR>
    <TD vAlign=top noWrap></TD>
    <TD vAlign=top width="100%" colSpan=3>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top noWrap></TD>
    <TD vAlign=top noWrap><FONT face=serif size=2>C.</FONT></TD>
    <TD vAlign=top noWrap></TD>
    <TD vAlign=top width="100%"><FONT size=2><FONT face=serif size=2>Form of
      Non-Qualified Stock Option Agreement for Northern Technologies
      International Corporation 1994 Stock Incentive Plan (incorporated by
      reference to Exhibit 10.2 to NTIC&#146;s Annual Report on Form 10-KSB for the
      fiscal year ended August 31, 1993).</FONT> </FONT></TD></TR>
  <TR>
    <TD vAlign=top noWrap></TD>
    <TD vAlign=top width="100%" colSpan=3>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top noWrap></TD>
    <TD vAlign=top noWrap><FONT face=serif size=2>D.</FONT></TD>
    <TD vAlign=top noWrap></TD>
    <TD vAlign=top width="100%"><FONT size=2><FONT face=serif size=2>Northern
      Technologies International Corporation 2000 Stock Incentive Plan
      (incorporated by reference to Exhibit 10.4 to NTIC&#146;s Annual Report on Form
      10-KSB for the fiscal year ended August 31, 2000).</FONT> </FONT></TD></TR>
  <TR>
    <TD vAlign=top noWrap></TD>
    <TD vAlign=top width="100%" colSpan=3>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top noWrap></TD>
    <TD vAlign=top noWrap><FONT face=serif size=2>E.</FONT></TD>
    <TD vAlign=top noWrap></TD>
    <TD vAlign=top width="100%"><FONT size=2><FONT face=serif size=2>Form of
      Incentive Stock Option Agreement for Northern Technologies International
      Corporation 2000 Stock Incentive Plan (incorporated by reference to
      Exhibit 10.5 to NTIC&#146;s Annual Report on Form 10-KSB for the fiscal year
      ended August 31, 2000).</FONT> </FONT></TD></TR>
  <TR>
    <TD vAlign=top noWrap></TD>
    <TD vAlign=top width="100%" colSpan=3>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top noWrap></TD>
    <TD vAlign=top noWrap><FONT face=serif size=2>F.</FONT></TD>
    <TD vAlign=top noWrap></TD>
    <TD vAlign=top width="100%"><FONT size=2><FONT face=serif size=2>Form of
      Non-Qualified Stock Option Agreement for Northern Technologies
      International Corporation 2000 Stock Incentive Plan (incorporated by
      reference to Exhibit 10.6 to NTIC&#146;s Annual Report on Form 10-KSB for the
      fiscal year ended August 31, 2000).</FONT> </FONT></TD></TR>
  <TR>
    <TD vAlign=top noWrap></TD>
    <TD vAlign=top width="100%" colSpan=3>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top noWrap></TD>
    <TD vAlign=top noWrap><FONT face=serif size=2>G.</FONT></TD>
    <TD vAlign=top noWrap></TD>
    <TD vAlign=top width="100%"><FONT size=2><FONT face=serif size=2>Northern
      Technologies International Corporation 2007 Stock Incentive Plan
      (incorporated by reference to Exhibit 10.7 to NTIC&#146;s Annual Report on Form
      10-KSB for the fiscal year ended August 31, 2006).</FONT> </FONT></TD></TR>
  <TR>
    <TD vAlign=top noWrap></TD>
    <TD vAlign=top width="100%" colSpan=3>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top noWrap></TD>
    <TD vAlign=top noWrap><FONT face=serif size=2>H.</FONT></TD>
    <TD vAlign=top noWrap></TD>
    <TD vAlign=top width="100%"><FONT size=2><FONT face=serif size=2>Form of
      Incentive Stock Option Agreement for Northern Technologies International
      Corporation 2007 Stock Incentive Plan (incorporated by reference to
      Exhibit 10.8 to NTIC&#146;s Annual Report on Form 10-KSB for the fiscal year
      ended August 31, 2006).</FONT> </FONT></TD></TR>
  <TR>
    <TD vAlign=top noWrap></TD>
    <TD vAlign=top width="100%" colSpan=3>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top noWrap></TD>
    <TD vAlign=top noWrap><FONT face=serif size=2>I.</FONT></TD>
    <TD vAlign=top noWrap></TD>
    <TD vAlign=top width="100%"><FONT size=2><FONT face=serif size=2>Form of
      Non-Qualified Stock Option Agreement for Northern Technologies
      International Corporation 2007 Stock Incentive Plan (incorporated by
      reference to Exhibit 10.9 to NTIC&#146;s Annual Report on Form 10-KSB for the
      fiscal year ended August 31, 2006).</FONT> </FONT></TD></TR></TABLE>
<P align=center><FONT face=serif size=2>63 </FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE><BR>
<TABLE style="TEXT-ALIGN: justify" cellSpacing=0 cellPadding=0 border=0>

  <TR>
    <TD vAlign=top noWrap>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD vAlign=top noWrap><FONT face=serif size=2>J.</FONT></TD>
    <TD vAlign=top noWrap>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD width="100%"><FONT size=2><FONT face=serif size=2>Form of Restricted
      Stock Agreement for Northern Technologies International Corporation 2007
      Stock Incentive Plan (incorporated by reference to Exhibit 10.10 to NTIC&#146;s
      Annual Report on Form 10-KSB for the fiscal year ended August 31,
      2006).</FONT> </FONT></TD></TR>
  <TR>
    <TD noWrap></TD>
    <TD width="100%" colSpan=3>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top noWrap></TD>
    <TD vAlign=top noWrap><FONT face=serif size=2>K.</FONT></TD>
    <TD vAlign=top noWrap></TD>
    <TD width="100%"><FONT size=2><FONT face=serif size=2>Northern
      Technologies International Corporation Employee Stock Purchase Plan
      (incorporated by reference to Exhibit 10.11 to NTIC&#146;s Annual Report on
      Form 10-KSB for the fiscal year ended August 31, 2006).</FONT>
  </FONT></TD></TR>
  <TR>
    <TD noWrap></TD>
    <TD width="100%" colSpan=3>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top noWrap></TD>
    <TD vAlign=top noWrap><FONT face=serif size=2>L.</FONT></TD>
    <TD vAlign=top noWrap></TD>
    <TD width="100%"><FONT size=2><FONT face=serif size=2>Description of
      Non-Employee Director Compensation Arrangements (filed herewith).</FONT>
      </FONT></TD></TR>
  <TR>
    <TD noWrap></TD>
    <TD width="100%" colSpan=3>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top noWrap></TD>
    <TD vAlign=top noWrap><FONT face=serif size=2>M.</FONT></TD>
    <TD vAlign=top noWrap></TD>
    <TD width="100%"><FONT size=2><FONT face=serif size=2>Description of
      Executive Officer Compensation Arrangements (filed herewith).</FONT>
      </FONT></TD></TR></TABLE>
<P align=justify><B><FONT face=serif size=2>Item 14.</FONT></B><B><FONT face=sans-serif size=2> </FONT></B><B><FONT face=serif size=2>PRINCIPAL
ACCOUNTANT FEES AND SERVICES. </FONT></B></P>
<P align=justify><FONT face=serif size=2>The information required under Item 14
of Part III of this report is to be contained under the headings &#147;Proposal Two &#150;
Ratification of Selection of Independent Registered Public Accounting Firm &#150;
Audit, Audit-Related, Tax and Other Fees&#148; and &#147;Proposal Two &#150; Ratification of
Selection of Independent Registered Public Accounting Firm &#150; Audit Committee
Pre-Approval Policy and Procedures&#148; in NTIC&#146;s definitive proxy statement to be
filed with the SEC with respect to NTIC&#146;s next annual meeting of stockholders,
which involves the election of directors and is incorporated herein by
reference, or, if such proxy statement is not filed with the SEC within 120 days
after the end of the fiscal year covered by this report, such information will
be filed as part of an amendment to this report not later than the end of the
120-day period. </FONT></P>
<P align=center><FONT face=serif size=2>64 </FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=center><B><FONT face=serif size=2>SIGNATURES </FONT></B></P>
<P align=justify><FONT face=serif 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></P>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD noWrap align=left width="50%"></TD>
    <TD noWrap align=left width="50%"><B><FONT face=serif size=2>NORTHERN
      TECHNOLOGIES INTERNATIONAL CORPORATION</FONT></B> </TD></TR></TABLE><BR>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR>
    <TD vAlign=bottom noWrap align=left width="50%"><FONT size=2>November __,
      2007</FONT>&nbsp; </TD>
    <TD vAlign=bottom noWrap align=left width="1%"><FONT size=2>By:</FONT>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="25%">&nbsp; <IMG src="northerntech_10ksb5x3x1.jpg" border=0>&nbsp;
    </TD>
    <TD noWrap align=left width="24%">&nbsp;</TD></TR>
  <TR>
    <TD noWrap align=left width="50%"></TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=left width="49%" colSpan=2><FONT size=2>G. Patrick
      Lynch</FONT>&nbsp; </TD></TR>
  <TR>
    <TD noWrap align=left width="50%"></TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=left width="49%" colSpan=2><FONT size=2>President and
      Chief Executive Officer</FONT>&nbsp; </TD></TR></TABLE><BR>
<P align=justify><FONT face=serif 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 16, 2007 in the
capacities indicated. </FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD noWrap align=left width="27%"><B><U><FONT face=serif size=2>Name</FONT></U></B>&nbsp; </TD>
    <TD noWrap align=left width="5%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD noWrap align=left width="38%"><B><U><FONT face=serif size=2>Title</FONT></U></B>&nbsp; </TD>
    <TD noWrap align=left width="5%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD noWrap align=left width="25%"><B><U><FONT face=serif size=2>Date</FONT></U></B>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="27%"><FONT face=serif size=2>/s/ </FONT><FONT face=serif size=2>G.
