Northern Technologies International Corporation Annual Report 2011

FY2011 Annual Report · Northern Technologies International Corporation

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N O R T H E R N
T E C H N OL O G I E S
I N T E R N A T I O N A L
C O R P O R A T I ON

2011 Annual Report

Northern Technologies International Corporation
>Notice of 2011 Annual Meeting
>Proxy Statement
>Annual Report on Form 10-K

OIL & GAS

Our Mission:

Our Environment:

Our business model of commercializing clean and green
technologies depends heavily on the talents, perseverance
and integrity of both our employees and our worldwide
federation of joint venture partners. We believe that our
responsibilities are first to our worldwide customers, then
to our people, next to our communities and finally to our
shareholders. Therefore we must:

• Exercise honor, humanity and disciplined management in

our actions.

• See a unified world through the global perspectives of

our people.

• Ensure that the environment becomes a better place

because of what we do.

• Invest continuously in our future.

It is our mission at NTIC to use our advanced technologies
to care for the world we live in, give back to society and
strive to set an example for environmental leadership and
responsibility.

At NTIC, we believe that there are no responsible
alternatives to doing business other than through
environmental sustainability. We also believe that
environmental responsibility and corporate business will
increasingly work together to grow both sustainability and
the bottom line.

We encourage our employees, joint venture partners,
distributors, affiliates and suppliers to carry out our
environmental commitments at the
level
through:

individual

• Daily environmentally responsible business practices.
• Advanced R&D processes that promote the use of

environmentally responsible raw materials, components
and other biobased inputs.

• Education and programs to raise awareness about

our technologies and how they can help solve current
environmental challenges.

• Each NTIC employee is expected to practice

an individual commitment to sustainability and
environmental responsibility in the workplace.

Through our individual commitments to lessen our
environmental footprint and our advanced technologies
which allow others to practice sustainability, we have the
power to benefit ourselves as individuals, our federation
of NTIC joint ventures and our environment for many
generations to come.

Our Technology Platforms:

OIL & GAS

Zerust®/EXCOR® business unit manufactures and markets corrosion inhibiting
technologies that provide customers with advanced corrosion solutions for rust
issues across their production facilities and supply chains. The technology uses
proprietary, non-toxic, chemical systems to create invisible molecular corrosion
shields on metal surfaces. The Zerust®/EXCOR® teams support clients globally
in a broad range of industries including automotive, electrical, electronic,
medical, machine fabrications, steel production, military and marine. Zerust®/
EXCOR® products and services allow customers to achieve substantial cost
savings as well as reduce negative environmental impact caused by traditional
corrosion prevention methods.

Zerust® Oil and Gas business unit provides advanced corrosion control
technologies and services to the petrochemical industry. Zerust® Oil and
Gas products and services utilize Zerust® proprietary corrosion inhibitors in
combination with advanced cathodic protection systems to dramatically enhance
corrosion protection of capital assets. These assets include above-ground storage
tanks, various pieces of process equipment, buried and submerged pipelines,
mothballed large capital equipment, pipeline flanges, valves, and welded joints.
Zerust®Oil & Gas technologies are successfully implemented in refineries,
offshore oil rigs, tank farms and retail gas stations in several countries.

Natur-Tec® business unit engineers and manufactures biobased and biodegradable
plastic resins intended to replace conventional, petroleum-based plastics. Natur-
Tec® has a broad bioplastics portfolio which spans flexible film, foam, rigid
injection molded materials and engineered plastics. These applications allow
for the production of 100% certified compostable finished products, such as
bags, food service products, and product packaging. Natur-Tec® products are
renewable resource based and do not contain conventional plastic materials.
Natur-Tec® products provide sustainable alternatives to conventional plastics
and enable industry and consumers to move closer to a carbon neutral footprint.

NOR T H E R N T E C H NOL OG I E S I NT E R NA T I ONA L C OR POR A T I ON

NOT I C E OF A NNUA L M E E T I NG OF ST OC K H OL DE R S

February 2, 2012

The Annual Meeting of Stockholders of Northern Technologies International Corporation, a Delaware corporation,
will be held at NTIC’s corporate executive offices located at 4201 Woodland Road, Circle Pines, Minnesota 55014,
beginning at 4:00 p.m., Central time, on Thursday, February 2, 2012, for the following purposes:

1. To elect seven persons to serve as directors until our next annual meeting of stockholders or until their

respective successors are elected and qualified.

2. To ratify the selection of Baker Tilly Virchow Krause, LLP as our independent registered public

accounting firm for the fiscal year ending August 31, 2012.

3. To transact such other business as may properly come before the meeting or any adjournment of the

meeting.

Only stockholders of record at the close of business on December 7, 2011 will be entitled to notice of, and to vote
at, the meeting and any adjournments thereof. A stockholder list will be available at our corporate offices
beginning January 23, 2012 during normal business hours for examination by any stockholder registered on NTIC’s
stock ledger as of the record date, December 7, 2011, for any purpose germane to the annual meeting.

We are pleased again this year to use the “Notice and Access” method of providing proxy materials to our
stockholders via the Internet. We believe that this process expedites your receipt of our proxy materials, lowers the
costs of our Annual Meeting and reduces the environmental impact of our meeting.

By Order of the Board of Directors,

Matthew C. Wolsfeld
Corporate Secretary

December 19, 2011
Circle Pines, Minnesota

Important: Whether or not you expect to attend the meeting in person, please vote by the Internet or
telephone, or request a paper proxy card to sign, date and return by mail so that your shares may be
voted. A prompt response is helpful and your cooperation is appreciated.

T A B L E OF C ONT E NT S

INTERNET AVAILABILITY OF PROXY MATERIALS ......................................................................... ii
GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING ................................. 1
Date, Time, Place and Purposes of Meeting ............................................................................................. 1
Who Can Vote .......................................................................................................................................... 1
How You Can Vote .................................................................................................................................. 1
How Does the Board Recommend that You Vote .................................................................................... 2
How You May Change Your Vote or Revoke Your Proxy ...................................................................... 3
Quorum Requirement ............................................................................................................................... 3
Vote Required ........................................................................................................................................... 3
Procedures at the Annual Meeting ............................................................................................................ 4
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT ....................... 5
PROPOSAL ONE – ELECTION OF DIRECTORS .................................................................................... 7
Number of Directors ................................................................................................................................. 7
Nominees for Director .............................................................................................................................. 7
Board Recommendation ........................................................................................................................... 7
Information About Current Directors and Board Nominees .................................................................... 7
Additional Information About Current Directors and Board Nominees .................................................. 8
CORPORATE GOVERNANCE ................................................................................................................ 11
Corporate Governance Guidelines .......................................................................................................... 11
Board Leadership Structure .................................................................................................................... 11
Director Independence ............................................................................................................................ 12
Board Meetings and Attendance ............................................................................................................. 12
Board Committees .................................................................................................................................. 12
Audit Committee .................................................................................................................................... 13
Compensation Committee ...................................................................................................................... 14
Nominating and Corporate Governance Committee .............................................................................. 15
Director Nominations Process ................................................................................................................ 16
Board Oversight of Risk ......................................................................................................................... 18
Code of Ethics ........................................................................................................................................ 18
Policy Regarding Director Attendance at Annual Meetings of Stockholders ........................................ 19
Complaint Procedures ............................................................................................................................. 19
Process Regarding Stockholder Communications with Board of Directors ........................................... 19
DIRECTOR COMPENSATION ................................................................................................................ 20
Summary of Cash and Other Compensation .......................................................................................... 20
Non-Employee Director Compensation Program ................................................................................... 21
Consulting Arrangements ....................................................................................................................... 22
Indemnification Agreements .................................................................................................................. 23
EXECUTIVE COMPENSATION .............................................................................................................. 24
Summary of Cash and Other Compensation .......................................................................................... 24
Our Executive Compensation Program .................................................................................................. 25
Outstanding Equity Awards at Fiscal Year End ..................................................................................... 28
Stock Incentive Plan ............................................................................................................................... 28
Post-Termination Severance and Change in Control Arrangements ...................................................... 30
Indemnification Agreements .................................................................................................................. 32
RELATED PERSON RELATIONSHIPS AND TRANSACTIONS ......................................................... 33
PROPOSAL TWO — RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM ............................................................................................................ 34
Selection of Independent Registered Public Accounting Firm ............................................................... 34
Audit, Audit-Related, Tax and Other Fees ............................................................................................. 34

Audit Committee Pre-Approval Policies and Procedures....................................................................... 34
Board of Directors Recommendation ..................................................................................................... 35
Audit Committee Report ........................................................................................................................ 35
OTHER MATTERS .................................................................................................................................... 36
Section 16(a) Beneficial Ownership Reporting Compliance .................................................................. 36
Stockholder Proposals for 2013 Annual Meeting ................................................................................... 36
Director Nominations for 2013 Annual Meeting .................................................................................... 37
Other Business ........................................................................................................................................ 37
Copies of Fiscal 2011 Annual Report ..................................................................................................... 37
Householding of Annual Meeting Materials .......................................................................................... 38
Proxy Solicitation Costs ......................................................................................................................... 38

________________

INTERNET AVAILABILITY OF PROXY MATERIALS
________________

Again this year, instead of mailing a printed copy of our proxy materials, including our Annual Report to
Stockholders, to each stockholder of record, we have decided to provide access to these materials in a fast
and efficient manner via the Internet. We believe that this process expedites your receipt of our proxy
materials, lowers the costs of our Annual Meeting and reduces the environmental impact of our meeting.
On December 19, 2011, we began mailing a Notice of Internet Availability of Proxy Materials to
stockholders of record as of December 7, 2011, and we posted our proxy materials on the website
referenced in the Notice of Internet Availability of Proxy Materials (www.proxyvote.com). As more fully
described in the Notice of Internet Availability of Proxy Materials, stockholders may choose to access our
proxy materials at www.proxyvote.com or may request a printed set of our proxy materials. In addition,
the Notice of Internet Availability of Proxy Materials and website provide information regarding how you
may request to receive proxy materials in printed form by mail or electronically by email on an ongoing
basis. For those who previously requested printed proxy materials or electronic materials on an ongoing
basis, you will receive those materials as you requested.

Important Notice Regarding the Availability of Proxy Materials for the
Annual Meeting of Stockholders to be Held on February 2, 2011:

The Notice of Annual Meeting of Stockholders and Proxy Statement and Annual Report to
Stockholders, including our Annual Report on Form 10-K for the fiscal year ended August 31, 2011
are available at www.proxyvote.com.

4201 Woodland Road, Circle Pines, Minnesota 55014

PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
February 2, 2012

The Board of Directors of Northern Technologies International Corporation is soliciting your proxy for
use at the 2012 Annual Meeting of Stockholders to be held on Thursday, February 2, 2012. The Board of
Directors expects to make available to our stockholders beginning on or about December 19, 2011 the
Notice of Annual Meeting of Stockholders, this proxy statement and a form of proxy on the Internet or
has sent these materials to stockholders of NTIC upon their request.

GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
________________

Date, Time, Place and Purposes of Meeting

The Annual Meeting of Stockholders of Northern Technologies International Corporation (sometimes
referred to as “NTIC,” “we,” “our” or “us” in this proxy statement) will be held on Thursday, February 2,
2012, at 4:00 p.m., Central time, at the principal executive offices of Northern Technologies International
Corporation located at 4201 Woodland Road, Circle Pines, Minnesota 55014, for the purposes set forth in
the Notice of Annual Meeting of Stockholders.

Who Can Vote

Stockholders of record at the close of business on December 7, 2011 will be entitled to notice of and to
vote at the meeting or any adjournment of the meeting. As of that date, there were 4,397,324 shares of
our common stock outstanding. Each share of our common stock is entitled to one vote on each matter to
be voted on at the Annual Meeting. Stockholders are not entitled to cumulate voting rights.

How You Can Vote

Your vote is important. Whether you hold shares directly as a stockholder of record or beneficially in
“street name” (through a broker, bank or other nominee), you may vote your shares without attending the
Annual Meeting. You may vote by granting a proxy or, for shares held in street name, by submitting
voting instructions to your broker, bank or other nominee.

If you are a stockholder whose shares are registered in your name, you may vote your shares in person at
the meeting or by one of the three following methods:

• Vote by Internet, by going to the website address http://www.proxyvote.com and following the

instructions for Internet voting shown on the Notice of Internet Availability of Proxy Materials or
on your proxy card.

• Vote by Telephone, by dialing 1-800-690-6903 and following the instructions for telephone
voting shown on the Notice of Internet Availability of Proxy Materials or on your proxy card.

• Vote by Proxy Card, by completing, signing, dating and mailing the enclosed proxy card in the

envelope provided if you received a paper copy of these proxy materials.

If you vote by Internet or telephone, please do not mail your proxy card.

If your shares are held in “street name” (through a broker, bank or other nominee), you may receive a
separate voting instruction form with this proxy statement or you may need to contact your broker, bank
or other nominee to determine whether you will be able to vote electronically using the Internet or
telephone.

The deadline for voting by telephone or by using the Internet is 11:59 p.m., Eastern Standard Time (10:59
p.m., Central Standard Time), on the day before the date of the Annual Meeting or any adjournments
thereof. Please see the Notice of Internet Availability of Proxy Materials, your proxy card or the
information your bank, broker, or other holder of record provided to you for more information on your
options for voting.

If you return your signed proxy card or use Internet or telephone voting before the Annual Meeting, the
named proxies will vote your shares as you direct. You have three choices on each matter to be voted on.

For the election of directors, you may:

• Vote FOR the seven nominees for director,

• WITHHOLD your vote from the seven nominees for director or

• WITHHOLD your vote from one or more of the seven nominees for director.

For each of the other proposals, you may:

• Vote FOR the proposal,

• Vote AGAINST the proposal or

• ABSTAIN from voting on the proposal.

If you send in your proxy card or use Internet or telephone voting, but do not specify how you want to
vote your shares, the proxies will vote your shares FOR all seven of the nominees for director and FOR
all of the other proposals set forth in the Notice of Annual Meeting of Stockholders.

How Does the Board Recommend that You Vote

The Board of Directors unanimously recommends that you vote FOR all seven of the nominees for
director and FOR the approval of all of the other proposals set forth in the Notice of Annual
Meeting of Stockholders.

How You May Change Your Vote or Revoke Your Proxy

If you are a stockholder whose shares are registered in your name, you may revoke your proxy at any time
before it is voted by one of the following methods:

• Submitting another proper proxy with a more recent date than that of the proxy first given by
following the Internet or telephone voting instructions or completing, signing, dating and
returning a proxy card to us.

• Sending written notice of your revocation to our Corporate Secretary.

• Attending the Annual Meeting and voting by ballot.

Quorum Requirement

The presence at the Annual Meeting, in person or by proxy, of the holders of a majority (2,198,663
shares) of the outstanding shares of our common stock as of the record date will constitute a quorum for
the transaction of business at the Annual Meeting. In general, shares of our common stock represented by
proxies marked “For,” “Against,” “Abstain” or “Withheld” are counted in determining whether a quorum
is present. In addition, a “broker non-vote” is counted in determining whether a quorum is present. A
“broker non-vote” is a proxy returned by a broker on behalf of its beneficial owner customer that is not
voted on a particular matter because voting instructions have not been received by the broker from the
customer, and the broker has no discretionary authority to vote on behalf of such customer on such
matter.

Vote Required

Assuming a quorum is represented at the Annual Meeting, either in person or by proxy, the election of the
seven nominees for director in Proposal One requires the affirmative vote of a plurality of the shares of
our common stock present in person or by proxy and entitled to vote at the Annual Meeting. This means
that a director nominee with the most votes for a particular slot is elected for that slot. The approval of
the other proposal described in this proxy statement requires the affirmative vote of the holders of a
majority of the shares of our common stock present in person or by proxy and entitled to vote at the
Annual Meeting.

If your shares are held in “street name” and you do not indicate how you wish to vote, your broker is
permitted to exercise its discretion to vote your shares on certain “routine” matters. The election of
directors in Proposal One is not a “routine” matter; whereas, the ratification of the selection of our
independent registered public accounting firm in Proposal Two is a “routine” matter. Accordingly, if you
do not direct your broker how to vote for a director in Proposal One, your broker may not exercise
discretion and may not vote your shares on that proposal. For purposes of Proposal One, broker non-
votes are considered to be shares represented by proxy at the meeting but are not considered to be shares
“entitled to vote” at the meeting. As such, a broker non-vote will not be counted as a vote “For” or
“Withheld” with respect to a director; and, therefore, will have no effect on the outcome of the election of
directors. Proxies marked “Abstain” will be counted in determining the total number of shares “entitled
to vote” and will have the effect of a vote “Against” the proposal.

Procedures at the Annual Meeting

The presiding officer at the Annual Meeting will determine how business at the meeting will be
conducted. Only matters brought before the Annual Meeting in accordance with our Bylaws will be
considered.

Only a natural person present at the Annual Meeting who is either one of our stockholders, or is acting on
behalf of one of our stockholders, may make a motion or second a motion. A person acting on behalf of a
stockholder must present a written statement executed by the stockholder or the duly authorized
representative of the stockholder on whose behalf the person purports to act.

SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
________________

The following table sets forth information known to us with respect to the beneficial ownership of our
common stock as of December 7, 2011 for:

•

each person known by us to beneficially own more than five percent of the outstanding shares of
our common stock,

each of our directors,

each of the executive officers named in the Summary Compensation Table included later in this
proxy statement under the heading “Executive Compensation” and

•

all of our current directors and executive officers as a group.

Shares are deemed to be “beneficially owned” by a person if such person, directly or indirectly, has sole
or shared power to vote or to direct the voting of such shares or sole or shared power to dispose or direct
the disposition of such shares. Except as otherwise indicated, we believe that each of the beneficial
owners of our common stock listed below, based on information provided by these owners, has sole
dispositive and voting power with respect to its shares, subject to community property laws where
applicable. Shares not outstanding but deemed beneficially owned by virtue of the right of a person or
member of a group to acquire them within 60 days are treated as outstanding only when determining the
amount and percent owned by such person or group.

Shares Subject to Options
Immediately Exercisable or
Exercisable Within 60 Days

Total Number of Shares
of Common Stock
Beneficially Owned(1)

Percent of
Total Voting
Power

Name
Stockholders Owning 5% or More:
Inter Alia Holding Company(2) ..........
Directors and Named Executive
Officers:
Pierre Chenu ......................................
Soo-Keong Koh .................................
Sunggyu Lee, Ph.D............................
G. Patrick Lynch(3) ............................
Ramani Narayan, Ph.D. .....................
Richard J. Nigon ................................
Mark J. Stone(4) .................................
Matthew C. Wolsfeld ........................
Directors and executive officers as a
group (nine persons)(5) .......................
* Represents beneficial ownership of less than one percent of our common stock.

14,000
8,665
9,999
11,540
9,999
2,889
9,999
18,950

86,041

601,668

13.7%

22,000
8,665
9,999
650,313
15,499
4,889
19,999
67,457

798,821

*
*
*
14.8%
*
*
*
1.5%

17.8%

(1)

Includes shares held by the following persons in securities brokerage accounts, which in certain circumstances
under the terms of the standard brokerage account form may involve a pledge of such shares as collateral:
Inter Alia (601,668 shares); Mr. Lynch (638,773 shares); Mr. Nigon (2,000 shares); Mr. Stone (10,000 shares);
and Mr. Wolsfeld (48,507 shares).

