---

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

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FORM 10-QSB

|(Mark one)                      
|--------------------------------
|x                               
|                                
|For the quarterly   period ended
|                                
|May 31, 2007                    
|                                
|o                               

For the transition period from ________________ to __________________.

Commission file number  1-11038

---

|NORTHERN   TECHNOLOGIES INTERNATIONAL CORPORATION
|-------------------------------------------------
|(Name of small business issuer in its charter)   

|Delaware                                                         |  | 41-0857886                          
|---------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of incorporation or   organization) |  | (I.R.S. Employer Identification No.)
|                                                                 |  |                                     
|4201 Woodland Rd   Circle Pines, Minnesota                       |  | 55014                               
|(Address of principal executive offices)                         |  | (Zip Code)                          

(763) 225-6600
(Issuers telephone number, including area code)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the issuer was required to file such reports) and
(2) has been subject to such filing requirements for the past 90 days.

|Yes
x | No
o
|----- | ----

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2) of the Exchange Act).

|Yes
o | No
x
|----- | ----

State the number of shares outstanding of each of the issuers classes of common equity, as of the latest practicable date.

|Class                           |  | Outstanding   as of July12, 2007
|------------------------------- |  | --------------------------------
|                                |  |                                 
|Common   Stock, $0.02 par value |  | 3,679,016                       

Transitional Small Business Disclosure Format (check one):

|Yes
o | No
x
|----- | ----

---



NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION FORM 10-QSB May 31, 2007

TABLE OF CONTENTS

|Description                      |                                                                                                                   | Page
|-------------------------------- | ----------------------------------------------------------------------------------------------------------------- | ----
|                                 |                                                                                                                   |     
|PART I.    FINANCIAL INFORMATION |                                                                                                                   |     
|                                 |                                                                                                                   |     
|Item 1.                          | Financial   Statements                                                                                            |     
|                                 |                                                                                                                   |     
|                                 | Consolidated   Balance Sheets as of May 31, 2007 (unaudited) and August 31, 2006 (audited)                        |     
|                                 |                                                                                                                   |     
|                                 | Consolidated Statements of Operations (unaudited) for the
Three and Nine Months Ended May 31, 2007 and 2006       |     
|                                 |                                                                                                                   |     
|                                 | Consolidated   Statements of Cash Flows (unaudited) for the Nine Months Ended May 31, 2007   and 2006             |     
|                                 |                                                                                                                   |     
|                                 | Notes to   Consolidated Financial Statements                                                                      |     
|                                 |                                                                                                                   |     
|Item 2.                          | Managements   Discussion and Analysis or Plan of Operation                                                       |     
|                                 |                                                                                                                   |     
|Item 3.                          | Controls   and Procedures                                                                                         |     
|                                 |                                                                                                                   |     
|PART II.  OTHER   INFORMATION    |                                                                                                                   |     
|                                 |                                                                                                                   |     
|Item 1.                          | Legal   Proceedings                                                                                               |     
|                                 |                                                                                                                   |     
|Item 2.                          | Unregistered Sales of Equity Securities, Use of Proceeds and
Small Business Issuer Purchases of Equity Securities |     
|                                 |                                                                                                                   |     
|Item 5.                          | Other   Information                                                                                               |     
|                                 |                                                                                                                   |     
|Item 6.                          | Exhibits                                                                                                          |     
|                                 |                                                                                                                   |     
|SIGNATURE PAGE                   |                                                                                                                   | 33  
|                                 |                                                                                                                   |     
|EXHIBIT INDEX                    |                                                                                                                   | 34  

---

This Quarterly Report on Form 10-QSB 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 Part I. Financial Information  Item 2.  Managements
Discussion and Analysis or Plan of Operation   Forward-Looking
Statements.

As used in this report, references to NTIC, the
Company, we, our or us, unless
the context otherwise requires, refer to Northern Technologies International
Corporation, its wholly owned subsidiaries  NTI Facilities, Inc. and
Northern Technologies Holding Company, LLC, and its majority-owned subsidiary
 React-NTI, LLC, all of which are consolidated on NTICs financial
statements.

All trademarks, trade names or service marks referred to in this report are
the property of their respective owners.

2



PART I - FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

|NORTHERN TECHNOLOGIES INTERNATIONAL   CORPORATION       
|--------------------------------------------------------
|AND SUBSIDIARIES  CONSOLIDATED BALANCE   SHEETS as of  
|May 31, 2007 (Unaudited) and August 31,   2006 (Audited)
|                                                        

|                                                                                                                                              |  | May 31,    2007 |            | August 31,   2006 |  
|--------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------- | ---------- | ----------------- | -
|                                                                                                                                              |  |                 |            |                   |  
|ASSETS                                                                                                                                        |  |                 |            |                   |  
|CURRENT   ASSETS:                                                                                                                             |  |                 |            |                   |  
|Cash   and cash equivalents                                                                                                                   |  | $               | 536,246    |                   | $
|Receivables:                                                                                                                                  |  |                 |            |                   |  
|Trade   excluding corporate joint ventures, less allowance for doubtful accounts of   $13,845 and $10,000 at May 31, 2007 and August 31, 2006 |  |                 | 1,418,727  |                   |  
|Trade   corporate joint ventures                                                                                                              |  |                 | 650,777    |                   |  
|Technical   and other services, corporate joint ventures                                                                                      |  |                 | 1,425,215  |                   |  
|Income   taxes                                                                                                                                |  |                 | 340,415    |                   |  
|Inventories                                                                                                                                   |  |                 | 1,653,268  |                   |  
|Prepaid   expenses                                                                                                                            |  |                 | 200,558    |                   |  
|Deferred   income taxes                                                                                                                       |  |                 | 237,088    |                   |  
|                                                                                                                                              |  |                 |            |                   |  
|Total   current assets                                                                                                                        |  |                 | 6,462,294  |                   |  
|PROPERTY AND EQUIPMENT, net                                                                                                                   |  |                 | 3,822,142  |                   |  
|OTHER ASSETS:                                                                                                                                 |  |                 |            |                   |  
|Investments   in corporate joint ventures:                                                                                                    |  |                 |            |                   |  
|Industrial   chemical                                                                                                                         |  |                 | 12,342,653 |                   |  
|Industrial   non-chemical                                                                                                                     |  |                 | 461,713    |                   |  
|Deferred   income taxes                                                                                                                       |  |                 | 628,197    |                   |  
|Notes   receivable and foreign deposit                                                                                                        |  |                 | 51,710     |                   |  
|Note   from employee                                                                                                                          |  |                 | 38,264     |                   |  
|Industrial   patents and trademarks, net                                                                                                      |  |                 | 977,368    |                   |  
|Goodwill                                                                                                                                      |  |                 | 304,000    |                   |  
|Other                                                                                                                                         |  |                 | 416,370    |                   |  
|                                                                                                                                              |  |                 |            |                   |  
|                                                                                                                                              |  |                 | 15,220,275 |                   |  
|                                                                                                                                              |  |                 |            |                   |  
|                                                                                                                                              |  | $               | 25,504,711 |                   | $
|                                                                                                                                              |  |                 |            |                   |  
|LIABILITIES   AND STOCKHOLDERS EQUITY                                                                                                        |  |                 |            |                   |  
|CURRENT   LIABILITIES:                                                                                                                        |  |                 |            |                   |  
|Bank   overdrafts                                                                                                                             |  | $               | 173,100    |                   | $
|Borrowings   made on line of credit                                                                                                           |  |                 | 884,000    |                   |  
|Current   portion of notes payable                                                                                                            |  |                 | 28,727     |                   |  
|Accounts   payable                                                                                                                            |  |                 | 968,865    |                   |  
|Payroll   and related benefits                                                                                                                |  |                 | 799,020    |                   |  
|Deferred   joint venture royalties                                                                                                            |  |                 | 168,000    |                   |  
|Other                                                                                                                                         |  |                 | 187,337    |                   |  
|                                                                                                                                              |  |                 |            |                   |  
|Total   current liabilities                                                                                                                   |  |                 | 3,209,049  |                   |  
|NOTES PAYABLE, NET OF   CURRENT PORTION                                                                                                       |  |                 | 1,218,952  |                   |  
|MINORITY INTEREST                                                                                                                             |  |                 | 54,962     |                   |  
|STOCKHOLDERS EQUITY:                                                                                                                         |  |                 |            |                   |  
|Preferred   stock, no par value; authorized 10,000 shares; none issued and outstanding                                                        |  |                 |           |                   |  
|Common stock, $0.02 par value per share; authorized 10,000,000 shares; issued
and outstanding 3,679,016 and 3,618,993, respectively           |  |                 | 73,580     |                   |  
|Additional   paid-in capital                                                                                                                  |  |                 | 4,735,323  |                   |  
|Retained   earnings                                                                                                                           |  |                 | 14,961,801 |                   |  
|Accumulated   other comprehensive income                                                                                                      |  |                 | 1,251,044  |                   |  
|                                                                                                                                              |  |                 |            |                   |  
|Total   stockholders equity                                                                                                                  |  |                 | 21,021,748 |                   |  
|                                                                                                                                              |  |                 |            |                   |  
|                                                                                                                                              |  | $               | 25,504,711 |                   | $
|                                                                                                                                              |  |                 |            |                   |  

See notes to consolidated financial statements.