      Patrick Lynch</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%">&nbsp;</TD>
    <TD noWrap align=left width="38%"><FONT face=serif size=2>President and
      Chief Executive Officer and</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%">&nbsp;</TD>
    <TD noWrap align=left width="25%"><FONT face=serif size=2>November
      </FONT><FONT face=serif size=2>__, </FONT><FONT face=serif size=2>2007</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="27%"><FONT face=serif size=2>G. Patrick
      Lynch</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="38%"><FONT face=serif size=2>Director</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%">&nbsp;</TD>
    <TD noWrap align=left width="25%">&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="27%">&nbsp; </TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="38%"><FONT face=serif size=2>(principal
      executive officer)</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="25%">&nbsp; </TD></TR>
  <TR>
    <TD width="100%" colSpan=5>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="27%"><FONT face=serif size=2>/s/ Matthew C. Wolsfeld,
      CPA</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="38%"><FONT face=serif size=2>Chief Financial
      Officer and Corporate</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="25%"><FONT face=serif size=2>November <FONT face=serif size=2>__, </FONT><FONT face=serif size=2>2007</FONT><FONT size=3>&nbsp; </FONT></FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="27%"><FONT face=serif size=2>Matthew C.
      Wolsfeld, CPA</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="38%"><FONT face=serif size=2>Secretary</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="25%">&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="27%">&nbsp; </TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="38%"><FONT face=serif size=2>(principal
      financial and accounting officer)</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="25%">&nbsp; </TD></TR>
  <TR>
    <TD width="100%" colSpan=5>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="27%"><FONT face=serif size=2>/s/ Pierre Chenu</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="38%"><FONT face=serif size=2>Chairman of the
      Board</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="25%"><FONT face=serif size=2>November
      </FONT><FONT face=serif size=2>16, </FONT><FONT face=serif size=2>2007</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="27%"><FONT face=serif size=2>Pierre
      Chenu</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="38%">&nbsp; </TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="25%">&nbsp; </TD></TR>
  <TR>
    <TD width="100%" colSpan=5>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="27%"><FONT face=serif size=2>/s/ Donald A. Kubik,
      Ph.D.</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="38%"><FONT face=serif size=2>Vice Chairman of
      the Board and Chief</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="25%"><FONT face=serif size=2>November <FONT face=serif size=2>16, </FONT><FONT face=serif size=2>2007</FONT><FONT size=3>&nbsp; </FONT></FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="27%"><FONT face=serif size=2>Donald A. Kubik,
      Ph.D.</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="38%"><FONT face=serif size=2>Technology
      Officer</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="25%">&nbsp; </TD></TR>
  <TR>
    <TD width="100%" colSpan=5>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="27%"><FONT face=serif size=2>/s/ Dr. Sunggyu Lee</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="38%"><FONT face=serif size=2>Director</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="25%"><FONT face=serif size=2>November <FONT face=serif size=2>16, </FONT><FONT face=serif size=2>2007</FONT><FONT size=3>&nbsp; </FONT></FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="27%"><FONT face=serif size=2>Dr. Sunggyu
      Lee</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="38%">&nbsp; </TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="25%">&nbsp; </TD></TR>
  <TR>
    <TD width="100%" colSpan=5>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="27%"><FONT face=serif size=2>/s/ Mark Mayers</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="38%"><FONT face=serif size=2>Director</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="25%"><FONT face=serif size=2>November <FONT face=serif size=2>16, </FONT><FONT face=serif size=2>2007</FONT><FONT size=3>&nbsp; </FONT></FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="27%"><FONT face=serif size=2>Mark
      Mayers</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="38%">&nbsp; </TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="25%">&nbsp; </TD></TR>
  <TR>
    <TD width="100%" colSpan=5>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="27%"><FONT face=serif size=2>/s/ Dr. Ramani Narayan</FONT>&nbsp;
</TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="38%"><FONT face=serif size=2>Director</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="25%"><FONT face=serif size=2>November <FONT face=serif size=2>16, </FONT><FONT face=serif size=2>2007</FONT><FONT size=3>&nbsp; </FONT></FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="27%"><FONT face=serif size=2>Dr. Ramani
      Narayan</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="38%">&nbsp; </TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="25%">&nbsp; </TD></TR>
  <TR>
    <TD width="100%" colSpan=5>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="27%"><FONT face=serif size=2>/s/ Dr. Barry Rosenbaum</FONT>&nbsp;
    </TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="38%"><FONT face=serif size=2>Director</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="25%"><FONT face=serif size=2>November <FONT face=serif size=2>16, </FONT><FONT face=serif size=2>2007</FONT><FONT size=3>&nbsp; </FONT></FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="27%"><FONT face=serif size=2>Dr. Barry
      Rosenbaum</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="38%">&nbsp; </TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="25%">&nbsp; </TD></TR>
  <TR>
    <TD width="100%" colSpan=5>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="27%"><FONT face=serif size=2>/s/ Mark J. Stone</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="38%"><FONT face=serif size=2>Director</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="25%"><FONT face=serif size=2>November <FONT face=serif size=2>16, </FONT><FONT face=serif size=2>2007</FONT><FONT size=3>&nbsp; </FONT></FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="27%"><FONT face=serif size=2>Mark J.
      Stone</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="38%">&nbsp; </TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="25%">&nbsp; </TD></TR></TABLE><BR>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=center><B><FONT face=serif size=2>NORTHERN TECHNOLOGIES INTERNATIONAL
CORPORATION<BR>&nbsp;<BR></FONT></B><B><FONT face=serif size=2>EXHIBIT INDEX TO
ANNUAL REPORT ON FORM 10-KSB<BR>&nbsp;<BR></FONT></B><B><FONT face=serif size=2>FOR THE FISCAL YEAR ENDED AUGUST 31, 2007 </FONT></B></P>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="10%"><B><FONT face=serif size=2>Item No.</FONT></B>&nbsp; </TD>
    <TD noWrap align=left width="5%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="44%"><B><FONT face=serif size=2>Item</FONT></B>&nbsp; </TD>
    <TD noWrap align=center width="5%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="36%"><B><FONT face=serif size=2>Method of Filing</FONT></B>&nbsp;
    </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="10%" bgColor=#c0c0c0><FONT face=serif size=2>3.1</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Restated Certificate of Incorporation of</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>Incorporated by reference to Exhibit</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Northern Technologies International</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>3.1 to NTIC&#146;s Annual Report on Form</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Corporation</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>10-KSB for the fiscal year ended August</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>31, 2006 (File No. 001-11038)</FONT>&nbsp; </TD></TR>
  <TR>
    <TD width="100%" colSpan=5>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="10%" bgColor=#c0c0c0><FONT face=serif size=2>3.2</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Amended and Restated Bylaws of Northern</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>Incorporated by reference to Exhibit 3.1</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Technologies International Corporation</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>to NTIC&#146;s Quarterly Report on Form</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>10-QSB for the fiscal quarter ended</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>November 30, 2005 (File No. 001-</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>11038)</FONT>&nbsp; </TD></TR>
  <TR>
    <TD width="100%" colSpan=5>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="10%" bgColor=#c0c0c0><FONT face=serif size=2>10.1</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Northern Technologies International</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>Incorporated by reference to Exhibit</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Corporation 1994 Stock Incentive Plan</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>10.3 to NTIC&#146;s Annual Report on Form</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>10-KSB for the fiscal year ended August</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>31, 1993 (File No. 001-11038)</FONT>&nbsp; </TD></TR>
  <TR>
    <TD width="100%" colSpan=5>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="10%" bgColor=#c0c0c0><FONT face=serif size=2>10.2</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Form of Incentive Stock Option Agreement</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>Incorporated by reference to Exhibit</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>for Northern Technologies International</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>10.1 to NTIC&#146;s Annual Report on Form</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Corporation 1994 Stock Incentive Plan</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>10-KSB for the fiscal year ended August</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>31, 1993 (File No. 001-11038)</FONT>&nbsp; </TD></TR>
  <TR>
    <TD width="100%" colSpan=5>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="10%" bgColor=#c0c0c0><FONT face=serif size=2>10.3</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Form of Non-Qualified Stock Option</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>Incorporated by reference to Exhibit</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Agreement for Northern Technologies</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>10.2 to NTIC&#146;s Annual Report on Form</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>International Corporation 1994 Stock</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>10-KSB for the fiscal year ended August</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Incentive Plan</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>31, 1993 (File No. 001-11038)</FONT>&nbsp; </TD></TR>
  <TR>
    <TD width="100%" colSpan=5>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="10%" bgColor=#c0c0c0><FONT face=serif size=2>10.4</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Northern Technologies International</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>Incorporated by reference to Exhibit</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Corporation 2000 Stock Incentive Plan</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>10.4 to NTIC&#146;s Annual Report on Form</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>10-KSB for the fiscal year ended August</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>31, 2000 (File No. 001-11038)</FONT>&nbsp; </TD></TR>
  <TR>
