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 heading "Forward-Looking Statements" 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.

General Overview

Northern Technologies International Corporation develops and markets proprietary environmentally beneficial products and technical services either directly or via a network of joint ventures and independent distributors in over 50 countries. NTIC's primary business is corrosion prevention. However, NTIC has three emerging businesses that have all generated revenue or are expected to generate revenues in the near future (1) corrosion prevention technology used in the oil and gas industry, which NTIC sells both directly and through joint ventures; (2) a product line of compounds and finished products based on a portfolio of proprietary bio-plastic technologies marketed under the Natur-Tec™ brand; and (3) technology and equipment that convert plastic waste into diesel, gasoline and heavy fractions, which is exclusively licensed from Zbigniew Tokarz, the inventor of the technology and sold through NTIC's joint venture Polymer Energy, LLC in North America and Asia.

NTIC participates, either directly or indirectly through holding companies, in 29 corporate joint venture arrangements in North America, South America, Europe, Asia and the Middle East. Each of these joint ventures generally manufactures and markets finished products in the geographic territory to which it is assigned. 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 NTIC's Natur-Tec™ products, the Polymer Energy technology and equipment that converts plastic waste into diesel, gasoline, and heavy fractions, and its corrosion prevention technology used in the oil and gas industry. NTIC categorizes its joint ventures into two principal areas:
industrial chemical and non-industrial chemical. The profits of NTIC's corporate joint ventures are shared by the respective corporate joint venture owners in accordance with their respective ownership percentages. NTIC typically owns 50% of its joint venture entities and thus does not control the decisions of these entities regarding whether to pay dividends or how much to pay in dividends in any given year.

NTIC has been selling its proprietary ZERUST® and EXCOR® rust and corrosion inhibiting products and services to the automotive, electronics, electrical, mechanical, military and retail consumer markets for over 30 years. NTIC also offers worldwide on-site technical consulting for rust and corrosion prevention issues. In North America, NTIC markets its technical services and ZERUST® products principally to industrial users by a direct sales force and a network of independent distributors. NTIC's technical service consultants work directly with the end users of NTIC's products to analyze their specific needs and develop systems to meet their technical requirements.

In January 2009, NTIC announced the signing of a multi-year contract between NTIC's Brazilian joint venture (Zerust Prevencao de Corrosao S.A.) and Petroleo Brasileiro S.A. (Petrobras) to install and service proprietary corrosion protection technologies on the roofs of an initial set of above ground oil storage tanks at the Petrobras REDUC refinery in Rio de Janeiro, Brazil. At the end of March 2009, NTIC announced that it has signed multiple research and development contracts with Petrobras' research and development group at the Leopoldo Américo Miguez de Mello Research & Development Center (CENPES) pursuant to which the parties will undertake a 20-month Petrobras funded effort to explore, understand and resolve bottom plate corrosion issues in aboveground storage tanks. A second 12-month Petrobras sponsored project also has started aimed at field trials of certain pipeline protection technologies. These initiatives are designed to help mitigate corrosion for critical oil and gas industry infrastructure. The projects are directly between NTIC and Petrobras and will be supported primarily by NTIC's R&D facilities in Beachwood, Ohio. Any new intellectual property generated will be jointly owned by NTIC and Petrobras with NTIC having access to commercialization rights. In addition, NTIC is pursuing opportunities to market NTIC's technology to other potential customers in the oil and gas industry across several countries through its joint venture partners and other strategic

partners. NTIC believes the sale of its new ZERUST® products to customers in the oil and gas industry will involve a long sales cycle, likely including a one- to two-year trial period with each customer and a slow integration process thereafter.

In addition to ZERUST® products and services, NTIC develops and in the beginning of fiscal 2008 launched a portfolio of bio-based and/ or biodegradable (compostable) polymer resin compounds and finished products under the Natur-Tec™ brand. These products are intended to reduce NTIC's customers' carbon footprint and provide environmentally sound disposal options. In recent years, a combination of market drivers, such as higher petroleum prices, a desire to reduce dependence on foreign oil, increased environmental awareness at the consumer level and regulations banning the use of traditional, petroleum-based plastics, have led to interest in sustainable, renewable resource-based and compostable alternatives to traditional plastics. Natur-Tec™ bio-based and/ or biodegradable plastics are manufactured using NTIC's patented and/or proprietary technologies and are intended to replace conventional petroleum-based plastics. The Natur-Tec™ bioplastics portfolio includes flexible film, foam, rigid injection molded materials and engineered plastics. Natur-Tec™ biodegradable and compostable finished products include shopping and grocery bags, lawn and leaf bags, can liners, pet waste collection bags, cutlery, packaging foam and coated paper products and are engineered to be fully biodegradable in a composting environment. Unlike competing plastic products claiming to be "degradable" or "oxo-degradable" that only break down into smaller plastic fragments, Natur-Tec™ products are designed to completely biodegrade within 180 days in accordance with the ASTM D6400 standard for compostable plastics and are certified 100 percent biodegradable and compostable by the Biodegradable Products Institute.