3



|NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION AND SUBSIDIARIES -CONSOLIDATED   STATEMENTS OF OPERATIONS (Unaudited)
|---------------------------------------------------------------------------------------------------------------------
|THREE AND NINE MONTHS ENDED May 31, 2007   AND May 31, 2006                                                          
|                                                                                                                     

|                                                                                               |  | Three Months Ended |            | Nine Months Ended |  
|---------------------------------------------------------------------------------------------- |  | ------------------ | ---------- | ----------------- | -
|                                                                                               |  |                    |            |                   |  
|                                                                                               |  | May 31, 2007       |            | May 31, 2006      |  
|                                                                                               |  |                    |            |                   |  
|NORTH AMERICAN OPERATIONS:                                                                     |  |                    |            |                   |  
|Sales                                                                                          |  | $                  | 4,407,798  |                   | $
|Cost   of goods sold                                                                           |  |                    | 2,876,012  |                   |  
|                                                                                               |  |                    |            |                   |  
|Gross   profit                                                                                 |  |                    | 1,531,786  |                   |  
|                                                                                               |  |                    |            |                   |  
|Operating expenses:                                                                            |  |                    |            |                   |  
|Selling                                                                                        |  |                    | 887,014    |                   |  
|General   and administrative                                                                   |  |                    | 608,104    |                   |  
|Lab   and technical support                                                                    |  |                    | 46,941     |                   |  
|                                                                                               |  |                    |            |                   |  
|                                                                                               |  |                    | 1,542,059  |                   |  
|                                                                                               |  |                    |            |                   |  
|NORTH AMERICAN OPERATING   (LOSS) INCOME                                                       |  |                    | (10,273    | )                 |  
|CORPORATE JOINT VENTURES AND HOLDING COMPANIES:                                                |  |                    |            |                   |  
|Equity   in income of industrial chemical corporate joint ventures and holding   companies     |  |                    | 722,075    |                   |  
|Equity   in income of industrial non-chemical corporate joint ventures and holding   companies |  |                    | 32,211     |                   |  
|Fees   for technical support and other services provided to corporate joint ventures           |  |                    | 1,162,974  |                   |  
|Expenses   incurred in support of corporate joint ventures                                     |  |                    | (1,161,702 | )                 |  
|                                                                                               |  |                    |            |                   |  
|INCOME FROM ALL CORPORATE   JOINT VENTURES AND HOLDING   COMPANIES                             |  |                    | 755,558    |                   |  
|INTEREST INCOME                                                                                |  |                    | 667        |                   |  
|INTEREST EXPENSE                                                                               |  |                    | (41,139    | )                 |  
|OTHER INCOME                                                                                   |  |                    | 6,281      |                   |  
|GAIN ON SALE OF ASSETS                                                                         |  |                    | 100        |                   |  
|MINORITY INTEREST INCOME   (EXPENSE)                                                           |  |                    | 7,606      |                   |  
|                                                                                               |  |                    |            |                   |  
|INCOME BEFORE INCOME TAX   EXPENSE                                                             |  |                    | 718,800    |                   |  
|INCOME TAX EXPENSE   (BENEFIT)                                                                 |  |                    | 91,000     |                   |  
|                                                                                               |  |                    |            |                   |  
|NET INCOME                                                                                     |  | $                  | 627,800    |                   | $
|                                                                                               |  |                    |            |                   |  
|NET INCOME PER COMMON   SHARE:                                                                 |  |                    |            |                   |  
|Basic                                                                                          |  | $                  | 0.17       |                   | $
|                                                                                               |  |                    |            |                   |  
|Diluted                                                                                        |  | $                  | 0.17       |                   | $
|                                                                                               |  |                    |            |                   |  
|WEIGHTED AVERAGE COMMON   SHARES                                                               |  |                    |            |                   |  
|ASSUMED OUTSTANDING:                                                                           |  |                    |            |                   |  
|Basic                                                                                          |  |                    | 3,679,016  |                   |  
|Diluted                                                                                        |  |                    | 3,708,626  |                   |  

See notes to consolidated financial statements.

4



|NORTHERN TECHNOLOGIES INTERNATIONAL   CORPORATION AND             
|------------------------------------------------------------------
|SUBSIDIARIES - CONSOLIDATED STATEMENTS OF CASH   FLOWS (Unaudited)
|NINE MONTHS ENDED MAY 31, 2007 and MAY 31,   2006                 
|                                                                  

|                                                                                                |  | May 31,   2007 |            | May 31,   2006 |  
|----------------------------------------------------------------------------------------------- |  | -------------- | ---------- | -------------- | -
|                                                                                                |  |                |            |                |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                           |  |                |            |                |  
|Net   income                                                                                    |  | $              | 2,066,227  |                | $
|Adjustments   to reconcile net income to net cash (used in) provided by operating   activities: |  |                |            |                |  
|Expensing   of fair value of stock options vested                                               |  |                | 60,786     |                |  
|Depreciation   expense                                                                          |  |                | 232,520    |                |  
|Amortization   expense                                                                          |  |                | 113,773    |                |  
|Gain   on sale of assets                                                                        |  |                | (726,295   | )              |  
|Minority   interest (income) expense                                                            |  |                | (292       | )              |  
|Equity   in income from corporate joint ventures:                                               |  |                |            |                |  
|Industrial   chemical                                                                           |  |                | (2,318,009 | )              |  
|Industrial   non-chemical                                                                       |  |                | (66,011    | )              |  
|Deferred   joint venture royalties                                                              |  |                | 72,000     |                |  
|Change   in current assets and liabilities:                                                     |  |                |            |                |  
|Receivables:                                                                                    |  |                |            |                |  
|Trade   excluding corporate joint ventures                                                      |  |                | 353,841    |                |  
|Trade   corporate joint ventures                                                                |  |                | (52,615    | )              |  
|Technical   and other services receivables, corporate joint ventures                            |  |                | (67,461    | )              |  
|Income   taxes                                                                                  |  |                | (6,596     | )              |  
|Inventories                                                                                     |  |                | (275,315   | )              |  
|Prepaid   expenses and other                                                                    |  |                | 33,093     |                |  
|Employee   note receivable                                                                      |  |                | 18,415     |                |  
|Accounts   payable                                                                              |  |                | (807,061   | )              |  
|Accrued   liabilities                                                                           |  |                | 133,952    |                |  
|                                                                                                |  |                |            |                |  
|Net   cash used in operating activities                                                         |  |                | (1,235,051 | )              |  
|CASH FLOWS FROM INVESTING   ACTIVITIES:                                                         |  |                |            |                |  
|Proceeds   from the sale of assets                                                              |  |                | 850,367    |                |  
|Investment   in corporate joint ventures                                                        |  |                | (538,104   | )              |  
|Dividends   received from corporate joint ventures                                              |  |                | 1,395,740  |                |  
|Loans   made                                                                                    |  |                |           |                |  
|Cash   received from notes receivable and foreign deposit                                       |  |                | 445,469    |                |  
|Additions   to property and equipment                                                           |  |                | (748,161   | )              |  
|(Increase)   decrease in other assets                                                           |  |                | (41,171    | )              |  
|Disposal   of industrial patents                                                                |  |                |           |                |  
|Additions   to industrial patents                                                               |  |                | (94,549    | )              |  
|                                                                                                |  |                |            |                |  
|Net   cash provided by (used in) investing activities                                           |  |                | 1,269,591  |                |  
|CASH FLOWS FROM FINANCING   ACTIVITIES:                                                         |  |                |            |                |  
|Net   borrowings made on line of credit (repayments)                                            |  |                | 274,000    |                |  
|(Repayment)   borrowing of term loan                                                            |  |                | (20,479    | )              |  
|Proceeds   from exercise of stock options                                                       |  |                | 104,772    |                |  
|Repayment   of note payable                                                                     |  |                |           |                |  
|Bank   overdrafts                                                                               |  |                | (155,704   | )              |  
|                                                                                                |  |                |            |                |  
|Net   cash provided by financing activities                                                     |  |                | 202,589    |                |  
|                                                                                                |  |                |            |                |  
|NET INCREASE IN CASH AND   CASH EQUIVALENTS                                                     |  |                | 237,129    |                |  
|CASH AND CASH EQUIVALENTS   AT BEGINNING OF PERIOD                                              |  |                | 299,117    |                |  
|                                                                                                |  |                |            |                |  
|CASH AND CASH EQUIVALENTS   AT END OF PERIOD                                                    |  | $              | 536,246    |                | $
|                                                                                                |  |                |            |                |  

See notes to consolidated financial statements.

5



|NORTHERN TECHNOLOGIES INTERNATIONAL   CORPORATION AND                 
|----------------------------------------------------------------------
|SUBSIDIARIES -  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|                                                                      

1.     INTERIM FINANCIAL INFORMATION

In the opinion of management, the accompanying unaudited consolidated financial
statements contain all necessary adjustments, which are of a normal recurring
nature, and present fairly the consolidated financial position of Northern
Technologies International Corporation and its subsidiaries (the Company) as of
May 31, 2007 and the results of their operations for the three and nine months
ended May 31, 2007 and May 31, 2006 and their cash flows for the nine months
ended May 31, 2007 and May 31, 2006, in conformity with accounting principles
generally accepted in the United States of America.