    <TD width="100%" colSpan=5>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="10%" bgColor=#c0c0c0><FONT face=serif size=2>10.5</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Form of Incentive Stock Option Agreement</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>Incorporated by reference to Exhibit</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>for Northern Technologies International</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>10.5 to NTIC&#146;s Annual Report on Form</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Corporation 2000 Stock Incentive Plan</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>10-KSB for the fiscal year ended August</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>31, 2000 (File No. 001-11038)</FONT>&nbsp; </TD></TR>
  <TR>
    <TD width="100%" colSpan=5>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="10%" bgColor=#c0c0c0><FONT face=serif size=2>10.6</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Form of Non-Qualified Stock Option</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>Incorporated by reference to Exhibit</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Agreement for Northern Technologies</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>10.6 to NTIC&#146;s Annual Report on Form</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>International Corporation 2000 Stock</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>10-KSB for the fiscal year ended August</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Incentive Plan</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>31, 2000 (File No. 001-11038)</FONT>&nbsp; </TD></TR></TABLE><BR>
<HR align=center width="100%" noShade SIZE=2>
<PAGE><BR>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="10%"><B><FONT face=serif size=2>Item No.</FONT></B>&nbsp; </TD>
    <TD noWrap align=left width="5%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="44%"><B><FONT face=serif size=2>Item</FONT></B>&nbsp; </TD>
    <TD noWrap align=center width="5%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="36%"><B><FONT face=serif size=2>Method of Filing</FONT></B>&nbsp;
    </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="10%" bgColor=#c0c0c0><FONT face=serif size=2>10.7</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Northern Technologies International</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>Incorporated by reference to Exhibit</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Corporation 2007 Stock Incentive Plan</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>10.7 to NTIC&#146;s Annual Report on Form</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>10-KSB for the fiscal year ended August</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>31, 2006 (File No. 001-11038)</FONT>&nbsp; </TD></TR>
  <TR>
    <TD width="100%" colSpan=5>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="10%" bgColor=#c0c0c0><FONT face=serif size=2>10.8</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Form of Incentive Stock Option Agreement</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>Incorporated by reference to Exhibit</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>for Northern Technologies International</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>10.8 to NTIC&#146;s Annual Report on Form</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Corporation 2007 Stock Incentive Plan</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>10-KSB for the fiscal year ended August</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>31, 2006 (File No. 001-11038)</FONT>&nbsp; </TD></TR>
  <TR>
    <TD width="100%" colSpan=5>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="10%" bgColor=#c0c0c0><FONT face=serif size=2>10.9</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Form of Non-Statutory Stock Option</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>Incorporated by reference to Exhibit</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Agreement for Northern Technologies</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>10.9 to NTIC&#146;s Annual Report on Form</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>International Corporation 2007 Stock</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>10-KSB for the fiscal year ended August</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Incentive Plan</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>31, 2006 (File No. 001-11038)</FONT>&nbsp; </TD></TR>
  <TR>
    <TD width="100%" colSpan=5>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="10%" bgColor=#c0c0c0><FONT face=serif size=2>10.10</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Form of Restricted Stock Agreement for</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>Incorporated by reference to Exhibit</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Northern Technologies International</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>10.10 to NTIC&#146;s Annual Report on</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Corporation 2007 Stock Incentive Plan</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>Form 10-KSB for the fiscal year ended</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>August 31, 2006 (File No. 001-11038)</FONT>&nbsp; </TD></TR>
  <TR>
    <TD width="100%" colSpan=5>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="10%" bgColor=#c0c0c0><FONT face=serif size=2>10.11</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Northern Technologies International</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>Incorporated by reference to Exhibit</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Corporation Employee Stock Purchase Plan</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>10.11 to NTIC&#146;s Annual Report on Form</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>10-KSB for the fiscal year ended August</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>31, 2006 (File No. 001-11038)</FONT>&nbsp; </TD></TR>
  <TR>
    <TD width="100%" colSpan=5>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="10%" bgColor=#c0c0c0><FONT face=serif size=2>10.12</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Consulting Agreement dated as of May 1,</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>Incorporated by reference to Exhibit</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>2006 between Northern Technologies</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>10.1 to NTIC&#146;s Current Report on Form</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>International Corporation and Emeritushnic</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>8-K as filed with the Securities and</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Facilities Company, Inc.</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>Exchange Commission on May 22,</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>2006 (File No. 001-11038)</FONT>&nbsp; </TD></TR>
  <TR>
    <TD width="100%" colSpan=5>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="10%" bgColor=#c0c0c0><FONT face=serif size=2>10.13</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Description of Non-Employee Director</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>Filed herewith</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Compensation Arrangements</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="36%" bgColor=#c0c0c0>&nbsp; </TD></TR>
  <TR>
    <TD width="100%" colSpan=5>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="10%" bgColor=#c0c0c0><FONT face=serif size=2>10.14</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Description of Executive Officer</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>Filed herewith</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Compensation Arrangements</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="36%" bgColor=#c0c0c0>&nbsp; </TD></TR>
  <TR>
    <TD width="100%" colSpan=5>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="10%" bgColor=#c0c0c0><FONT face=serif size=2>10.15</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Commercial Note: Revolving Credit dated</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>Incorporated by reference to Exhibit</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>August 6, 2004 by Northern Technologies</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>10.1 to NTIC&#146;s Quarterly Report on</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>International Corporation payable to National</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>Form 10-QSB for the fiscal quarter</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>City Bank</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>ended May 31, 2005</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>(File No. 001-11038)</FONT>&nbsp; </TD></TR>
  <TR>
    <TD width="100%" colSpan=5>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="10%" bgColor=#c0c0c0><FONT face=serif size=2>10.16</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Commercial Note Addendum dated August 6,</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>Incorporated by reference to Exhibit</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>2004 between Northern Technologies</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>10.2 to NTIC&#146;s Quarterly Report on</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>International Corporation and National City</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>Form 10-QSB for the fiscal quarter</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Bank</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>ended May 31, 2005</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>(File No. 001-11038)</FONT>&nbsp; </TD></TR></TABLE><BR>
<HR align=center width="100%" noShade SIZE=2>
<PAGE><BR>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="10%"><B><FONT face=serif size=2>Item No.</FONT></B>&nbsp; </TD>
    <TD noWrap align=left width="5%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="44%"><B><FONT face=serif size=2>Item</FONT></B>&nbsp; </TD>
    <TD noWrap align=center width="5%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="36%"><B><FONT face=serif size=2>Method of Filing</FONT></B>&nbsp;
    </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="10%" bgColor=#c0c0c0><FONT face=serif size=2>10.17</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Security Agreement dated August 6, 2004</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>Incorporated by reference to Exhibit</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>between Northern Technologies International</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>10.3 to NTIC&#146;s Quarterly Report on</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Corporation and National City Bank</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>Form 10-QSB for the fiscal quarter</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>ended May 31, 2005</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>(File No. 001-11038)</FONT>&nbsp; </TD></TR>
  <TR>
    <TD width="100%" colSpan=5>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="10%" bgColor=#c0c0c0><FONT face=serif size=2>10.18</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Modification and Extension of Promissory</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>Incorporated by reference to Exhibit</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Note dated March 2, 2005 between Northern</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>10.4 to NTIC&#146;s Quarterly Report on</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Technologies International Corporation and</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>Form 10-QSB for the fiscal quarter</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>National City Bank</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>ended May 31, 2005</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>(File No. 001-11038)</FONT>&nbsp; </TD></TR>
  <TR>
