UNITED
STATESSECURITIES
AND EXCHANGE COMMISSIONWashington,
D.C. 20549

FORM
10-QSB

Quarterly
Report Pursuant to Section 13 or 15(d) ofThe
Securities Exchange Act of 1934

|For the Quarterly Period Ended: | Commission File Number
|------------------------------- | ----------------------
|November 30, 2003               | 1-11038               

NORTHERN
TECHNOLOGIES INTERNATIONAL CORPORATION(Exact name of registrant as specified in its
charter)

|Delaware                 | 41-0857886                             
|------------------------ | ---------------------------------------
|(State of Incorporation) | (I.R.S. Employer Identification Number)

6680 N.
Highway 49, Lino Lakes, MN 55014(Address of principal executive offices)

(651)
784-1250(Registrants telephone number)

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

YES   |X|   NO   |_|

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

|                              |                                   
|----------------------------- | ----------------------------------
|Class                         | Outstanding as of January 12, 2004
|Common Stock, $0.02 par value | 3,626,192                         

This
document consists of 19 pages

---

PART I
- FINANCIAL INFORMATION

ITEM 1 -
FINANCIAL STATEMENTS

NORTHERN
TECHNOLOGIES INTERNATIONAL CORPORATION AND SUBSIDIARY

CONSOLIDATED
BALANCE SHEETS (Unaudited)

|                                                                                                                                         | November 30,2003 |  | August 31,2003 |           
|---------------------------------------------------------------------------------------------------------------------------------------- | ---------------- |  | -------------- | ----------
|ASSETS                                                                                                                                   |                  |  |                |           
|CURRENT ASSETS:                                                                                                                          |                  | 
|Cash and cash equivalents                                                                                                                |                  |  | $              | 68,705    
|Investments, available-for-sale                                                                                                          |                  |  |                | 1,140,620 
|Receivables:                                                                                                                             |                  | 
|Trade excluding corporate joint ventures, less allowance for doubtful accounts         of $11,563 and $11,563, respectively              |                  |  |                | 1,492,242 
|Trade corporate joint ventures                                                                                                           |                  |  |                | 304,244   
|Technical and other services, corporate joint ventures                                                                                   |                  |  |                | 796,189   
|Income taxes                                                                                                                             |                  |  |                | 523,442   
|Inventories                                                                                                                              |                  |  |                | 903,811   
|Prepaid expenses                                                                                                                         |                  |  |                | 350,963   
|Deferred income taxes                                                                                                                    |                  |  |                | 12,000    
|                                                                                                                                         |                  |  |                |           
|Total current assets                                                                                                                     |                  |  |                | 5,592,216 
|PROPERTY AND EQUIPMENT, net                                                                                                              |                  |  |                | 505,850   
|OTHER ASSETS:                                                                                                                            |                  | 
|Investments in corporate joint ventures:                                                                                                 |                  | 
|Industrial chemical                                                                                                                      |                  |  |                | 7,065,660 
|Industrial non-chemical                                                                                                                  |                  |  |                | 240,154   
|Deferred income taxes                                                                                                                    |                  |  |                | 343,000   
|Notes receivable and foreign deposit                                                                                                     |                  |  |                | 1,277,847 
|Note from employee                                                                                                                       |                  |  |                | 120,343   
|Industrial patents, net                                                                                                                  |                  |  |                | 334,867   
|Other                                                                                                                                    |                  |  |                | 195,274   
|                                                                                                                                         |                  |  |                |           
|                                                                                                                                         |                  |  |                | 9,577,145 
|                                                                                                                                         |                  |  |                |           
|                                                                                                                                         |                  |  | $              | 15,675,211
|                                                                                                                                         |                  |  |                |           
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                     |                  | 
|CURRENT LIABILITIES:                                                                                                                     |                  | 
|Accounts payable                                                                                                                         |                  |  | $              | 527,176   
|Dividends payable                                                                                                                        |                  |  |                | 181,666   
|Accrued liabilities:                                                                                                                     |                  | 
|Payroll and related benefits                                                                                                             |                  |  |                | 186,839   
|Other                                                                                                                                    |                  |  |                | 536,826   
|                                                                                                                                         |                  |  |                |           
|Total current liabilities                                                                                                                |                  |  |                | 1,432,507 
|DEFERRED GROSS PROFIT                                                                                                                    |                  |  |                | 25,000    
|COMMITMENTS AND CONTINGENCIES                                                                                                            |                  | 
|STOCKHOLDERS EQUITY:                                                                                                                    |                  | 
|Preferred stock, no par value, authorized 10,000 shares, none issued                                                                     |                  | 
|Common stock, $0.02 par value per share; authorized 10,000,000 shares; issued and      outstanding 3,626,192 and 3,626,192, respectively |                  |  |                | 72,524    
|Additional paid-in capital                                                                                                               |                  |  |                | 4,191,964 
|Retained earnings                                                                                                                        |                  |  |                | 9,685,280 
|Accumulated other comprehensive gain (loss)                                                                                              |                  |  |                | 267,936   
|                                                                                                                                         |                  |  |                |           
|Total stockholders equity                                                                                                               |                  |  |                | 14,217,704
|                                                                                                                                         |                  |  |                |           
|                                                                                                                                         |                  |  | $              | 15,675,211
|                                                                                                                                         |                  |  |                |           