These consolidated financial statements should be read in conjunction with the
consolidated financial statements and related notes contained in the
Companys annual report on Form 10-KSB for the fiscal year ended
August 31, 2006 and with the Managements Discussion and Analysis or Plan
of Operation section appearing in this quarterly report.  Operating results
for the three and nine months ended May 31, 2007 are not necessarily indicative
of the results that may be expected for the full fiscal year ending August 31,
2007.

2.     RECENTLY ISSUED ACCOUNTING
PRONOUNCEMENTS

In June 2006, the FASB issued FASB Interpretation 48, Accounting for
Uncertainty in Income Taxes  an interpretation of FASB
Statement 109, (FIN 48). FIN 48 clarifies the
accounting for uncertainty in income taxes recognized in a companys
financial statements in accordance with SFAS 109, Accounting for
Income Taxes. 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.

3.     STOCK-BASED COMPENSATION

In December 2004, FASB published FASB Statement No. 123 (revised 2004),
Share-Based Payment.  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, Accounting for Stock-Based
Compensation, and supersedes APB Opinion No. 25, Accounting for Stock
Issued to Employees, 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). FAS 123(R) permits entities to use any option-pricing model that
meets the fair value objective in the Statement.  The Company implemented
FAS 123(R) on September 1, 2006, using the modified prospective transition
method.

6



The Company granted options to purchase 15,167 shares of its common stock during
nine months ended May 31, 2007.  No options were issued during the three
months ended May 31, 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
$60,786 during the nine months ended May 31, 2007, related to the options that
vested during such time period, which reduced net income per share by $0.02 for
the nine month period. No compensation expense for stock options issued was
recognized during the three months ended May 31, 2007. The Company estimates
that there will be no additional compensation expense relating to option grants
for the remainder of fiscal year 2007. As of May 31, 2007, the total
compensation cost for nonvested options not yet recognized in the Companys
statements of operations was $65,856, net of estimated forfeitures.  Stock
based compensation expense of $54,867 and $10,989 are expected to be recognized
during the nine months ending May 31, 2008 and 2009, respectively.  Future
option grants will impact the compensation expense recognized.

The fair value of the options granted during the nine months ended May 31, 2007
and 2006 was estimated using the Black-Scholes option pricing model with the
following weighted average assumptions:

|                                  |  | May 31, 2007 |           | May 31, 2006 | 
|--------------------------------- |  | ------------ | --------- | ------------ | 
|                                  |  |              |           |              | 
|Dividend yield                    |  |              | 2.00%     |              | 
|Expected volatility               |  |              | 42.9%     |              | 
|Expected life of option           |  |              | 5   years |              | 
|Average risk-free interest   rate |  |              | 4.67%     |              | 

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.

Had compensation cost for stock options been determined based on the fair value
methodology prescribed by SFAS 123(R), the Companys net income and net
income per common share for the three and nine month periods ended May 31, 2006
would have been reduced to the pro forma amounts indicated below:

|                                    |  | 3 Months   Ended   May 31, 2006 |         | 9 Months   Ended   May 31, 2006 |  
|----------------------------------- |  | ------------------------------- | ------- | ------------------------------- | -
|                                    |  |                                 |         |                                 |  
|Net income (loss):                  |  |                                 |         |                                 |  
|As reported                         |  | $                               | 717,963 |                                 | $
|Pro forma                           |  | $                               | 717,963 |                                 | $
|Basic net income per   common share |  |                                 |         |                                 |  
|As reported                         |  | $                               | 0.20    |                                 | $
|Pro forma                           |  | $                               | 0.20    |                                 | $
|Diluted net income per   share      |  |                                 |         |                                 |  
|As reported                         |  | $                               | 0.20    |                                 | $
|Pro forma                           |  | $                               | 0.20    |                                 | $
|Stock-based compensation,   net:    |  |                                 |         |                                 |  
|As reported                         |  | $                               | 0       |                                 | $
|Pro forma                           |  | $                               | 0       |                                 | $

7



4.     INVENTORIES

Inventories consisted of the following:

|                     |  | May 31,   2007 |           | August 31,   2006 |  
|-------------------- |  | -------------- | --------- | ----------------- | -
|                     |  |                |           |                   |  
|Production materials |  | $              | 301,299   |                   | $
|Finished goods       |  |                | 1,351,968 |                   |  
|                     |  |                |           |                   |  
|                     |  | $              | 1,653,268 |                   | $
|                     |  |                |           |                   |  

5.     PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

|                                |  | May 31,   2007 |           | August 31,   2006 |  
|------------------------------- |  | -------------- | --------- | ----------------- | -
|                                |  |                |           |                   |  
|Land                            |  | $              | 310,365   |                   | $
|Buildings and improvements      |  |                | 3,031,564 |                   |  
|Machinery and equipment         |  |                | 1,242,432 |                   |  
|                                |  |                |           |                   |  
|                                |  |                | 4,584,361 |                   |  
|Less accumulated   depreciation |  |                | (762,219  | )                 |  
|                                |  |                |           |                   |  
|                                |  | $              | 3,822,142 |                   | $
|                                |  |                |           |                   |  

NTIC recognized a gain on the sale of land, building and equipment that
previously served as its corporate headquarters of $726,295 during the nine
months ended May 31, 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.

6.     INDUSTRIAL PATENTS AND TRADEMARKS, NET

Industrial patents and trademarks, net consisted of the following:

|                                |  | May 31,   2007 |           | August 31,   2006 |  
|------------------------------- |  | -------------- | --------- | ----------------- | -
|                                |  |                |           |                   |  
|Patents and trademarks          |  | $              | 1,373,394 |                   | $
|Less accumulated   amortization |  |                | (396,026  | )                 |  
|                                |  |                |           |                   |  
|                                |  | $              | 977,368   |                   | $
|                                |  |                |           |                   |  

Patent and trademark costs are amortized over seven years once a patent or
trademark application is filed and approved.  Amortization expense was
$113,773 and $121,694, for the nine months ended May 31, 2007 and 2006,
respectively.  Amortization expense is estimated to approximate $175,000 in
each of the next five fiscal years.

7.     NOTES RECEIVABLE AND FOREIGN DEPOSITS

Notes receivable and foreign deposits consisted of the following:

|                                                         |  | May 31,   2007 |        | August 31,   2006 |  
|-------------------------------------------------------- |  | -------------- | ------ | ----------------- | -
|                                                         |  |                |        |                   |  
|Notes receivable from   corporate joint venture partners |  | $              | 51,710 |                   | $
|Foreign deposits                                         |  |                |       |                   |  
|                                                         |  |                |        |                   |  
|                                                         |  | $              | 51,710 |                   | $
|                                                         |  |                |        |                   |  

8



8.     INVESTMENTS IN CORPORATE JOINT VENTURES

Composite financial information from the audited and unaudited financial
statements of the Companys joint ventures carried on the equity basis is
summarized as follows:

|                                                                                            |  | May 31,   2007 |            | August 31,   2006 |  
|------------------------------------------------------------------------------------------- |  | -------------- | ---------- | ----------------- | -
|                                                                                            |  |                |            |                   |  
|Current assets                                                                              |  | $              | 36,481,058 |                   | $
|Total assets                                                                                |  |                | 42,967,257 |                   |  
|Current liabilities                                                                         |  |                | 13,733,953 |                   |  
|Non-current liabilities                                                                     |  |                | 3,522,544  |                   |  
|Joint ventures equity                                                                      |  |                | 25,710,645 |                   |  
|Northern Technologies International Corporations share of Corporate Joint
Ventures equity |  | $              | 12,804,366 |                   | $

|                                                                                                        |  | Nine   Months Ended |           
|------------------------------------------------------------------------------------------------------- |  | ------------------- | ----------
|                                                                                                        |  |                     |           
|                                                                                                        |  | May 31,   2007      |           
|                                                                                                        |  |                     |           
|Net sales                                                                                               |  | $                   | 59,265,028
|Gross profit                                                                                            |  |                     | 28,705,348
|Net income                                                                                              |  |                     | 4,903,342 
|Northern Technologies International Corporations share of equity in income
of Corporate Joint Ventures |  | $                   | 2,384,020 

During the nine months ended May 31, 2007, the Company invested in corporate
joint ventures as follows:

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s
investment.  It is anticipated that this is the first of two installments
towards the Company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.

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s investment.   The total increase in
capitalization by both owners of the joint venture was $286,000.

In February 2007, the Company invested $313,582 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.

9.     GOODWILL

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 each of May 31, 2007 and August 31, 2006 was
$304,000.

10.    CORPORATE DEBT

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 May 31, 2007,
the interest rate was 7.57%, the weighted average interest rate for the nine
months ended May 31, 2007 was 7.58%.  Amounts borrowed under the facility
are collateralized by a lien on substantially all of the Company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 was in compliance with
all covenants under the revolving credit facility.  Outstanding balances
were $884,000 and $610,000 as of May 31, 2007 and August 31, 2006,
respectively.  The Company expects the line of credit to be extended under
substantially similar terms in the near future.

9



The Company has a term loan in the 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) which commenced June 1, 2006.  All of the remaining unpaid
principal and accrued interest is due and payable on the maturity date. 
The term loan note is secured by a first lien on the Company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.