(2) According to a Schedule 13D/A filed with the SEC on December 2, 2011, Inter Alia Holding Company is an

entity of which G. Patrick Lynch, our President and Chief Executive Officer, is a 25% stockholder. G. Patrick
Lynch shares equal voting and dispositive power over such shares with three other members of his family.
Inter Alia Holding Company’s address is 23205 Mercantile Road, Beachwood, Ohio 44122.

(4)

Includes 601,668 shares held by Inter Alia Holding Company. See note (2) above. Mr. Lynch’s address is
4201 Woodland Road, Circle Pines, Minnesota 55014.

(5)

Includes 10,000 shares held jointly with Mr. Stone’s spouse.

(6) The amount beneficially owned by all current directors and executive officers as a group includes 601,668

shares held of record by Inter Alia Holding Company and 10,000 shares held jointly with spouses. See notes
(2) and (4) above.

PROPOSAL ONE – ELECTION OF DIRECTORS
________________

Number of Directors

Our Bylaws provide that the Board of Directors will consist of at least one member or such other number
as may be determined by the Board of Directors from time to time or by the stockholders at an annual
meeting. The Board of Directors has fixed the number of directors at seven.

Nominees for Director

The Board of Directors has nominated the following seven individuals to serve as our directors until the
next annual meeting of stockholders or until their successors are elected and qualified. All of the
nominees named below are current members of the Board of Directors.

• Pierre Chenu
• Soo-Keong Koh
• Sunggyu Lee, Ph.D.
• G. Patrick Lynch

• Ramani Narayan, Ph.D.
• Richard J. Nigon
• Mark J. Stone

Proxies can only be voted for the number of persons named as nominees in this proxy statement, which is
seven.

Board Recommendation

The Board of Directors unanimously recommends a vote FOR the election of all of the seven nominees
named above.

If prior to the Annual Meeting, the Board of Directors should learn that any nominee will be unable to
serve for any reason, the proxies that otherwise would have been voted for this nominee will be voted for
a substitute nominee as selected by the Board. Alternatively, the proxies, at the Board’s discretion, may
be voted for that fewer number of nominees as results from the inability of any nominee to serve. The
Board of Directors has no reason to believe that any of the nominees will be unable to serve.

Information about Current Directors and Board Nominees

The following table sets forth as of December 1, 2011 the name, age and principal occupation of each
current director and each individual who has been nominated by the Board of Directors to serve as a
director of our company, as well as how long each individual has served as a director of NTIC.

Name
Pierre Chenu(1)(2)
Soo-Keong Koh(3)
Sunggyu Lee, Ph.D.

Age Principal Occupation
73 Non-Executive Chairman of the Board of NTIC
60 Managing Director of EcoSave Pte Ltd.
59 Russ Ohio Research Scholar in Syngas Utilization and

G. Patrick Lynch

Professor of Chemical and Biomolecular Engineering at
Ohio University
President and Chief Executive Officer of NTIC

Director
Since
2003
2008
2004

2004

Name
Ramani Narayan, Ph.D.

Age Principal Occupation
62 Distinguished Professor in the Department of Chemical
Engineering & Materials Science at Michigan State
University
Senior Vice President of Cedar Point Capital, Inc.
President of Petrus International, Inc.

63
52

Director
Since
2004

2010
2001

Richard J. Nigon(1)(2)
Mark J. Stone(1)(3)
_________________________
(1)
(2)
(3)

Member of the Audit Committee
Member of the Compensation Committee
Member of the Nominating and Corporate Governance Committee

Additional Information about Current Directors and Board Nominees

The following paragraphs provide information about each nominee, including all positions he holds, his
principal occupation and business experience for the past five years, and the names of other publicly-held
companies of which he currently serves as a director or has served as a director during the past five years.
We believe that all of our director nominees display personal and professional integrity; satisfactory
levels of education and/or business experience; broad-based business acumen; an appropriate level of
understanding of our business and its industry and other industries relevant to our business; the ability and
willingness to devote adequate time to the work of the Board of Directors and its committees; a fit of
skills and personality with those of our other directors that helps build a board that is effective, collegial
and responsive to the needs of our company; strategic thinking and a willingness to share ideas; a
diversity of experiences, expertise and background; and the ability to represent the interests of all of our
stockholders. The information presented below regarding each nominee also sets forth specific
experience, qualifications, attributes and skills that led the Board of Directors to the conclusion that such
individual should serve as a director in light of our business and structure.

Pierre Chenu has been a director of NTIC since 2003 and Non-Executive Chairman of the Board since
July 2005. Mr. Chenu is currently retired. Prior to his retirement, Mr. Chenu served as Vice President,
Worldwide Operations, Flat Glass Activities within the Asahi-Glaverbel Glass Group, a position he had
served for five years. Prior to that, Mr. Chenu was a member of the Executive Committee of Glaverbel
S.A., with various operating responsibilities in France, Spain, Italy, Russia, Germany, China and the
United States. Before joining Glaverbel, Mr. Chenu worked for U.S. Steel in steel production in
Pittsburgh, Pennsylvania and for Corning Inc. where he held various staff, line and executive positions in
the United States, France and the United Kingdom. Mr. Chenu holds a Master’s Degree in Engineering,
with a specialty in metallurgy, from the University of Liege (Belgium) and a M.B.A. from Harvard
University. Mr. Chenu is a citizen of Belgium. We believe Mr. Chenu’s qualifications to sit on the Board
of Directors include his significant executive and operational experiences both in the United States and
internationally prior to his retirement, including his positions with Asahi-Glaverbel Glass Group, U.S.
Steel and Corning Inc. The Board of Directors believes such operational experience is critical to NTIC’s
management in operating NTIC’s business and its various international joint ventures.

Soo-Keong Koh has been a director of NTIC since May 2008. Mr. Koh is the Managing Director of
Ecosave Pte Ltd., a company whose business is focused on environmental biotech and energy
conservation technologies, a position he has held since April 2007. From January 1986 to April 2007,
Mr. Koh served as Chief Executive Officer and President of Toll Asia Pte Ltd formerly SembCorp
Logistics Ltd (SembLog), a Singapore public listed company, which was acquired by Toll in May 2006.
Mr. Koh has over 20 years of experience in the logistics industry. Mr. Koh holds a Bachelor of
Engineering, a Master of Business Administration and a Postgraduate Diploma in Business Law from the
University of Singapore (now known as the National University of Singapore). We believe Mr. Koh’s

qualifications to sit on the Board of Directors include his experience on other public company boards of
directors and his significant executive experience with companies including those focused on
environmental awareness, which has become a focus of NTIC during the past several years, especially in
light of NTIC’s Natur-Tec™ bioplastics business. Mr. Koh’s previous board of directors experience is
helpful in guiding NTIC with respect to corporate governance matters, particularly in his role as Chair of
the Nominating and Corporate Governance Committee. Additionally, Mr. Koh has specific executive
experience with companies located in Asia, which is where several of NTIC’s more significant joint
ventures are located.

Sunggyu Lee, Ph.D. was elected a director of NTIC in January 2004. Dr. Lee is Russ Ohio Research
Scholar in Syngas Utilization and Professor of Chemical and Biomolecular Engineering, Ohio University,
Athens, Ohio. Previously, he held positions of Professor of Chemical and Biologic Engineering, Missouri
University of Science and Technology, Rolla, Missouri from 2005 to 2010, C.W. LaPierre Professor and
Chairman of Chemical Engineering at University of Missouri-Columbia from 1997 to 2005, and Robert
Iredell Professor and Head of Chemical Engineering Department at the University of Akron, Akron, Ohio
from 1988 to1996. He has authored seven books and over 480 archival publications and received 29 U.S.
patents in a variety of chemical and polymer processes and products. He is currently serving as Editor of
Encyclopedia of Chemical Processing, Taylor & Francis, New York, NY and also as Book Series Editor
of Green Chemistry and Chemical Engineering, CRC Press, Boca Raton, FL. Throughout his career, he
has served as consultant and technical advisor to a number of national and international companies in the
fields of polymers, petrochemicals and energy. He received his Ph.D. from Case Western Reserve
University, Cleveland, Ohio in 1980. We believe Dr. Lee’s qualifications to sit on the Board of Directors
include his significant technical and industrial expertise with chemical and polymer processes and
products. Such expertise is particularly with respect to assessing and operating NTIC’s Natur-Tec™
bioplastics business.

G. Patrick Lynch, an employee of NTIC since 1995, has been President since July 2005 and Chief
Executive Officer since January 2006 and was appointed a director of NTIC in February 2004.
Mr. Lynch served as President of North American Operations of NTIC from May 2004 to July 2005.
Prior to May 2004, Mr. Lynch held various positions with NTIC, including Vice President of Strategic
Planning, Corporate Secretary and Project Manager. Mr. Lynch is also an officer and director of Inter
Alia Holding Company, which is a significant stockholder of NTIC. Prior to joining NTIC, Mr. Lynch
held positions in sales management for Fuji Electric Co., Ltd. in Tokyo, Japan, and programming project
management for BMW AG in Munich, Germany. Mr. Lynch received an M.B.A. degree from the
University of Michigan Business School in Ann Arbor, Michigan. We believe Mr. Lynch’s qualifications
to sit on the Board of Directors include his depth of knowledge of our company and its day-to-day
operations in light of his position as chief executive officer of NTIC, as well as his affiliation with a
significant stockholder of NTIC, which the Board of Directors believes generally helps align
management’s interests with those of our stockholders.

Ramani Narayan, Ph.D. has been a director of NTIC since November 2004. He is a Distinguished
Professor at Michigan State University in the Department of Chemical Engineering & Materials Science,
where he has 105 refereed publications in leading journals to his credit, 18 patents, edited three books and
one expert dossier in the area of bio-based polymeric materials. His research encompasses design &
engineering of sustainable, biobased products, biodegradable plastics and polymers, biofiber reinforced
composites, reactive extrusion polymerization and processing, studies in plastic end-of-life options like
biodegradation and composting. He conducts carbon footprint calculations for plastics and products. He
also performs LCA (Life Cycle Assessment) for reporting a product’s environmental footprint. He serves
as Scientific Chair and board member of the Biodegradable Products Institute (BPI), North America. He
serves on the Technical Advisory Board of Tate & Lyle. He served on the Board of Directors of ASTM
International, an international standards setting organization and currently chairs the committee on

Environmentally Degradable Plastics and Biobased Products (D20.96) and the Plastics Terminology
Committee D20.92. He is also the technical expert for the USA on ISO (International Standards
Organization) TC 61 on Plastics – specifically for Terminology, and Biodegradable Plastics. He has won
numerous awards, including the Named MSU University Distinguished Professor in 2007; the Governors
University Award for commercialization excellence; Michigan State University Distinguished Faculty
Award, 2006, 2005 Withrow Distinguished Scholar award, Fulbright Distinguished Lectureship Chair in
Science & Technology Management & Commercialization (University of Lisbon; Portugal); First
recipient of the William N. Findley Award, The James Hammer Memorial Lifetime Achievement Award,
and Research and Commercialization Award sponsored by ICI Americas, Inc. & the National Corn
Growers Association. We believe Dr. Narayan’s qualifications to sit on the Board of Directors include
his significant technical expertise in the bioplastics area which has been helpful to NTIC’s management in
assessing and operating NTIC’s Natur-Tec™ bioplastics business.

Richard J. Nigon has been a director of NTIC since February 2010. Mr. Nigon is the Senior Vice
President of Cedar Point Capital, Inc., a private company that raises capital for early stage companies.
From February 2001 until May 2007, Mr. Nigon was a Director of Equity Corporate Finance for Miller
Johnson Steichen Kinnard (“MJSK”), a privately held investment firm. In December 2006, MJSK was
acquired by Stifel Nicolaus and Mr. Nigon was a Managing Director of Private Placements at Stifel
Nicolaus. From February 2000 to February 2001, Mr. Nigon served as the Chief Financial Officer of
Dantis, Inc., a web hosting company. Prior to joining Dantis, Mr. Nigon was employed by Ernst &
Young, LLP from 1970 to 2000, where he served as a partner from 1981 to 2000. While at Ernst &
Young, Mr. Nigon served as the Director of Ernst & Young’s Twin Cities Entrepreneurial Services Group
and was the coordinating partner on several publicly-traded companies in the consumer retailing and
manufacturing sectors. Mr. Nigon also currently serves as President of NorthStar Education Finance,
Inc., a non-profit organization formed to foster, aid, encourage and assist the pursuit of higher education.
In addition to NTIC, Mr. Nigon also serves on the board of directors of Vascular Solutions, Inc. and a
number of privately-held companies and previously served on the board of directors of Virtual
Radiologics, Inc. We believe Mr. Nigon’s qualifications to sit on the Board of Directors include: (1) his
significant financial and accounting expertise, which the Board of Directors believes is critical to its
financial and accounting oversight responsibilities; (2), his experience on other U.S. public company
boards of directors, which allows Mr. Nigon to provide valuable perspectives and input on accounting,
compensation and corporate governance matters, particularly in his roles as Chair of the Audit Committee
and Compensation Committee; and (3) his experience with several private investment firms that have
invested in early stage companies, which the Board of Directors believes is helpful in assessing and
operating NTIC’s newer businesses.

Mark J. Stone has been a director of NTIC since 2001. Mr. Stone has been President of Petrus
International, Inc., an international consulting firm, since 1992. Mr. Stone has advised a variety of
Japanese and other multi-national corporations in areas including project finance and international
investment strategy. Mr. Stone is also President of MM Management, LLC, an entity that manages Chef
Masaharu Morimoto’s business interests. Mr. Stone was a director of Aqua Design, Inc., an international
water desalination company, from 1988 to 1996. Mr. Stone was Director, Marketing & Business
Development of Toray Marketing & Sales (America) Inc. from 1986 to 1992. From 1980 to 1986, Mr.
Stone was employed by Mitsui & Co. (U.S.A.), Inc. where he founded and was Treasurer of Hydro
Management Resources, a Mitsui subsidiary, which finances, owns and operates water treatment projects.
Mr. Stone holds an A.B. from Harvard University. We believe Mr. Stone’s qualifications to sit on the
Board of Directors include his financial and accounting expertise, which the Board of Directors believes
is critical to its financial and accounting oversight responsibilities, and his significant experience working
with other international companies, which the Board of Directors believes is helpful in managing NTIC’s
international operations and joint ventures.

CORPORATE GOVERNANCE
________________

Corporate Governance Guidelines

The Board of Directors has adopted Corporate Governance Guidelines. A copy of these Corporate
Governance Guidelines can be found on the “Investor Relations—Board of Directors—Corporate
Governance” section of our corporate website www.ntic.com. Among the topics addressed in our
Corporate Governance Guidelines are:

• Board size, composition and qualifications;
• Selection of directors;
• Board leadership;
• Board committees;
• Board and committee meetings;
• Executive sessions of outside directors;
• Meeting attendance by directors and non-directors;
• Appropriate information and access;
• Ability to retain advisors;
• Conflicts of interest;
• Board interaction with corporate constituencies;
• Change of principal occupation and board memberships;
• Retirement and term limits;
• Board compensation;
• Stock ownership by directors and executive officers;
• Loans to directors and executive officers;
• CEO evaluation;
• Board and committee evaluation;
• Director continuing education;
• Succession planning; and
• Communications with directors.

Board Leadership Structure

Under our Corporate Governance Guidelines, the office of Chairman of the Board and Chief Executive
Officer may or may not be held by one person. The Board of Directors believes it is best not to have a
fixed policy on this issue and that it should be free to make this determination based on what it believes is
best under the circumstances. However, the Board of Directors strongly endorses the concept of an
independent director being in a position of leadership. Under our Corporate Governance Guidelines, if at
any time the Chief Executive Officer and Chairman of the Board positions are held by the same person,
the Board of Directors will elect an independent director as a lead independent director.

G. Patrick Lynch currently serves as our President and Chief Executive Officer and Pierre Chenu serves
as our non-executive Chairman of the Board. Because the Chief Executive Officer and Chairman of the
Board positions currently are not held by the same person, we do not have a lead independent director.
We currently believe this leadership structure is in the best interests of our company and our stockholders
and strikes the appropriate balance between the Chief Executive Officer’s responsibility for the strategic
direction, day-to-day-leadership and performance of our company and the Chairman’s responsibility to
provide oversight of our company’s corporate governance and guidance to our chief executive officer and
to set the agenda for and preside over Board of Directors meetings.

Immediately prior to all regular Board of Directors meetings, our independent directors meet in executive
session with no company management or non-independent directors present during a portion of the
meeting. After each such executive session, our Chairman of the Board provides our Chief Executive
Officer with any actionable feedback from our independent directors.

Director Independence

The Board of Directors has affirmatively determined that four of NTIC’s current seven directors are
“independent directors” under the Listing Rules of the NASDAQ Stock Market: Pierre Chenu, Soo-
Keong Koh, Richard J. Nigon and Mark J. Stone.

In making these affirmative determinations that such individuals are “independent directors,” the Board of
Directors reviewed and discussed information provided by the directors and by NTIC with regard to each
director’s business and personal activities as they may relate to NTIC and NTIC’s management.

Board Meetings and Attendance

The Board of Directors met four times during the fiscal year ended August 31, 2011. Each of the
directors attended at least 75 percent of the aggregate of the total number of meetings of the Board and
the total number of meetings held by all Board committees on which he served.

Board Committees

The Board of Directors has a standing Audit Committee, Compensation Committee and Nominating and
Corporate Governance Committee, each of which has the composition and responsibilities described
below. The Board of Directors may from time to time establish other committees to facilitate the
management of our company and may change the composition and responsibilities of our existing
committees. Each of the Audit Committee, Compensation Committee and Nominating and Corporate
Governance Committee operates under a written charter adopted by the Board of Directors, which can be
found on the “Investor Relations—Corporate Governance” section of our corporate website
www.ntic.com.

The following table summarizes the current membership of each of our three Board committees.

Director

Pierre Chenu
Soo-Keong Koh
Sunggyu Lee, Ph.D.
G. Patrick Lynch
Ramani Narayan, Ph.D.
Richard J. Nigon
Mark J. Stone

Audit
√
—
—
—
—
Chair
√

Compensation
√
—
—
—
—
Chair
—

Nominating and
Corporate Governance
—
Chair
—
—
—
—
√

Audit Committee

Responsibilities. The Audit Committee provides assistance to the Board of Directors in fulfilling its
responsibilities for oversight, for quality and integrity of the accounting, auditing, reporting practices,
systems of internal accounting and financial controls, the annual independent audit of our financial
statements, and the legal compliance and ethics programs of NTIC as established by management. The
Audit Committee’s primary responsibilities include:

• Overseeing our financial reporting process, internal control over financial reporting and

disclosure controls and procedures on behalf of the Board of Directors;

• Having sole authority to appoint, retain and oversee the work of our independent registered public

accounting firm and establish the compensation to be paid to the firm;

• Reviewing and pre-approving all audit services and permissible non-audit services to be provided

to NTIC by our independent registered public accounting firm;

• Establishing procedures for the receipt, retention and treatment of complaints regarding

accounting, internal accounting controls or auditing matters and for the confidential, anonymous
submission by our employees of concerns regarding questionable accounting or auditing matters;
and

• Overseeing the establishment and administration (including the grant of any waiver from) a

written code of ethics applicable to our principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar functions.