See
notes to consolidated financial statements.

2

---

NORTHERN
TECHNOLOGIES INTERNATIONAL CORPORATION AND
SUBSIDIARY

CONSOLIDATED
STATEMENTS OF INCOME (Unaudited)THREE MONTHS ENDED
NOVEMBER 30, 2003 AND 2002

|                                                                                              | November 30,2003 |  | November 30,2002 |          
|--------------------------------------------------------------------------------------------- | ---------------- |  | ---------------- | ---------
|NORTH AMERICAN OPERATIONS:                                                                    |                  |  |                  |          
|Sales                                                                                         |                  |  | $                | 2,538,757
|Cost of goods sold                                                                            |                  |  |                  | 1,313,113
|                                                                                              |                  |  |                  |          
|Gross profit                                                                                  |                  |  |                  | 1,225,644
|Operating expenses:                                                                           |                  | 
|Selling                                                                                       |                  |  |                  | 448,340  
|General and administrative                                                                    |                  |  |                  | 588,648  
|Research, engineering, and technical support                                                  |                  |  |                  | 204,464  
|                                                                                              |                  |  |                  |          
|                                                                                              |                  |  |                  | 1,241,452
|                                                                                              |                  |  |                  |          
|NORTH AMERICAN OPERATING LOSS                                                                 |                  |  |                  | (15,808  
|CORPORATE JOINT VENTURES AND EUROPEAN HOLDING COMPANY:                                        |                  | 
|Equity in income of industrial chemical corporate joint ventures and European holding company |                  |  |                  | 262,513  
|Equity in loss of industrial non-chemical corporate joint ventures                            |                  |  |                  | (3,111   
|Equity in loss of business consulting corporate joint ventures                                |                  |  |                  | (6,250   
|Fees for technical support and other services provided to corporate joint ventures            |                  |  |                  | 755,929  
|Expenses incurred in support of corporate joint ventures                                      |                  |  |                  | (577,559 
|                                                                                              |                  |  |                  |          
|INCOME FROM CORPORATE JOINT VENTURES AND EUROPEAN HOLDING COMPANY                             |                  |  |                  | 431,522  
|INTEREST INCOME                                                                               |                  |  |                  | 8,491    
|                                                                                              |                  |  |                  |          
|INCOME BEFORE INCOME TAX EXPENSE (BENEFIT)                                                    |                  |  |                  | 424,205  
|INCOME TAX EXPENSE (BENEFIT)                                                                  |                  |  |                  | 51,000   
|                                                                                              |                  |  |                  |          
|NET INCOME                                                                                    |                  |  | $                | 373,205  
|                                                                                              |                  |  |                  |          
|NET INCOME PER COMMON SHARE:                                                                  |                  | 
|Basic                                                                                         |                  |  | $                | 0.10     
|                                                                                              |                  |  |                  |          
|Diluted                                                                                       |                  |  | $                | 0.10     
|                                                                                              |                  |  |                  |          
|WEIGHTED AVERAGE COMMON SHARES ASSUMED OUTSTANDING:                                           |                  | 
|Basic                                                                                         |                  |  |                  | 3,626,192
|                                                                                              |                  |  |                  |          
|Diluted                                                                                       |                  |  |                  | 3,640,604
|                                                                                              |                  |  |                  |          

See
notes to consolidated financial statements.