11.     STOCKHOLDERS EQUITY

During the nine months ended May 31, 2007, the Company did not purchase or
retire any shares of its common stock.  During the nine months ended May
31, 2007, the Company issued 22,778 shares of its common stock upon the exercise
of stock options, as detailed below.  The Company granted 37,245 shares of
its common stock to various employees with a value of $298,330 under its 2000
Stock Incentive Plan during the nine months ended May 31, 2007.

|Options Exercised |  | Exercise Price
|----------------- |  | --------------
|                  |  |               
|22,000            |  | $  4.56       
|111               |  | $  5.56       
|667               |  | $  5.75       

During the nine months ended May 31, 2006, the Company did not purchase or
retire any shares of common stock.  The following stock options to purchase
shares of common stock were exercised:

|Options Exercised |  | Exercise Price
|----------------- |  | --------------
|                  |  |               
|16,000            |  | $  4.56       
|1,000             |  | $  5.70       
|2,000             |  | $  5.00       
|2,000             |  | $  3.34       

12.     SUPPLEMENTAL CASH FLOW
INFORMATION

The Company did not declare or pay any cash dividends during fiscal 2006 and as
of July 12, 2007 had not declared or paid any cash dividends during fiscal
2007.

The Company issued 37,245 shares of unrestricted common stock to satisfy
$298,330 of accrued payroll liability during the nine months ended May 31,
2007.

10



13.     TOTAL COMPREHENSIVE INCOME

The Companys total comprehensive income was as follows:

|                                                                       |  | Three Months Ended |         | Nine Months Ended |  
|---------------------------------------------------------------------- |  | ------------------ | ------- | ----------------- | -
|                                                                       |  |                    |         |                   |  
|                                                                       |  | May 31,   2007     |         | May 31,   2006    |  
|                                                                       |  |                    |         |                   |  
|Net income                                                             |  | $                  | 627,800 |                   | $
|Other comprehensive income    foreign currency translation adjustment |  |                    | 202,075 |                   |  
|                                                                       |  |                    |         |                   |  
|Total comprehensive income                                             |  | $                  | 829,875 |                   | $
|                                                                       |  |                    |         |                   |  

14.     NET INCOME PER COMMON SHARE

Basic net income per common share is computed by dividing net income by the
weighted average number of common shares outstanding.  Diluted net income
per share assumes the exercise of stock options using the treasury stock method,
if dilutive.

No options to purchase shares of common stock were excluded from the computation
of common share equivalents as of May 31, 2007 and May 31, 2006, as all stock
option exercise prices were less than the average market price of a share of
common stock.

15.     STOCK-BASED COMPENSATION

In January 2007, the Companys stockholders approved a new 2007 Stock
Incentive Plan and a new Employee Stock Purchase Plan.  The Compensation
Committee of the Board of Directors administers both of the plans.  The
newly approved 2007 Stock Incentive Plan replaced the Companys 2000 Stock
Incentive Plan, which is now terminated with respect to future
grants.

The 2007 Stock Incentive Plan provides for the grant of up to a total of 400,000
incentive stock options, non-statutory stock options, stock appreciation rights,
restricted stock, stock unit awards, performance awards and stock bonuses to
eligible recipients to enable the Company and its subsidiaries to attract and
retain qualified individuals through opportunities for equity participation in
the Company, and to reward those individuals who contribute to the achievement
of the Companys economic objectives.  Options granted under the 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s common stock on the date of grant.

The Employee Stock Purchase Plan provides for purchase of up to 100,000 common
shares for employees of the Company to purchase on a periodic basis through
payroll deductions at a 10% discount to the fair market value of the
Companys common stock.

The following table summarizes information about stock options outstanding and
exercisable at May 31, 2007:

|Option   Grant   Date |  | Per Share   Exercise Prices |      | Remaining   Contractual Life   (years) |  | Number of   Options   Outstanding (#) |  | Number of   Options   Exercisable (#) |       
|--------------------- |  | --------------------------- | ---- | -------------------------------------- |  | ------------------------------------- |  | ------------------------------------- | ------
|                      |  |                             |      |                                        |  |                                       |  |                                       |       
|9/1/2003              |  | $                           | 5.30 |                                        |  | 1.3                                   |  |                                       | 4,000 
|9/1/2004              |  | $                           | 5.25 |                                        |  | 2.3                                   |  |                                       | 6,000 
|11/12/2004            |  | $                           | 6.15 |                                        |  | 2.5                                   |  |                                       | 3,000 
|9/1/2005              |  | $                           | 5.75 |                                        |  | 3.3                                   |  |                                       | 10,000
|11/4/2005             |  | $                           | 5.38 |                                        |  | 3.4                                   |  |                                       | 56,000
|9/1/2006              |  | $                           | 8.01 |                                        |  | 4.3                                   |  |                                       | 10,000
|1/23/07               |  | $                           | 7.51 |                                        |  | 4.7                                   |  |                                       | 1,167 
|                      |  |                             |      |                                        |  |                                       |  |                                       |       
|                      |  |                             |      |                                        |  |                                       |  |                                       | 90,167

11



The weighted average fair value of options granted during the nine months ended
May 31, 2007 and 2006 was $2.95 and $2.00, respectively.

16.     SEGMENT INFORMATION

Net sales by geographic location as a percentage of total net sales were as follows:

|                                                                                          |  | May 31,   2007 |      | May 31,   2006 | 
|----------------------------------------------------------------------------------------- |  | -------------- | ---- | -------------- | 
|                                                                                          |  |                |      |                | 
|Inside the U.S.A. to   unaffiliated customers                                             |  |                | 80.7 | %              | 
|Outside the U.S.A. to:                                                                    |  |                |      |                | 
|Corporate Joint Ventures   in which the Company is a shareholder directly and  indirectly |  |                | 12.0 | %              | 
|Unaffiliated customers                                                                    |  |                | 7.3  | %              | 
|                                                                                          |  |                |      |                | 
|                                                                                          |  |                | 100  | %              | 
|                                                                                          |  |                |      |                | 

One of the Companys North American customers accounted for in the
aggregate approximately 30.8% and 29.2% of the Companys net sales for the
nine months ended May 31, 2007 and 2006 respectively, and $36,629 and $207,630
of the Companys receivables at May 31, 2007 and August 31, 2006,
respectively.

17.     RETIREMENT PLAN

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s contributions or 3.5% of the employees salary. 
The Company recognized expense for the savings plan of $74,517 and $72,121, for
the nine months ended May 31, 2007 and 2006, respectively.

18.     RELATED PARTY TRANSACTIONS

On May 18, 2006, the Company and Emeritushnic Facilities Company, Inc.
(EFC), an entity owned by the Company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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 $225,000 in the
nine months ended May 31, 2007, and reimbursed EFC for out-of-pocket expenses
reasonably incurred in the course of providing such services in an aggregate
amount of $159,610 for the nine months ended May 31, 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.

On May 1, 2006, the Company and Inter Alia Holding Co. (Inter Alia)
entered into a termination agreement pursuant to which they mutually agreed to
terminate that certain Manufacturers Representative Agreement dated as of
October 1, 1976 and as subsequently amended thereafter.  Inter Alia
beneficially owns approximately 25.4% of the Companys outstanding common
stock, and Philip M. Lynch, the Companys former Chairman of the Board and
Chief Executive Officer and current Chairman Emeritus, and G. Patrick Lynch, the
Company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 $80,000
and $320,000 for the three and nine months ended May 31, 2006.  The Company
paid Inter Alia commissions on royalties paid by corporate joint ventures and
net proceeds of sales of the Companys products of approximately $0 and
$65,001, for the three and nine months ended May 31, 2006.  In addition,
the Company paid health insurance premiums of $0 and $6,623 for the three and
nine months ended May 31, 2006, related to policies that insure Philip M. Lynch,
the Companys former Chairman of the Board and Chief Executive Officer and
current Chairman Emeritus.

12



The Company made consulting payments to 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 and May 1, 2007.  The
consulting services rendered by Dr. Narayan related to research and development
associated with various new technologies and are contracted on a quarter to
quarter basis cancellable by NTIC at anytime.

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 NTIC at anytime.

The Company pays rent for its Beachwood office and lab location to a related
party.  See Note 19.

19.     INCOME TAXES

Reconciliations of the expected federal income tax at the statutory rate with
the provisions for income taxes for the nine months ended May 31 are as
follows:

|                                                                 |  | May 31,   2007 |          | May 31,   2006 |  
|---------------------------------------------------------------- |  | -------------- | -------- | -------------- | -
|                                                                 |  |                |          |                |  
|Tax computed at statutory   rates                                |  | $              | 819,000  |                | $
|Tax effect on equity in   income of international joint ventures |  |                | (801,000 | )              |  
|Tax effect on dividends   received from corporate joint ventures |  |                | 352,000  |                |  
|Research and development   credit                                |  |                | (100,000 | )              |  
|Other                                                            |  |                | 101,000  |                |  
|                                                                 |  |                |          |                |  
|                                                                 |  | $              | 371,000  |                | $
|                                                                 |  |                |          |                |  

20.     COMMITMENTS AND CONTINGENCIES

In April 2007 REACT-NTI, LLC (REACT), a company that is 75% owned by
NTIC was served with a summons and complaint that was filed by Shamrock
Technologies, Inc. (Shamrock) 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 of commissions in the
approximate amount of $314,500 owed by REACT under a license agreement between
REACT and Shamrock.  The complaint alleges breach of the license agreement
by REACT and seeks damages in an unspecified amount for such breach as well as
damages of approximately $300,000 for the alleged failure of REACT to purchase
from Shamrock certain inventory manufactured for sale to a customer. 
REACT, acknowledges that the commissions are owed, but denies all of the claims
of breach of the license agreement by it.  REACT intends to appropriately
defend itself against the allegations of breach and also intends to file
counter-claim for a breach of the license agreement by Shamrock and to pursue
injunctive relieve against Shamrock to protect its licensed Technology and
Confidential Information disclosed to Shamrock under the license agreement.