The Audit Committee has the authority to engage the services of outside experts and advisors as it deems
necessary or appropriate to carry out its duties and responsibilities.

Composition. The current members of the Audit Committee are Mr. Chenu, Mr. Nigon and Mr. Stone.
Mr. Nigon is the chair of the Audit Committee.

Each current member of the Audit Committee qualifies as “independent” for purposes of membership on
audit committees pursuant to the Listing Rules of the NASDAQ Stock Market and the rules and
regulations of the SEC and is “financially literate” as required by the Listing Rules of the NASDAQ
Stock Market. In addition, the Board of Directors has determined that Mr. Nigon qualifies as an “audit
committee financial expert” as defined by the rules and regulations of the SEC and meets the
qualifications of “financial sophistication” under the Listing Rules of the NASDAQ Stock Market as a
result of his extensive financial background and various financial positions he has held throughout his
career. Stockholders should understand that these designations related to our Audit Committee members’
experience and understanding with respect to certain accounting and auditing matters do not impose upon
any of them any duties, obligations or liabilities that are greater than those generally imposed on a
member of the Audit Committee or of the Board of Directors.

Meetings. The Audit Committee met four times during fiscal 2011, one time outside the presence of
management and one time face to face with Baker Tilly Virchow Krause, LLP, our independent registered
public accounting firm.

Other Information. Additional information regarding the Audit Committee and our independent
registered public accounting firm is disclosed under the “Proposal Two —Ratification of Selection of
Independent Registered Public Accounting Firm” section of this proxy statement.

Compensation Committee

Responsibilities. The Compensation Committee provides assistance to the Board of Directors in fulfilling
its oversight responsibility relating to compensation of our chief executive officer and other executive
officers and administers our equity compensation plans. In so doing, the Compensation Committee,
among other things:

•

recommending to the Board of Directors for its determination, the annual salaries, incentive
compensation, long-term compensation and any and all other compensation applicable to our
executive officers;

establishing, and from time to time reviewing and revising, corporate goals and objectives with
respect to compensation for our executive officers and establishing and leading a process for the
full Board of Directors to evaluate the performance of our executive officers in light of those
goals and objectives;

administering our equity compensation plans and recommending to the Board of Directors for its
determination grants of options or other equity-based awards for executive officers, employees
and independent consultants under our equity compensation plans;

reviewing our policies with respect to employee benefit plans; and

establishing and from time to time reviewing and revising processes and procedures for the
consideration and determination of executive compensation.

The Compensation Committee has the authority to engage the services of outside experts and advisors as
it deems necessary or appropriate to carry out its duties and responsibilities.

Composition. The current members of the Compensation Committee are Mr. Chenu and Mr. Nigon. Mr.
Nigon is the Chair of the Compensation Committee. The Board of Directors has determined that each of
the members of the Compensation Committee is considered an “independent director” under the Listing
Rules of the NASDAQ Stock Market, a “non-employee director” within the meaning of Rule 16b-3 under
the Securities Exchange Act of 1934, as amended, and an “outside director” within the meaning of
Section 162(m) under the Internal Revenue Code of 1986, as amended.

Processes and Procedures for Consideration and Determination of Executive Compensation. As
described in more detail above under the heading “—Responsibilities,” the Board of Directors has
delegated to the Compensation Committee the responsibility, among other things, to recommend to the
Board of Directors any and all compensation payable to our executive officers, including annual salaries,
incentive compensation and long-term incentive compensation, and to administer our equity and incentive
compensation plans applicable to our executive officers. Decisions regarding executive compensation
made by the Compensation Committee are not considered final and are subject to final review and
approval by the entire Board of Directors. Under the terms of its formal written charter, the
Compensation Committee has the power and authority, to the extent permitted by our Bylaws and
applicable law, to delegate all or a portion of its duties and responsibilities to a subcommittee of the
Compensation Committee. The Compensation Committee has not generally delegated any of its duties
and responsibilities to subcommittees, but rather has taken such actions as a committee, as a whole.

Our President and Chief Executive Officer assists the Compensation Committee in gathering
compensation related data regarding our executive officers and making recommendations to the
Compensation Committee regarding the form and amount of compensation to be paid to each executive

officer. In making final recommendations to the Board of Directors regarding compensation to be paid to
our executive officers, the Compensation Committee considers the recommendations of our President and
Chief Executive Officer, but also considers other factors, such as its own views as to the form and amount
of compensation to be paid, the achievement by the company of pre-established performance objectives
the general performance of the company and the individual officers, the performance of the company’s
stock price and other factors that may be relevant.

Final deliberations and decisions by the Compensation Committee regarding its recommendations to the
Board of Directors of the form and amount of compensation to be paid to our executive officers, including
our President and Chief Executive Officer, are made by the Compensation Committee, without the
presence of the President and Chief Executive Officer or any other executive officer of our company. In
making final decisions regarding compensation to be paid to our executive officers, the Board of
Directors considers the same factors and gives considerable weight to the recommendations of the
Compensation Committee.

Meetings. The Compensation Committee met three times during fiscal 2011.

Nominating and Corporate Governance Committee

Responsibilities. The primary responsibilities of the Nominating and Corporate Governance Committee
include:

•

identifying individuals qualified to become members of the Board of Directors;

recommending director nominees for each annual meeting of our stockholders and director
nominees to fill any vacancies that may occur between meetings of stockholders;

• being aware of best practices in corporate governance matters;

• developing and overseeing an annual Board of Directors and Board committee evaluation

process; and

•

establishing and leading a process for determination of the compensation applicable to the non-
employee directors on the Board.

The Nominating and Corporate Governance Committee has the authority to engage the services of outside
experts and advisors as it deems necessary or appropriate to carry out its duties and responsibilities.

Composition. The current members of the Nominating and Corporate Governance Committee are Mr.
Koh and Mr. Stone. Mr. Koh is the chair of the Nominating and Corporate Governance Committee. The
Board of Directors has determined that each of the members of the Nominating and Corporate
Governance Committee is considered an “independent director” under the Listing Rules of the NASDAQ
Stock Market.

Processes and Procedures for Consideration and Determination of Director Compensation. As
mentioned above under the heading “—Responsibilities,” the Board of Directors has delegated to the
Nominating and Corporate Governance Committee the responsibility, among other things, to review and
make recommendations to the Board of Directors concerning compensation for non-employee members
of the Board of Directors, including but not limited to retainers, meeting fees, committee chair and
member retainers and equity compensation. Decisions regarding director compensation made by the
Nominating and Corporate Governance Committee are not considered final and are subject to final review

and approval by the entire Board of Directors. Under the terms of its formal written charter, the
Nominating and Corporate Governance Committee has the power and authority, to the extent permitted
by our Bylaws and applicable law, to delegate all or a portion of its duties and responsibilities to a
subcommittee of the Nominating and Corporate Governance Committee. The Nominating and Corporate
Governance Committee has not generally delegated any of its duties and responsibilities to
subcommittees, but rather has taken such actions as a committee, as a whole.

In making recommendations to the Board of Directors regarding compensation to be paid to our non-
employee directors, the Nominating and Corporate Governance Committee considers fees and other
compensation paid to directors of comparable public companies, the number of board and committee
meetings that our directors are expected to attend, and other factors that may be relevant. In making final
decisions regarding non-employee director compensation, the Board of Directors considers the same
factors and the recommendation of the Nominating and Corporate Governance Committee.

Meetings. The Nominating and Corporate Governance Committee met four times during fiscal 2011.

Director Nominations Process

Pursuant to a Director Nominations Process adopted by the Board of Directors, in selecting nominees for
the Board of Directors, the Nominating and Corporate Governance Committee first determines whether
the incumbent directors are qualified to serve, and wish to continue to serve, on the Board. The
Nominating and Corporate Governance Committee believes that NTIC and its stockholders benefit from
the continued service of qualified incumbent directors because those directors have familiarity with and
insight into NTIC’s affairs that they have accumulated during their tenure with the company. Appropriate
continuity of Board membership also contributes to the Board’s ability to work as a collective body.
Accordingly, it is the practice of the Nominating and Corporate Governance Committee, in general, to re-
nominate an incumbent director if the director wishes to continue his or her service with the Board, the
director continues to satisfy the criteria for membership on the Board that the Nominating and Corporate
Governance Committee generally views as relevant and considers in deciding whether to re-nominate an
incumbent director or nominate a new director, the Nominating and Corporate Governance Committee
believes the director continues to make important contributions to the Board, and there are no special,
countervailing considerations against re-nomination of the director.

Pursuant to a Director Nominations Process adopted by the Board of Directors, in identifying and
evaluating new candidates for election to the Board, the Nominating and Corporate Governance
Committee solicits recommendations for nominees from persons whom the Nominating and Corporate
Governance Committee believes are likely to be familiar with qualified candidates having the
qualifications, skills and characteristics required for Board nominees from time to time. Such persons
may include members of the Board of Directors and our senior management and advisors to our company.
In addition, the Nominating and Corporate Governance Committee may engage a search firm to assist it
in identifying qualified candidates. In addition, from time to time, if appropriate, the Nominating and
Corporate Governance Committee may engage a search firm to assist it in identifying and evaluating
qualified candidates.

The Nominating and Corporate Governance Committee reviews and evaluates each candidate whom it
believes merits serious consideration, taking into account available information concerning the candidate,
any qualifications or criteria for Board membership established by the Nominating and Corporate
Governance Committee, the existing composition of the Board, and other factors that it deems relevant.
In conducting its review and evaluation, the Nominating and Corporate Governance Committee solicits
the views of our management, other Board members, and other individuals it believes may have insight

into a candidate. The Nominating and Corporate Governance Committee may designate one or more of
its members and/or other Board members to interview any proposed candidate.

The Nominating and Corporate Governance Committee will consider recommendations for the
nomination of directors submitted by our stockholders. For more information, see the information set
forth under the heading “Other Matters ─ Director Nominations for 2013 Annual Meeting.” The
Nominating and Corporate Governance Committee will evaluate candidates recommended by
stockholders in the same manner as those recommended as stated above.

There are no formal requirements or minimum qualifications that a candidate must meet in order for the
Nominating and Corporate Governance Committee to recommend the candidate to the Board. The
Nominating and Corporate Governance Committee believes that each nominee should be evaluated based
on his or her merits as an individual, taking into account the needs of our company and the Board of
Directors. However, in evaluating candidates, there are a number of criteria that the Nominating and
Corporate Governance Committee generally views as relevant and is likely to consider. Some of these
factors include whether the candidate is an “independent director” under the Listing Rules of the
NASDAQ Stock Market and meets any other applicable independence tests under the federal securities
laws and rules and regulations of the Securities and Exchange Commission; whether the candidate is
“financially literate” or “financially sophisticated” and otherwise meets the requirements for serving as a
member of an audit committee under the Listing Rules of the NASDAQ Stock Market; whether the
candidate is an “audit committee financial expert” under the federal securities laws and the rules and
regulations of the Securities and Exchange Commission; the needs of our company with respect to the
particular talents and experience of its directors; the personal and professional integrity and reputation of
the candidate; the candidate’s level of education and business experience; the candidate’s broad-based
business acumen; the candidate’s level of understanding of our business and its industry; the candidate’s
ability and willingness to devote adequate time to work of the Board and its committees; the fit of the
candidate’s skills and personality with those of other directors and potential directors in building a board
that is effective, collegial and responsive to the needs of our company; whether the candidate possesses
strategic thinking and a willingness to share ideas; the candidate’s diversity of experiences, expertise and
background; and the candidate’s ability to represent the interests of all stockholders and not a particular
interest group.

We do not have a formal stand-alone diversity policy in considering whether to recommend any director
nominee, including candidates recommended by stockholders. As discussed above, the Nominating and
Corporate Governance Committee will consider the factors described above, including the candidate’s
diversity of experiences, expertise and background. The Nominating and Corporate Governance
Committee seeks nominees with a broad diversity of experience, expertise and backgrounds. The
Nominating and Corporate Governance Committee does not assign specific weights to particular criteria
and no particular criterion is necessarily applicable to all prospective nominees. The Board of Directors
believes that the backgrounds and qualifications of directors, considered as a group, should provide a
significant mix of experience, knowledge and abilities that will allow the Board of Directors to fulfill its
responsibilities. While the Nominating and Corporate Governance Committee focuses on obtaining a
diversity of experiences, expertise and background on the Board of Directors rather than a diversity of
personal characteristics, it recognizes the desirability of racial, ethnic, gender, age and other personal
diversity and considers it an additional benefit when a new director can also increase the personal
diversity of the Board of Directors as a whole. The Nominating and Corporate Governance Committee
evaluates its effectiveness in achieving diversity in a broad sense on the Board of Directors through its
annual review of Board member composition prior to recommending nominees for election each year.

Board Oversight of Risk

The Board of Directors as a whole has responsibility for risk oversight, with more in-depth reviews of
certain areas of risk being conducted by the relevant Board committees that report on their deliberations
to the full Board of Directors. The oversight responsibility of the Board and its committees is enabled by
management reporting processes that are designed to provide information to the Board about the
identification, assessment and management of critical risks and management’s risk mitigation strategies.
The areas of risk that we focus on include operational, financial (accounting, credit, liquidity and tax),
legal, compensation, competitive, health, safety, environmental, economic, political and reputational
risks.

The standing committees of the Board of Directors oversee risks associated with their respective principal
areas of focus. The Audit Committee’s role includes a particular focus on the qualitative aspects of
financial reporting to stockholders, on our processes for the management of business and financial risk,
our financial reporting obligations and for compliance with significant applicable legal, ethical and
regulatory requirements. The Audit Committee, along with management, is also responsible for
developing and participating in a process for review of important financial and operating topics that
present potential significant risk to our company. The Compensation Committee is responsible for
overseeing risks and exposures associated with our executive compensation programs and arrangements
and management succession planning. The Nominating and Corporate Governance Committee oversees
risks relating to our corporate governance matters, director compensation programs and director
succession planning.

We recognize that a fundamental part of risk management is understanding not only the risks a company
faces and what steps management is taking to manage those risks, but also understanding what level of
risk is appropriate for the company. The involvement of the full Board of Directors each year in
establishing our key corporate business strategies and annual fiscal budget is a key part of the Board’s
assessment of management’s appetite for risk and also a determination of what constitutes an appropriate
level of risk for our company.

We believe our current Board leadership structure is appropriate and helps ensure proper risk oversight
for our company for a number of reasons, including: (1) general risk oversight by the full Board of
Directors in connection with its role in reviewing our key business strategies and monitoring on an on-
going basis the implementation of our key business strategies; (2) more detailed oversight by our standing
Board committees that are currently comprised of and chaired by our independent directors, and (3) the
focus of our Chairman of the Board on allocating appropriate Board agenda time for discussion regarding
the implementation of our key business strategies and specifically risk management.

Code of Ethics

The Board of Directors has adopted a Code of Ethics, which applies to all of our directors, executive
officers, including our Chief Executive Officer and Chief Financial Officer, and other employees, and
meets the requirements of the Securities and Exchange Commission and the NASDAQ Stock Market. A
copy of our Code of Ethics is available on the “Investor Relations—Corporate Governance” section of
our corporate website www.ntic.com.

Policy Regarding Director Attendance at Annual Meetings of Stockholders

It is the policy of the Board of Directors that directors standing for re-election should attend our annual
meeting of stockholders, if their schedules permit. A Board of Directors meeting is generally held on the
day following each annual meeting of stockholders. All of our directors attended the 2011 annual
meeting of stockholders.

Complaint Procedures

The Audit Committee has established procedures for the receipt, retention and treatment of complaints
received by NTIC regarding accounting, internal accounting controls or auditing matters, and the
submission by our employees, on a confidential and anonymous basis, of concerns regarding questionable
accounting or auditing matters. Our personnel with such concerns are encouraged to discuss their
concerns with our outside legal counsel, who in turn will be responsible for informing the Audit
Committee.

Process Regarding Stockholder Communications with Board of Directors

Stockholders may communicate with the Board of Directors of NTIC by sending correspondence,
addressed to our Corporate Secretary, Northern Technologies International Corporation, 4201 Woodland
Road, Circle Pines, Minnesota 55014, or mwolsfeld@ntic.com with an instruction to forward the
communication to a particular director. Our Corporate Secretary will receive the correspondence and
forward it to any individual director or directors to whom the communication is directed.

Summary of Cash and Other Compensation

DIRECTOR COMPENSATION
________________

The following table provides summary information concerning the compensation of each individual who
served as a director of our company during the fiscal year ended August 31, 2011, other than G. Patrick
Lynch, our President and Chief Executive Officer, who was not compensated separately for serving on
the Board of Directors during fiscal 2011. His compensation during fiscal 2011 for serving as an
executive officer of our company is set forth under the heading “Executive Compensation” included
elsewhere in this proxy statement.

DIRECTOR COMPENSATION – FISCAL 2011

Name
Pierre Chenu ...........................
Tilman B. Frank, M.D. (4). ......
Soo-Keong Koh ......................
Sunggyu Lee, Ph.D. ...............
Ramani Narayan, Ph.D. ..........
Richard J. Nigon ....................
Mark J. Stone .........................

Fees Earned or
Paid in Cash ($)

37,000
4,500
20,000
18,000
18,000
26,750
26,250

Option
Awards ($)(1)(2)
21,600
$
35,994
14,400
14,400
14,400
14,400
14,400

All Other

Compensation ($)(3) Total ($)
$ 58,600
40,494
34,400
32,400
138,024
41,150
40,650

0
0
0
0
105,624
0
0

(1) The amounts in this column do not reflect compensation actually received by the directors nor do they reflect
the actual value that will be recognized by the directors. Instead, the amounts reflect the grant date fair value
for option grants made by us in fiscal 2011, calculated in accordance with Financial Accounting Standards
Board (FASB) Accounting Standards Codification (ASC) Topic 718 and, in the case of Dr. Tilman, an
additional $21,594 in incremental fair value for an option modification effected in January 2011 in connection
with the termination of his service on the Board of Directors. On September 1, 2010, each director, other than
Mr. Lynch, received a stock option to purchase 4,000 shares of our common stock at an exercise price of $9.76
per share granted under the Northern Technologies International Corporation 2007 Stock Incentive Plan, the
material terms of which are described in more detail under the heading “Executive Compensation —Stock
Incentive Plan.” Such options vested in full on September 1, 2011 and will expire on August 31, 2015 or earlier
in the case of a director whose service as a director is terminated prior to such date. In addition, on September
1, 2010, Mr. Chenu received an additional stock option to purchase 2,000 shares of our common stock in
consideration for his service as Chairman of the Board. The terms of this stock option are identical to the other
director stock options granted on that date. See “—Non-Employee Director Compensation Program—Stock
Options.” The grant date fair value and incremental fair value associated with these awards and as calculated in
accordance with FASB ASC Topic 718 is determined based on our Black-Scholes option pricing model. The
grant date value per share for the options granted on September 1, 2010 was $3.60 and was determined using the
following specific assumptions: risk free interest rate: 1.31%; expected life: 5.0 years; expected volatility:
49.2%; and expected dividend yield: 2.0%. The incremental fair value for the option modification in January
2011 was determined using the following specific assumptions: risk free interest rate: 1.31%; expected life: 5.0
years; expected volatility: 49.2%; and expected dividend yield: 2.0%.