    <TD width="100%" colSpan=5>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="10%" bgColor=#c0c0c0><FONT face=serif size=2>10.19</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Promissory Note Modification Agreement</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>Incorporated by reference to Exhibit</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>dated January 30, 2006 between Northern</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>10.18 to NTIC&#146;s Annual Report on</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Technologies International Corporation and</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>Form 10-KSB for the fiscal year ended</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>National City Bank</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>August 31, 2006 (File No. 001-11038)</FONT>&nbsp; </TD></TR>
  <TR>
    <TD width="100%" colSpan=5>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="10%" bgColor=#c0c0c0><FONT face=serif size=2>10.20</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Promissory Note Modification Agreement</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>Incorporated by reference to Exhibit</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>dated August 24, 2006 between Northern</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>10.19 to NTIC&#146;s Annual Report on</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Technologies International Corporation and</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>Form 10-KSB for the fiscal year ended</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>National City Bank</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>August 31, 2006 (File No. 001-11038)</FONT>&nbsp; </TD></TR>
  <TR>
    <TD width="100%" colSpan=5>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="10%" bgColor=#c0c0c0><FONT face=serif size=2>10.21</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Commercial Note dated as of May 3, 2006</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>Incorporated by reference to Exhibit</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>issued by Northern Technologies Holding</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>10.6 to NTIC&#146;s Current Report on Form</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Company, LLC to National City Bank</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>8-K as filed with the Securities and</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>Exchange Commission on May 9, 2006</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>(File No. 001-11038)</FONT>&nbsp; </TD></TR>
  <TR>
    <TD width="100%" colSpan=5>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="10%" bgColor=#c0c0c0><FONT face=serif size=2>10.22</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Mortgage dated as of May 3, 2006 between</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>Incorporated by reference to Exhibit</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Northern Technologies Holding Company,</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>10.7 to NTIC&#146;s Current Report on Form</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>LLC and National City Bank</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>8-K as filed with the Securities and</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>Exchange Commission on May 9, 2006</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>(File No. 001-11038)</FONT>&nbsp; </TD></TR>
  <TR>
    <TD width="100%" colSpan=5>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="10%" bgColor=#c0c0c0><FONT face=serif size=2>10.23</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Commercial Guaranty dated as of May 3,</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>Incorporated by reference to Exhibit</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>2006 issued by Northern Technologies</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>10.8 to NTIC&#146;s Current Report on Form</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>International Corporation, as Guarantor</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>8-K as filed with the Securities and</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>Exchange Commission on May 9, 2006</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>(File No. 001-11038)</FONT>&nbsp; </TD></TR>
  <TR>
    <TD width="100%" colSpan=5>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="10%" bgColor=#c0c0c0><FONT face=serif size=2>14.1</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Code of Ethics</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>Incorporated by reference to Exhibit</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>14.1 to NTIC&#146;s Annual Report on Form</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>10-KSB for the fiscal year ended August</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>31, 2004 (File No. 001-11038)</FONT>&nbsp; </TD></TR>
  <TR>
    <TD width="100%" colSpan=5>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="10%" bgColor=#c0c0c0><FONT face=serif size=2>21.1</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Subsidiaries of the Registrant</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>Filed herewith</FONT>&nbsp; </TD></TR>
  <TR>
    <TD width="100%" colSpan=5>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="10%" bgColor=#c0c0c0><FONT face=serif size=2>23.1</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="44%" bgColor=#c0c0c0><FONT face=serif size=2>Consent of Virchow, Krause &amp; Company, LLP</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD noWrap align=center width="36%" bgColor=#c0c0c0><FONT face=serif size=2>Filed herewith</FONT>&nbsp; </TD></TR></TABLE><BR>
<HR align=center width="100%" noShade SIZE=2>
<PAGE><BR>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="10%"><B><FONT face=serif size=2>Item No.</FONT></B>&nbsp; </TD>
    <TD noWrap align=left width="5%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="47%"><B><FONT face=serif size=2>Item</FONT></B>&nbsp; </TD>
    <TD noWrap align=center width="5%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="33%"><B><FONT face=serif size=2>Method of Filing</FONT></B>&nbsp;
    </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="10%" bgColor=#c0c0c0><FONT face=serif size=2>31.1</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="47%" bgColor=#c0c0c0><FONT face=serif size=2>Certification of President and Chief Executive</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="33%" bgColor=#c0c0c0>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="47%" bgColor=#c0c0c0><FONT face=serif size=2>Officer Pursuant to SEC Rule 13a-14(a), as</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="33%" bgColor=#c0c0c0><FONT face=serif size=2>Filed herewith</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="47%" bgColor=#c0c0c0><FONT face=serif size=2>adopted pursuant to Section 302 of the</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="33%" bgColor=#c0c0c0>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="47%" bgColor=#c0c0c0><FONT face=serif size=2>Sarbanes-Oxley Act of 2002</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="33%" bgColor=#c0c0c0>&nbsp; </TD></TR>
  <TR>
    <TD width="100%" colSpan=5>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="10%" bgColor=#c0c0c0><FONT face=serif size=2>31.2</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="47%" bgColor=#c0c0c0><FONT face=serif size=2>Certification of Chief Financial Officer</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="33%" bgColor=#c0c0c0><FONT face=serif size=2>Filed herewith</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="47%" bgColor=#c0c0c0><FONT face=serif size=2>Pursuant to SEC Rule 13a-14(a), as adopted</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="33%" bgColor=#c0c0c0>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="47%" bgColor=#c0c0c0><FONT face=serif size=2>pursuant to Section 302 of the Sarbanes-Oxley</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="33%" bgColor=#c0c0c0>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="47%" bgColor=#c0c0c0><FONT face=serif size=2>Act of 2002</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="33%" bgColor=#c0c0c0>&nbsp; </TD></TR>
  <TR>
    <TD width="100%" colSpan=5>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="10%" bgColor=#c0c0c0><FONT face=serif size=2>32.1</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="47%" bgColor=#c0c0c0><FONT face=serif size=2>Certification of President and Chief Executive</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD noWrap align=center width="33%" bgColor=#c0c0c0><FONT face=serif size=2>Furnished herewith</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="47%" bgColor=#c0c0c0><FONT face=serif size=2>Officer Pursuant to Rule 18 U.S.C. Section</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="33%" bgColor=#c0c0c0>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="47%" bgColor=#c0c0c0><FONT face=serif size=2>1350, as adopted pursuant to Section 906 of</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="33%" bgColor=#c0c0c0>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="47%" bgColor=#c0c0c0><FONT face=serif size=2>the Sarbanes-Oxley Act of 2002</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="33%" bgColor=#c0c0c0>&nbsp; </TD></TR>
  <TR>
    <TD width="100%" colSpan=5>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="10%" bgColor=#c0c0c0><FONT face=serif size=2>32.2</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD noWrap align=left width="47%" bgColor=#c0c0c0><FONT face=serif size=2>Certification of Chief Financial Officer</FONT>&nbsp; </TD>
    <TD noWrap align=center width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="33%" bgColor=#c0c0c0><FONT face=serif size=2>Furnished herewith</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="47%" bgColor=#c0c0c0><FONT face=serif size=2>Pursuant to Rule 18 U.S.C. Section 1350, as</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="33%" bgColor=#c0c0c0>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="47%" bgColor=#c0c0c0><FONT face=serif size=2>adopted pursuant to Section 906 of the</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="33%" bgColor=#c0c0c0>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="10%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="47%" bgColor=#c0c0c0><FONT face=serif size=2>Sarbanes-Oxley Act of 2002</FONT>&nbsp; </TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="33%" bgColor=#c0c0c0>&nbsp;
</TD></TR></TABLE><BR>
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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.13
<SEQUENCE>3
<FILENAME>exhibit10-13.htm
<DESCRIPTION>DESCRIPTION OF NON-EMPLOYEE DIRECTOR COMPENSATION ARRANGEMENTS
<TEXT>
<HTML>
<HEAD>
<TITLE></TITLE>
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<body>



<P align=right><FONT face=serif size=2></FONT><B><FONT face=serif size=2>Exhibit
10.13 </FONT></B></P>
<P align=center><B><FONT face=serif size=2>NORTHERN TECHNOLOGIES INTERNATIONAL
CORPORATION<BR>&nbsp;<BR></FONT></B><B><FONT face=serif size=2>DESCRIPTION OF
NON-EMPLOYEE DIRECTOR<BR>COMPENSATION ARRANGEMENTS</FONT></B></P>
<P align=justify><B><FONT face=serif size=2>Overview </FONT></B></P>
<P align=justify><FONT face=serif size=2>NTIC&#146;s non-employee directors currently
consist of Pierre Chenu, Dr. Sunggyu Lee, Mark M. Mayers, Dr. Ramani Narayan,
Dr. Barry Rosenbaum and Mark J. Stone. We use a combination of cash and
long-term equity-based incentive compensation in the form of annual stock option
grants to attract and retain qualified candidates to serve on the Board of
Directors.</FONT></P>
<P align=justify><FONT face=serif size=2>In November 2007, the Board of
Directors, upon recommendation of the Nominating and Corporate Governance
Committee, approved increases in certain meeting fees, additional Chairman of
the Board and Audit Committee retainers and increased automatic stock option
grants as described in more detail below. With the exception of the increased
automatic stock option grants, which will be effective commencing September 1,
2008, the other non-employee director compensation changes will be effective
commencing January 28, 2008. </FONT></P>
<P align=justify><B><FONT face=serif size=2>Annual Retainers; Meeting Fees
</FONT></B></P>
<P align=justify><FONT face=serif size=2>Each person who was a non-employee
director for all of fiscal 2007 and the Chairman of the Board received an annual
retainer of $10,000 in fiscal 2007 for services rendered as a director of NTIC.