13



In February 2007, NTIC was served with a summons and complaint that was
originally filed by Evelyna Cantwell and Jack Cantwell, individually and also
doing business as Byrd-Walsh International, LLC in the Federal District Court
for the Southern District of Florida.  The lawsuit alleges breach of
contract, breach of implied contract, promissory estoppels, equitable estoppels,
negligence, wrongful conversion, fraud, constructive fraud, misappropriation,
and violation of the Uniform Trade Secrets Act. The suit seeks total damages in
excess of $45 million.  Based on the allegations in the complaint and our
understanding of relevant facts and circumstances, we believe that the
claims made by the Cantwells and Byrd-Walsh in this
lawsuit are without merit and we intend to vigorously defend against
them.   The amounts claimed in this lawsuit are substantial, however,
and there can be no assurances as to the outcome of this pending action.
Likewise, there can be no assurances regarding the impact that this matter may
have on our financial results or financial condition.

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 put up a $600,000 Stand-by Letter of Credit to potentially fund
NTICs obligations related to the courts in Finland against the
defendant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.

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.

In June 2007, the Internal Revenue Service concluded its audit of the Company
for fiscal 2004 and 2005.  They have assessed taxes and penalties based on
their findings, however  the company feels that they have adequate defenses
to counter the assessed taxes and have started the appeals process.  They
intend to vigorously defend their position.  It has been determined that
any resulting loss is not likely and not reasonably estimateable at this time,
therefore, no provision has been made in the financial statements.

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.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.

On November 16, 2006, the independent directors of the Company
approved the material terms of an annual bonus plan for executive officers and
certain employees of the Company for fiscal year ending August 31, 2007, 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s annual compensation to the achievement of such
measures.  The following is a brief summary of the material terms approved
by the Board:

14



| |  | The total amount available under the bonus plan will be up to 25% of the
Companys earnings before interest, taxes and other income
(EBITOI);                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                          
| |  | 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
| |   |                                                                                                                                                                                          
| |  | 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.                   

15



ITEM 2 - MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

This Managements Discussion and Analysis provides material historical and
prospective disclosures intended to enable investors and other users to assess
NTICs financial condition and results of operations.  Statements that
are not historical are forward-looking and involve risks and uncertainties
discussed under the captions Forward-Looking Statements and
Risk Factors appearing elsewhere in this report.  The following
discussion of the results of the operations and financial condition of NTIC
should be read in conjunction with NTICs consolidated financial statements
and the related notes thereto included under Part I, Item 1 entitled
Financial Statements of this report.

Overview

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, manufacturer sales 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® and EXCOR®.  NTIC also offers
direct, worldwide on-site technical support on rust and corrosion issues. 
In North America, NTIC markets its technical service and Zerust® products
principally to industrial users by a direct sales force and through a network of
independent distributors and sales representatives.  NTICs technical
service representatives work directly with the end users of NTICs products
to analyze their specific needs and develop systems to meet their technical
requirements.

NTIC participates, either directly or indirectly through holding companies, in
approximately 30 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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s joint ventures
currently sell rust and corrosion inhibiting products and custom packaging
systems, NTIC also has joint ventures that manufacture, market and sell
bio-based additives with both industrial and personal care applications, plastic
recycling technology and electronic sensing instruments.

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s target market includes NTIC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.

NTIC conducts all foreign transactions based on the U.S. dollar, except for its
investments in various foreign corporate joint ventures.  The exchange rate
differential relating to investments in foreign corporate joint ventures is
accounted for under the requirements of SFAS No. 52, Foreign Currency
Translation.

The Companys net sales increased 2.0% and 3.3% during the three and nine
months ended May 31, 2007 as compared to the same periods in fiscal 2006
primarily as a result of the increase of React-NTI products to new and existing
customers in North America offset by a slight decrease in net sales of
Zerust® products.  Net sales of Zerust® products decreased
$35,933 to $8,833,283 for the nine months ended May 31, 2007 as compared to the
same period in fiscal 2006.  Net sales of React-NTI products increased
$446,307 to $4,076,784 for the nine months ended May 31, 2007 as compared to the
same period in fiscal 2006.

Cost of goods sold as a percentage of net sales increased slightly to 65.3% and
64.1% during the three and nine months ended May 31, 2007 as compared to 63.9%
and 62.4% during the same periods in fiscal 2006, primarily as a result of the
increase in raw material prices and a change in the product mix.

16



Total net sales of all of the Companys joint ventures increased 15.6% to
$59,265,028 during the nine months ended May 31, 2007 as compared to $51,278,645
during the same period in fiscal 2006.  The Company receives fees for
technical and other support services it provides to its joint ventures based on
the revenues of the individual joint ventures.  The Company recognized
increased fee income of $250,950 for such technical and support services during
the nine months ended May 31, 2007 as compared to the same period in fiscal 2006
due to the increase in total net sales of the joint ventures.  The Company
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.  The Company incurred increased direct joint
venture expenses of $157,544 during the nine months ended May 31, 2007 compared
to the same period in fiscal 2006.

NTICs net income for the three months ended May 31, 2007 decreased $90,164
to $627,800 compared to $717,963 for the three months ended May 31, 2006. 
Net income for the nine months ended May 31, 2007 increased $509,551 to
$2,066,227 compared to $1,556,676 for the nine months ended May 31,
2006.

NTICs working capital was $3,253,245 at May 31, 2007, including $536,246
in cash and cash equivalents.  In August 2006, NTIC increased its existing
$1,000,000 revolving credit facility with National City Bank to
$1,500,000.  As of May 31, 2007, NTIC had $884,000 outstanding under the
revolving credit facility.  The revolving credit facility expires on
January 31, 2008 although NTIC expects to renew it on substantially the same
terms before it expires.

NTIC elected not to pay a cash dividend in fiscal 2006, based on fiscal 2005
results, or thus far in fiscal 2007, based on fiscal 2006 results, 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 financing
arrangements.

Results of Operations

The following table sets forth our year to date results of operations for the
nine months ended May 31, 2007 and
2006.

|                                      |  | May 31,   2007 |            | % of Net   Sales |  | May 31,   2006 |   | % of Net   Sales |            | $   Change |  | %   Change |  
|------------------------------------- |  | -------------- | ---------- | ---------------- |  | -------------- | - | ---------------- | ---------- | ---------- |  | ---------- | -
|                                      |  |                |            |                  |  |                |   |                  |            |            |  |            |  
|Net sales                             |  | $              | 12,910,067 |                  |  | 100            | % | $                | 12,499,693 |            |  | 100        | %
|Cost of goods sold                    |  |                | 8,280,131  |                  |  | 64.1           | % |                  | 7,803,716  |            |  | 62.4       | %
|Selling expenses                      |  |                | 2,466,218  |                  |  | 19.1           | % |                  | 2,444,017  |            |  | 19.6       | %
|General and administrative   expenses |  |                | 2,235,276  |                  |  | 17.3           | % |                  | 1,888,954  |            |  | 15.1       | %
|Lab and technical support   expenses  |  | $              | 177,316    |                  |  | 1.4            | % | $                | 213,837    |            |  | 1.7        | %

The following table sets forth our results of operations for the third quarter
(three months) ended May 31, 2007 and
2006.

|                                      |  | May 31,   2007 |           | % of Net   Sales |  | May 31,   2006 |   | % of Net   Sales |           | $   Change |  | %    Change |  
|------------------------------------- |  | -------------- | --------- | ---------------- |  | -------------- | - | ---------------- | --------- | ---------- |  | ----------- | -
|                                      |  |                |           |                  |  |                |   |                  |           |            |  |             |  
|Net sales                             |  | $              | 4,407,798 |                  |  | 100            | % | $                | 4,320,371 |            |  | 100         | %
|Cost of goods sold                    |  |                | 2,876,012 |                  |  | 65.3           | % |                  | 2,759,360 |            |  | 63.9        | %
|Selling expenses                      |  |                | 887,014   |                  |  | 20.1           | % |                  | 871,828   |            |  | 20.2        | %
|General and administrative   expenses |  |                | 608,104   |                  |  | 13.8           | % |                  | 638,484   |            |  | 14.8        | %
|Lab and technical support   expenses  |  | $              | 46,941    |                  |  | 1.1            | % | $                | 65,411    |            |  | 1.5         | %

Net Sales and Cost of Goods Sold. NTICs net sales originating in
the United States increased during the three and nine months ended May 31, 2007
compared to the same periods in fiscal 2006 primarily as a result of an increase
in the demand for React-NTI products sold to an existing customer in North
America offset by a small decrease in demand for Zerust® products sold to
existing customers.  Cost of goods sold increased as a percentage of net
sales for the three and nine months ended May 31, 2007 compared to the same
period in fiscal 2006 primarily as a result of an increase in petroleum based
raw material prices.