(2) The table below provides information regarding the aggregate number of options to purchase shares of our
common stock outstanding at August 31, 2011 and held by each of the directors listed in the above Director
Compensation table. Note that because of the grant date, neither the Director Compensation table above nor the
table below reflects option grants on September 1, 2011. See “—Non-Employee Director Compensation
Program—Stock Options.”

Name
Pierre Chenu .....................
Tilman B. Frank, M.D. .....
Soo-Keong Koh ................
Sunggyu Lee, Ph.D. ..........
Ramani Narayan, Ph.D. ....
Richard J. Nigon ...............
Mark J. Stone ....................

Aggregate Number
Of Securities
Underlying Options

20,000
—
12,666
14,000
14,000
6,333
14,000

Exercisable/
Unexercisable
14,000/6,000
—
8,665/4,001
9,999/4,001
9,999/4,001
2,111/4,222
9,999/4,001

Exercise
Price(s)

Expiration
Date(s)

$ 8.57 – 12.84

8/31/2012 – 8/31/2015

—

7.75 – 12.84
8.57 – 12.84
8.57 – 12.84
9.76 – 10.20
8.57 – 12.84

—

5/1/2013 – 8/31/2015
8/31/2012 – 8/31/2015
8/31/2012 – 8/31/2015
2/1/2015 – 8/31/2015
8/31/2012 – 8/31/2015

(3) We do not provide perquisites or other personal benefits to our directors. The amounts reflected for each of Dr.
Lee and Dr. Narayan reflect consulting fees paid during the fiscal year ended August 31, 2011 as described in
more detail below under the heading “—Consulting Arrangements.”

(4) Dr. Frank did not stand for re-election as a director at the 2011 Annual Meeting of Stockholders and thus served

as a director until the date of our 2011 Annual Meeting of Stockholders, January 21, 2011.

Non-Employee Director Compensation Program

Overview. Our non-employee directors for purposes of our director compensation program currently
consist of Pierre Chenu, Soo-Keong Koh, Sunggyu Lee, Ph.D., Ramani Narayan, Ph.D., Richard J. Nigon
and Mark J. Stone. During the fiscal year ended August 31, 2011, our former director, Tilman B. Frank,
M.D., also received compensation under our director compensation program.

We use a combination of cash and long-term equity-based incentive compensation in the form of annual
stock option grants to attract and retain qualified candidates to serve on the Board of Directors. In setting
non-employee director compensation, we follow the process and procedures described under the heading
“Corporate Governance—Nominating and Corporate Governance Committee—Processes and Procedures
for the Determination of Director Compensation.”

Cash Retainers and Meeting Fees. Each of our non-employee directors receives annual cash retainers and
meeting fees. The following table sets forth the annual cash retainers paid to our non-employee directors:

Description
Board Member ..........................................................................................................................
Chairman of the Board ..............................................................................................................
Audit Committee Chair .............................................................................................................
Audit Committee Member (not including Chair) ......................................................................

Annual Cash
Retainer
10,000
15,000
5,000
4,000

The annual cash retainers are paid in the beginning of each calendar quarter. For example, the retainers
paid in the beginning of the first calendar quarter are for the period from January 1 through March 31.

Each of our non-employee directors also receives $1,000 for each Board, Board committee and strategy
review meeting attended. No director, however, earns more than $1,000 per day in Board, Board
committee and strategy review meeting fees.

Stock Options. Each of our non-employee directors is automatically granted a five-year non-qualified
option to purchase 4,000 shares of our common stock on the first day of each fiscal year in consideration
for his service as a director of NTIC and the Chairman of the Board is automatically granted an additional
five-year non-qualified option to purchase 2,000 shares of our common stock on the first day of each
fiscal year in consideration for his services as Chairman. In addition, each new non-employee director is

automatically granted a five-year non-qualified option to purchase a pro rata portion of 4,000 shares of
our common stock calculated by dividing the number of months remaining in the fiscal year at the time of
election or appointment by 12 on the date the director is first elected or appointed as a director of NTIC.
Each automatically granted option becomes exercisable, on a cumulative basis, on the one-year
anniversary of the date of its grant. The vesting of director options was changed during fiscal 2011 on a
prospective basis from a three-year annual vesting to a one-year cliff vesting to conform the vesting to
prevalent market practices and to reflect the fact that directors serve for one-year terms of service. The
exercise price of such options is equal to the fair market value of a share of our common stock on the date
of grant.

Under the terms of our stock incentive plan, unless otherwise provided in a separate agreement, if a
director’s service with our company terminates for any reason, the unvested portion of the option will
immediately terminate and the director’s right to exercise the then vested portion of the option will:

•

immediately terminate if the director’s service relationship with our company terminated for
“cause”;

continue for a period of 12 months if the director’s service relationship with our company
terminates as a result of the director’s death or disability; or

continue for a period of three months if the director’s service relationship with our company
terminates for any reason, other than for cause or upon death or disability.

In connection with the termination of his service as a director of our company and in recognition of his
past service as a director, the Board of Directors amended Dr. Frank’s options to accelerate the vesting of
his options to the extent they had not previously vested as of his termination date.

We refer you to note (1) to the Director Compensation Table above for a summary of all option grants to
our non-employee directors during the fiscal year ended August 31, 2011 and note (2) to the Director
Compensation Table for a summary of all options to purchase shares of our common stock held by our
non-employee directors as of August 31, 2011. Subsequent to our fiscal year ended August 31, 2011 and
pursuant to the terms of our director compensation program, each of our non-employee directors was
automatically granted a five-year non-qualified option to purchase 4,000 shares of our common stock at
an exercise price of $16.45 per share, and Mr. Chenu, as Chairman of the Board, was automatically
granted an additional five-year non-qualified option to purchase 2,000 shares of our common stock.

Reimbursement of Expenses. All of our directors are reimbursed for travel expenses for attending
meetings and other miscellaneous out-of-pocket expenses incurred in performing their Board functions.

Consulting Arrangements

We paid consulting fees to Bioplastic Polymers LLC which is owned by Ramani Narayan, Ph.D. in the
aggregate amount of $100,000 and royalty fees in an aggregate amount of $5,624 during the fiscal year
ended August 31, 2011. The consulting services rendered by Bioplastic Polymers LLC related to research
and development associated with various new technologies. The royalty fees were paid pursuant to an
oral agreement pursuant to which we have agreed to pay Bioplastic Polymers LLC and Dr. Narayan in
consideration of the transfer and assignment by Biopolymer Plastics LLC and Dr. Narayan of certain
biodegradable polymer technology to us, an aggregate of three percent of the gross margin on any net
sales of products incorporating the biodegradable polymer technology transferred to us by Bioplastic
Polymers LLC and Dr. Narayan for a period of 10 years, provided that if a patent for or with respect to
biodegradable polymer technology is issued before the expiration of such 10 year period, then until the

expiration of such patent we will pay to Bioplastic Polymers LLC and Dr. Narayan an aggregate of three
percent of the biodegradable polymer technology gross margin attributable to such patent.

In May 2009, we entered into a technology transfer and consulting agreement with Sunggyu Lee, Ph.D.
pursuant to which we agreed to pay Dr. Lee $30,000 payable in six $5,000 monthly installments in
exchange for an 18-month option to purchase certain technology developed by Dr. Lee. If we decide to
exercise the option, Dr. Lee has agreed to transfer to us the technology and to provide us consulting
services related to the further development and commercialization of the technology in exchange for an
additional $120,000 payable in eight $15,000 monthly installments. If we commercialize any products or
services that incorporate the transferred technology or any other new related inventions developed by Dr.
Lee during the term of the agreement and transferred to us under the agreement, we have agreed to pay
Dr. Lee a royalty of three percent of any earnings before interest and taxes to us generated from the
commercial exploitation by us of any products or services that incorporate the technology and/or
inventions. Such royalties will be required to be paid until the earlier of the last to expire of any
applicable patents covering such technology or inventions, the invalidity of such patents, or if there are no
issued patents covering such technology and inventions, 10 years from the first date of commercial sale or
license. The agreement may be terminated by NTIC if, at any stage, NTIC determines in its sole
discretion not to proceed with the project. No fees were paid to Dr. Lee under this agreement during the
fiscal year ended August 31, 2011.

Indemnification Agreements

We have entered into agreements with all of our directors under which we are required to indemnify them
against expenses, judgments, penalties, fines, settlements and other amounts actually and reasonably
incurred, including expenses of a derivative action, in connection with an actual or threatened proceeding
if any of them may be made a party because he or she is or was one of our directors. We will be obligated
to pay these amounts only if the director acted in good faith and in a manner that he or she reasonably
believed to be in or not opposed to our best interests. With respect to any criminal proceeding, we will be
obligated to pay these amounts only if the director had no reasonable cause to believe his or her conduct
was unlawful. The indemnification agreements also set forth procedures that will apply in the event of a
claim for indemnification.

EXECUTIVE COMPENSATION
________________

Summary of Cash and Other Compensation

The following table provides summary information concerning all compensation awarded to, earned by or
paid to G. Patrick Lynch, our President and Chief Executive Officer who serves as our principal executive
officer, and Matthew C. Wolsfeld, our Chief Financial Officer and Corporate Secretary who serves as our
principal financial officer. Mr. Lynch and Mr. Wolsfeld are the only two individuals who have been
designated by our Board of Directors as “executive officers” of our company. We refer to these
individuals in this proxy statement as our “named executive officers” or “executives.”

SUMMARY COMPENSATION TABLE

Fiscal
Year
2011
2010

Salary
$ 230,000
209,923

Bonus(1)
$ 116,882
59,293

Stock
Awards(2)
$ 116,882
59,293

Option
Awards(3)
$ 0
34,560

All Other
Compensation(4)
$ 12,220
10,758

Total
$ 475,984
373,827

2011
2010

170,000
154,865

88,606
44,992

0
25,920

11,839
7,988

359,051
278,757

Name and Principal Position
G. Patrick Lynch .......................
President and Chief Executive
Officer

Matthew C. Wolsfeld ................
Chief Financial Officer and
Corporate Secretary

(1) Represents discretionary cash bonuses earned in fiscal year as indicated, but actually paid to named executive
officer in the following fiscal year. Annually, prior to the November meeting of the Board of Directors, the
Compensation Committee recommends annual incentive compensation to be paid to our executive officers in
cash and/or shares of our common stock. The Board of Directors then considers and, if it deems appropriate,
approves the amount and manner of payment of the annual incentive compensation. The bonuses earned for
fiscal 2011 and fiscal 2010 were paid in cash and shares of our common stock as determined by the Board of
Directors, upon recommendation of the Compensation Committee. The amounts reflected in the column entitled
“Bonus” reflect the cash amount of bonus received by each of the officers during fiscal 2012 and fiscal 2011 in
consideration for their fiscal 2011 and fiscal 2010 performance, respectively. The following executives also
received the following number of shares of NTIC common stock as part of their fiscal 2011 and fiscal 2010
bonuses: Mr. Lynch (7,985 and 4,208 shares, respectively) and Mr. Wolsfeld (6,053 and 3,193 shares,
respectively). The number of shares was determined by dividing one-half of the amounts of the total stock
bonus to be awarded to the individual by the closing sale price of a share of NTIC common stock, as reported on
the NASDAQ Global Market, on the date the Board of Directors determined the amount of the bonus. We refer
you to the information under the heading “—Executive Compensation Program—Annual Incentive
Compensation” for a discussion of the factors taken into consideration by the Board of Directors in determining
the amount of bonus paid to each named executive officer.

(2) As described above in note (1), the following named executive officers received the following number of shares
of NTIC common stock in connection with their annual bonuses for fiscal 2011 and fiscal 2010: Mr. Lynch
(7,985 and 4,208 shares, respectively); and Mr. Wolsfeld (6,053 and 3,193 shares, respectively). The amounts
reflected in the column entitled “Stock Awards” for each officer reflect the aggregate grant date fair value for
stock awards granted to such officer computed in accordance with FASB ASC Topic 718. The grant date fair
value is determined based on the closing sale price of our common stock on the date of grant.

(3) The amounts in this column do not reflect compensation actually received by the executives nor do they reflect
the actual value that will be recognized by the executives. Instead, the amounts reflect the grant date fair value
for option grants made by us in fiscal 2011 and fiscal 2010, calculated in accordance with FASB ASC Topic
718. On November 20, 2009, each of the named executive officers was granted stock options in part to retain
and motivate such executives since neither of them received annual bonuses for fiscal 2009. Because of the
grant date of such option awards, the value of such awards is reflected in fiscal 2010. The grant date fair value

is determined based on our Black-Scholes option pricing model. The grant date value per share was $2.88 and
was determined using the following specific assumptions: risk free interest rate: 2.33%; expected life: 5.0
years; expected volatility: 48.26%; and expected dividend yield: 0.0%.

(4) The amounts shown in the column entitled “All Other Compensation” for fiscal 2011 include the following with

respect to each named executive officer:

Name
G. Patrick Lynch ........................................................
Matthew C. Wolsfeld .................................................

401(k) Match
$ 8,808
8,670

Personal Use
of Auto
$ 3,411
3,168

Our Executive Compensation Program

Our executive compensation program for the fiscal year ended August 31, 2011 consisted of:

• Base salary;
• Annual incentive compensation, paid in the form of both cash and shares of our common

stock; and

• All other compensation.

Base Salary. We provide a base salary for our named executive officers, which, unlike some of the other
elements of our executive compensation program, is not subject to company or individual performance
risk. We recognize the need for most executives to receive at least a portion of their total compensation in
the form of a guaranteed base salary that is paid in cash regularly throughout the year to support their
standard of living.

We initially fix base salaries for our executives at a level that we believe enables us to hire and retain
them in a competitive environment and to reward satisfactory individual performance and a satisfactory
level of contribution to our overall business objectives. The Compensation Committee reviews base
salaries for our named executive officers each year beginning in July and generally recommends to the
Board of Directors any increases for the following fiscal year in July or August or as soon as practicable
thereafter. Regardless of when the final decision regarding base salaries for a fiscal year is made by the
Board of Directors, any increases in base salaries are effective as of September 1 of that year, which
depending upon the timing of the final decision could result in a retroactive payment to the executive
shortly after the final decision is made.

The Compensation Committee’s recommendations to the Board of Directors regarding the base salaries of
our named executive officers are based on a number of factors, including: the executive’s level of
responsibility, prior experience and base salary for the prior year, the skills and experiences required by
the position, length of service with our company, past individual performance, cost of living increases and
other considerations the Compensation Committee deems relevant. The Compensation Committee also
recognizes that in addition to the typical responsibilities and duties held by our executives by virtue of
their positions, our executives due to the small number of our employees, often possess additional
responsibilities and perform additional duties that would be typically delegated to others in most
organizations with additional personnel and resources.

We historically have granted our executive officers a mid-single digit percentage increase in their base
salary each fiscal year, although the percentage may be higher or lower if the responsibilities of the
executive increased or decreased during the year. We did not implement any base salary increases during
fiscal 2009 but rather in an effort to save costs at the time temporarily reduced the base salaries of our
executives and other officers by approximately 15 percent on average. In January 2010, when we

eliminated the cost reductions in base salary instituted during the prior fiscal year, we also implemented
base salary increases.

Annualized base salary rates for fiscal 2009, 2010 and 2011 for our named executive officers were as
follows:

Name
G. Patrick Lynch .............
Matthew C. Wolsfeld ......
__________________

Fiscal
2009(1)
$221,000/189,000
163,000/139,500

Fiscal
2010(2)
$221,000/189,000
163,000/139,500

% Change
From Fiscal
2009
0.0%/0.0%
0.0%/0.0%

Fiscal
2011
$230,000
170,000

% Change
From Fiscal
2010(3)

4.1%
4.3%

(1)

(2)

(3)

Reflects fiscal 2009 base salary prior to temporary 15 percent cost reduction implemented in January 2009
and after such reduction.

Reflects fiscal 2010 base salary after elimination of temporary 15 percent cost reduction in January 2010
and base salary reflecting the temporary 15 percent cost reduction.

Reflects the percentage increase from the fiscal 2010 base salary after elimination of the temporary 15
percent cost reduction.

Mr. Lynch’s base salary for fiscal 2012 is $257,600 and Mr. Wolsfeld’s base salary for fiscal 2012 is
$190,400, representing base salary increases of 12 percent over their respective base salaries for fiscal
2010.

Annual Incentive Compensation. In addition to base compensation, we provide our named executive
officers the opportunity to earn annual incentive compensation based on the achievement of certain
company and individual related performance goals. Our annual bonus program directly aligns the
interests of our 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 our 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 of our annual bonus plan program for
fiscal 2011:

• The total amount available under the bonus plan was up to 25 percent of our earnings before

interest, taxes and other income (EBITOI);

• The total amount available under the bonus plan was $0 if EBITOI, as adjusted to take into

account amounts to be paid under the bonus plan, fell below 70 percent of target EBITOI; and

• The payment of bonuses under the plan to executive officer participants was made in both
cash and shares of NTIC common stock, the exact amount and percentages of which was
determined by the Board of Directors, upon recommendation of the Compensation
Committee.

Mr. Lynch received a bonus of $233,764 for fiscal 2011, $116,882 of which was paid in cash and
$116,882 of which was paid in 7,985 shares of our common stock issued as a stock bonus under our stock
incentive plan. Mr. Wolsfeld received a bonus of $177,212 for fiscal 2011, $88,606 of which was paid in
cash and $88,606 of which was paid in 6,053 shares of our common stock issued as a stock bonus under
our stock incentive plan. In determining the amount of individual bonuses for fiscal 2011, the Board and
Compensation Committee considered each individual’s allocation percentage of the total amount

available under the bonus plan, which allocation percentage was based on the individual’s annual base
salary and his or her position and level of responsibility within the company. Mr. Lynch’s individual
allocation percentage for fiscal 2011 was 16.8 percent and Mr. Wolsfeld’s individual allocation
percentage for fiscal 2011 was 12.4 percent. Individual bonus payouts were then determined primarily
based upon our actual EBITOI for fiscal 2011 compared to a pre-established target EBITOI for fiscal
2011 and to a lesser extent (25 percent of the payout, in the case of each of Mr. Lynch and Mr. Wolsfeld)
based upon such executive’s achievement of certain pre-established individual performance objectives.
Mr. Lynch and Mr. Wolsfeld’s pre-established individual performance objectives for fiscal 2011 related
primarily to operational objectives and long-term strategic initiatives.

Under the annual bonus plan for fiscal 2012, the total amount available under the bonus plan, as in past
years, will be up to 25 percent of our EBITOI and will be $0 if EBITOI, as adjusted to take into account
amounts to be paid under the bonus plan, is below 70 percent of a pre-established target EBITOI for fiscal
2012. Each plan participant’s percentage of the overall bonus pool will be based upon the number of plan
participants, the individual’s annual base salary and the individual’s position and level of responsibility
within the company. In the case of Mr. Lynch and Mr. Wolsfeld, 75 percent of the amount of their
individual bonus payout will be determined based upon our actual EBITOI for fiscal 2012 compared to a
pre-established target EBITOI for fiscal 2012 and 25 percent of their individual payout will be determined
based upon their achievement of certain pre-established individual performance objectives. The payment
of bonuses under the plan are discretionary and may be paid to executive participants in both cash and
shares of our common stock in the form of stock bonuses under our stock incentive plan, the exact
amount and percentages of which will be determined by the Company’s Board of Directors, upon
recommendation of the Compensation Committee, after the completion of the Company’s consolidated
financial statements for fiscal 2012.