The annual retainer is paid quarterly. Each person who was a non-employee
director for a portion of fiscal 2007 received a prorated portion of such annual
retainer. Each of our non-employee directors also received $1,000 for each Board
meeting attended and $500 for each Audit Committee, Compensation Committee and
Nominating and Corporate Governance Committee meeting attended. Any director
that is an employee of NTIC (Mr. Lynch and Dr. Kubik) does not receive any
retainer or Board or Committee meeting fees.</FONT></P>
<P align=justify><FONT face=serif size=2>Commencing January 28, 2008, the
Chairman of the Board will receive an additional annual retainer of $25,000, the
Chair of the Audit Committee will receive an additional annual retainer of
$5,000 and other members of the Audit Committee will receive an additional
retainer of $4,000. In addition, commencing January 28, 2008, each of our
non-employee directors will receive $1,000 for each strategy review meeting
attended in addition to Board meetings and the fee to be paid for attendance at
each Audit Committee, Compensation Committee and Nominating and Corporate
Governance Committee meeting will be increased from $500 to $1,000. No director,
however, will earn more than $1,000 per day in Board, Board committee and
strategy review meeting fees. </FONT></P>
<P align=justify><B><FONT face=serif size=2>Stock Options </FONT></B></P>
<P align=justify><FONT face=serif size=2>For the past several years, each of our
non-employee directors have been automatically granted a five-year non-qualified
option to purchase 2,000 shares of our common stock on the first day of each
fiscal year in consideration for their services as directors of NTIC.
Non-employee directors who were elected or appointed to the Board following the
first day of our fiscal year received an automatic grant of an option to
purchase a pro rata portion of 2,000 shares of our common stock calculated by
dividing the number of months remaining in the fiscal year at the time of
election or appointment divided by 12, which options were automatically granted
at the time of their election or appointment. Each automatically <FONT face=serif size=2>granted option becomes exercisable, on a cumulative basis,
with respect to one-third of the shares covered by such option on each one-year
anniversary of the date of its grant. The exercise price of such option is equal
to the fair market value of a share of our common stock on the date of
grant.</FONT>&nbsp;</FONT></P>
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<PAGE>
<P align=justify><FONT face=serif size=2>Prior to January 23, 2007, such options
were granted under the terms of the Northern Technologies International
Corporation 2000 Stock Incentive Plan. After January 23, 2007 and the adoption
by our stockholders of the Northern Technologies International Corporation 2007
Stock Incentive Plan, such options were granted under the 2007 plan and standing
resolutions of the Board of Directors providing for such automatic
grants.</FONT></P>
<P align=justify><FONT face=serif size=2>Commencing on September 1, 2008, each
of our non-employee directors will be automatically granted a five-year
non-qualified option to purchase 4,000 shares of our common stock on the first
day of each fiscal year in consideration for their services as directors of NTIC
and the Chairman of the Board will be automatically granted an additional
five-year non-qualified option to purchase 2,000 shares of our common stock on
the first day of each fiscal year in consideration for his services as Chairman.
</FONT></P>
<P align=justify><B><FONT face=serif size=2>Reimbursement of Expenses
</FONT></B></P>
<P align=justify><FONT face=serif size=2>All of our directors are reimbursed for
travel expenses for attending meetings and other miscellaneous expenses incurred
in performing their Board functions. </FONT></P>
<P align=justify><B><FONT face=serif size=2>Consulting Arrangements
</FONT></B></P>
<P align=justify><FONT face=serif size=2>We paid consulting fees to Bioplastic
Polymers LLC which is owned by Dr. Ramani Narayan in the aggregate amount of
$100,000 during the fiscal year ended August 31, 2007. We paid consulting fees
to Dr. Sunggyu Lee in the aggregate amount of $50,000 during the fiscal year
ended August 31, 2007. The consulting services rendered by Drs. Narayan and Lee
related to research and development associated with various new technologies.
Our consulting relationship with Dr. Lee was terminated in May 2007.</FONT></P>
<P align=justify><FONT face=serif size=2>We have entered into an oral agreement
with Bioplastic Polymers LLC which is owned by Dr. Narayan, and Dr. Narayan
pursuant to which we have agreed to pay Bioplastic Polymers LLC and Dr. Narayan
in consideration of the transfer and assignment by Biopolymer Plastics LLC and
Dr. Narayan of certain biodegradable polymer technology to us, three percent of
the gross margin on any net sales of products incorporating the biodegradable
polymer technology transferred to us by Bioplastic Polymers LLC and Dr. Narayan
for a period of 10 years, provided that if a patent for or with respect to
biodegradable polymer technology is issued before the expiration of such 10 year
period, then we will until the expiration of such patent pay to Bioplastic
Polymers LLC and Dr. Narayan three percent of the biodegradable polymer
technology gross margin attributable to such patent.</FONT></P>
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<DOCUMENT>
<TYPE>EX-10.14
<SEQUENCE>4
<FILENAME>exhibit10-14.htm
<DESCRIPTION>DESCRIPTION OF EXECUTIVE OFFICER COMPENSATION ARRANGEMENTS
<TEXT>
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<P align=right><B><FONT face=serif size=2>Exhibit 10.14 </FONT></B></P>
<P align=center><B><FONT face=serif size=2>NORTHERN TECHNOLOGIES INTERNATIONAL
CORPORATION<BR>&nbsp;<BR></FONT></B><B><FONT face=serif size=2>DESCRIPTION OF
EXECUTIVE OFFICER<BR>COMPENSATION ARRANGEMENTS </FONT></B></P>
<P align=justify><FONT face=serif size=2>The following is a description of oral
compensation arrangements between Northern Technologies International
Corporation and each of the executive officers of NTIC as of August 31, 2007:
</FONT></P>
<TABLE style="PADDING-RIGHT: 6pt; PADDING-LEFT: 6pt" cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD style="BORDER-TOP: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid" noWrap align=center width="11%" bgColor=#c0c0c0><B><FONT face=serif size=2>Name
      of</FONT></B>&nbsp; </TD>
    <TD style="BORDER-TOP: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid" noWrap align=center width="18%" bgColor=#c0c0c0>&nbsp;
</TD>
    <TD style="BORDER-TOP: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid" noWrap align=center width="14%" bgColor=#c0c0c0><B><FONT face=serif size=2>Base</FONT></B>&nbsp; </TD>
    <TD style="BORDER-TOP: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid" noWrap align=center width="16%" bgColor=#c0c0c0><B><FONT face=serif size=2>Bonus</FONT></B>&nbsp; </TD>
    <TD style="BORDER-TOP: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid" noWrap align=center width="13%" bgColor=#c0c0c0><B><FONT face=serif size=2>Stock</FONT></B>&nbsp; </TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-TOP: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid" noWrap align=center width="27%" bgColor=#c0c0c0>&nbsp;
  </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=center width="11%" bgColor=#c0c0c0><B><FONT face=serif size=2>Executive</FONT></B>&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=center width="18%" bgColor=#c0c0c0><B><FONT face=serif size=2>Title</FONT></B>&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=center width="14%" bgColor=#c0c0c0><B><FONT face=serif size=2>Salary</FONT></B>&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=center width="16%" bgColor=#c0c0c0><B><FONT face=serif size=2>Arrangements</FONT></B>&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=center width="13%" bgColor=#c0c0c0><B><FONT face=serif size=2>Options</FONT></B>&nbsp; </TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid" noWrap align=center width="27%" bgColor=#c0c0c0><B><FONT face=serif size=2>Other</FONT></B>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-LEFT: #000000 1pt solid; BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="11%" bgColor=#c0c0c0><B><FONT face=serif size=2>Officer</FONT></B>&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid; BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="18%" bgColor=#c0c0c0>&nbsp;
</TD>
    <TD style="BORDER-LEFT: #000000 1pt solid; BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="14%" bgColor=#c0c0c0>&nbsp;
</TD>
    <TD style="BORDER-LEFT: #000000 1pt solid; BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="16%" bgColor=#c0c0c0>&nbsp;
</TD>
    <TD style="BORDER-LEFT: #000000 1pt solid; BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="13%" bgColor=#c0c0c0>&nbsp;
</TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid; BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="27%" bgColor=#c0c0c0>&nbsp;
  </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="11%"><FONT face=serif size=2>G. Patrick</FONT>&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="18%"><FONT face=serif size=2>President and</FONT>&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=center width="14%"><FONT face=serif size=2>$210,000 per</FONT>&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="16%"><FONT face=serif size=2>See footnote</FONT>&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="13%"><FONT face=serif size=2>Stock</FONT>&nbsp; </TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid" noWrap align=left width="27%"><FONT face=serif size=2>Under NTIC&#146;s 401(k)
      Plan,</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="11%"><FONT face=serif size=2>Lynch</FONT>&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="18%"><FONT face=serif size=2>Chief Executive</FONT>&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=center width="14%"><FONT face=serif size=2>year.</FONT>&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="16%"><FONT face=serif size=2>(2) below</FONT>&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="13%"><FONT face=serif size=2>options to</FONT>&nbsp; </TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid" noWrap align=left width="27%"><FONT face=serif size=2>participants,
      including</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="11%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="18%"><FONT face=serif size=2>Officer</FONT>&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=center width="14%"><FONT face=serif size=2>See footnote</FONT>&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="16%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="13%"><FONT face=serif size=2>purchase</FONT>&nbsp; </TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid" noWrap align=left width="27%"><FONT face=serif size=2>executive officers,
      may</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="11%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="18%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=center width="14%"><FONT face=serif size=2>(1) below</FONT>&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="16%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="13%"><FONT face=serif size=2>shares of</FONT>&nbsp; </TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid" noWrap align=left width="27%"><FONT face=serif size=2>voluntarily request that
      NTIC</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="11%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="18%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="14%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="16%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="13%"><FONT face=serif size=2>NTIC</FONT>&nbsp; </TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid" noWrap align=left width="27%"><FONT face=serif size=2>reduce pre-tax
      compensation</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="11%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="18%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="14%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="16%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="13%"><FONT face=serif size=2>common</FONT>&nbsp; </TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid" noWrap align=left width="27%"><FONT face=serif size=2>by up to 15% (subject
      to</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="11%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="18%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="14%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="16%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="13%"><FONT face=serif size=2>stock are</FONT>&nbsp; </TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid" noWrap align=left width="27%"><FONT face=serif size=2>certain special