3

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NORTHERN
TECHNOLOGIES INTERNATIONAL CORPORATION AND SUBSIDIARY

CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited)THREE MONTHS ENDED
NOVEMBER 30, 2003 AND 2002

|                                                                                            | 2003 |  | 2002 |         
|------------------------------------------------------------------------------------------- | ---- |  | ---- | --------
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                       |      |  |      |         
|Net income                                                                                  |      |  | $    | 373,205 
|Adjustments to reconcile net income to net cash (used in) provided by operating activities: |      | 
|Depreciation expense                                                                        |      |  |      | 40,146  
|Amortization expense                                                                        |      |  |      | 1,886   
|Equity in (income) loss from corporate joint ventures:                                      |      | 
|Industrial chemical                                                                         |      |  |      | (262,513
|Industrial non-chemical                                                                     |      |  |      | 3,111   
|Business consulting                                                                         |      |  |      | 6,250   
|Dividends received from corporate joint ventures                                            |      |  |      |        
|Gain on sale of equipment                                                                   |      |  |      | (5,300  
|Change in current assets and liabilities:                                                   |      | 
|Receivables:                                                                                |      | 
|Trade excluding corporate joint ventures                                                    |      |  |      | (214,069
|Trade corporate joint ventures                                                              |      |  |      | (11,306 
|Technical and other services receivables, corporate joint ventures                          |      |  |      | (30,510 
|Income taxes                                                                                |      |  |      | 7,646   
|Inventories                                                                                 |      |  |      | 67,688  
|Prepaid expenses and other                                                                  |      |  |      | (225,421
|Notes receivable and foreign deposits                                                       |      |  |      | (100,000
|Note from employee                                                                          |      |  |      | 5,700   
|Accounts payable                                                                            |      |  |      | (11,344 
|Accrued liabilities                                                                         |      |  |      | 118,184 
|                                                                                            |      |  |      |         
|Total adjustments                                                                           |      |  |      | (609,852
|                                                                                            |      |  |      |         
|Net cash used in operating activities                                                       |      |  |      | (236,647
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                       |      | 
|Sale of investments available-for-sale                                                      |      |  |      | 503,319 
|Proceeds from the sale of equipment                                                         |      |  |      | 5,300   
|Investment in joint ventures:                                                               |      | 
|Industrial chemical                                                                         |      |  |      | (445,000
|Industrial non-chemical                                                                     |      |  |      |        
|Business consulting                                                                         |      |  |      | (6,250  
|Additions to property                                                                       |      |  |      | (19,258 
|Partial return of original investment in European holding company                           |      |  |      |        
|Decrease in other assets                                                                    |      |  |      | 3,502   
|Additions to industrial patents                                                             |      |  |      | (19,587 
|                                                                                            |      |  |      |         
|Net cash provided by investing activities                                                   |      |  |      | 22,026  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                       |      | 
|Dividend paid to shareholders                                                               |      |  |      |        
|Repurchase of common stock                                                                  |      |  |      |        
|                                                                                            |      |  |      |         
|Net cash used in financing activities                                                       |      |  |      |        
|                                                                                            |      |  |      |         
|NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                        |      |  |      | (214,621
|CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                            |      |  |      | 283,326 
|                                                                                            |      |  |      |         
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                  |      |  | $    | 68,705  
|                                                                                            |      |  |      |         

See
notes to consolidated financial statements.