Although we do not have any stock retention or ownership guidelines, the Board of Directors encourages
our executives to have a financial stake in our company in order to align the interests of our stockholders
and management. Therefore, we typically provide for a portion of our annual incentive compensation to
be paid to our executives in the form of stock bonuses. We believe that stock bonuses are an important
part of our overall compensation program. We believe that stock bonuses align the interests of our
executives with the interests of our stockholders and long-term value creation and enable our executives
to achieve meaningful equity ownership in our company. Through the grant of stock bonuses, we seek to
align the long-term interests of our executives with the long-term interests of our stockholders by creating
a strong and direct linkage between compensation and long-term stockholder return. When our
executives deliver returns to our stockholders, in the form of increases in our stock price or otherwise,
stock bonuses permit an increase in their compensation. We believe stock bonuses also may enable us to
attract, retain and motivate our executives by maintaining competitive levels of total compensation.

All Other Compensation. It is generally our policy not to extend significant perquisites to our executives
that are not available to our employees generally. The only significant perquisite that we provide to our
named executive officers is the personal use of a company owned vehicle. Our executives also receive
benefits, which are also received by our other employees, including participation in the Northern
Technologies International Corporation 401(k) Plan and health, dental and life insurance benefits. Under
the 401(k) plan, all eligible participants, including our named executive officers, may voluntarily request
that we reduce his or her pre-tax compensation by up to 10 percent (subject to certain special limitations)
and contribute such amounts to a trust. We typically contribute an amount equal to 50 percent of the first
seven percent of the amount that each participant contributed under this plan. We do not provide pension
arrangements or post-retirement health coverage for our executives or employees. We also do not provide
any nonqualified defined contribution or other deferred compensation plans.

Outstanding Equity Awards at Fiscal Year End

The following table provides information regarding stock options for each of our named executive
officers that remained outstanding at August 31, 2011. We did not have any equity incentive plan awards
or stock awards outstanding at August 31, 2011.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END—FISCAL 2011

Name
G. Patrick Lynch ....................

Matthew C. Wolsfeld .............

Number of Securities
Underlying Unexercised
Options (#)
Exercisable
4,000
3,540
3,000
12,950

Option Awards
Number of Securities
Underlying Unexercised
Options (#)
Unexercisable(1)
8,000(2)
0
6,000(2)
0

Option
Exercise
Price ($)
$ 7.65
9.95
7.65
9.95

Option
Expiration Date
11/19/2014
11/16/2012
11/19/ 2014
11/16/2012

(1) All options described in this table were granted under the 2007 plan. Under the 2007 plan, upon the occurrence
of a change in control, the unvested and unexercisable options will be accelerated and become fully vested and
immediately exercisable as of the date of the change in control. For more information, we refer you to the
discussion below under the heading “—Stock Incentive Plan.”

(2) These options vest over a three-year period, with one-third of the underlying shares vesting on each of

November 20, 2010, 2011 and 2012 so long as the individual remains an employee of NTIC as of such date.

Stock Incentive Plan

We have only one stock incentive plan under which stock options are currently outstanding and future
stock incentive awards may be granted – the Northern Technologies International Corporation Amended
and Restated 2007 Stock Incentive Plan. Under the terms of the 2007 plan, our named executive officers,
in addition to other employees and individuals, are eligible to receive stock-based compensation awards,
such as stock options, stock appreciation rights, restricted stock awards, stock bonuses and performance
awards. To date, only incentive and non-statutory stock options and stock bonuses have been granted
under the plan. The plan contains both an overall limit on the number of shares of our common stock that
may be issued, as well as individual and other grant limits.

Incentive stock options must be granted with a per share exercise price equal to at least the fair market
value of a share of our common stock on the date of grant. For purposes of the plan, the fair market value
of our common stock is the mean between the reported high and low sale price of our common stock, as
reported by the NASDAQ Global Market. We generally set the per share exercise price of all stock
options granted under the plan at an amount equal to the fair market value of a share of our common stock
on the date of grant.

Except in connection with certain specified changes in our corporate structure or shares, the Board of
Directors or Compensation Committee may not, without prior approval of our stockholders, seek to effect
any re-pricing of any previously granted, “underwater” option or stock appreciation right by amending or
modifying the terms of the underwater option or stock appreciation right to lower the exercise price,
cancelling the underwater option or stock appreciation right in exchange for cash, replacement options or
stock appreciation rights having a lower exercise price, or other incentive awards, or repurchasing the
underwater options or stock appreciation rights and granting new incentive awards under the plan. For
purposes of the plan, an option or stock appreciation right is deemed to be “underwater” at any time when
the fair market value of our common stock is less than the exercise price.

We generally provide for the vesting of stock options in equal annual installments over a three-year
period commencing on the one-year anniversary of the date of grant for employees and in full on the one-
year anniversary of the date of grant for directors and for option terms of five years.

Optionees may pay the exercise price of stock options in cash, except that the Compensation Committee
may allow payment to be made (in whole or in part) by (1) using a broker-assisted cashless exercise
procedure pursuant to which the optionee, upon exercise of an option, irrevocably instructs a broker or
dealer to sell a sufficient number of shares of our common stock or loan a sufficient amount of money to
pay all or a portion of the exercise price of the option and/or any related withholding tax obligations and
remit such sums to us and directs us to deliver stock certificates to be issued upon such exercise directly
to such broker or dealer; or (2) using a cashless exercise procedure pursuant to which the optionee
surrenders to us shares of our common stock either underlying the option or that are otherwise held by the
optionee.

Under the terms of the plan, unless otherwise provided in a separate agreement, if a named executive
officer’s employment or service with our company terminates for any reason, the unvested portion of the
option will immediately terminate and the executive’s right to exercise the then vested portion of the
option will:

•

immediately terminate if the executive’s employment or service relationship with our
company terminated for “cause”;

continue for a period of 12 months if the executive’s employment or service relationship with
our company terminates as a result of the executive’s death, disability or retirement; or

continue for a period of three months if the executive’s employment or service relationship
with our company terminates for any reason, other than for cause or upon death, disability or
retirement.

As set forth in the plan, the term “cause” is as defined in any employment or other agreement or policy
applicable to the named executive officer or, if no such agreement or policy exists, means (i) dishonesty,
fraud, misrepresentation, embezzlement or other act of dishonesty with respect to us or any subsidiary,
(ii) any unlawful or criminal activity of a serious nature, (iii) any intentional and deliberate breach of a
duty or duties that, individually or in the aggregate, are material in relation to the overall duties, or
(iv) any material breach of any employment, service, confidentiality or non-compete agreement entered
into with us or any subsidiary.

Under the terms of the plan, if a participant is determined by the committee to have taken any action that
would constitute “cause” or an “adverse action” during or within one year after the termination of the
participant’s employment or other service with our company, all rights of the participant under the plan
and any agreements evidencing an award then held by the participant will terminate and be forfeited and
the committee may require the participant to surrender and return to us any shares received, and/or to
disgorge any profits or any other economic value made or realized by the participant in connection with
any awards or any shares issued upon the exercise or vesting of any awards during or within one year
after the termination of the participant’s employment or other service. Additionally, as applicable, we
may defer the exercise of any option or stock appreciation right for a period of up to six months after
receipt of a participant’s written notice of exercise or the issuance of share certificates upon the vesting of
any incentive award for a period of up to six months after the date of such vesting in order for the
committee to make any determination as to the existence of cause or an adverse action. An “adverse
action” includes any of the following actions or conduct that the committee determines to be injurious,
detrimental, prejudicial or adverse to our interests: (i) disclosing any confidential information of our

company or any subsidiary to any person not authorized to receive it; (ii) engaging, directly or indirectly,
in any commercial activity that in the judgment of the committee competes with our business or the
business of any of our subsidiaries; or (iii) interfering with our relationships or the relationships of our
subsidiaries and our and their respective employees, independent contractors, customers, prospective
customers and vendors.

As described in more detail under the heading “—Post-Termination Severance and Change in Control
Arrangements” if there is a change in control of our company, then, under the terms of agreements
evidencing options granted to our named executive officers and other employees under the plan, all
outstanding options will become immediately exercisable in full and will remain exercisable for the
remainder of their terms, regardless of whether the executive to whom such options have been granted
remains in the employ or service of us or any of our subsidiaries.

Post-Termination Severance and Change in Control Arrangements

We recently entered into an employment agreement with each of G. Patrick Lynch, NTIC’s President and
Chief Executive Officer, and Matthew C. Wolsfeld, NTIC’s Chief Financial Officer and Corporate
Secretary. Although each of the executive’s employment with our company remains “at will,” the
employment agreements provide each of the executives certain severance benefits in the event the
executive’s employment is terminated by us without “cause” or by the executive for “good reason” and
the executive executes and does not revoke a separation agreement and a release of all claims.

If an executive’s employment is terminated by us without “cause” or by the executive for “good reason,”
in addition to any accrued but unpaid salary and benefits through the date of termination, the executive
will be entitled to a severance cash payment from us in an amount equal to two times (one and one-half
times, in the case of Mr. Wolsfeld) the executive’s average total annual compensation for the two most
recently completed fiscal years, plus a pro rata portion of the target bonus that the executive otherwise
would have been eligible to receive under our bonus plan for the fiscal year during which the executive’s
employment is terminated, with such pro rata portion based on the number of complete months during the
fiscal year that the executive was employed with our company. The severance payment will be paid in
several installments in the form of salary continuation in accordance with our normal payroll practices
over a 24-month period (18-month period, in the case of Mr. Wolsfeld). If, however, the termination
event occurs within 24 months after a change in control of our, the severance payment will be paid in one
lump sum. If the executive is eligible for and timely elects continued coverage under our group medical
plan, group dental plan and/or group vision plan pursuant to Section 4980B of the Internal Revenue Code
of 1986, as amended (“COBRA”), for each of the first 18 months of the COBRA continuation period, we
also will reimburse the executive in an amount equal to the difference between the amount the executive
pays for such COBRA continuation coverage each month and the amount paid by a full-time active
employee each month for the same level of coverage elected by the executive. In addition, all outstanding
and unvested options to purchase shares of our common stock and other stock incentive awards granted to
the executive under our stock incentive plan will become immediately vested and exercisable.

agreement prohibiting the executive’s continued employment with our company. “Good reason” is
defined as (i) a material diminution in the executive’s authority, duties or responsibilities; (ii) a material
diminution in the executive’s annual base salary; (iii) a material change in the geographic location at
which we require the executive to provide services, except for travel reasonably required in the
performance of the executive’s responsibilities; or (iv) any action or inaction that constitutes a material
breach by us of the employment agreement. “Change in control” has the meaning assigned to such term
in our stock incentive plan as in effect from time to time to the extent such change in control is a “change
of control event” as defined under Code Section 409A and applicable Internal Revenue Service
regulations. Under the terms of our stock incentive plan, a “change in control” means:

•

the sale, lease, exchange or other transfer of all or substantially all of our assets to a corporation
that is not controlled by us;

the approval by our stockholders of any plan or proposal for our liquidation or dissolution;

certain merger or business combination transactions;

• more than 40 percent of our outstanding voting shares are acquired by any person or group of
persons who did not own any shares of common stock on the effective date of the plan; and

•

certain changes in the composition of our Board of Directors.

If a change in control of our company had occurred on August 31, 2011, the number of options indicated
in the table below held by each of our named executive officers would have been automatically
accelerated and exercisable. The estimated value of the automatic acceleration of the vesting of unvested
stock options held by a named executive officer as of August 31, 2011 is also indicated in the table below
and is based on the difference between: (i) the market price of the shares of our common stock underlying
the unvested stock options held by such officer as of August 31, 2011 (based on the closing sale price of
our common stock on August 31, 2011 — $16.45), and (ii) the exercise price of the options.

Executive Officer
G. Patrick Lynch .................
Matthew C. Wolsfeld ..........

Number of Unvested Options
Subject to Automatic Acceleration
8,000
6,000

Estimated Value of Automatic
Acceleration of Vesting
70,400
52,800

If the employment agreements described above were in effect as of August 31, 2011, our named executive
officers would have been entitled to the following compensation and benefits in connection with a
termination of their employment as of such date depending upon the applicable triggering event:

Executive Officer
G. Patrick Lynch............

Triggering Event

Type of Payment

Cash severance(1)
Benefits continuation(2)
Pro rata target bonus(3)
Equity acceleration(4)
Total:

Voluntary/
For Cause
Termination
$ 0
0
0
0
0

Involuntary
Termination
without
Cause
$ 849,811
17,543
242,033
70,400
1,179,787

Qualifying
Change in
Control
Termination
$ 849,811
17,543
242,033
70,400
1,179,787

Death
0
0
242,033
0
242,033

Disability
0
0
242,033
0
242,033

Executive Officer
Matthew C. Wolsfeld ....

Triggering Event

Type of Payment

Cash severance(1)
Benefits continuation(2)
Pro rata target bonus(3)
Equity acceleration(4)
Total:

Voluntary/
For Cause
Termination
$ 0
0
0
0
0

Involuntary
Termination
without
Cause
$ 478,356
22,476
178,894
52,800
732,526

Qualifying
Change in
Control
Termination
$ 478,356
22,476
178,894
52,800
732,526

Death
0
0
178,894
0
178,894

Disability
0
0
178,894
0
178,894

(1)

(2)

(3)

(4)

Includes the value of two times (one and one-half times, in the case of Mr. Wolsfeld) the executive’s
average total annual compensation for the two most recently completed fiscal years.

Includes the value of medical, dental and vision benefit continuation for each executive and their family for
18 months following the executive’s termination.

Includes value of full target bonus for the entire year in light of assumed termination date of August 31,
2011, the last day of the fiscal year.

Includes the value of acceleration of all unvested shares that are subject to options, based on a closing sale
price of $16.45 per share as of August 31, 2011.

Indemnification Agreements

We have entered into agreements with all of our executive officers under which we are required to
indemnify them against expenses, judgments, penalties, fines, settlements and other amounts actually and
reasonably incurred, including expenses of a derivative action, in connection with an actual or threatened
proceeding if any of them may be made a party because he is or was one of our executive officers. We
will be obligated to pay these amounts only if the executive officer acted in good faith and in a manner
that he or she reasonably believed to be in or not opposed to our best interests. With respect to any
criminal proceeding, we will be obligated to pay these amounts only if the executive officer had no
reasonable cause to believe his conduct was unlawful. The indemnification agreements also set forth
procedures that will apply in the event of a claim for indemnification.

RELATED PERSON RELATIONSHIPS AND TRANSACTIONS
________________

Please see “Director Compensation” and “Executive Compensation” for information regarding consulting
arrangements we have with two of our current directors and the other compensation arrangements with
our directors and executive officers during fiscal 2011.

PROPOSAL TWO — RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

Selection of Independent Registered Public Accounting Firm

_________________

The Audit Committee of the Board of Directors has selected Baker Tilly Virchow Krause, LLP to serve as
our independent registered public accounting firm for the fiscal year ending August 31, 2012. Although it
is not required to do so, the Board of Directors is asking our stockholders to ratify the Audit Committee’s
selection of Baker Tilly Virchow Krause, LLP. If our stockholders do not ratify the selection of Baker
Tilly Virchow Krause, LLP, another independent registered public accounting firm will be considered by
the Audit Committee of the Board of Directors. Even if the selection is ratified by our stockholders, the
Audit Committee may in its discretion change the appointment at any time during the year, if it determines
that such a change would be in the best interests of our company and its stockholders.

Representatives of Baker Tilly Virchow Krause, LLP will be present at the Annual Meeting to respond to
appropriate questions. They will also have the opportunity to make a statement if they wish to do so.

Audit, Audit-Related, Tax and Other Fees

The following table presents the aggregate fees billed to us by Baker Tilly Virchow Krause, LLP, our
independent registered public accounting firm, for the fiscal years ended August 31, 2011 and August 31,
2010.

Aggregate Amount Billed by
Baker Tilly Virchow Krause, LLP ($)
Fiscal 2010
Fiscal 2011
$ 190,343
$ 195,433
26,100
3,400
—
—
—
—

Audit Fees(1) .........................................................
Audit-Related Fees(2) ............................................
Tax Fees ...............................................................
All Other Fees ......................................................
__________________________
(1)

These fees consisted of the audit of our annual financial statements by year, review of financial statements
included in our quarterly reports on Form 10-Q and other services normally provided in connection with
statutory and regulatory filings or engagements.

(2)

These fees consisted of reviews of quarterly financials, Sarbanes Oxley controls testing, reviews of
registration statements and the issuance of consents, and for fiscal 2010, also providing a comfort letter in
connection with our September 2009 offering and review of SEC comment letter. The Audit Committee
has considered whether the provision of these services is compatible with maintaining the independence of
Baker Tilly Virchow Krause, LLP and has determined that it is.

Audit Committee Pre-Approval Policies and Procedures

Rules adopted by the Securities and Exchange Commission in order to implement requirements of the
Sarbanes-Oxley Act of 2002 require public company audit committees to pre-approve audit and non-audit
services provided by a company’s independent registered public accounting firm. All services rendered
by Baker Tilly Virchow Krause, LLP to NTIC were permissible under applicable laws and regulations
and all services provided to NTIC, other than de minimis non-audit services allowed under applicable
law, were approved in advance by the Audit Committee in accordance with these rules. The Audit
Committee has not adopted any formal pre-approval policies and procedures.

Board of Directors Recommendation

The Board of Directors unanimously recommends that our stockholders vote FOR ratification of the
selection of Baker Tilly Virchow Krause, LLP, as our independent registered public accounting firm for
the fiscal year ending August 31, 2012.

Audit Committee Report

This report is furnished by the Audit Committee of the Board of Directors with respect to NTIC’s
financial statements for the fiscal year ended August 31, 2011.

One of the purposes of the Audit Committee is to oversee NTIC’s accounting and financial reporting
processes and the audit of NTIC’s annual financial statements. NTIC’s management is responsible for the
preparation and presentation of complete and accurate financial statements. NTIC’s independent
registered public accounting firm, Baker Tilly Virchow Krause, LLP, is responsible for performing an
independent audit of NTIC’s financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States) and for issuing a report on their audit.

In performing its oversight role, the Audit Committee has reviewed and discussed NTIC’s audited
financial statements for the fiscal year ended August 31, 2011 with NTIC’s management. Management
represented to the Audit Committee that NTIC’s financial statements were prepared in accordance with
generally accepted accounting principles. The Audit Committee has discussed with Baker Tilly Virchow
Krause, LLP, NTIC’s independent registered public accounting firm, the matters required to be discussed
by Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU
section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T. The Audit
Committee has received the written disclosures and the letter from Baker Tilly Virchow Krause, LLP
required by applicable requirements of the Public Company Accounting Oversight Board regarding the
Baker Tilly Virchow Krause, LLP’s communications with the Audit Committee concerning
independence. The Audit Committee has discussed with Baker Tilly Virchow Krause, LLP its
independence and concluded that the independent registered public accounting firm is independent from
NTIC and NTIC’s management.