      limitations)</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="11%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="18%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="14%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="16%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="13%"><FONT face=serif size=2>granted from</FONT>&nbsp; </TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid" noWrap align=left width="27%"><FONT face=serif size=2>and contribute such
      amounts</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="11%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="18%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="14%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="16%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="13%"><FONT face=serif size=2>time to time</FONT>&nbsp; </TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid" noWrap align=left width="27%"><FONT face=serif size=2>to a trust. NTIC
      contributed</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="11%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="18%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="14%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="16%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="13%"><FONT face=serif size=2>in the sole</FONT>&nbsp; </TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid" noWrap align=left width="27%"><FONT face=serif size=2>an amount equal to 3.5%
      of</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="11%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="18%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="14%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="16%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="13%"><FONT face=serif size=2>discretion of</FONT>&nbsp; </TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid" noWrap align=left width="27%"><FONT face=serif size=2>the amount that
      each</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="11%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="18%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="14%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="16%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="13%"><FONT face=serif size=2>the NTIC</FONT>&nbsp; </TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid" noWrap align=left width="27%"><FONT face=serif size=2>participant contributed
      under</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="11%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="18%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="14%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="16%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="13%"><FONT face=serif size=2>Board of</FONT>&nbsp; </TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid" noWrap align=left width="27%"><FONT face=serif size=2>this plan.</FONT>&nbsp;
  </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="11%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="18%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="14%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="16%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="13%"><FONT face=serif size=2>Directors.</FONT>&nbsp; </TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid" noWrap align=left width="27%">&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="11%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="18%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="14%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="16%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="13%">&nbsp; </TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid" noWrap align=left width="27%"><FONT face=serif size=2>Executive officers
      receive</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="11%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="18%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="14%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="16%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="13%">&nbsp; </TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid" noWrap align=left width="27%"><FONT face=serif size=2>other benefits received
      by</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="11%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="18%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="14%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="16%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="13%">&nbsp; </TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid" noWrap align=left width="27%"><FONT face=serif size=2>other NTIC
      employees,</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="11%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="18%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="14%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="16%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="13%">&nbsp; </TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid" noWrap align=left width="27%"><FONT face=serif size=2>including health, dental
      and</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-LEFT: #000000 1pt solid; BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="11%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid; BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="18%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid; BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="14%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid; BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="16%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid; BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="13%">&nbsp; </TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid; BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="27%"><FONT face=serif size=2>life insurance
      benefits.</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="11%"><FONT face=serif size=2>Dr. Donald</FONT>&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="18%"><FONT face=serif size=2>Vice Chairman</FONT>&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=center width="14%"><FONT face=serif size=2>$175,000 per</FONT>&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="16%"><FONT face=serif size=2>See footnote</FONT>&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="13%"><FONT face=serif size=2>See above</FONT>&nbsp; </TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid" noWrap align=left width="27%"><FONT face=serif size=2>See above</FONT>&nbsp;
  </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="11%"><FONT face=serif size=2>Kubik</FONT>&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="18%"><FONT face=serif size=2>and Chief</FONT>&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=center width="14%"><FONT face=serif size=2>year.</FONT>&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="16%"><FONT face=serif size=2>(2) below</FONT>&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="13%">&nbsp; </TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid" noWrap align=left width="27%">&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="11%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="18%"><FONT face=serif size=2>Technology</FONT>&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=center width="14%"><FONT face=serif size=2>See footnote</FONT>&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="16%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="13%">&nbsp; </TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid" noWrap align=left width="27%">&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-LEFT: #000000 1pt solid; BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="11%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid; BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="18%"><FONT face=serif size=2>Officer</FONT>&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid; BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="14%"><FONT face=serif size=2>(1) below</FONT>&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid; BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="16%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid; BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="13%">&nbsp; </TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid; BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="27%">&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="11%"><FONT face=serif size=2>Matthew C.</FONT>&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="18%"><FONT face=serif size=2>Chief Financial</FONT>&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=center width="14%"><FONT face=serif size=2>$155,000 per</FONT>&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="16%"><FONT face=serif size=2>See footnote</FONT>&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="13%"><FONT face=serif size=2>See above</FONT>&nbsp; </TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid" noWrap align=left width="27%"><FONT face=serif size=2>See above</FONT>&nbsp;
  </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="11%"><FONT face=serif size=2>Wolsfeld</FONT>&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="18%"><FONT face=serif size=2>Officer and</FONT>&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=center width="14%"><FONT face=serif size=2>year.</FONT>&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="16%"><FONT face=serif size=2>(2) below</FONT>&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="13%">&nbsp; </TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid" noWrap align=left width="27%">&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="11%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="18%"><FONT face=serif size=2>Secretary</FONT>&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=center width="14%"><FONT face=serif size=2>See footnote</FONT>&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="16%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid" noWrap align=left width="13%">&nbsp; </TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid" noWrap align=left width="27%">&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-LEFT: #000000 1pt solid; BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="11%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid; BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="18%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid; BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="14%"><FONT face=serif size=2>(1) below</FONT>&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid; BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="16%">&nbsp; </TD>
    <TD style="BORDER-LEFT: #000000 1pt solid; BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="13%">&nbsp; </TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid; BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="27%">&nbsp;
</TD></TR></TABLE><BR>
<TABLE style="TEXT-ALIGN: justify" cellSpacing=0 cellPadding=0 border=0>

  <TR>
    <TD vAlign=top noWrap><FONT face=serif size=2>(1)</FONT></TD>
    <TD vAlign=top noWrap  >&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD width="100%"><FONT face=serif size=2>Annual base salaries for NTIC&#146;s
      executive officers are determined each year by NTIC&#146;s Board of Directors,
      upon recommendation of the Compensation Committee of the Board. The
      salaries listed in the table are the base salaries for fiscal
    2008.</FONT></TD></TR>
  <TR>
    <TD width="100%" colSpan=3>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top noWrap><FONT face=serif size=2>(2)</FONT></TD>
    <TD vAlign=top noWrap  ></TD>
    <TD width="100%"><FONT face=serif size=2>Annual performance bonuses for
      NTIC&#146;s executive officers are determined each year by NTIC&#146;s Board of
      Directors, upon recommendation of the Compensation Committee of the Board,
      have typically been comprised of cash and/or a stock
  bonus.</FONT></TD></TR></TABLE><BR>
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<DOCUMENT>
<TYPE>EX-21.1
<SEQUENCE>5
<FILENAME>exhibit21-1.htm
<DESCRIPTION>SUBSIDIARIES OF THE REGISTRANT
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<P align=right><B><FONT face=serif size=2>Exhibit 21.1 </FONT></B></P>
<P align=center><B><FONT face=serif size=2>SUBSIDIARIES OF THE REGISTRANT
</FONT></B></P>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD noWrap align=center width="26%">&nbsp; </TD>
    <TD noWrap align=center width="1%"  ></TD>
    <TD noWrap align=center width="24%"><FONT face=serif size=2>State or Other</FONT>&nbsp; </TD>
    <TD noWrap align=center width="1%"  ></TD>
    <TD noWrap align=center width="23%">&nbsp; </TD>
    <TD noWrap align=center width="1%"  ></TD>
    <TD noWrap align=center width="23%">&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="26%">&nbsp; </TD>
    <TD noWrap align=center width="1%"  ></TD>
    <TD noWrap align=center width="24%"><FONT face=serif size=2>Jurisdiction of</FONT>&nbsp; </TD>
    <TD noWrap align=center width="1%"  ></TD>
    <TD noWrap align=center width="23%">&nbsp; </TD>