NTIC's Polymer Energy LLC joint venture markets and sells a system that uses catalytic pyrolysis to efficiently convert plastic waste (primarily polyolefins) into hydrocarbons (primarily a mix of diesel, gasoline, and heavy fractions,). Each unit can process up to ten tons of plastic waste per day, and the modular design allows for easily scalable capacity. The Polymer Energy™ process can handle plastic that is contaminated with other types of waste such as metals, glass, dirt and water and the system can tolerate up to 25% of other waste in the input waste stream. The output crude oil mix is high-grade and can be further processed in a refinery or used as an input for co-generation of electricity. NTIC, through Polymer Energy LLC, a joint venture in which NTIC has a 62.5% interest has an exclusive license to market the technology in countries in Asia and North America as per the current JV agreement.

Financial Overview

Like many companies, NTIC's operating results have been adversely affected by worldwide economic conditions, particularly adverse conditions affecting the worldwide automobile industry. One of the primary markets for NTIC's rust and corrosion inhibiting products has been the automotive industry, which is not expected to improve in the short to medium term, especially in light of the current worldwide economic conditions affecting that industry. In particular, the U.S. auto industry furloughs in the beginning of calendar 2009 adversely affected sales of NTIC's ZERUST® products during NTIC's second and third fiscal quarters 2009.

In response to such conditions, NTIC implemented in December 2008 and January 2009 several cost reduction measures. NTIC reduced the base salaries of its executive and other officers by approximately 15% on average, by 10% for all other employees and suspended NTIC's matching of 401(k) contributions. NTIC also implemented a hiring freeze and laid off 16% of its work force. Furthermore, significant cost concessions were requested and obtained from all of NTIC's major vendors and service providers. NTIC enacted other expense control measures across all of its departments with the objective to conserve cash and reduce expenses while protecting the essential sales and marketing efforts of each business. For the three months ending May 31, 2009, NTIC has realized an a 28.5% and 19.4% reduction in its total overall operating expense and expenses incurred in support of corporate joint ventures and new technologies as a result of these cost cutting measures compared to the three months ended November 30, 2008 and February 28, 2009, respectively. NTIC may consider additional cost reduction measures during fourth quarter of fiscal 2009 or first quarter of fiscal 2010, if its net sales do not improve in the near future.

NTIC's North American consolidated net sales decreased 48.8% and 29.8% during the three and nine months ended May 31, 2009, respectively, compared to the three and nine months ended May 31, 2008 primarily as a result of decreased demand for NTIC's ZERUST® products and the elimination of the React Inc. sales. Although sales of NTIC's Natur-Tec™ products offset to some extent decreased demand for NTIC's ZERUST® products during the nine

month period comparison, sales of NTIC's Natur-Tec™ products decreased significantly during the three month period comparisons. During the three and nine months ended May 31, 2009, over 90% of NTIC's consolidated net sales were derived from sales of ZERUST® and EXCOR® rust and corrosion inhibiting packaging products and services. Net sales of ZERUST® products decreased 47.9% and 31.7% during the three and nine months ended May 31, 2009, respectively, compared to the three and nine months ended May 31, 2008.

During the three and nine months ended May 31, 2009, 0.8% and 7.5% of NTIC's North American consolidated net sales, respectively, were derived from the sales of Natur-Tec™ products compared to 3.1% and 2.2% during the three and nine months ended May 31, 2008, respectively. Net sales of Nature-Tec™ products decreased 86.3% during the three months ended May 31, 2009 and increased 143.4% during the nine months ended May 31, 2009 compared to the three and nine months ended May 31, 2008. NTIC believes that its Natur-Tec™ business during second and third fiscal quarters 2009 were adversely affected by the U.S. economic recession, which NTIC believes adversely affected the ability of its principal Natur-Tec™ distributor to purchase and distribute Natur-Tec™ products from NTIC during that time. NTIC believes that its Natur-Tec™ sales will increase during its fourth fiscal quarter 2009 as compared to the previous two fiscal quarters primarily as a result of this significant customer.