Based on the review and discussions of the Audit Committee described above, in reliance on the
unqualified opinion of Baker Tilly Virchow Krause, LLP regarding NTIC’s audited financial statements,
and subject to the limitations on the role and responsibilities of the Audit Committee discussed above and
in the Audit Committee’s charter, the Audit Committee recommended to the Board of Directors that
NTIC’s audited financial statements for the fiscal year ended August 31, 2011 be included in its Annual
Report on Form 10-K for the fiscal year ended August 31, 2011 for filing with the Securities and
Exchange Commission.

This report is dated as of November 3, 2011.

Audit Committee

Mark J. Stone, Chair
Pierre Chenu
Richard J. Nigon

OTHER MATTERS
________________

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors, executive
officers and all persons who beneficially own more than 10 percent of the outstanding shares of our
common stock to file with the Securities and Exchange Commission initial reports of ownership and
reports of changes in ownership of our common stock. Executive officers, directors and greater than 10
percent beneficial owners are also required to furnish NTIC with copies of all Section 16(a) forms they
file. To our knowledge, based upon a review of the copies of such reports furnished to us and written
representations that no other reports were required, during the fiscal year ended August 31, 2011, none of
our directors or executive officers or beneficial owners of greater than 10 percent of our common stock
failed to file on a timely basis the forms required by Section 16 of the Exchange Act, except that each of
G. Patrick Lynch, one of our directors and executive officers, and Inter Alia Holding Company and
Julianne Lynch, beneficial owners of greater than 10 percent of our common stock, filed a late Form 4 on
March 7, 2011 reporting, among other transactions, an open market sale of shares of our common stock
effected on March 2, 2011 by Inter Alia Holding Company, and a late Form 4 on June 17, 2011 reporting
an open market sale of shares of our common stock effected on June 10, 2011 by Inter Alia Holding
Company. All of these sales by Inter Alia Holding Company were effected pursuant to a trading plan
adopted under Rule 10b5-1(c) of the Securities Exchange Act of 1934, as amended.

Stockholder Proposals for 2013 Annual Meeting

Stockholders who, in accordance with Rule 14a-8 under the Exchange Act, wish to present proposals for
inclusion in the proxy materials relating to the 2013 Annual Meeting of Stockholders must submit their
proposals so that they are received by us at our principal executive offices no later than the close of
business on August 22, 2012, unless the date of the meeting is delayed by more than 30 calendar days.
The proposals must satisfy the requirements of the proxy rules promulgated by the Securities and
Exchange Commission and as the rules of the SEC make clear, simply submitting a proposal does not
guarantee that it will be included.

Any other stockholder proposals to be presented at the 2013 Annual Meeting of Stockholders (other than
a matter brought pursuant to SEC Rule 14a-8) must be given in writing to our Corporate Secretary and
must be delivered to or mailed and received at our principal executive offices, not less than 90 days nor
more than 120 days prior to the anniversary date of the 2012 Annual Meeting of Stockholders; provided,
however, that in the event that the 2013 Annual Meeting of Stockholders is not held within 30 days before
or after such anniversary date, notice by the stockholder to be timely must be received not later than the
close of business on the 10th day following the day on which such notice of the date of the annual meeting
was mailed or such public disclosure was made, whichever first occurs. The proposal must contain
specific information required by our Bylaws, a copy of which may be obtained by writing to our
Corporate Secretary. If a proposal is not timely and properly made in accordance with the procedures set
forth in our Bylaws, it will be defective and may not be brought before the meeting. If the proposal is
nonetheless brought before the meeting and the Chairman of the meeting does not exercise the power and
duty to declare the proposal defective, the persons named in the proxy may use their discretionary voting
with respect to the proposal.

Director Nominations for 2013 Annual Meeting

In accordance with procedures set forth in our Bylaws, NTIC stockholders may propose nominees for
election to the Board of Directors only after providing timely written notice to our Corporate Secretary.
To be timely, a stockholder’s notice to the Corporate Secretary must be delivered to or mailed and
received at NTIC’s principal executive offices not less than 90 days nor more than 120 days prior to the
anniversary date of the immediately preceding annual meeting; provided, however, that in the event that
the annual meeting with respect to which such notice is to be tendered is not held within 30 days before or
after such anniversary date, notice by the stockholder to be timely must be received not later than the
close of business on the 10th day following the day on which such notice of the date of the meeting was
mailed or public disclosure was made, whichever first occurs. The notice must set forth, among other
things:

•

the nominee’s name, age, business address, residence address and record address;

the nominee’s principal occupation or employment;

the class and number of shares of NTIC capital stock which are beneficially owned by the
nominee;

signed consent to serve as a director of NTIC; and

any other information concerning the nominee required under the rules of the Securities and
Exchange Commission in a proxy statement soliciting proxies for the election of directors.

Submissions must be made by mail, courier or personal delivery. E-mailed submissions will not be
considered. The Nominating and Corporate Governance Committee will consider only those stockholder
recommendations whose submissions comply with the procedural requirements set forth in NTIC’s
Bylaws. The Nominating and Corporate Governance Committee will evaluate candidates recommended
by stockholders in the same manner as those recommended by others.

Other Business

Our management does not intend to present other items of business and knows of no items of business
that are likely to be brought before the Annual Meeting, except those described in this proxy statement.
However, if any other matters should properly come before the Annual Meeting, the persons named in the
enclosed proxy will have discretionary authority to vote such proxy in accordance with their best
judgment on the matters.

Copies of Fiscal 2011 Annual Report

We have sent or made electronically available to each of our stockholders a copy of our annual
report on Form 10-K (without exhibits) for the fiscal year ended August 31, 2011. The exhibits to
our Form 10-K are available by accessing the SEC’s EDGAR filing database at www.sec.gov. We
will furnish a copy of any exhibit to our Form 10-K upon receipt from any such person of a written
request for such exhibits upon the payment of our reasonable expenses in furnishing the exhibits.
This request should be sent to: Northern Technologies International Corporation, 4201 Woodland
Road, Circle Pines, Minnesota 55014, Attention: Stockholder Information.

Householding of Annual Meeting Materials

Some banks, brokers and other nominee record holders may be participating in the practice of
“householding” proxy statements and annual reports. This means that only one copy of this proxy
statement or NTIC’s Annual Report to Stockholders may have been sent to multiple stockholders in each
household. NTIC will promptly deliver a separate copy of either document to any stockholder upon
written or oral request to NTIC’s Stockholder Information Department, Northern Technologies
International Corporation, 4201 Woodland Road, Circle Pines, Minnesota 55014, telephone: (763) 225-
6637. Any stockholder who wants to receive separate copies of this proxy statement or NTIC’s Annual
Report to Stockholders in the future, or any stockholder who is receiving multiple copies and would like
to receive only one copy per household, should contact the stockholder’s bank, broker, or other nominee
record holder, or the stockholder may contact NTIC at the above address and phone number.

Proxy Solicitation Costs

The cost of soliciting proxies, including the preparation, assembly, electronic availability and mailing of
proxies and soliciting material, as well as the cost of making available or forwarding this material to the
beneficial owners of our common stock will be borne by NTIC. Our directors, officers and regular
employees may, without compensation other than their regular compensation, solicit proxies by
telephone, e-mail, facsimile or personal conversation. We may reimburse brokerage firms and others for
expenses in making available or forwarding solicitation materials to the beneficial owners of our common
stock.

_________________________

Your vote is important. Whether or not you plan to attend the Annual Meeting in person, vote your
shares of NTIC common stock by the Internet or telephone, or request a paper proxy card to sign, date
and return by mail so that your shares may be voted.

By Order of the Board of Directors

Pierre Chenu
Chairman of the Board

December 19, 2011
Circle Pines, Minnesota

OPPENHEIMER: 2896237 v06 11/21/2011

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________
FORM 10-K

(Mark one)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

F or the fiscal year ended A ugust 31, 2011

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to __________________.

Commission file number 001-11038
____________________
NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation or organization)
4201 Woodland Road
P.O. Box 69
Circle Pines, Minnesota
(Address of principal executive offices)

41-0857886
(I.R.S. Employer Identification No.)

55014
(Zip Code)

(763) 225-6600
(Registrant’s telephone number, including area code)

Securities registered under Section 12(b) of the Act:

Title of each class
Common Stock, par value $0.02 per share

Name of each exchange on which registered
The NASDAQ Stock Market LLC
(NASDAQ Global Market)

Securities registered under Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES  NO 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES  NO 

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  NO 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files). YES  NO 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See

definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act). (Check one):

Large accelerated filer 

Accelerated filer 

Non-accelerated filer 
(Do not check if a smaller reporting company)

Smaller reporting company 

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Act). YES  NO 

The aggregate market value of the registrant’s common stock, excluding shares beneficially owned by affiliates, computed by reference to the closing
sales price at which the common stock was last sold as of February 28, 2011 (the last business day of the registrant’s second fiscal quarter) as reported by the
NASDAQ Global Market on that date was $58.6 million.

As of November 18, 2011, 4,397,324 shares of common stock of the registrant were outstanding.

DOC UM E NT S I NC OR POR AT E D B Y R E F E R E NC E

Part III of this Annual Report on Form 10-K incorporates by reference information (to the extent specific sections are referred to herein) from the

registrant’s Proxy Statement for its 2012 Annual Meeting of Stockholders to be held February 2, 2012.

NOR T H E R N T E C H NOL OG I E S I NT E R NA T I ONA L C OR POR A T I ON

A NNUA L R E POR T ON F OR M 10-K
F I SC A L Y E A R E NDE D A UG UST 31, 2011

T A B L E OF C ONT E NT S

Page

PART I ..........................................................................................................................................................

Item 1.

BUSINESS ............................................................................................................................ 1

Item 1A. RISK FACTORS ................................................................................................................. 14

Item 1B. UNRESOLVED STAFF COMMENTS ............................................................................. 29

Item 2.

PROPERTIES ..................................................................................................................... 29

Item 3.

LEGAL PROCEEDINGS ................................................................................................... 29

Item 4.

[REMOVED AND RESERVED] ....................................................................................... 30

Item 4A. EXECUTIVE OFFICERS OF THE REGISTRANT .......................................................... 30

PART II ...................................................................................................................................................... 32

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER

MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES ............................. 32

Item 6.

SELECTED FINANCIAL DATA ...................................................................................... 33

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS .................................................................................. 33

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ... 51

Item 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ................................... 52

Item 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE......................................................... 78

Item 9A. CONTROLS AND PROCEDURES ................................................................................... 78

Item 9B. OTHER INFORMATION .................................................................................................. 79

PART III ..................................................................................................................................................... 81

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE ............ 81

Item 11.

EXECUTIVE COMPENSATION ...................................................................................... 81

Item 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS ................................. 82

Page

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR

INDEPENDENCE .............................................................................................................. 83

Item 14.

PRINCIPAL ACCOUNTING FEES AND SERVICES ..................................................... 83

PART IV ...................................................................................................................................................... 84

Item 15.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES .................................................. 84

SIGNATURES ........................................................................................................................................... 86

_______________

This annual report on Form 10-K 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 “Item 1. Business –
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 and its wholly owned subsidiaries, NTI
Facilities, Inc. and Northern Technologies Holding Company, LLC, and its majority owned subsidiary, Zerust
Prevenção de Corrosão S.A., all of which are consolidated on NTIC’s consolidated financial statements. NTIC’s
consolidated financial statements do not include the accounts of any of its joint ventures.

References in this report to NTIC’s joint ventures do not include NTIC’s majority owned Brazilian subsidiary,
Zerust Prevenção de Corrosão S.A. As used in this report, references to “Zerust Brazil” refer to NTIC’s majority
owned Brazilian subsidiary, Zerust Prevenção de Corrosão S.A. As used in this report, references to “EXCOR”
refer to NTIC’s primary joint venture in Germany, Excor Korrosionsschutz – Technologien und Produkte GmbH,
references to “NTI ASEAN” refer to NTIC’s joint venture holding company for NTIC’s joint venture investments in
the Association of Southeast Asian Nations (ASEAN) region, NTI ASEAN, LLC, and references to “HNTI” refer to
NTIC’s joint venture in India, Harita NTI Limited.

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

PART I

I tem 1.

B USI NE SS

Overview

Northern Technologies International Corporation develops and markets proprietary environmentally
beneficial products and services in over 55 countries either directly or via a network of joint ventures,
independent distributors and agents. NTIC’s primary business is corrosion prevention marketed mainly
under the ZERUST® brand. NTIC has been selling its proprietary ZERUST® rust and corrosion inhibiting
products and services to the automotive, agriculture, electronics, electrical, mechanical, military and retail
consumer markets for over 35 years, and more recently, has targeted and expanded into the oil and gas
industry. NTIC also sells a portfolio of bio-based and biodegradable (compostable) polymer resin
compounds and finished products marketed under the Natur-Tec® brand. These products are intended to
reduce NTIC’s customers’ carbon footprint and provide environmentally sound disposal options.

In fiscal 2011, 95.0% of NTIC’s consolidated net sales were derived from the sales of ZERUST® rust and
corrosion inhibiting products and services. NTIC’s ZERUST® rust and corrosion inhibiting products
include plastic and paper packaging, liquids and coatings, rust removers and cleaners, diffusers and
variations of these products designed specifically for the oil and gas industry. NTIC’s also offers
worldwide on-site technical consulting for rust and corrosion prevention issues. NTIC’s technical service
consultants work directly with the end users of NTIC’s ZERUST® rust and corrosion inhibiting products
to analyze their specific needs and develop systems to meet their technical requirements. In North
America, NTIC sells its ZERUST® corrosion prevention solutions through a direct sales force as well as a
network of independent distributors and agents. Internationally, NTIC sells its ZERUST® corrosion
prevention solutions through its majority owned Brazilian subsidiary, Zerust Prevenção de Corrosão S.A.
(Zerust Brazil), and joint venture arrangements in North America, Europe and Asia.

One of NTIC’s strategic initiatives is to expand into and penetrate other markets for its ZERUST®
corrosion prevention solutions. For the past several years, NTIC has focused its sales and marketing
efforts on the oil and gas industry since the infrastructure that supports that industry is typically
constructed using metals that are highly susceptible to corrosion and NTIC believes that its ZERUST®
corrosion prevention solutions will minimize maintenance downtime on critical oil and gas industry
infrastructure, extend the life of such infrastructure and reduce the risk of environmental pollution due to
corrosion leaks. Petroleo Brasileiro S.A. (Petrobras), an oil company located in Brazil, has conducted
extensive multi-year product field trials of NTIC’s ZERUST® rust and corrosion inhibiting products.
During fiscal 2010, Zerust Brazil received a Phase I contract for an initial implementation of $1.4 million
(BRL$ 2.5 million) in ZERUST® products to help protect Petrobras’s off-shore oil production platforms
from corrosion damage. During fiscal 2011, Zerust Brazil received a Phase 2 expanded contract with
Petrobras to supply an additional $2.6 million (BRL$ 4.21 million) in ZERUST® products. NTIC is also
pursuing opportunities to market its ZERUST® rust and corrosion prevention solutions to other potential
customers in the oil and gas industry across several countries through NTIC’s joint venture partners and
other strategic partners and alliances. NTIC has entered into various agreements to provide sales and
marketing services for NTIC’s oil and gas industry specific corrosion prevention solutions with a
particular focus on the markets in North America, South America, the Middle East and Asia. NTIC
believes the sale of its ZERUST® corrosion prevention solutions to customers in the oil and gas industry
will involve a long sales cycle, likely including a one- to two-year trial period with each customer and a
slow integration process thereafter.

NTIC’s consolidated net sales for fiscal 2011 included $984,004 in sales of Natur-Tec® bio-plastic resin
compounds and finished products. Natur-Tec® bio-based and 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 biopolymer resin compounds
which are available in several grades tailored for a variety of applications, such as blown-film extrusion,
extrusion coating, injection molding and rigid, engineered plastics, and finished products, including
shopping and grocery bags, lawn and leaf bags, can liners, pet waste collection bags, cutlery, packaging
foam and coated paper products, which are engineered to be fully biodegradable in a composting
environment in accordance with ASTM D6400 and as certified by the Biodegradable Products Institute
(BPI). In North America, NTIC markets its Natur-Tec® resin compounds and finished products primarily
through a network of independent distributors and agents. Internationally, NTIC sells its Natur-Tec®
resin compounds and finished products both directly and through some of its joint venture arrangements,
including in particular its joint venture in India, Harita NTI Limited (HNTI).

In fiscal 2011, NTIC and HNTI signed a memorandum of understanding with the Indian conglomerate
ITC Limited to jointly develop and commercialize biopolymer extrusion coated paper products targeted at
the consumer goods packaging market in India. The companies are jointly developing solutions in the
Indian market towards providing biodegradable/compostable products such as food service ware, food
packaging, personal care product packaging and other fast-moving consumer goods packaging. The
biopolymer resin compounds will be manufactured by HNTI for integration with paper manufactured by
ITC’s Paperboards and Specialty Papers Division. In addition, during fiscal 2011, NTIC entered into an
agreement with Italy-based Naturfuels s.r.l. to distribute its Natur-Tec® bioplastic materials and products
in the Italian and Swiss markets. Under the terms of the distribution agreement, NTIC will supply
Naturfuels with NTIC’s patented high-strength Natur-Tec® compostable film grade resin compounds to
be used for the production of bio-plastic shopping and garbage bags on conventional plastic film
production equipment in fiscal 2012.

Joint Ventures

NTIC participates, either directly or indirectly, in 24 active joint venture arrangements in North America,
Europe and Asia. Each of these joint ventures generally manufactures and markets products in the
geographic territory 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. Although Zerust
Brazil was originally formed as a joint venture with NTIC, it is no longer considered a joint venture, but
rather a majority owned subsidiary of NTIC and unlike NTIC’s joint ventures, Zerust Brazil’s results are
consolidated on NTIC’s consolidated financial statements.

While most of NTIC’s joint ventures exclusively sell rust and corrosion inhibiting products, some of
NTIC’s joint ventures sell NTIC’s Natur-Tec® resin compounds and finished products and NTIC’s
Polymer Energy LLC joint venture manufactures and sells Polymer Energy™ equipment that converts
waste plastic into diesel, gasoline and heavy fractions.

The following table sets forth a list of NTIC’s operating joint ventures as of November 18, 2011, the
country in which the joint venture is organized and NTIC’s ownership percentage in each joint venture:

Joint Venture Name
TAIYONIC LTD.
ACOBAL SAS
ZERUST-NIC (TAIWAN) CORP.
EXCOR GMBH
ZERUST SINGAPORE PTE. LTD

Country
Japan
France
Taiwan(1)
Germany
Singapore(1)

NTIC
Percent (%)
Ownership

50%
50%
25%
50%
50%

Joint Venture Name
ZERUST AB
MOSTNIC
KOREA ZERUST CO., LTD.
ZERUST OY
ZERUST (U.K.) LTD.
EXCOR-ZERUST S.R.O.
EXCOR SP. Z.O.O.
ZERUST SPECIALTY TECH CO. LTD.
TIANJIN ZERUST CO.
HARITA NTI LIMITED
CHONG WAH-NTIA SDN. BHD.
NTIA ZERUST PHILIPPINES, INC.
FIBRO NTI JOINT STOCK CO.
ZERUST CONSUMER PRODUCTS, LLC
POLYMER ENERGY LLC(2)
ZERUST – DNEPR
PT. CHEMINDO – NTIA
LENPROMTECHNOLOGIES, LLC
MUTEC GMBH

____________________

Country
Sweden
Russia
South Korea
Finland
United Kingdom
Czech Republic
Poland
Thailand(1)
China(1)
India
Malaysia(1)
Philippines(1)
Turkey
United States
United States
Ukraine
Indonesia(1)
Russia
Germany(3)

NTIC
Percent (%)
Ownership

50%
50%
25%
50%
50%
50%
50%
25%
25%
50%
25%
25%
50%
50%
62.5%
50%
25%
50%
44%

Indirect ownership interest through NTI ASEAN, LLC.