17



Selling Expenses.  NTICs selling expenses increased a
negligible amount for the three and nine months ended May 31, 2007 compared the
same period in fiscal 2006.  Selling expenses as a percentage of net sales
increased by a negligible amount for the nine months ended May 31, 2007 and
decreased by a negligible amount for the three months ended May 31, 2007
compared to same period in fiscal 2006.

General and Administrative Expenses.  NTICs general and
administrative expenses increased for the nine months ended May 31, 2007
compared to same period in fiscal 2006 primarily as a result of increases in (i)
information technology expenses of $34,000, (ii) insurance expense of $18,000,
(iii) legal expenses of $72,000, (iv) audit and tax expense of $61,000, (v)
salary and benefits expenses of $70,000,  and (vi) depreciation expense of
$66,000.  General and Administrative Expenses decreased for the three
months ended May 31, 2007 compared to same period in fiscal 2006 primarily as a
result decreases in travel and related expenses of $32,000.  As a
percentage of net sales, general and administrative expenses changed slightly
for the three and nine months ended May 31, 2007 compared to same period in
fiscal 2006 primarily as a result of the changes in spending as described
above.

The Company includes expenses in General and Administrative that provide benefit
to the various joint ventures and in additional to providing benefit to North
American operations.  Specifically, expenses associated with Information
technology, general insurance, building expenses, audit and tax and directors
fees.

Lab and Technical Support Expenses.  NTICs lab and technical
support expenses decreased slightly for the three and nine months ended May 31,
2007 compared to the same periods in fiscal 2006.  As a percentage of net
sales, lab and technical support expenses decreased by a negligible amount for
the three and nine months ended May 31, 2007 compared to same period in fiscal
2006.

International Corporate Joint Ventures and Holding Companies.  NTIC
continues its business program of establishing corporate joint venture
arrangements in international markets directly or indirectly through holding
companies. NTIC and/or an existing corporate joint venture manufactures and
supplies proprietary ingredients, which make the finished products functional
and enable manufacturing of the finished products to take place in the foreign
countries.  NTICs corporate joint ventures then market the finished
products in their territories, and NTICs corporate joint ventures
profits are shared by the corporate joint venture shareholders in accordance
with their ownership percentages of the joint venture entity.

The Company had equity in income of industrial chemical corporate joint ventures
and holding companies of $2,384,020 and $2,117,612 for the nine months ended May
31, 2007 and 2006, respectively and $754,286 and $802,286 for the three months
ended May 31, 2007 and 2006, respectively.  The increase in equity in
income for the nine months ended May 31, 2007 was due to the increase in revenue
and profitability due to the growth of corporate joint ventures as a whole. The
decrease during the three months ended May 31, 2007 was attributable to equity
losses in one of the joint ventures that is currently in startup
mode.

The Company receives fees for technical and other support to the Companys
corporate joint ventures based on the revenues of the individual corporate joint
ventures.  The Company recognized fee income for such support in the
amounts of $3,508,977 and $3,258,027 for the nine months ended May 31, 2007 and
2006, respectively and $1,162,974 and $1,123,978 for the three months ended May
31, 2007 and 2006, respectively.   The increase in fees for technical
and other support to its corporate joint ventures was due to the increase in
revenues and profitability from the corporate joint ventures as a whole.

The Company sponsors a worldwide corporate joint venture conference
approximately every three to four years in which all of its corporate joint
ventures are invited to participate.  The Company defers a portion of its
technical and other support fees received from its corporate joint ventures in
each accounting period leading up to the next conference, reflecting that the
Company has not fully earned the payments received during that period.  The
next corporate joint venture conference is scheduled to be held in 2008. 
There was $168,000 of deferred income recorded within other accrued liabilities
at May 31, 2007, related to this future conference.  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.

18



The Company incurred direct expenses related to its corporate joint ventures and
the holding companies of $1,161,702 and $3,819,003 for the three and nine months
ended May 31, 2007 compared to $1,204,929 and $3,661,459 for the same periods in
2006.  These expenses include: product and business development,
consulting, travel, 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 the Company
acquired certain rights.  The increases in direct expenses incurred
relating to the Companys corporate joint ventures and holding companies
for the nine months ended May 31, 2007 compared to the same period in fiscal
2006 was attributable to increases of (i) salary, wages and associated benefits
of $226,000, (ii) legal expenses of $90,000 and (iii) travel related expenses of
$85,000 offset by decreases in expenses related to consulting fees of $57,000
and technical service expenses of $140,000. The decrease for the three months
ended May 31, 2007 as compared to May 31, 2006 was minimal.  As a percentage of
net sales, direct expenses incurred relating to NTICs corporate joint
ventures and holding companies increased for the three and nine months ended May
31, 2007 compared to the same respective period in fiscal 2006, primarily as a
result of the changes in spending as described above.

Interest Income.  NTICs interest income decreased to $2,368
for the nine months ended May 31, 2007 compared to $30,108 for the same period
in fiscal 2006 due to a lower average invested cash balances during the most
recent period.

Interest Expense.  NTICs interest expense increased to
$131,503 for the nine months ended May 31, 2007 compared to $55,392 for the same
period in fiscal 2006 due to a higher average outstanding debt and an increase
in interest rates during the most recent period.

Gain on sale of assets.  NTIC recognized a gain on the sale of land,
building and equipment that previously served as NTICs corporate
headquarters of $726,295 during the nine months ended May 31, 2007.  This
was a one-time sale and no additional gain is anticipated to be recognized
relating to the building in the future.

Income Before Income Tax Expense.  Income before income taxes
increased $607,551 to $2,437,227 for the nine months ended May 31, 2007 compared
to $1,829,676 for the same period in fiscal 2006.

Income Tax Expense. Income tax expense for the nine months ended May 31,
2007 and 2006 was calculated based on managements estimate of NTICs
annual effective income tax rate.  NTICs annual effective income tax
rate for the nine months ended May 31, 2007 and 2006 was lower than the
statutory rate primarily due to NTICs equity in income of corporate joint
ventures being recognized based on after-tax earnings of these entities. 
To the extent joint ventures 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.

Liquidity and Capital Resources

Sources of Cash and Working Capital.  As of May 31, 2007,
NTICs working capital was $3,253,245 with $536,246  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.

NTIC has a revolving credit facility 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 May 31, 2007, the interest
rate was 7.60%.  Amounts borrowed under the facility are collateralized by
a lien on substantially all of NTIC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 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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.  Outstanding balances under the
revolving credit facility were $884,000 and $610,000 as of May 31, 2007 and
August 31, 2006, respectively.  The increase in the utilization of the line
of credit is a result of the cash needed to finance the renovations to the new
corporate headquarters.  The line of credit is subject to a borrowing base
calculation and at May 31, 2007, NTIC had $616,000 in available credit under the
line.

19



The Company has put up a $600,000 Stand-by Letter of Credit to potentially fund
NTICs obligations related to the courts in Finland against the
defendant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.

NTIC believes that a combination of its existing cash and cash equivalents,
funds available through existing financing arrangements and forecasted cash
flows, will continue to be adequate to fund its operations, capital
expenditures, debt repayments and stock repurchases for at least the next twelve
months.

Uses of Cash and Cash Flows.  Cash flows used in operations for the
nine months ended May 31, 2007 was $1,235,051, 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 used in operations for the nine months ended May 31, 2006 was
$33,630, which resulted principally from net income, depreciation and
amortization expense, inventories and accrued liabilities being offset by equity
income of corporate joint ventures, trade excluding corporate joint ventures and
prepaid expenses.

Net cash provided by investing activities for the nine months ended May 31, 2007
was $1,269,591 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.  The Company received back its required deposit of $445,469 from
the courts in Finland and replaced it with a stand-by Letter of Credit. 
Net cash used in investing activities for the nine months ended May 31, 2006 was
$525,840, which resulted from additions to property and equipment and industrial
patents, offset by dividends received from corporate joint ventures and cash
received on loans.

Net cash provided by financing activities for the nine months ended May 31, 2007
was $202,589, which resulted primarily from the borrowings on the line of credit
and cash generated from the exercising of stock options, offset by bank
overdrafts.  Net cash provided by financing activities for the nine months
ended May 31, 2006 was $809,695, which resulted primarily from the borrowings on
a term loan and bank overdrafts, offset by the payoff of the note payable and
repayments on the line of credit.

Capital Expenditures and Commitments.  NTIC has no material lease
commitments as of May 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.  NTIC has no
postretirement benefit plan and does not anticipate establishing any
postretirement benefit program.

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 maturity date.  The loan is
secured by a first lien on the real estate and building.

20



NTIC sold the real property and building in which NTIC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 and is reflected in
NTICs fiscal 2007 financial results.

Off-Balance Sheet Arrangements

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.

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.s $1,903,571 mortgage obligation with
National City Bank, Cleveland, Ohio.  The building is fully leased at
present.

Inflation and Seasonality

Inflation in the U.S. and abroad has historically had little effect on
NTIC.  NTICs business has not historically been seasonal.

Market Risk

NTIC is exposed to some market risk stemming from changes in foreign currency
exchange rates, commodity prices and interest rates.

NTIC is exposed to foreign currency exchange rate risk arising from its
investments in its foreign corporate joint ventures and holding companies since
NTICs fees for technical support and other services and dividend
distributions from these foreign entities are paid in foreign currencies. 
NTIC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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
the consolidated statement of income.