4

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NORTHERN
TECHNOLOGIES INTERNATIONAL CORPORATION AND SUBSIDIARY

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, to present fairly the consolidated financial position of Northern
Technologies International Corporation and wholly owned subsidiary (the Company)
as of November 30, 2003 and the results of their operations for the three months
ended November 30, 2003 and 2002, and their cash flows for the three months
ended November 30, 2003 and 2002, 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 as of and for the year ended
August 31, 2003 contained in the Companys filing on Form 10-KSB
dated December 11, 2003 and with Managements Discussion and Analysis of
Financial Condition and Results of Operations appearing on pages 7 through 12 of
this quarterly report.

Certain
fiscal year 2003 amounts have been reclassified to conform to fiscal year 2004
presentations. These reclassifications had no effect on stockholders
equity, sales, or net income as previously reported.

2.  STOCK-BASED
COMPENSATION

The
Company accounts for its stock option plan using the intrinsic value method and
has adopted the disclosure only provision of SFAS No. 123, as
amended in 2002 by SFAS No. 148, Accounting for Stock-Based Compensation
 Transition and Disclosure. No compensation cost has been
recognized for the stock options granted under the stock incentive plan. Had
compensation cost been determined based upon fair value at the grant date for
the awards under these plans, the Companys net earnings and earnings per
share would have been as follows:

|                                                    | November 30,2003 |  | November 30,2002 |        
|--------------------------------------------------- | ---------------- |  | ---------------- | -------
|Net Income:                                         |                  |  |                  |        
|As reported                                         |                  |  | $                | 373,205
|Stock-based compensation, net of related tax effect |                  |  |                  | (9,598 
|Pro forma                                           |                  |  |                  | 363,607
|                                                   
|Net Income per common share  basic:                |                  | 
|As reported                                         |                  |  | $                | 0.10   
|Stock-based compensation, net of related tax effect |                  |  |                  | 0.00   
|Pro forma                                           |                  |  |                  | 0.10   
|                                                   
|Net Income per common share  assuming dilution:    |                  | 
|As reported                                         |                  |  | $                | 0.10   
|Stock-based compensation, net of related tax effect |                  |  |                  | 0.00   
|Pro forma                                           |                  |  |                  | 0.10   

5

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3.
INVENTORIES

Inventories
consist of the following:

|                     | November 30,2003 |  | August 31,2003 |        
|-------------------- | ---------------- |  | -------------- | -------
|Production materials |                  |  | $              | 415,151
|Finished goods       |                  |  |                | 488,660
|                     |                  |  |                |        
|                     |                  |  | $              | 903,811
|                     |                  |  |                |        

4.  PROPERTY
AND EQUIPMENT

Property
and equipment consist of the following:

|                              | November 30,2003 |  | August 31,2003 |          
|----------------------------- | ---------------- |  | -------------- | ---------
|Land                          |                  |  | $              | 29,097   
|Buildings and improvements    |                  |  |                | 639,531  
|Machinery and equipment       |                  |  |                | 850,601  
|                              |                  |  |                |          
|                              |                  |  |                | 1,519,229
|Less accumulated depreciation |                  |  |                | 1,013,379
|                              |                  |  |                |          
|                              |                  |  | $              | 505,850  
|                              |                  |  |                |          

5.  NOTES
RECEIVABLE AND FOREIGN DEPOSITS

Notes
receivable and foreign deposits consist of the following:

|                                                                           | November 30,2003 |  | August 31,2003 |          
|-------------------------------------------------------------------------- | ---------------- |  | -------------- | ---------
|Notes receivable from North American operations                            |                  |  | $              | 600,000  
|Notes receivable from industrial chemical corporate joint venture partners |                  |  |                | 232,378  
|Foreign deposits                                                           |                  |  |                | 445,469  
|                                                                           |                  |  |                |          
|                                                                           |                  |  | $              | 1,277,847
|                                                                           |                  |  |                |          