As previously disclosed, almost all historical sales by React-NTI included in NTIC's consolidated statement of operations were derived from sales by React Inc., a 100% owned subsidiary of React-NTI, of proprietary ink additives to one customer. During fourth quarter of fiscal 2007, this customer notified React Inc. that no future orders would be placed after current orders were received. As a result, NTIC anticipates no additional sales of proprietary ink additives. Concurrent with the decline of its ink additive sales, React-NTI continued to develop and pursue additional sales through a patented sintered metal mold release agent sold under the brand name SERAVAT™ and renewable resource-based personal care chemical additive under the brand name Farona™. In fiscal 2009, NTIC implemented several cost control and cash preservation measures. These measures included elimination of further product and market development related to these products. As previously disclosed, during the second quarter of fiscal 2009, management determined that the fair value of the React-NTI reporting unit was less than the carrying value. As a result, a loss on impairment of goodwill and long-lived assets of $554,000 was recorded to appropriately reflect the fair value of such assets. In addition, during the nine months ended May 31, 2009, NTIC derecognized previously recorded trade payables of $320,000 as a result of negotiations between NTIC and its vendor. This amount is recorded in general and administrative expenses in NTIC's consolidated statement of operations. At May 31, 2009, the remaining net book value of the assets and liabilities of React-NTI and its subsidiaries approximates $0.

Cost of goods sold as a percentage of net sales decreased to 59.5% in the three months ended May 31, 2009 as compared to 63.0% for the three months ended May 31, 2008 primarily as a result of the decrease in Natur-Tec™ products sales as a percentage of total sales during the three months ended May 31, 2009 compared to the three months ended May 31, 2008, which sales are sold at lower margins than NTIC's ZERUST® products. Cost of goods sold as a percentage of net sales increased to 66.5% in the nine months ended May 31, 2009 as compared to 60.6% for the nine months ended May 31, 2008 primarily as a result of the increase of Natur-Tec™ products sales as a percentage of total sales during the nine months ended May 31, 2009 compared to the nine months ended May 31, 2008.

Total net sales of all of NTIC's joint ventures decreased 54.1% and 41.6% during the three and nine months ended May 31, 2009, respectively, compared to the three and nine months ended May 31, 2008 primarily as a result of decreased demand for ZERUST® products due to the global economic slowdown and, to a lesser extent, fluctuations in the foreign currency exchange rate of the U.S. dollar compared to other currencies in which NTIC's joint ventures conduct business. As a result of the decrease in total net sales of NTIC's joint ventures, NTIC recognized a decrease in fee income for technical and support services of 45.8% and 39.2%, respectively, and a decrease in its equity in income of corporate joint ventures and holding companies of 100.6% and 78.4%, respectively, during the three and nine months ended May 31, 2009. NTIC incurs direct expenses related to its corporate joint ventures and holding companies. Such expenses include product and business development, consulting, travel, technical and marketing services to existing joint ventures, legal fees incurred in the establishment of new joint ventures, registration and promotion and legal defense of worldwide trademarks, and legal fees incurred in connection with the filing of patent applications. NTIC's direct joint venture expenses decreased 37.7% and 12.0% during the three and nine months ended May 31, 2009, respectively, compared to the three and nine months ended May 31, 2008. NTIC's total income from its corporate joint ventures and holding companies decreased 105.2% and 99.1% during the three and nine

months ended May 31, 2009, respectively, compared to the nine months ended May 31, 2008 primarily as a result of the adverse worldwide economic situation.

NTIC spent $2,222,575 in the nine months ended May 31, 2009 and $1,847,547 in the nine months ended May 31, 2008 in connection with its research and development activities. NTIC anticipates that it will spend between $2,800,000 and $3,000,000 in total during fiscal 2009 on research and development activities related to its new technologies. These expenses are accounted for in the "Expenses incurred in support of corporate joint ventures" section of NTIC's consolidated statements of operations.

NTIC incurred a net loss of ($638,679), or ($0.17) per diluted common share, during the three months ended May 31, 2009 compared to net income of $788,148 or $0.21 per diluted common share, for the three months ended May 31, 2008. NTIC incurred a net loss of ($2,139,484), or (0.57) per diluted common share, during the nine months ended May 31, 2009 compared to net income of $2,106,034 or $0.56 per diluted common share, for the nine months ended May 31, 2008. These significant decreases were primarily the result of the decreased demand of NTIC's ZERUST® products in the United States and internationally due to the global economic recession, and to a lesser extent, the $554,000 loss on impairment relating to React-NTI.