Some raw materials used in NTICs products are exposed to commodity price
changes.  The primary commodity price exposures are with a variety of
plastic resins.

NTICs revolving credit facility bears interest at a rate based on LIBOR
and thus may subject NTIC to some market risk on interest rates. $884,000 was
outstanding under this facility as of May 31, 2007.

Related Party Transactions

See note 17 to NTICs consolidated financial statements for disclosure
regarding related party transactions.

21



Critical Accounting Policies

The preparation of NTIC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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.

Investments in Corporate Joint Ventures

NTIC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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s investments in corporate joint ventures were
$12,804,366 and $10,772,102 as of May 31, 2007 and August 31, 2006,
respectively.

Accounts and Notes Receivable

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
slow down in the economy could have a material negative impact on NTIC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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 $13,845 and $10,000 at May 31, 2007 and August 31,
2006, respectively.

Revenue Recognition

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.

Foreign Currency Translation (Accumulated Other Comprehensive
Income)

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.

22



Stock-Based Compensation

In December 2004, FASB published FASB Statement No. 123 (revised 2004),
Share-Based Payment.  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, Accounting for Stock-Based
Compensation, and supersedes APB Opinion No. 25, Accounting for Stock
Issued to Employees, 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.  FAS 123(R) permits entities to use any
option-pricing model that meets the fair value objective in the Statement. 
NTIC implemented FAS 123(R) on September 1, 2006, using the modified prospective
transition method.

Forward-Looking Statements

This Quarterly Report on Form 10-QSB contains not only historical
information, but also forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934.  In addition, NTIC or others on
NTICs behalf may make forward-looking statements from time to time in oral
presentations, including telephone conferences, in press releases or reports, on
NTICs Internet web site or otherwise.  Statements that are not
historical are forward-looking and reflect expectations and assumptions. 
NTIC tries to identify forward-looking statements in this report and elsewhere
by using words such as may, will, should,
expects, anticipates, contemplates,
estimates, believes, plans,
projected, predicts, potential or
continue or the negative of these or similar terms.

Forward-looking statements involve risks and uncertainties.  These
uncertainties include factors that affect all businesses as well as matters
specific to NTIC.  NTIC cautions 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 below under the heading Risk
Factors, as well as others that NTIC may consider immaterial or does not
anticipate at this time.  The risks and uncertainties described below under
the heading Risk Factors 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 future quarterly
reports on Form 10-QSB and current reports on Form 8-K it files with
or furnishes to the Securities and Exchange Commission.

Risk Factors

The following are the most significant factors known to NTIC that could
materially adversely affect its business, financial condition or operating
results.

Over 19% of NTICs consolidated net sales, not including sales made
at the various corporate joint venture, are generated outside of the U.S. and
NTIC intends to continue to expand its international operations. 
NTICs international operations require management attention and financial
resources and expose NTIC to difficulties presented by international economic,
political, legal, accounting and business factors.

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s consolidated net sales, not including the
corporate joint venture sales, outside the United States were 19.3% of its total
consolidated net sales for the nine months ended May 31, 2007 and 20.3% of its
total consolidated net sales for fiscal 2006.  One of NTICs strategic
objectives is to expand its international operations.  NTIC has recently
entered into joint ventures in Australia, the Ukraine, Thailand and the United
Arab Emirates.  The expansion of NTIC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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:

23



| |  | difficulties in managing and staffing international operations and the required
infrastructure costs including legal, tax, accounting, information
technology;                                                                                                                                                                                                      
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                     
| |  | 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;
| |   |                                                                                                                                                                                                                                                                                                                                                                     
| |  | 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;                                                                                                                          
| |   |                                                                                                                                                                                                                                                                                                                                                                     
| |  | pricing pressure that NTIC   or its corporate joint ventures may experience internationally;                                                                                                                                                                                                                                                                        
| |   |                                                                                                                                                                                                                                                                                                                                                                     
| |  | laws and business practices   favoring local companies;                                                                                                                                                                                                                                                                                                             
| |   |                                                                                                                                                                                                                                                                                                                                                                     
| |  | currency exchange rate   fluctuations;                                                                                                                                                                                                                                                                                                                              
| |   |                                                                                                                                                                                                                                                                                                                                                                     
| |  | longer payment cycles and difficulties in enforcing agreements and collecting
receivables through certain foreign legal systems;                                                                                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                                                                                                     
| |  | difficulties in enforcing   or defending intellectual property rights; and                                                                                                                                                                                                                                                                                          
| |   |                                                                                                                                                                                                                                                                                                                                                                     
| |  | multiple, changing and   often inconsistent enforcement of laws and regulations.                                                                                                                                                                                                                                                                                    

NTIC cannot assure you that one or more of the factors listed above will not
harm its business.  Any material decrease in NTICs international
sales could adversely influence NTICs operating results.

NTIC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s liquidity and financial
position.

NTICs liquidity and financial position rely on dividend distributions 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s
joint ventures to declare dividends in amounts typically expected by NTIC could
adversely affect NTICs liquidity and financial position.

Fluctuations in foreign currency exchange rates could result in declines
in our reported consolidated net sales and net earnings.

Because the functional currency of NTIC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s fees for technical support and other services and dividend
distributions from these foreign entities are paid in foreign currencies. 
NTICs reported consolidated net sales and net income are subject to
fluctuations in foreign exchange rates.  NTIC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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s
consolidated statements of income.

24



Approximately 30.8% of NTICs consolidated net sales
for the nine months ended May 31, 2007 and 26.6% of NTICs consolidated net
sales for the fiscal year ended August 31, 2006 were dependent upon a single
customer, the loss of which would adversely affect NTICs financial
condition and consolidated operating results.

One of NTICs North American customers accounted for, in the aggregate,
approximately 30.8% of NTICs consolidated net sales for the nine months
ended May 31, 2007 and 26.6% of NTICs consolidated net sales for the
fiscal year ended August 31, 2006.  If NTIC were to lose this customer or
if this customer were to substantially decrease its purchases of NTICs
products, NTICs financial condition and consolidated operating results
would be adversely affected.

NTICs compliance with U.S. generally accepted accounting principles
and any changes in such principles might adversely affect NTICs operating
results and financial condition.  Any requirement to consolidate
NTICs corporate joint ventures or subject them to compliance with
Sarbanes-Oxley Act of 2002 could adversely affect NTICs operating results
and financial condition.

NTIC adopted accounting policy FASB Interpretation No. 46R (FIN 46R),
Consolidation of Variable Interest Entities, a revision of FIN
46 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 all of its corporate joint ventures or if
NTICs corporate joint ventures otherwise would be required to be
Sarbanes-Oxley compliant, 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s implementation of such new accounting pronouncements.

One of NTICs principal stockholders beneficially owns 25.2% of
NTICs outstanding common stock and is affiliated with NTICs
President and Chief Executive Officer and thus may be able influence matters
requiring stockholder approval and could discourage or otherwise impede a
transaction in which a third party wishes to purchase NTICs outstanding
shares at a premium.

Inter Alia Holding Company beneficially owned approximately 25.2% of NTICs
outstanding common stock.  Inter Alia is an entity owned by, among others,
G. Patrick Lynch, NTICs President and Chief Executive Officer and a
director, and Philip M. Lynch, NTICs former Chairman of the Board and
Chief Executive Officer and current Chairman Emeritus.  Messrs. G.P. Lynch
and P.M. Lynch share voting and dispositive power of shares of NTIC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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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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s common
stock.

25



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s business.

One of NTIC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 any future litigation
over this trademark, 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 affect on NTICs business.

NTIC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s products and its operating results.

NTIC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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s future costs of complying with the various environmental
requirements, as they now exist or may be altered in the future, could adversely
affect its 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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s operating results.

NTIC intends to grow its business through additional joint ventures,
alliances and acquisitions, which could be risky and could harm its
business.

One of NTIC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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:

| |  | diversion of managements   attention;                                                                                                                                                                                                                                                                                              
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                     
| |  | difficulties in assimilating the operations and products of an acquired business
or in realizing projected efficiencies, cost savings and revenue
synergies;                                                                                                                                                                        
| |   |                                                                                                                                                                                                                                                                                                                                     
| |  | potential loss of key employees or customers of the acquired businesses or
adverse effects on existing business relationships with suppliers and
customers;                                                                                                                                                                         
| |   |                                                                                                                                                                                                                                                                                                                                     
| |  | adverse impact on overall profitability if acquired businesses do not achieve
the financial results projected in NTICs valuation models;                                                                                                                                                                                           
| |   |                                                                                                                                                                                                                                                                                                                                     
| |  | reallocation of amounts of capital from other operating initiatives and/or an
increase in NTICs leverage and debt service requirements to pay the
acquisition purchase prices, which could in turn restrict our ability to access
additional capital when needed or to pursue other important elements of
NTICs business strategy;
| |   |                                                                                                                                                                                                                                                                                                                                     
| |  | inaccurate assessment of undisclosed, contingent or other liabilities or
problems and unanticipated costs associated with the acquisition; and                                                                                                                                                                                      
| |   |                                                                                                                                                                                                                                                                                                                                     
| |  | 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s operating results.                                                                                                                             

26



NTIC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s ability to compete effectively for these
opportunities and the availability of capital to complete such
transactions.

NTIC relies on its independent distributors, manufacturers sales
representatives and corporate joint ventures to market and sell its
products.