6.  INVESTMENTS
IN CORPORATE JOINT VENTURES

In
September 2003 the Company invested an additional $440,000 in React-NTI LLC, in
connection with React-NTI LLCs acquisition of React Inc. React-NTI LLC is
an industrial chemical joint venture formed in fiscal 2003 in which the Company
now has a 75% ownership interest. Under the terms of the agreement related to
React-NTI LLC, there are certain matters requiring unanimous approval of the
Company and the minority shareholder. These rights represent substantive
participating rights of the minority shareholder as defined in Emerging Issues
Task Force (EITF) No. 96-16, Investors Accounting for an Investee When
the Investor has a Majority of the Voting Interest but the Minority
Shareholder or Shareholders Have Certain Approval or Veto Rights.
Accordingly, the Company does not control React-NTI LLC and will account for its
investment under the equity method rather than by consolidation. The Company
believes that React-NTI LLC has sufficient

6

---

equity to finance its activities
without additional subordinated financial support from other parties, and
accordingly does not expect to make additional capital contributions or provide
financing to React-NTI, LLC. Any future changes to the LLC agreement or the
financial arrangements surrounding this investment could result in consolidation
of React-NTI LLC in the future. In connection with its acquisition of React,
Inc., React-NTI LLC has allocated a portion of the purchase price to intangible
assets. This allocation is based on a preliminary estimate of the value of
identifiable intangible assets and is subject to adjustment based upon further
analysis and appraisal which could impact the equity in income or loss recorded
by the Company related to amortization of intangible assets deemed to have
finite lives.

The
Company invested $6,250 in an existing business consulting corporate joint
venture in the United States. The Company has obtained a 25% ownership interest
in this company to utilize various government and military associations. As the
company has no assets its investment value is $0.

7.
STOCKHOLDERS EQUITY

During
the three months ended November 30, 2003, the Company did not purchase or retire
any shares of common stock.

8.
SUPPLEMENTAL CASH FLOW INFORMATION

During
the three months ended November 30, 2003, the Company declared a cash dividend
of $0.05 per share that was paid on December 17, 2003 to shareholders of record
on December 3, 2003.

9.  TOTAL
COMPREHENSIVE INCOME

The
Companys total comprehensive income was as follows:

|                                                                              | Three Months EndedNovember 30 | 
|----------------------------------------------------------------------------- | ----------------------------- | 
|
|Net income                                                                    |                               | 
|Other comprehensive income (loss)    Foreign currency translation adjustment |                               | 
|                                                                              |                               | 
|Total comprehensive income                                                    |                               | 
|                                                                              |                               | 

10.  NET INCOME
PER SHARE

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

7

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ITEM 2
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

Critical
Accounting Policies

Sales
Originating in North America  Northern Technologies International
Corporation and Subsidiaries (the Company) considers sales originating in North
America to be all sales shipped/invoiced from the Companys facilities
located in Minnesota and Ohio. There are no sales from the Corporate Joint
Ventures included in the amount as the Companys investments in Corporate
Joint Ventures are accounted for using the equity method.

Cash
Equivalents  The Company considers investments with an original
maturity of three months or less to be cash equivalents.

Investments
Available for Sale  The Company accounts for securities available for
sale in accordance with Statement of Financial Accounting Standards No. 115,
Accounting for Certain Investments in Debt and Equity Securities (SFAS
No. 115). SFAS No. 115 requires that available-for-sale securities be carried at
fair value, with unrealized gains and losses reported as other comprehensive
income within stockholders equity, net of applicable income taxes.
Realized gains and losses and declines in value deemed to be
other-than-temporary on available-for-sale securities are included in other
income. Fair value of the securities is based upon the quoted market price on
the last business day of the quarter or fiscal year. The cost basis for realized
gains and losses on available-for-sale securities is determined on a specific
identification basis. At November 30, 2003, the Companys
available-for-sale securities consisted of commercial paper, corporate debt,
certificates of deposit and discount notes with a cost basis and accrued
interest income totaling a fair value of $1,140,620.

Inventories
 Inventories are recorded at the lower of cost (first-in, first-out basis)
or market.