(1)
(2) Polymer Energy LLC had immaterial activity in fiscal 2011 and fiscal 2010 and is not fully consolidated on

NTIC’s consolidated financial statements.
Indirect ownership through Northern Instruments Corporation LLC.

(3)

NTIC typically owns a 50% ownership interest in each of its joint ventures. However, NTIC owns a
62.5% ownership interest in Polymer Energy LLC and a 50% ownership interest in NTI ASEAN, LLC
for NTIC’s joint venture investments in the Association of Southeast Asian Nations (ASEAN) region.
Taiyo Petroleum Gas Co. Ltd., NTIC’s existing joint venture partner in Japan, owns the remaining 50%
ownership interest in NTI ASEAN, LLC.

NTIC has a 50% ownership interest in Northern Instruments Corporation LLC for NTIC’s joint venture
investment in Mütec GmbH in Germany. Taiyo Petroleum Gas Co. Ltd. owns the remaining 50%
ownership interest in Northern Instruments Corporation LLC. Northern Instruments Corporation LLC in
turn owns 88% of Mütec GmbH. Mütec GmbH manufactures proprietary electronic sensing instruments,
which it sells through distributors as well as certain joint ventures.

NTIC’s joint venture in Germany, EXCOR GmbH (EXCOR), and NTIC’s ASEAN joint venture holding
company (NTI ASEAN) are considered significant to NTIC’s consolidated assets and income; and
therefore NTIC provides certain additional financial information regarding these entities in the notes to
NTIC’s consolidated financial statements and elsewhere in this report.

NTIC’s receipt of funds as a result of sales by its joint ventures is dependent upon NTIC’s receipt of
dividend distributions from the joint ventures and NTIC’s receipt of fees for services that NTIC provides
to its joint ventures based primarily on the revenues of the joint ventures. The profits of NTIC’s joint
ventures are shared by the respective joint venture owners in accordance with their respective ownership
percentages. NTIC typically owns 50% or less of each of its joint venture entities and thus does not
control the decisions of these entities regarding whether to pay dividends and, if paid, how much the
dividends should be in any given year. NTIC’s equity in income from its joint ventures was $5,536,243
in fiscal 2011 compared to $3,919,084 in fiscal 2010, an increase of 41.3%. NTIC provides certain
services to its joint ventures, including technical consulting, legal, insurance, technical and marketing

services. NTIC’s fee income for services provided to joint ventures was $6,129,979 in fiscal 2011
compared to $4,690,450 in fiscal 2010, an increase of 30.7%, primarily as a result of improved joint
venture sales, which increased 40.4% to $119,276,553 during fiscal 2011 compared to $84,973,646
during fiscal 2010. Sales by NTIC’s joint ventures are not included in the net sales of NTIC. NTIC
incurs direct expenses related to its joint ventures and in connection with NTIC’s provision of services to
its joint ventures. Such expenses include items such as employee compensation and benefits, travel,
consulting, legal and lab supplies and testing expenses. NTIC incurred $1,000,576 in direct joint venture
expenses in fiscal 2011 compared to $875,869 in fiscal 2010, representing an increase of 14.2%.

While NTIC is not aware of any specific potential risk beyond its initial investment in and any
undistributed earnings of each of its joint ventures, there can be no assurance that NTIC will not be
subject to lawsuits based on product liability claims or other claims arising out of the activities of its joint
ventures. To mitigate the ramifications of such an occurrence, NTIC maintains liability insurance
specifically applicable to its ownership positions in its joint venture arrangements in excess of any
insurance the joint ventures may maintain.

Products

NTIC derives revenues directly and/or indirectly through its joint ventures from the following product
lines:

ZERUST® Corrosion Prevention Solutions. In fiscal 2011, 95.0% of NTIC’s consolidated net sales were
derived from developing, manufacturing and marketing ZERUST® rust and corrosion inhibiting products
and services. Corrosion not only damages the appearance of metal products and components but also
negatively impacts their mechanical performance. This applies to the rusting of ferrous metals (iron and
steel) and the deterioration by oxidation of nonferrous metals (aluminum, copper, brass, etc.). NTIC’s
ZERUST® corrosion prevention solutions include plastic and paper packaging, liquids and coatings, rust
removers and cleaners, diffusers and variations of these products designed specifically for the oil and gas
industry, as well as technical corrosion management and consulting services.

Plastic and Paper Packaging. NTIC’s ZERUST® packaging products contain proprietary nontoxic
chemical formulations that continuously release an invisible, odorless, safe and environmentally friendly
corrosion inhibiting vapor into the enclosure that passivates metal surfaces and thereby inhibits rust and
corrosion. The corrosion-inhibiting protection is maintained as long as the metal products to be protected
remain enclosed within the ZERUST® packaging. Electron scanning shows that once the contents are
removed from the ZERUST® package, the ZERUST® protection dissipates from the contents’ surfaces
within two hours, leaving a clean, dry and corrosion-free metal component. This mechanism of corrosion
protection enables NTIC’s customers to easily package metal objects for rust-free shipment or long-term
storage. Furthermore, by eliminating costly greasing and degreasing processes and/or significantly
reducing the use of oils to inhibit corrosion, NTIC’s ZERUST® corrosion prevention solutions provide
customers significant savings in labor, material and capital expenditures for equipment to apply, remove
and dispose of oil and grease, as well as the attendant environmental problems, as compared to traditional
methods of corrosion prevention.

NTIC developed the first means of combining volatile corrosion inhibiting chemical systems with
polyethylene and polypropylene resins. Combining ZERUST® chemical systems with polyethylene and
polypropylene resins permitted NTIC to introduce a line of plastic packaging products in the form of low
and high density polyethylene bags and shroud film, including stretch, shrink, skin and bubble cushioning
film, thereby giving packaging engineers an opportunity to ship and store ferrous, nonferrous and mixed
multi-metal products in a clean, dry and corrosion-free condition, with an attendant overall savings in
total packaging cost. In addition to plastic packaging, NTIC has developed additives in liquid form to

imbue kraft paper, corrugated cardboard, solid fiber and chipboard packaging materials with corrosion
protection properties. NTIC’s ZERUST® plastic and paper packaging products come in various
thicknesses, strength enhancements, protection types, shapes and sizes.

Liquids and Coatings. NTIC’s corrosion prevention solutions include a line of metal surface treatment
liquids and coatings, which are oil, water and bio-solvent based, marketed under the Axxatec,™ Axxanol™
and Z-Maxx brand names. These liquids and coatings provide powerful corrosion protection in
aggressive environments, such as salt air and humid high temperatures. Products are formulated for most
metal types and protection levels.

Rust Removers and Cleaners. NTIC also sells rust removal and cleaning products designed to recover
rusty parts by replacing labor-intensive, abrasive cleaners that damage surfaces and fail to remove rust
from small gear teeth and other difficult to reach areas under the ICT® and Axxaclean™ brand names.

Diffusers. NTIC’s corrosion prevention solutions include a line of several diffusers, such as ZERUST
ICT® Vapor Capsules, ZERUST ICT® Plastabs® and ZERUST ICT® Cor-Tabs®, which are designed to
provide corrosion protection of interior surfaces, such as metals within switch gearboxes, electronic
cabinets and other enclosures holding electrical gear. Diffuser products are self-contained corrosion
inhibiting capsules and tabs that prevent corrosion of multiple metal types within enclosures. Diffusers
work by permeating the interior air of an enclosure with an invisible, odorless, non-toxic corrosion
inhibiting vapor that protects metal surfaces within the distance of a certain specified “radius of
protection” which lasts for one or two years depending on the model. This invisible and dry protective
layer revaporizes upon removal of the capsule from the enclosure, leaving all surfaces clean, dry, residue-
free and corrosion-free. This product line also includes items such as ZERUST® gun cases and car
covers, which are targeted at retail consumers.

ZERUST® Corrosion Prevention Solutions Designed Specifically for the Oil and Gas Industry. NTIC has
developed proprietary corrosion inhibiting solutions specifically for the mitigation of corrosion in capital
assets used in the petroleum and chemical process industries and is initially targeting the sale of these
ZERUST® corrosion solutions to potential customers in the oil and gas industry. The infrastructure that
supports the oil and gas industry is typically constructed using metals that are highly susceptible to
corrosion. The industrial environment at these facilities usually contains compounds, including sulfides
and chlorides, which cause aggressive corrosion. This problem affects pipelines, petroleum storage tanks,
spare parts in long-term storage, process and other critical equipment. Besides the losses due to
replacement of parts and structures, maintenance and repairs, product loss, etc., there are significant costs
associated with lowered production. In addition, there are also considerable health, safety and
environmental risks that can greatly increase the losses due to corrosion. NTIC believes that its
ZERUST® oil and gas corrosion prevention solutions will minimize maintenance downtime on critical oil
and gas industry infrastructure, extend the life of such infrastructure and reduce the risk of environmental
pollution due to corrosion related product leaks.

NTIC’s rust and corrosion inhibiting products for the oil and gas industry include ZERUST® Flange
Savers,™ ZERUST® ReCAST-R VCI Dispensers and ZERUST® Zerion chemicals in addition to many of
the traditional ZERUST® rust and corrosion inhibiting products previously described.

ZERUST® Flange Savers™ are specially designed covers that have been impregnated with a proprietary
ZERUST® inhibitor formulation that provide corrosion protection for flanges, valves and welded joints.
Oil and gas pipeline segments are connected by flanges and welded joints of varying sizes, designs and
materials. These connection points often corrode under aggressive industrial environments and harsh
operating conditions, thereby causing costly operational and safety problems. ZERUST® Flange Savers™

are available in various sizes to accommodate different pipe diameters, pressure ratings and international
standards for pipeline valves and flanges.

ZERUST® ReCAST-R VCI Dispensers protect the interior surfaces of aboveground storage tank roofs by
delivering proprietary inhibitor formulations into the vapor space between the surface of the product and
the tank roof. Certain grades of oil that contain sulphur emit corrosive sour gas vapors that destroy the
internal surfaces of aboveground storage tank roofs and their support structures above the product layer.
Aggressive pitting and crevice corrosion create holes in the tank tops that cause unsafe operating
conditions and environmental problems. Internal tank coatings decrease surface corrosion but have
proven to be ineffective in preventing dangerous pitting and crevice corrosion, especially in the interstitial
spaces between the roof and support structures. The ZERUST® ReCAST-R solution is designed to extend
the service life of a single tank roof to 25 years and beyond by forming a protective layer that prevents
corrosion in highly aggressive environments. Each system is tailored to a customer’s requirements,
depending upon specific environmental conditions, product stored, tank diameter and type of metal and
can be applied on both new and existing tank roofs.

ZERUST® Zerion chemicals protect the bottoms of aboveground storage tanks by delivering proprietary
inhibitor formulations into the sand/soil bed on which the tank bottom rests. Bottom plate corrosion leads
to loss of stored product into the soil causing economic losses as well as environmental issues. Each
system is tailored to a customer’s requirements, depending upon specific environmental conditions,
product stored, tank diameter and type of metal and can be applied on both new and existing tank
bottoms.

Z-CIS® Technical Services. As an on-going effort to help NTIC’s customers improve and control their
processes in terms of corrosion management, NTIC markets and offers unique corrosion management and
consulting services to target customers. This ZERUST® corrosion inhibitor system (known as Z-CIS®)
utilizes NTIC’s global experience in successful corrosion management control. Services and consulting
are billed according to work done on the customer’s behalf to improve the customer’s internal and
external corrosion control systems. Several major automotive companies and their automotive parts
suppliers have used NTIC’s Z-CIS® system.

Natur-Tec® Resin Compounds and Finished Products. NTIC manufactures and sells a range of bio-
based and biodegradable (compostable) polymer resin compounds and finished products under the Natur-
Tec® brand. NTIC’s consolidated net sales for fiscal 2011 included $984,004 in sales of Natur-Tec® resin
compounds and finished products. In recent years, a combination of market drivers such as volatile
petroleum prices, a desire to reduce dependence on foreign oil, increased environmental and sustainability
awareness at the corporate and consumer level, improved technical properties and product functionality,
as well as recent foreign, state and local governmental regulations banning the use of traditional,
petroleum-based plastics or mandating the use of certain biodegradable or compostable products, have led
to increased interest in sustainable, renewable resource based and compostable alternatives to traditional
plastics. The term “bio-plastics” encompasses a broad category of plastics that are either bio-based,
which means derived from renewable resources such as corn or cellulosic/plant material or blends thereof,
or are engineered to be fully biodegradable, or both. According to Freedonia Research, the market for
bio-plastic resins worldwide is estimated at $1 billion and is projected to grow to over $2.6 billion by
2013.

Resin Compounds. Natur-Tec® resin compounds are produced by blending commercially available base
resins, such as Ecoflex® from BASF or Ingeo® PLA from NatureWorks LLC, with organic and inorganic
fillers, and proprietary polymer modifiers and compatabilizers, using NTIC’s proprietary and patent
pending ReX Process. In this process, biodegradable polymers, natural polymers made from renewable
resources, and organic and inorganic materials are reactively blended in the presence of proprietary

compatibilizers and polymer modifiers to produce bio-based and/or biodegradable polymer resin
formulations that exhibit unique and stable morphology. Natur-Tec® resin compounds are engineered for
high performance, ease of processing and reduced cost compared to most other bio-plastic materials, and
can be processed by converters using conventional manufacturing processes and equipment.

Natur-Tec® resin compounds are available in several grades tailored for a variety of applications, such as
blown-film extrusion, extrusion coating, injection molding and rigid, engineered plastics. Natur-Tec®
flexible film resin compounds are fully biodegradable and compostable and meet requirements of
international standards for compostable plastics such as ASTM D6400 (U.S.) and EN 13432 (Europe),
and are certified as 100% compostable by the Biodegradable Products Institute in the United States.
Natur-Tec® film resin compounds can be used to produce film for applications, such as bags, including
compost bags, lawn and leaf bags, pet waste bags and carry-out bags, agricultural film and consumer and
industrial packaging. The Natur-Tec® compostable injection molding resin compounds are biobased and
biodegradable and are designed to replace conventional plastic materials for injection molded plastic
applications. Natur-Tec® compostable injection molding resin compounds are manufactured using
sustainable and renewable resources, per the ASTM D6866 standard which allows industry and
consumers the opportunity to reduce or neutralize their carbon footprint, and are designed to meet the
requirements of international standards for compostable plastics, such as ASTM D6400 and EN 13432.
Natur-Tec® compostable injection molding resin compounds can be used for injection molded plastic
applications, such as cutlery, hangers, containers and packaging. Natur-Tec® biobased injection molding
resin compounds are made with at least 50% of biobased/renewable resource-based materials per the
ASTM D6866 standard and are meant to enhance sustainability by replacing petroleum-based plastics.
Natur-Tec® also produces biobased injection molding resin compounds that are not designed or intended
to biodegrade but rather aid in sustainability by requiring far less energy for production and by reducing
dependence on petroleum as a raw material. Natur-Tec® biobased injection molding resin compounds
exhibit the same properties as conventional plastic materials and can be used in applications, such as
automotive components, consumer goods, electronics, medical products, furniture and packaging.

Finished Products. Natur-Tec® finished products include totally biodegradable compost and trash bags,
agricultural film and other single-use disposable products, such as compostable cutlery, food and
consumer goods packaging that are currently marketed under the Natur-Bag® or Natur-Ware® brands.

The Natur-Bag® product line offers eight different compostable bag sizes, from three to 69 gallons. The
bags are available in various SKU configurations from retail packs that are sold to the consumer either
through retail outlets or through online stores, and industrial case packs that are sold to commercial and
industrial customers primarily through wholesalers and distributors. The Natur-Bag® products are
manufactured from the Natur-Tec® flexible film resin compounds and thus are fully biodegradable and
compostable.

The Natur-Ware® product line consists of biobased and compostable cutlery made from the Natur-Tec®
compostable injection molding resin compounds. Natur-Ware® cutlery can be composted along with food
scraps in zero-waste programs.

Polymer Energy™ Conversion of Waste Plastic to Fuel Machines. NTIC’s Polymer Energy LLC joint
venture markets and sells a system that uses catalytic pyrolysis to convert waste plastic (primarily
polyolefins) into hydrocarbons (primarily a mix of diesels, gasoline and heavy fractions) resulting in an
economically viable and environmentally responsible alternative to current methods of recycling and
disposal of waste plastic. The Polymer Energy™ process can handle plastic that is contaminated to some
extent with other types of waste such as metals, glass, dirt and water, and as a result, the waste plastic
does not need to be pre-sorted, cleaned or dried prior to processing, which significantly reduces the
overall cost of operation. 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’s Polymer Energy LLC joint venture has an
exclusive license to market the Polymer Energy™ system in countries in Asia and North America.

Electronic Measuring Instruments. NTIC’s Mütec GmbH joint venture develops, manufactures and
sells proprietary electronics components including signal converters, Input-Output interfaces, bulk goods
property measurement instruments, and process sensor technologies.

Sales, Marketing and Distribution

ZERUST® Corrosion Prevention Solutions. In the United States, NTIC markets its ZERUST® rust and
corrosion inhibiting products and services, including its products designed for the oil and gas industry,
principally to industrial users in the automotive, electronics, electrical, mechanical, military, retail
consumer and oil and gas markets by a direct sales force and through a network of independent
distributors, manufacturer’s sales representatives and strategic partners. NTIC’s technical service
consultants work directly with the end users of NTIC’s ZERUST® products to analyze their specific
corrosion prevention needs and develop systems to meet their technical requirements. As of August 31,
2011, NTIC (excluding Zerust Brazil) had 12 employees selling ZERUST® products and services, and
several independent distributors and manufacturer’s sales representatives marketing its ZERUST®
products and services.

Internationally, NTIC has entered into several joint venture and similar arrangements with foreign
partners (either directly or through a holding company). NTIC receives fees for providing technical
support, marketing assistance and other services to its joint ventures based primarily on the revenues of
the joint ventures in accordance with the terms of the joint venture arrangements. Such services include
consulting, legal, insurance, technical and marketing services.