In addition to its direct sales force, NTIC relies on its independent
distributors, manufacturers sales representatives and corporate joint
ventures to market and sell its products in the United States and
internationally.  NTICs independent distributors, manufacturers
sales representatives and joint venture partners might terminate their
relationship with NTIC, or devote insufficient sales efforts to NTICs
products.  NTIC does not control its independent distributors,
manufacturers sales representatives and joint ventures and they may not be
successful in implementing NTICs marketing plans. NTICs failure to
maintain its existing relationships with its independent distributors,
manufacturers sales representatives and joint ventures, or its failure to
recruit and retain additional skilled independent distributors,
manufacturers sales representatives and joint venture partners could have
an adverse effect on NTICs operations.

NTIC has very limited staffing and will continue to be dependent upon key
employees.

NTICs success is dependent upon the efforts of a small management team and
staff.  NTICs future success will also depend in large part on its
ability to 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 employment.  The loss or interruption of
services of any of NTIC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s business, financial condition and operating results.

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s business and operating results
could be adversely affected.

The efficient operation of NTIC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s business and product
development and could result in decreased sales, causing NTICs business
and operating results to suffer.  In addition, NTIC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s
business and operating results.

NTIC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.

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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s products or gain
access to its trade secrets and know-how.  NTICs competitors may
initiate litigation to challenge the validity of NTICs patents, or they
may use their resources to design comparable products that do not infringe
NTICs patents.  NTIC may incur substantial costs if its competitors
initiate litigation to challenge the validity of is 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.

27



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s trade secrets may otherwise become
known or be independently developed by competitors.

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.

One of NTIC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s competitors new products may beat
NTICs products to market, may be more effective or less expensive than
NTICs products or render NTIC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.

NTIC faces intense competition in 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.

NTICs products are sold in highly competitive markets throughout the
world.  The principal competitive factors in NTICs markets are
pricing, product innovation, quality and reliability, product support and
customer service and reputation.  NTIC competes in all of its products 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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.

Recently enacted and future changes in securities laws and regulations
have increased and are likely to continue to increase our
costs.

Changing laws, regulations and standards relating to corporate governance and
public disclosure, including the Sarbanes-Oxley Act of 2002, Public Company
Accounting Oversight Board (PCAOB) rules and regulations, Securities and
Exchange Commission rules and regulations and American Stock Exchange rules,
create challenges and compliance requirements for publicly held companies,
including NTIC.  NTICs efforts to comply with evolving laws, rules,
regulations and standards have resulted in, and are likely to continue to result
in, increased general and administrative expenses and a diversion of management
time and attention from revenue-generating activities to compliance
activities.  In particular, NTIC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s report on that
assessment will require the commitment of significant financial and managerial
resources.

28



NTIC is exposed to risks relating to evaluations of internal control over
financial reporting required by Section 404 of the Sarbanes-Oxley
Act.

Changing laws, regulations and standards relating to corporate governance and
public disclosure, including the Sarbanes-Oxley Act and related 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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s financial results or
investors confidence in NTIC, and could cause NTIC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.

ITEM 3  CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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s rules and
forms and that such information is accumulated and communicated to NTICs
management, including NTIC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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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s disclosure controls and procedures as of the end of the period
covered in this report.  Based on that evaluation, NTICs Chief
Executive Officer and Chief Financial Officer concluded that NTIC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s Exchange Act reports is recorded, processed, summarized, and
reported within the time periods specified in the SECs rules and forms,
and that material information relating to NTIC and its consolidated subsidiaries
is made known to management, including NTICs Chief Executive Officer and
Chief Financial Officer, particularly during the period when NTICs
periodic reports are being prepared.

29



NTIC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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.

Changes in Internal Control over Financial Reporting

There was no change in NTICs internal control over financial reporting
that occurred during the quarter ended May 31, 2007 that has materially
affected, or is reasonably likely to materially affect NTICs internal
control over financial reporting.

30



PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

A description of NTICs legal proceedings in the first paragraph under Note
19 of NTICs consolidated financial statements included within this report
is incorporated herein by reference.

In April 2007 REACT-NTI, LLC, a company that is 75% owned by NTIC
(REACT), was served with a summons and complaint that was filed by
Shamrock Technologies, Inc. (Shamrock) 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 of
commissions in the approximate amount of $314,500 owed by REACT under a license
agreement between REACT and Shamrock.  The complaint alleges breach of the
license agreement by REACT and seeks damages in an unspecified amount for such
breach as well as damages of approximately $300,000 for the alleged failure of
REACT to purchase from Shamrock certain inventory manufactured for sale to a
customer.  REACT, acknowledges that the commissions are owed, but denies
all of the claims of breach of the license agreement by it.  REACT intends
to appropriately defend itself against the allegations of breach and also
intends to file counter-claim for a breach of the license agreement by Shamrock
and to pursue injunctive relieve against Shamrock to protect its licensed
Technology and Confidential Information disclosed to Shamrock under the license
agreement.

In February 2007, NTIC was served with a summons and complaint that was
originally filed by Evelyna Cantwell and Jack Cantwell, individually and also
doing business as Byrd-Walsh International, LLC in the Federal District Court
for the Southern District of Florida.  The lawsuit alleges breach of
contract, breach of implied contract, promissory estoppels, equitable estoppels,
negligence, wrongful conversion, fraud, constructive fraud, misappropriation,
and violation of the Uniform Trade Secrets Act. The suit seeks total damages in
excess of $45 million.  Based on the allegations in the complaint and our
understanding of relevant facts and circumstances, we believe that the
claims made by the Cantwells and Byrd-Walsh in this
lawsuit are without merit and we intend to vigorously defend against
them.   The amounts claimed in this lawsuit are substantial, however,
and there can be no assurances as to the outcome of this pending action.
Likewise, there can be no assurances regarding the impact that this matter may
have on our financial results or financial condition.

In June 2007, the Internal Revenue Service concluded its audit of the Company
for fiscal 2004 and 2005.  They have assessed taxes and penalties based on
their findings, the company feels that they have adequate defenses to counter
the assessed taxes and have started the appeals process.  They intend to
vigorously defend their position.  It has been determined that any
resulting loss is not likely and not reasonably estimateable at this time,
therefore, no provision has been made in the financial statements.

ITEM 2.   UNREGISTERED SALES OF EQUITY SECURITIES, USE OF
PROCEEDS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES

Recent Sales of Unregistered Equity Securities

During the three months ended May 31, 2007, NTIC did not issue any shares of its
common stock or other equity securities of NTIC that were not registered under
the Securities Act of 1933.

Small Business Issuer Purchases of Equity Securities

During the three months ended May 31, 2007, NTIC did not purchase any shares of
its common stock or other equity securities of NTIC.

On November 13, 2003, the Board of Directors of NTIC authorized Matthew
Wolsfeld, Chief Financial Officer of NTIC, to repurchase on behalf of NTIC, up
to 100,000 shares of NTICs common stock from time to time in accordance
with applicable rules governing issuer stock repurchases.  Since being
authorized, NTIC has repurchased and retired an aggregate of 44,200 shares of
its common stock.

31



ITEM 5.     OTHER INFORMATION

On December 10, 2006, NTIC obtained a demand line of credit of up to the
principal amount of $600,000 from National City Bank to fund NTICs
obligations related to a required deposit of $445,469 with the courts in Finland
in connection with NTICs legal action in Finland.  Refer to Note 20
of NTICs consolidated financial statements included elsewhere in this
report for more information regarding the legal action.  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 on
January 15, 2007 and on the 15th day of each month thereafter and on
demand.

On February 15, 2007, NTIC received a comment letter from the Securities and
Exchange Commission (SEC).  The letter inquires as to the
Report of Independent Registered Public Accounting Firm.   NTIC has
had various correspondences with the SEC regarding the letter and fully intends
to investigate the matter and provide a response to the SEC in accordance with
the time frame requested.

ITEM 6.     EXHIBITS

The following exhibits are being filed or furnished with this quarterly report
on Form 10-QSB:

|Exhibit No. |  | Description                                                                                                                                      
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|            |  |                                                                                                                                                  
|31.1        |  | Certification of Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002                                               
|            |  |                                                                                                                                                  
|31.2        |  | Certification of Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002                                               
|            |  |                                                                                                                                                  
|32.1        |  | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|            |  |                                                                                                                                                  
|32.2        |  | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32



SIGNATURES

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

|                     | NORTHERN   TECHNOLOGIES INTERNATIONAL CORPORATION
|-------------------- | -------------------------------------------------
|                     |                                                  
|                     |                                                  
|                     |                                                  
|                     |                                                  
|Date:  July 12, 2007 |                                                  
|                     |                                                  
|                     |                                                  

33



NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION QUARTERLY REPORT ON FORM
10-QSB EXHIBIT INDEX

|Exhibit   No. |  | Description                                                                                                                                       |  | Method of   Filing  
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------
|              |  |                                                                                                                                                   |  |                     
|31.1          |  | Certification of Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002                                                |  | Filed   herewith    
|              |  |                                                                                                                                                   |  |                     
|31.2          |  | Certification of Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002                                                |  | Filed   herewith    
|              |  |                                                                                                                                                   |  |                     
|32.1          |  | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |  | Furnished   herewith
|              |  |                                                                                                                                                   |  |                     
|32.2          |  | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |  | Furnished   herewith

34