Property
and Depreciation  Property and equipment are stated at cost.
Depreciation is computed using the straight-line method based on the estimated
service lives of the various assets as follows:

|Buildings and improvements | 5-20 years
|-------------------------- | ----------
|Machinery and equipment    | 3-10 years

Investments
in Corporate Joint Ventures  Investments in Corporate Joint Ventures
are accounted for using the equity method. Intercompany profits on inventories
held by the Corporate Joint Ventures that were purchased from the Company have
been eliminated based on the Companys ownership percentage in each
corporate joint venture.

Recoverability
of Long-Lived Assets  The Company reviews its long-lived assets
whenever events or changes in circumstances indicate the carrying amount of the
assets may not be recoverable. The Company determines potential impairment by
comparing the carrying value of the assets with expected net cash flows expected
to be provided by operating activities of the business or related products.
Should the sum of the expected undiscounted future net cash flows be less than
the carrying value, the Company would determine whether an impairment loss
should be recognized. An impairment loss would be measured by comparing the
amount by which the carrying value exceeds the fair value of the asset. As of
November 30, 2003, the Company did not consider any of its assets impaired.

Income
Taxes  The Company utilizes the liability method of accounting for
income taxes as set forth in Statement of Financial Accounting Standards (SFAS)
No. 109, Accounting for Income Taxes. SFAS No. 109 requires an asset and
liability approach to financial accounting and reporting for income taxes.
Deferred income tax assets and liabilities are computed annually for differences
between the financial statement and tax basis of assets and liabilities that
will result in taxable or deductible amounts in the future,

8

---

based on enacted tax
laws and rates applicable to the periods in which the differences are expected
to affect taxable income. Valuation allowances are established when necessary to
reduce deferred tax assets to the amount expected to be realized. Income tax
expense is the tax payable or refundable for the period plus or minus the change
during the period in deferred tax assets and liabilities.

Foreign
Currency Translation (Accumulated Other Comprehensive Income (Loss)) 
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 (loss).

Revenue
Recognition  In recognizing revenue, the Company applies the
provisions of the Securities and Exchange Commission Staff Accounting Bulletin
101, Revenue Recognition. The Company recognizes revenue from the sale of
its products when persuasive evidence of an arrangement exists, the product has
been delivered, the fee is fixed and determinable and collection of the
resulting receivable is reasonably assured. A portion of the gross profit on
products shipped to the Companys Corporate Joint Ventures is deferred
until such products are sold by the Corporate Joint Ventures.

Shipping
and Handling  The Company records all amounts billed to customers in a
sales transaction related to shipping and handling as sales. The Company records
costs related to shipping and handling in cost of goods sold.

Use
of Estimates  The preparation of the financial statements in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.

RESULTS OF
OPERATIONS

General
 The Company 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.

NORTH AMERICAN
OPERATIONS

Sales Net sales increased by $557,686 or 28.2% during the first quarter of
2004 from those of the first quarter of 2003. First quarter of 2004 North
America sales have benefited due an improving North America economy, expanding
export environment for existing North America customers, and investing in both
strategic and tactical sales account development strategies.

Cost
of Sales  Cost of goods sold as a percentage of net sales were 51.7%
and 46.3% for the first quarter of 2004 and 2003, respectively. Variations are
due primarily to the mix of product sales slightly offset by increases in the
price of resin.

Operating
Expenses  As a percentage of net sales, total operating expenses were
48.9% in the first quarter of fiscal 2004 and 57.3% in the first quarter of
fiscal 2003.

Operating
expense classification percentages of net sales were as follows:

9

---

|                                             | Three Months Ended | 
|-------------------------------------------- | ------------------ | 
|
|Selling expense                              |                    | 
|General and administrative                   |                    | 
|Research, engineering, and technical support |                    | 

Selling
Expenses. The Companys selling expenses increased by $25,600 or 6.1%
to $448,340 during the first quarter of fiscal 2004 as compared to $422,740
during the same period in fiscal 2003. The increase in selling expenses during
the first quarter of fiscal 2004 was primarily related to the hiring of
additional sales people and the associated commission and travel related
expenses. As a percentage of sales, selling expense decreased to 17.7% in the
first quarter of fiscal 2004 from 21.3% in the first quarter of fiscal 2003.