    <TD noWrap align=center width="1%"  ></TD>
    <TD noWrap align=center width="23%"><FONT face=serif size=2>Names Under Which</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="26%">&nbsp; </TD>
    <TD noWrap align=center width="1%"  ></TD>
    <TD noWrap align=center width="24%"><FONT face=serif size=2>Incorporation or</FONT>&nbsp; </TD>
    <TD noWrap align=center width="1%"  ></TD>
    <TD noWrap align=center width="23%">&nbsp; </TD>
    <TD noWrap align=center width="1%"  ></TD>
    <TD noWrap align=center width="23%"><FONT face=serif size=2>Subsidiary Does</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="26%"><FONT><FONT face=serif size=2>Name of
      Subsidiary</FONT>&nbsp; </FONT></TD>
    <TD noWrap align=center width="1%"  >&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="24%"><FONT><FONT face=serif size=2>Organization</FONT>&nbsp; </FONT></TD>
    <TD noWrap align=center width="1%"  >&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="23%"><FONT><FONT face=serif size=2>Ownership Interest</FONT>&nbsp; </FONT></TD>
    <TD noWrap align=center width="1%"  >&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="23%"><FONT><FONT face=serif size=2>Business</FONT>&nbsp;
      </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="26%" bgColor=#c0c0c0><FONT face=serif size=2>NTI
      Facilities, Inc.</FONT>&nbsp; </TD>
    <TD noWrap align=center width="1%"   bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="24%" bgColor=#c0c0c0><FONT face=serif size=2>Ohio</FONT>&nbsp; </TD>
    <TD noWrap align=center width="1%"   bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="23%" bgColor=#c0c0c0><FONT face=serif size=2>100%</FONT>&nbsp; </TD>
    <TD noWrap align=center width="1%"   bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="23%" bgColor=#c0c0c0><FONT face=serif size=2>Same</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="26%"><FONT face=serif size=2>React-NTI LLC</FONT>&nbsp;
    </TD>
    <TD noWrap align=center width="1%"  ></TD>
    <TD noWrap align=center width="24%"><FONT face=serif size=2>Delaware</FONT>&nbsp; </TD>
    <TD noWrap align=center width="1%"  ></TD>
    <TD noWrap align=center width="23%"><FONT face=serif size=2>75%</FONT>&nbsp; </TD>
    <TD noWrap align=center width="1%"  ></TD>
    <TD noWrap align=center width="23%"><FONT face=serif size=2>Same</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="26%" bgColor=#c0c0c0><FONT face=serif size=2>Northern Technologies</FONT>&nbsp; </TD>
    <TD noWrap align=center width="1%"   bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="24%" bgColor=#c0c0c0><FONT face=serif size=2>Delaware</FONT>&nbsp; </TD>
    <TD noWrap align=center width="1%"   bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="23%" bgColor=#c0c0c0><FONT face=serif size=2>100%</FONT>&nbsp; </TD>
    <TD noWrap align=center width="1%"   bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="23%" bgColor=#c0c0c0><FONT face=serif size=2>Same</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="26%" bgColor=#c0c0c0><FONT face=serif size=2>Holding Company, LLC</FONT>&nbsp; </TD>
    <TD noWrap align=left width="1%"   bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="24%" bgColor=#c0c0c0>&nbsp;
    </TD>
    <TD noWrap align=left width="1%"   bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="23%" bgColor=#c0c0c0>&nbsp;
    </TD>
    <TD noWrap align=left width="1%"   bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="23%" bgColor=#c0c0c0>&nbsp;
    </TD></TR></TABLE><BR>
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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>6
<FILENAME>exhibit23-1.htm
<DESCRIPTION>CONSENT OF VIRCHOW, KRAUSE & COMPANY, LLP
<TEXT>
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<P align=right><B><FONT face=serif size=2>Exhibit 23.1 </FONT></B></P>
<P align=center><B><FONT face=serif size=2>CONSENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM </FONT></B></P>
<P align=justify><FONT face=serif size=2>We consent to the incorporation by
reference in the Registration Statements on Form S-8 (File Nos. 333-140245,
333-140244, 333-32596 and 333-33931) of Northern Technologies International
Corporation and Subsidiaries of our report dated</FONT><B><FONT face=serif size=2> </FONT></B><FONT face=serif size=2>November 6, 2007, which appears on
page [33] of this annual report on Form 10-KSB for the year ended August 31,
2007.</FONT></P>
<P align=justify><FONT face=serif size=2>/s/ Virchow, Krause &amp; Company, LLP
</FONT></P>
<P align=justify><FONT face=serif size=2>Minneapolis, Minnesota<BR>November 29,
2007 </FONT></P>
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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>7
<FILENAME>exhibit31-1.htm
<DESCRIPTION>CERTIFICATION OF PRESIDENT AND CHIEF EXECUTIVE OFFICER PURSUANT TO SEC RULE 13A
<TEXT>
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<P align=right><B><FONT face=serif size=2>Exhibit 31.1 </FONT></B></P>
<P align=center><B><FONT face=serif size=2>CERTIFICATION PURSUANT TO SECTION
302(a) OF THE<BR>SARBANES-OXLEY ACT OF 2002</FONT></B></P>
<P align=justify><FONT face=serif size=2>I, G. Patrick Lynch, certify that:
</FONT></P>
<P align=justify><FONT face=serif size=2>1. I have reviewed this annual report
on Form 10-KSB of Northern Technologies International </FONT><FONT face=serif size=2>Corporation; </FONT></P>
<P align=justify><FONT face=serif size=2>2. Based on my knowledge, this 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 report; </FONT></P>
<P align=justify><FONT face=serif size=2>3. Based on my knowledge, the financial
statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations
and cash flows of the small business issuer as of, and for, the periods
presented in this report; </FONT></P>
<P align=justify><FONT face=serif size=2>4. The small business issuer&#146;s other
certifying officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) for the small business issuer and have: </FONT></P>
<P style="PADDING-LEFT: 15pt" align=justify><FONT face=serif size=2>(a) Designed
such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material
information relating to the small business issuer, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;</FONT></P>
<P style="PADDING-LEFT: 15pt" align=justify><FONT face=serif size=2>(b)
Evaluated the effectiveness of the small business issuer&#146;s disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and</FONT></P>
<P style="PADDING-LEFT: 15pt" align=justify><FONT face=serif size=2>(c)
Disclosed in this report any change in the small business issuer&#146;s internal
control over financial reporting that occurred during the small business
issuer&#146;s fourth quarter that has materially affected, or is reasonably likely to
materially affect, the small business issuer&#146;s internal control over financial
reporting; and</FONT></P>
<P align=justify><FONT face=serif size=2>5. The small business issuer&#146;s other
certifying officers and I have disclosed, based on our most recent evaluation of
internal controls over financial reporting, to the small business issuer&#146;s
auditors and the audit committee of the small business issuer&#146;s board of
directors (or persons performing the equivalent function): </FONT></P>
<P style="PADDING-LEFT: 15pt" align=justify><FONT face=serif size=2>(a) All
significant deficiencies and material weaknesses in the design or operation of
internal controls over financial reporting which are reasonably likely to
adversely affect the small business issuer&#146;s ability to record, process,
summarize and report financial information; and</FONT></P>
<P style="PADDING-LEFT: 15pt" align=justify><FONT face=serif size=2>(b) Any
fraud, whether or not material, that involves management or other employees who
have a significant role in the small business issuer&#146;s internal controls over
financial reporting. </FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR>
    <TD vAlign=bottom noWrap align=left width="50%"  ><FONT size=2>Date:&nbsp; November 29, 2007</FONT>&nbsp;
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="25%"  >&nbsp; <IMG src="northerntech_10ksb5x3x1.jpg" border=0>&nbsp; </TD>
    <TD noWrap align=left width="24%"  >&nbsp;</TD></TR>
  <TR>
    <TD noWrap align=left width="50%"  ></TD>
    <TD noWrap align=left width="49%"   colSpan=2><FONT size=2>G. Patrick Lynch</FONT>&nbsp; </TD></TR>
  <TR>
    <TD noWrap align=left width="50%"  ></TD>
    <TD noWrap align=left width="49%"   colSpan=2><FONT size=2>President and Chief Executive
      Officer</FONT><FONT size=3>&nbsp;
</FONT></TD></TR></TABLE><BR>&nbsp;<BR>
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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>8
<FILENAME>exhibit31-2.htm
<DESCRIPTION>CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SEC RULE 13A-14(A)
<TEXT>
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<P align=right><B><FONT face=serif size=2>Exhibit 31.2 </FONT></B></P>
<P align=center><B><FONT face=serif size=2>CERTIFICATION PURSUANT TO SECTION
302(A) OF THE<BR>SARBANES-OXLEY ACT OF 2002 </FONT></B></P>
<P align=justify><FONT face=serif size=2>I, Matthew C. Wolsfeld, certify that:
</FONT></P>
<P align=justify><FONT face=serif size=2>1. I have reviewed this annual report
on Form 10-KSB of Northern Technologies International </FONT><FONT face=serif size=2>Corporation; </FONT></P>
<P align=justify><FONT face=serif size=2>2. Based on my knowledge, this 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 report; </FONT></P>
<P align=justify><FONT face=serif size=2>3. Based on my knowledge, the financial
statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations
and cash flows of the small business issuer as of, and for, the periods
presented in this report; </FONT></P>
<P align=justify><FONT face=serif size=2>4. The small business issuer&#146;s other
certifying officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) for the small business issuer and have: </FONT></P>
<P style="PADDING-LEFT: 15pt" align=justify><FONT face=serif size=2>(a) Designed
such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material
information relating to the small business issuer, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;</FONT></P>
<P style="PADDING-LEFT: 15pt" align=justify><FONT face=serif size=2>(b)
Evaluated the effectiveness of the small business issuer&#146;s disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and</FONT></P>
<P style="PADDING-LEFT: 15pt" align=justify><FONT face=serif size=2>(c)
Disclosed in this report any change in the small business issuer&#146;s internal
control over financial reporting that occurred during the small business
issuer&#146;s fourth quarter that has materially affected, or is reasonably likely to
materially affect, the small business issuer&#146;s internal control over financial
reporting; and </FONT></P>
<P align=justify><FONT face=serif size=2>5. The small business issuer&#146;s other
certifying officers and I have disclosed, based on our most recent evaluation of
internal controls over financial reporting, to the small business issuer&#146;s
auditors and the audit committee of the small business issuer&#146;s board of
directors (or persons performing the equivalent function): </FONT></P>
<P style="PADDING-LEFT: 15pt" align=justify><FONT face=serif size=2>(a) All
significant deficiencies and material weaknesses in the design or operation of
internal controls over financial reporting which are reasonably likely to
adversely affect the small business issuer&#146;s ability to record, process,
summarize and report financial information; and</FONT></P>
<P style="PADDING-LEFT: 15pt" align=justify><FONT face=serif size=2>(b) Any
fraud, whether or not material, that involves management or other employees who
have a significant role in the small business issuer&#146;s internal controls over
financial reporting.</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR>
    <TD vAlign=bottom noWrap align=left width="50%"  ></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="25%"  >&nbsp; <IMG src="northerntech_10ksb5x14x1.jpg" border=0>&nbsp; </TD>
    <TD noWrap align=left width="24%"  >&nbsp;</TD></TR>
  <TR>
    <TD noWrap align=left width="50%"  ><FONT size=2>Date:&nbsp; November 29, 2007</FONT>&nbsp;
    </TD>
    <TD noWrap align=left width="49%"   colSpan=2><FONT size=2>Matthew C. Wolsfeld, CPA</FONT><FONT size=3>&nbsp; </FONT></TD></TR>
  <TR>
    <TD noWrap align=left width="50%"  ></TD>
    <TD noWrap align=left width="49%"   colSpan=2><FONT size=2>Chief Financial Officer and Corporate
      Secretary</FONT><FONT size=3>&nbsp; </FONT></TD></TR></TABLE><BR>
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</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>9
<FILENAME>northerntech_10ksb5x14x1.jpg
<DESCRIPTION>GRAPHIC
<TEXT>
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<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>10
<FILENAME>exhibit32-1.htm
<DESCRIPTION>CERTIFICATION OF PRESIDENT AND CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 18 U.S.