NTIC's working capital was $4,915,140 at May 31, 2009, including $141,639 in cash and cash equivalents. As of May 31, 2009, NTIC had $963,000 of borrowings under its $2,300,000 demand line of credit.

NTIC expects to meet its future liquidity requirements during at least the next 12 months by using its existing cash and cash equivalents, forecasted cash flows from future operations, distributions of earnings and technical assistance fees to NTIC from its joint venture investments and funds available through existing or anticipated financing arrangements. In order to take advantage of new product market opportunities to expand its business and increase its revenues, NTIC may decide to finance such opportunities by borrowing under its line of credit or raising additional financing through the issuance of debt or equity securities.

Results of Operations



The following table sets forth NTIC's results of operations for the three months
ended May 31, 2009 and May 31, 2008.



                       May 31,       % of         May 31,       % of            $            %
                        2009       Net Sales       2008       Net Sales       Change       Change

Net sales            $ 1,673,634       100.0 %  $ 3,269,721       100.0 %  $ (1,596,087 )    -48.8 %

Cost of goods sold       995,672        59.5 %    2,059,855        63.0 %    (1,064,183 )    -51.7 %

Selling expenses         577,736        34.5 %      799,949        24.5 %      (222,213 )    -27.8 %

General and
administrative
expenses                 599,012        35.8 %      702,592        21.5 %      (103,580 )    -14.7 %

Lab and technical
support expenses          13,823         0.8 %       32,631         1.0 %       (18,808 )    -57.6 %

The following table sets forth NTIC's results of operations for the nine months ended May 31, 2009 and May 31, 2008.

                     Nine Months      % of        Nine Months       % of
                        Ended         Net        Ended May 31,      Net            $            %
                     May 31, 2009    Sales           2008          Sales         Change       Change

Net sales            $  6,678,748      100.0 %  $     9,518,162      100.0 %  $ (2,839,414 )    -29.8 %

Cost of goods sold      4,444,075       66.5 %        5,763,500       60.6 %    (1,319,425 )    -22.9 %

Selling expenses        1,924,102       28.8 %        2,413,895       25.4 %      (489,793 )    -20.3 %

General and
administrative
expenses                2,184,974       32.7 %        2,545,414       26.7 %      (360,440 )    -14.2 %

Lab and technical
support expenses           51,285        0.8 %          143,375        1.5 %       (92,090 )    -64.2 %

Loss on impairment        554,000        8.3 %                -        0.0 %       554,000        0.0 %

Net Sales. NTIC's net sales originating in the United States decreased 48.8% and 29.8% during the three and nine months ended May 31, 2009, respectively, compared to the same respective periods in fiscal 2008 primarily as a result of decreased demand for NTIC's ZERUST® products as a result of the U.S. economic recession and, to a lesser extent, the loss of the principal customer of React Inc. and decreased sales of NTIC's Natur-Tec™ products.

The following table sets forth NTIC's net sales for the three months ended May 31, 2009 and May 31, 2008 by segment:

                                   May 31,       May 31,          $           %
                                    2009          2008          Change      Change

ZERUST® sales                    $ 1,646,715   $ 3,161,206   $ (1,514,491 )  -47.9 %
Natur-Tec™ sales                      14,029       102,290        (88,261 )  -86.3 %
React-NTI sales                       12,890         6,225          6,665    107.1 %
React Inc. sales                           -             -              -        -
Total North American net sales   $ 1,673,634   $ 3,269,721   $ (1,596,123 )  -48.8 %

The following table sets forth NTIC's net sales for the nine months ended May 31, 2009 and May 31, 2008 by segment:

                                   May 31,       May 31,          $           %
                                    2009          2008          Change      Change
ZERUST® sales                    $ 6,159,096   $ 9,021,496   $ (2,862,436 )  -31.7 %
Natur-Tec™ sales                     499,037       204,998        294,039    143.4 %
React-NTI sales                       20,615        43,508        (22,893 )  -52.6 %
React Inc. sales                           -       248,160       (248,160 ) -100.0 %
Total North American net sales   $ 6,678,748   $ 9,518,162   $ (2,839,450 )  -29.8 %

Cost of Goods Sold. Cost of goods sold decreased 51.7% and 22.9% for the three months and nine months ended May 31, 2009, respectively, compared to the same respective periods in fiscal 2008 primarily as a result of the significant decrease in sales of NTIC's ZERUST® products and the loss of the principal customer of React Inc. Cost of goods sold as a percentage of net sales changed to 59.5% and 66.5% for the three and nine months ended May 31, 2009, respectively, compared to 63.0% and 60.1% in the same respective periods in fiscal 2008 primarily as a result of reductions in the raw material costs, offset partially by smaller profit margins realized by sales of NTIC's Natur-Tec™ products compared to sales of NTIC's ZERUST® products.