General
and Administrative Expenses. The Companys general and administrative
expenses increased by $87,308 or 17.4% to $588,648 during the first quarter of
fiscal 2004 as compared to $501,340 during the same period in fiscal 2003. The
increase is attributable to increases in accrued management bonus, travel
expense and audit fees offset by decreases in legal and court cost and directors
expenses. As a percentage of sales, general and administrative expenses
decreased to 23.2% in the first quarter of fiscal 2004 from 25.3% in the first
quarter of fiscal 2003.

Research,
Engineering, and Technical Support Expenses. The Companys research,
engineering, and technical support expenses decreased by $6,246 or 3.0% to
$204,464 during the first quarter of fiscal 2004 as compared to $210,710 during
the same period in fiscal 2003. The decrease in research, engineering, and
technical support expenses during the first quarter of fiscal 2004 was primarily
related to decreases in technical consulting expense. As a percentage of sales,
research, engineering, and technical support expenses decreased to 8.1% in the
first quarter of fiscal 2004 from 10.6% in the first quarter of fiscal 2003.

CORPORATE JOINT
VENTURES AND EUROPEAN HOLDING COMPANY

Corporate
Joint Ventures and European Holding Company The Company receives fees
for technical and other support to the Corporate Joint Ventures based on the
revenues of the individual Corporate Joint Ventures. The Company recognized fee
income for such support in the amounts of $755,929 and $615,007 for the first
quarter of fiscal years 2004 and 2003, respectively. The increase in fees for
technical and other support to Corporate Joint Ventures was due to the increase
in revenues from the Corporate Joint Ventures as a whole.

The
Company sponsors a worldwide Corporate Joint Venture conference every three
years in which all of its Corporate Joint Ventures are invited to participate.
The Company defers a portion of its royalty income received from its Corporate
Joint Ventures in each period leading up to the next conference, reflecting that
the Company has not fully earned the royalty payments received during that
period. The next Joint Venture conference is scheduled to be held late in 2004
and there is $255,450 of deferred royalty income recorded within other accrued
liabilities at November 30, 2003, related to this conference. The deferred
income is expected to be recognized in income in 2004 when the conference is
held. The costs associated with these joint venture conferences are recognized
as incurred, generally in the period in which the conference is held.

The
Company incurred direct expenses related to Corporate Joint Ventures and the
European holding company of $577,559 and $551,065 in first quarter of fiscal
years 2004 and 2003, respectively. These expenses include: consulting, travel,
technical and marketing services to existing joint ventures, legal fees

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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.

INCOME TAX

Income
Taxes  Income tax expense (benefit) for the three months ended
November 30, 2003 and 2002 was calculated based on managements estimate of
the Companys annual effective income tax rate. The Companys annual
effective income tax rate for fiscal 2004 is lower than the statutory rate
primarily due to the Company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 the Company, it
is not expected to result in any material additional income tax liability after
the application of foreign tax credits.

LIQUIDITY AND
CAPITAL RESOURCES

At
November 30, 2003, the Companys working capital was $4,159,709, including
$68,705 in cash and cash equivalents and $1,140,620 in investments available for
sale, compared to a working capital of $4,760,183, including $283,326 in cash
and cash equivalents and $1,643,939 in investments available for sale at August
31, 2003.

Cash
flows used in operations for the three months ended November 30, 2003 and 2002
were $236,647 and $829,316, respectively. The net cash used in operations for
the three months ended November 30, 2003 resulted principally from net income
being more than offset by the noncash equity income of industrial chemical joint
ventures, and uses of cash for increases in operating assets and reductions of
operating liabilities. During the three months ended November 2002, the Company
made a $445,469 deposit relating to a legal case involving potential trademark
infringement against a competitor in Europe. The Company expects that the amount
will be fully recoverable at the conclusion of the prosecution of the
competitor. The net cash provided by operations for the three months ended
November 30, 2002 resulted principally from net income being more than offset by
the noncash equity income of industrial chemical joint ventures, and uses of
cash for increases in operating assets and reductions of operating liabilities.