<TEXT>
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<P align=right><B><FONT face=serif size=2>Exhibit 32.1 </FONT></B></P>
<P align=center><B><FONT face=serif size=2>CERTIFICATION PURSUANT TO 18 U.S.C.
SECTION 1350, AS ADOPTED PURSUANT TO<BR>SECTION 906 OF THE SARBANES-OXLEY ACT OF
2002 </FONT></B></P>
<P align=justify><FONT face=serif 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, 2007 as filed with the Securities and Exchange
Commission on the date hereof (the &#147;Report&#148;), I, G. Patrick Lynch, President and
Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 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></P>
<TABLE style="TEXT-ALIGN: justify" cellSpacing=0 cellPadding=0 border=0>

  <TR>
    <TD vAlign=top noWrap  >&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD vAlign=top noWrap><FONT face=serif size=2>(1)</FONT></TD>
    <TD vAlign=top noWrap  >&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD width="100%"><FONT face=serif size=2>The Report fully complies with
      the requirements of Section 13(a) or 15(d) of the Securities Exchange Act
      of 1934; and</FONT></TD></TR>
  <TR>
    <TD noWrap  ></TD>
    <TD width="100%" colSpan=3>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top noWrap  ></TD>
    <TD vAlign=top noWrap><FONT face=serif size=2>(2)</FONT></TD>
    <TD vAlign=top noWrap  ></TD>
    <TD width="100%"><FONT face=serif size=2>The information contained in the
      Report fairly presents, in all material respects, the financial condition
      and results of operations of the Company.</FONT></TD></TR>
  <TR>
    <TD vAlign=top noWrap  ></TD>
    <TD vAlign=top noWrap  ></TD>
    <TD vAlign=top noWrap  ></TD>
    <TD width="100%"  >&nbsp;</TD></TR></TABLE>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR>
    <TD vAlign=bottom noWrap align=left width="50%"  ></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="25%"  >&nbsp; <IMG src="northerntech_10ksb5x15x1.jpg" border=0>&nbsp; </TD>
    <TD noWrap align=left width="24%"  >&nbsp;</TD></TR>
  <TR>
    <TD noWrap align=left width="50%"  ></TD>
    <TD noWrap align=left width="49%"   colSpan=2><FONT size=2>G. Patrick. Lynch</FONT><FONT size=3>&nbsp;
      </FONT></TD></TR>
  <TR>
    <TD noWrap align=left width="50%"  ></TD>
    <TD noWrap align=left width="49%"   colSpan=2><FONT size=2>President and Chief Executive
      Officer</FONT><FONT size=3>&nbsp; </FONT></TD></TR>
  <TR>
    <TD noWrap align=left width="50%"  ></TD>
    <TD noWrap align=left width="49%"   colSpan=2><FONT size=2>(principal executive officer)</FONT>&nbsp;
  </TD></TR>
  <TR>
    <TD noWrap align=left width="50%"  ></TD>
    <TD noWrap align=left width="49%"   colSpan=2>&nbsp;</TD></TR>
  <TR>
    <TD noWrap align=left width="50%"  ><FONT size=2>Circle Pines, Minnesota<BR>November 29,
      2007</FONT></TD>
    <TD noWrap align=left width="49%"   colSpan=2></TD></TR></TABLE><BR>
<HR align=center width="100%" noShade SIZE=2>



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<SEQUENCE>12
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<DESCRIPTION>CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO RULE 18 U.S.C. SECTION 135
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<P align=right><B><FONT face=serif size=2>Exhibit 32.2 </FONT></B></P>
<P align=center><B><FONT face=serif size=2>CERTIFICATION PURSUANT TO 18 U.S.C.
SECTION 1350, AS ADOPTED PURSUANT TO<BR>SECTION 906 OF THE SARBANES-OXLEY ACT OF
2002 </FONT></B></P>
<P align=justify><FONT face=serif 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, 2007 as filed with the Securities and Exchange
Commission on the date hereof (the &#147;Report&#148;), I, Matthew C. Wolsfeld, Chief
Financial Officer of the Company, certify, pursuant to 18 U.S.C. 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></P>
<TABLE style="TEXT-ALIGN: justify" cellSpacing=0 cellPadding=0 border=0>

  <TR>
    <TD vAlign=top noWrap  >&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD vAlign=top noWrap><FONT face=serif size=2>(1)</FONT></TD>
    <TD vAlign=top noWrap  >&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD width="100%"><FONT face=serif size=2>The Report fully complies with
      the requirements of Section 13(a) or 15(d) of the Securities Exchange Act
      of 1934; and</FONT> </TD></TR>
  <TR>
    <TD noWrap  ></TD>
    <TD width="100%" colSpan=3>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top noWrap  ></TD>
    <TD vAlign=top noWrap><FONT face=serif size=2>(2)</FONT></TD>
    <TD vAlign=top noWrap  ></TD>
    <TD width="100%"><FONT face=serif size=2>The information contained in the
      Report fairly presents, in all material respects, the financial condition
      and results of operations of the Company.</FONT> </TD></TR>
  <TR>
    <TD vAlign=top noWrap  ></TD>
    <TD vAlign=top noWrap  ></TD>
    <TD vAlign=top noWrap  ></TD>
    <TD width="100%"  >&nbsp;</TD></TR></TABLE>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR>
    <TD vAlign=bottom noWrap align=left width="50%"  ></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="25%"  >&nbsp; <IMG src="northerntech_10ksb5x16x1.jpg" border=0>&nbsp; </TD>
    <TD noWrap align=left width="24%"  >&nbsp;</TD></TR>
  <TR>
    <TD noWrap align=left width="50%"  ></TD>
    <TD noWrap align=left width="49%"   colSpan=2><FONT size=2>Matthew C. Wolsfeld, CPA</FONT><FONT size=3>&nbsp; </FONT></TD></TR>
  <TR>
    <TD noWrap align=left width="50%"  ></TD>
    <TD noWrap align=left width="49%"   colSpan=2><FONT size=2>Chief Financial Officer and Corporate
      Secretary</FONT><FONT size=3>&nbsp; </FONT></TD></TR>
  <TR>
    <TD noWrap align=left width="50%"  ></TD>
    <TD noWrap align=left width="49%"   colSpan=2><FONT size=2>(principal financial officer and
      principal</FONT><FONT size=3>&nbsp; </FONT></TD></TR>
  <TR>
    <TD noWrap align=left width="50%"  ></TD>
    <TD noWrap align=left width="49%"   colSpan=2><FONT size=2>accounting officer)</FONT>&nbsp; </TD></TR>
  <TR>
    <TD noWrap align=left width="50%"  ></TD>
    <TD noWrap align=left width="49%"   colSpan=2>&nbsp;</TD></TR>
  <TR>
    <TD noWrap align=left width="50%"  ><FONT size=2>Circle Pines, Minnesota<BR>November 29,
      2007</FONT></TD>
    <TD noWrap align=left width="49%"   colSpan=2></TD></TR></TABLE><BR>
<HR align=center width="100%" noShade SIZE=2>

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end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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