Selling Expenses. NTIC's selling expenses decreased 27.8% for the three months ended May 31, 2009 compared to the same period in fiscal 2008 due to decreases in (i) salaries of $58,000, (ii) consulting expense of $23,000, (iii) travel related expenses of $35,000 and (iv) commissions of $65,000. NTIC's selling expenses decreased 20.3% for the nine months ended May 31, 2009 compared the same period in fiscal 2008 due to decreases in (i) salaries of $110,000,
(ii) consulting expense of $61,000, (iii) commissions of $55,000 and (iv) travel related expenses of $89,000. Selling expenses as a percentage of net sales increased to 34.5% and 28.8% during the three and nine months ended May 31, 2009, respectively, from 24.5% and 25.4% during the same respective periods in fiscal 2008, due to the decrease in net sales.

General and Administrative Expenses. NTIC's general and administrative expenses decreased by 14.7% during the three months ended May 31, 2009 compared to the same period in fiscal 2008 due to decreases in (i) audit and tax expense of $19,000 (ii) general expenses associated with React-NTI of $60,000 (iii) travel related expenses of $20,000 and (iv) salaries of $45,000. Additionally, during the three months ended May 31, 2009, NTIC derecognized previously recorded trade payables of $320,000 as a result of negotiations between NTIC and its vendor. NTIC's general and administrative expenses decreased by 14.2% during the nine months ended May 31, 2009 compared to the same period in fiscal 2008 due to decreases in (i) audit and tax expense of $74,000 (ii) general expenses associated

with React-NTI of $70,000 (iii) travel related expenses of $15,000 and
(iv) salaries of $73,000. As a percentage of net sales, general and administrative expenses increased to 35.8% and 32.7% during the three and nine months ended May 31, 2009, respectively, from 21.5% and 26.7% during the same respective periods in fiscal 2008, due to the decrease in net sales. NTIC includes expenses in general and administrative expenses that provide benefit to the various joint ventures in addition to providing benefit to NTIC's North American operations, including specifically, expenses associated with information technology, general insurance, executive and non-executive salary, bonus and benefits, building expenses, audit and tax and directors fees.

Lab and Technical Support Expenses. NTIC's lab and technical support expenses decreased by 57.6% and 64.2% during the three and nine months ended May 31, 2009, respectively, compared to the same respective periods in fiscal 2008 primarily as a result of a change in the allocation of these expenses to sales activities. As a percentage of net sales, lab and technical support expenses were relatively immaterial during the three and nine months ended May 31, 2009 as well as during the same respective periods in fiscal 2008.

International Corporate Joint Ventures and Holding Companies. Net sales of NTIC's corporate joint ventures for the three and nine months ended May 31, 2009 and the same respective periods in fiscal 2008, excluding React-NTI LLC, were as follows:

                              Three Months Ended             Nine Months Ended
                            May 31,        May 31,        May 31,        May 31,
                              2009           2008           2009           2008
Industrial chemical       $ 12,746,821   $ 30,419,909   $ 44,737,253   $ 78,897,265
Non-industrial chemical      1,405,139        382,723      1,891,391        996,488
Total                     $ 14,151,960   $ 30,802,632   $ 46,628,644   $ 79,893,753

NTIC receives fees for technical and other support services it provides to its corporate joint ventures based on the revenues of the individual corporate joint ventures. NTIC recognized fee income for such support of $821,810 and $2,760,379 in the three and nine months ended May 31, 2009, respectively, compared to $1,517,428 and $4,537,855 during the same respective periods in fiscal 2008, a decrease of 45.8% and 39.2%, respectively. The decrease in fees for technical and other support to its corporate joint ventures was due to the decrease in revenues from the corporate joint ventures as a whole, as well as fluctuations in the foreign currency exchange rate of the U.S. dollar compared to other currencies in which NTIC's joint ventures conduct business.

NTIC 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. NTIC defers a portion of its technical and other support fees received from its corporate joint ventures in each accounting period leading up to the next conference, reflecting that NTIC has not fully earned the payments received during that period. The next corporate joint venture conference is scheduled to be held in the summer of 2010. There was no deferred income . . .