Net
cash provided by investing activities for the three months ended November 30,
2003 was $22,026, which resulted from the sales of investments offset by
investments in corporate joint ventures and additions to property and equipment
and industrial patents. Net cash provided by investing activities for the three
months ended November 30, 2002 was $869,423, which resulted from the sale of
investments available-for-sale and from the partial return of the Companys
original investment in European holding company partially offset by investments
in international joint ventures, additions to patents and additions to property
and equipment.

There
was no cash used in financing activities for the three months ended November 30,
2003. Net cash used in financing activities for the three months ended November
30, 2002 was $26,660, which resulted from the repurchase of common stock.

The
Company expects to meet future liquidity requirements by utilizing its existing
cash and cash equivalents and investments available for sale combined with cash
flows from future operations and distributions of earnings and technical
assistance fees to the Company from the corporate joint venture investments.

The
Company has no long-term debt and no material capital lease commitments as of
November 30, 2003; however, the Companys subsidiary has entered into a
15-year lease agreement for 16,994 square feet of

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office, manufacturing,
laboratory, and warehouse space requiring monthly payments of $17,072, which are
adjusted annually according to the annual consumer price index through November
2014.

The
Company has no postretirement benefit plan and does not anticipate establishing
any postretirement benefit program.

Inflation in
the U.S. historically has had little effect on the Company.

Recently
Issued Accounting Pronouncements

In  January
2003, the Financial Accounting Standards Board (FASB) issued FASB  Interpretation
No. 46, Consolidation of Variable Interest Entities (FIN 46). FIN  46 addresses
consolidation by business enterprises where equity investors do not  bear the residual
economic risks and rewards. These entities have been  commonly referred to as special
purpose entities. FIN 46 is  effective for the Company for any interests in
variable interest entities for  the second quarter of fiscal 2004 ending February 29,
2004, while the remaining  provisions are applicable for the first quarter of fiscal 2005
ending November  30, 2004. The Company is in the process of evaluating the impact
this  will have on the consolidated financial statements of the Company.

Disclosure
of the Control Environment

As of November
30, 2003, the end of the period  covered by this report, the Company carried out an
evaluation under the  supervision of, and with participation from, its Chairman of the
Board and  Co-Chief Executive Officer, President and Co-Chief Executive Officer, and
Chief  Financial Officer, of the Companys disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of  1934 (the
Exchange Act). Based upon that evaluation the Company, as well as its  Chairman of the
Board and Co-Chief Executive Officer, President and Co-Chief  Executive Officer, and
Chief Financial Officer, concluded that the  Companys disclosure controls and
procedures need improvement to be  considered effective. We continue to evaluate methods
to improve our internal  controls and procedures and he Company intends to evaluate and
fix all  weaknesses in internal controls as required by the rules promulgated under the
Exchange Act and the Sarbanes-Oxley Act of 2002. We do not believe that these  disclosure
and internal control deficiencies resulted in material misstatements  in our consolidated
financial statements contained in this Form 10-QSB.

PART II
 OTHER INFORMATION

|ITEM 1 - LEGAL PROCEEDINGS:                                   | None
|------------------------------------------------------------- | ----
|ITEM 2 - CHANGES IN SECURITIES:                               | None
|ITEM 3 - DEFAULTS UPON SENIOR SECURITIES:                     | None
|ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS: | None
|ITEM 5 - OTHER INFORMATION:                                   | None
|ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K                    

(a) Exhibits

None;  however
the written statements of our applicable officers, as required pursuant  to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002,
accompanied the filing of this report as  correspondence to the Securities and Exchange
Commission.

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(b) Reports on
Form 8-K

The  Company
did not file any Current Reports on Form 8-K during the three months  ended November 30,
2003.

SIGNATURE
PAGE

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: January 13, 2003 |                                                                                                                                   
|                       | Matthew C. Wolsfeld, CPA                                                                                                          
|                       | Chief Financial Officer                                                                                                           
|                       | (Mr. Wolsfeld is the Principal Financial and Accounting Officer and has been duly authorized to sign on behalf of the registrant.)

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