With respect to the sales and marketing of ZERUST® rust and corrosion inhibiting products and services
to the oil and gas industry, NTIC uses a combination of direct sales personnel, independent sales agents
and its joint venture network. However, since many of NTIC’s existing joint ventures do not have
significant experience and contacts within the oil and gas industry, NTIC has formed one and may
continue to form other new joint ventures to focus exclusively on the sale and marketing of ZERUST®
rust and corrosion inhibiting products and services to this industry. In addition, in an attempt to penetrate
this industry within certain markets more quickly, NTIC has entered into certain sales and marketing
agency agreements with specific organizations that have existing long term relationships with key oil and
gas industry clients. NTIC also engages in certain direct marketing activities to build its brand within the
oil and gas industry, such as traditional advertising and direct mail campaigns and presence and
participation at selected key trade shows and technical forums. NTIC continues to believe the sale of its
ZERUST® corrosion prevention solutions 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.

Natur-Tec® Resin Compounds and Finished Products. In the United States, NTIC markets its Natur-
Tec® resin compounds and finished products through a network of approximately 22 national and
regional distributors and independent manufacturer’s sales representatives and two NTIC direct sales
employees as of August 31, 2011. Target customers for Natur-Tec® finished products include individual
consumers and commercial and institutional organizations such as corporations and universities that are
mandated to divert their organic waste away from landfills to composting. Sales and marketing efforts
have focused on strengthening and expanding NTIC’s West Coast distribution network in California and
expanding NTIC’s distribution reach to geographical “green” hotspots such as Oregon, Washington,
Minnesota and New England, where a combination of favorable governmental regulation and
environmental awareness is driving the adoption and use of compostable bags and food service ware.

NTIC is also targeting key national and regional retailers utilizing independent sales agents. Target
customers for Natur-Tec® resin compounds include film extruders and injection molders who would
purchase Natur-Tec® resin compounds to manufacture and sell their own finished bio-based,
biodegradable or compostable end products, such as film, bags and cutlery.

Internationally, NTIC uses some of its joint ventures, including in particular, NTIC’s joint venture in
India, and a network of eight distributors to market its Natur-Tec® resin compounds and finished
products. During fiscal 2011, NTIC and HNTI signed a memorandum of understanding with the Indian
conglomerate ITC Limited to jointly develop and commercialize biopolymer extrusion coated paper
products targeted at the consumer goods packaging market in India. The two companies jointly develop
solutions for the Indian market towards providing biodegradable or compostable products such as food
service ware, food packaging, personal care product packaging and other fast-moving consumer goods
packaging. The biopolymer resin compounds are manufactured and sold by HNTI, for integration with
paper manufactured by ITC’s Paperboards and Specialty Papers Division. Both companies also
collaboratively develop and promote joint branding and messaging for these products. In addition, during
fiscal 2011, NTIC entered into an agreement with Italy based Naturfuels s.r.l. to distribute Natur-Tec®
resin compounds and finished products in the Italian and Swiss markets. Under the terms of the
distribution agreement, NTIC will supply Naturfuels with its Natur-Tec® compostable film grade resin
compounds.

Competition

ZERUST® Corrosion Prevention Solutions. While NTIC is unaware of any third parties with which
NTIC competes on a worldwide basis with respect to its corrosion prevention solutions, NTIC does
compete with several third parties on a regional basis. NTIC evaluates competing rust and corrosion
inhibiting products on an ongoing basis. Some of NTIC’s competitors are established companies that
may have financial, marketing and other resources substantially greater than those of NTIC. As a result,
they may be able to adapt more quickly to new or emerging technologies and changes in customer
requirements, or devote greater resources to the promotion and sale of their products than NTIC. With
respect to its rust and corrosion inhibiting products, NTIC competes on the basis of price, product
innovation, quality and reliability, product support, customer service, reputation as well as price. Some of
these companies may have achieved significant market acceptance of their competing products and brand
recognition. NTIC, however, believes it has an advantage over most of its competitors as a result of
NTIC’s technical innovation and its value added service. NTIC attempts to provide its customers with the
highest level of technical service and applications engineering in addition to ZERUST® rust and corrosion
inhibiting products. Nonetheless, the commoditization of certain of NTIC’s ZERUST® rust and corrosion
inhibiting products have led and may continue to lead to decreased pricing and lower margins on such
products. In addition, because the barriers to entry are low, additional competitors, including plastic
extrusion companies, may emerge, which likely would lead to the further commoditization of NTIC’s rust
and corrosion inhibiting products.

With respect to NTIC’s corrosion prevention solutions for use in the oil and gas industry, NTIC’s primary
barrier to entry is a combination of conservatism, complacency, confidence in old approaches as well as
the complexity of the buying organization. Some of NTIC’s competitors with respect to its traditional
ZERUST® rust and corrosion inhibiting products also compete in the oil and gas industry. NTIC also
faces competition from new suppliers who provide alternative approaches to corrosion prevention, some
of which have a significant market presence and more years of experience and credibility in the oil and
gas industry. Original equipment manufacturer (OEM) suppliers to the oil and gas industry present a new
market vertical for NTIC’s traditional industrial Zerust® products.

Natur-Tec® Resin Compounds and Finished Products. With respect to NTIC’s Natur-Tec® resin
compounds and finished products, NTIC competes with several established companies that have been
producing and selling similar products for a significantly longer time period, and have significantly more
sales, more extensive and effective distribution networks and better brand recognition than NTIC. Most
of these companies also have substantially more financial and other resources than NTIC. NTIC
competes on the basis of performance, brand awareness, distribution network, product availability,
product offering, shelf life, place of manufacture and price. Because of price competition, NTIC’s
margins on its Natur-Tec® resin compounds and finished products are smaller than its margins on its
ZERUST® corrosion prevention solutions. NTIC also faces supply constraints for the base resins used to
manufacture NTIC’s Natur-Tec® resin compounds and finished products since there are a limited number
of suppliers of such base resins and limited capacity for their production.

Research and Development

NTIC’s research and development activities are directed at improving existing products, developing new
products, reducing costs and improving quality assurance through improved testing of NTIC’s products.
NTIC’s internal research and development activities are conducted at its facilities located in Circle Pines,
Minnesota; Beachwood, Ohio; Dresden, Germany; and Chennai, India under the direction of
internationally known scientists and research institutes under exclusive contract to NTIC with respect to
the subject of their respective research efforts. EXCOR has established a wholly owned subsidiary, Excor
Korrosionsforschung GmbH, to conduct research into new fields of corrosion inhibiting packaging and
the applications engineering of such products in conjunction with NTIC’s domestic research and
development operations. With respect to NTIC’s Natur-Tec® resin compounds and finished products,
Ramani Narayan, Ph.D., a current director of NTIC and Distinguished Professor in the Department of
Chemical Engineering & Materials Science at Michigan State University, provides his expertise and
technical support to NTIC.

NTIC spent $4,364,109 in fiscal 2011 and $3,333,683 in fiscal 2010 in connection with its research and
development activities. NTIC anticipates that it will spend between $4,300,000 and $4,500,000 in fiscal
2012 on research and development activities. These amounts are net of reimbursements related to certain
research and development contracts. Such reimbursements totaled $219,175 and $600,023 in fiscal 2011
and fiscal 2010, respectively. Most of NTIC’s research and development contracts under which NTIC
received reimbursements during fiscal 2011 were in connection with developing corrosion prevention
solutions for the oil and gas industry, and to a lesser extent, U.S. government or other grants or awards in
connection with developing future potential Natur-Tec® products.

During fiscal 2009, NTIC entered into a multi-year contract between Zerust Brazil and Petrobras to install
and service proprietary corrosion protection technologies on the roofs of an initial set of aboveground oil
storage tanks at the Petrobras REDUC refinery in Rio de Janeiro, Brazil. Also during fiscal 2009, NTIC
signed multiple joint research and development contracts with Petrobras’s 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,
which continued during fiscal 2011 and are expected to be concluded in fiscal 2012, are designed to help
mitigate corrosion for critical oil and gas industry infrastructure, such as storage tanks and pipelines.

NTIC was awarded three National Science Foundation (NSF) awards -- one in June 2009 as a Phase I
Small Business Technology Transfer (STTR) grant for $150,000 on advanced polylactide materials for
biobased and biodegradable products, the second in September 2009 as a Phase I Small Business
Innovation Research (SBIR) grant for an additional $150,000 on “Biobased coatings for corrosion

protection” and a third in November 2011 as a Phase II SBIR grant of $500,000 for the development of
advanced polylactide materials for biobased and biodegradable plastic products. The Phase I projects
were completed in June 2010 and have helped NTIC develop biobased technologies for new innovative
applications in the ZERUST® and Natur-Tec® business areas. The research and technology development
was conducted in collaboration with Michigan State University. NTIC plans to use modified polylactic
acid chemistries developed at Michigan State University to expand its product portfolio with enhanced
solutions for bioplastics packaging.

During fiscal 2010, NTIC was awarded money from the U.S. Department of Defense for a Phase I Small
Business Innovation Research contract worth $70,000 to develop non-plastic marine biodegradable waste
bags for the U.S. Navy. NTIC collaborated with the U.S. Army Natick labs and Michigan State
University on this project. In November 2011, NTIC was awarded a Department of Defense Small
Business Innovation Research Phase II grant of $500,000 for the development of biobased and marine
biodegradable non-plastic bags for the U.S. Navy.

Intellectual Property Rights

NTIC’s success depends and will continue to depend in part upon its ability to maintain patent and
trademark protection for its products and processes, to preserve its proprietary information and trade
secrets and to operate without infringing the proprietary rights of third parties. NTIC’s policy is to
attempt to protect its technology by, among other things, filing patent applications and trademark
applications and vigorously preserving the trade secrets covering its technology and other intellectual
property rights.

In 1979, NTIC developed and patented the first polyolefin (plastic) based industrial corrosion inhibiting
packing material in the world. The U.S. patent granted under this patent application became the most
important intellectual property right in NTIC’s history. This patent expired in 2000. NTIC has since filed
for 12 letters of patents in the U.S. covering various corrosion inhibiting technologies, systems and
applications, and now owns several patents in these areas. These patents as well as patent applications
have been extended to the countries of strategic relevance to NTIC including, but not limited to, the
Patent Cooperation Treaty. In addition, EXCOR owns several patents in the area covering various
corrosion inhibiting technologies and also applied for new patents on proprietary new corrosion inhibiting
technologies. NTIC is also seeking additional patent protection covering various host materials into
which its corrosion inhibiting additives and other protective features can be incorporated, proprietary new
process technologies, and chemical formulations outside the area of corrosion protection. NTIC owns
several patents outside the area of corrosion protection both in the U.S. and in countries of strategic
relevance to NTIC including, but not limited to, the Patent Cooperation Treaty.

In addition to seeking patent protection, NTIC maintains an extensive portfolio of trademarks in countries
where NTIC has a presence directly or through its joint ventures. NTIC continuously pursues new
trademark applications of strategic interest worldwide. NTIC owns the following U.S. registered
trademarks: NTI®, NTI & Globe Design, ZERUST®, EXCOR®, ICT®, Z-CIS®, COR TAB®,
PLASTABS®, MATCH-TECH®, COR/SCI®, NIC®, NATUR-TEC®, NATUR-TEC & Design®, NATUR-
BAG® and NATUR-WARE®. NTIC also has a registered trademark on the use of the Color Yellow with
respect to corrosion inhibiting packaging. In addition, NTIC has applied for the following new trademarks
in the U.S.: Polymer Energy™ and Polymer Energy Logo™. Furthermore, NTI®, ZERUST®, The
ZERUST People®, EXCOR®, the Color Yellow®, NTI ASEAN®, COR/SCI®, Polymer Energy® and
Polymer Energy Logo® as well as other marks have been registered in the European Union with several
new applications pending.

NTIC requires its employees, consultants and advisors having access to its confidential information,
including trade secrets, to execute confidentiality agreements upon commencement of their employment
or consulting relationships with NTIC. These agreements generally provide that all confidential
information NTIC develops or makes known to the individual during the course of the individual’s
employment or consulting relationship with NTIC must be kept confidential by the individual and not
disclosed to any third parties. NTIC also requires all of its employees and consultants who perform
research and development for NTIC to execute agreements that generally provide that all inventions
developed by these individuals during their employment by or service arrangement with NTIC will fall
under NTIC’s proprietary intellectual property rights.

Manufacturing

NTIC’s ZERUST® rust and corrosion inhibiting products are manufactured according to NTIC’s
specifications primarily by selected sub-contractors and joint ventures under trade secrecy agreements
and/or license agreements. During fiscal 2012, NTIC expects to manufacture certain select new
ZERUST® rust and corrosion inhibiting products in house at its corporate headquarters location in Circle
Pines, Minnesota in order to improve the speed and quality of product development and technical support.

NTIC’s joint venture in India produces NTIC’s Natur-Tec® resin compounds at a compounding facility in
Chennai, India. Depending upon future demand for NTIC’s Natur-Tec® resin compounds, NTIC may
need to open an additional compounding facility to produce its Natur-Tec® resin compounds. The resin
compounds produced in India can be shipped to any facility around the world where they can then be
converted into a finished product, such as a bag or piece of cutlery. NTIC’s Natur-Tec® finished products
are manufactured using NTIC’s Natur-Tec® resin compounds by selected sub-contractors. Because of an
increasing trend for customers to buy American made products and products that have a reduced or
neutral carbon footprint, NTIC is exploring alternative United States based sub-contractors for its Natur-
Tec® finished products.

NTIC is ISO 9001 certified with respect to the manufacturing of its products and ISO 14000 certified with
respect to environmental management standards. NTIC believes that the process of ISO 9001
certification serves as an excellent total quality management tool, enabling NTIC to ensure consistency in
the performance of its products. NTIC believes that the process of ISO 14000 certification serves as an
excellent tool for NTIC to continuously improve its environmental performance. In addition, because
potential customers may prefer or require manufacturers to have achieved ISO certification, such ISO
certifications may provide NTIC with certain competitive advantages.

Availability of Raw Materials

NTIC generally does not carry excess quantities of raw materials or purchased parts because of
widespread availability for such materials and parts from various suppliers. However, with respect to its
Natur-Tec® resin compounds and finished products, there are a limited number of suppliers of the base
resins used to manufacture the resin compounds and finished products, and NTIC has experienced some
delay in obtaining such base resins. In addition, a number of raw materials and purchased parts used in
NTIC’s rust and corrosion inhibiting products and Natur-Tec® finished products are sourced from
suppliers who currently serve as NTIC’s sole source of supply for these materials and parts. Although
NTIC believes it can obtain these raw materials and parts from other sources of supply, an unexpected
loss of supply over a short period of time may not allow NTIC to replace these sources in the ordinary
course of business.

Backlog

NTIC had an order backlog of $400,000 as of August 31, 2011 compared to $342,000 as of August 31,
2010. These are orders that are held by NTIC pending release instructions from the customers to be used
in just-in-time production. Customers generally place orders on an “as needed” basis and expect delivery
within a relatively short period of time.

Employees

As of August 31, 2011, NTIC had 58 full-time employees located in the United States, consisting of 22 in
sales and marketing, 16 in research and development and lab, nine in administration, 10 in production and
one responsible for international coordination. As of August 31, 2011, NTIC’s majority owned Brazilian
subsidiary, the operations of which are consolidated on NTIC’s consolidated financial statements, had 12
full-time employees. There are no unions representing NTIC’s employees and NTIC believes that its
relations with its employees are good.

Available Information

NTIC is a Delaware corporation that was originally organized as a Minnesota corporation in 1970.
NTIC’s principal executive office is located at 4201 Woodland Road, Circle Pines, Minnesota 55014 and
its telephone number is (763) 225-6600. NTIC’s website is located at www.ntic.com. The information
on NTIC’s website or any other website is not incorporated by reference into this report and is included as
an inactive textual reference only.

NTIC makes available, free of charge and through its Internet web site, its annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to any such reports
filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended,
as soon as reasonably practicable after NTIC electronically files such material with, or furnishes it to, the
Securities and Exchange Commission.

Forward-Looking Statements

This report contains or incorporates by reference not only historical information, but also forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created by those
sections. In addition, NTIC or others on its behalf may make forward-looking statements from time to
time in oral presentations, including telephone conferences and/or web casts open to the public, in press
releases or reports, on NTIC’s Internet web sites or otherwise. All statements other than statements of
historical facts included in this report that address activities, events or developments that NTIC expects,
believes or anticipates will or may occur in the future are forward-looking statements including, in
particular, the statements about NTIC’s guidance, plans, objectives, strategies and prospects regarding,
among other things, its financial condition, results of operations and business. NTIC has identified some
of these forward-looking statements with words like “believe,” “may,” “could,” “would,” “might,”
“forecast,” “possible,” “potential,” “project,” “will,” “should,” “expect,” “intend,” “plan,” “predict,”
“anticipate,” “estimate,” “approximate” or “continue” and other words and terms of similar meaning. The
use of future dates is also an indication of a forward-looking statement. Forward-looking statements may
be contained in the notes to NTIC’s consolidated financial statements and elsewhere in this report,
including under the heading “Part II. Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations.”

NTIC wishes to caution readers not to place undue reliance on any forward-looking statement that speaks
only as of the date made and to recognize that forward-looking statements are predictions of future
results, which may not occur as anticipated. Actual results could differ materially from those anticipated
in the forward-looking statements and from historical results, due to the risks and uncertainties described
under the heading “Item 1A. Risk Factors” below, as well as others that NTIC may consider immaterial
or does not anticipate at this time. Although NTIC believes that the expectations reflected in its forward-
looking statements are reasonable, NTIC does not know whether its expectations will prove correct.
NTIC’s expectations reflected in its forward-looking statements can be affected by inaccurate
assumptions NTIC might make or by known or unknown risks and uncertainties, including those
described below under the heading “Item 1A. Risk Factors.” The risks and uncertainties described under
the heading “Item 1A. Risk Factors” below are not exclusive and further information concerning NTIC
and its business, including factors that potentially could materially affect its financial results or condition,
may emerge from time to time. NTIC assumes no obligation to update forward-looking statements to
reflect actual results or changes in factors or assumptions affecting such forward-looking statements.
NTIC advises stockholders and investors to consult any further disclosures NTIC may make on related
subjects in its annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form
8-K that NTIC files with or furnishes to the Securities and Exchange Commission.

I tem 1A . R I SK FA C T OR S

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

Disruption and turmoil in global credit and financial markets, which may be exacerbated by the
inability of certain countries to continue to service their sovereign debt obligations, and the possible
negative implications of such events to the global economy, may negatively impact our business,
operating results and financial condition.

The recent downgrade of the U.S. credit rating and the possibility that certain European Union member
states will default on their debt obligations have contributed to significant uncertainty about the stability
of global credit and financial markets. The credit and economic conditions within certain European
Union countries in particular, including Greece, Ireland, Italy, Portugal and Spain, have continued to
deteriorate and have contributed to the instability in global credit and financial markets. The possibility
that such EU member states will default on their debt obligations, the continued uncertainty regarding
international and the European Union’s financial support programs and the possibility that other EU
member states may experience similar financial troubles could further disrupt global credit and financial
markets. While the ultimate outcome of these events cannot be predicted, it is possible that such events
could have a negative effect on the global economy as a whole, and the business, operating results and
financial condition of us and our joint ventures, in particular. For example, if the European sovereign
debt crisis continues or worsens, the negative implications to the global economy and us and our joint
ventures could be significant. Approximately 60% of the $119.3 million in net sales of our joint ventures
during fiscal 2011 was to customers in the European Union. A deterioration of economic conditions in
such countries likely would have an adverse effect the net sales of our joint ventures and, accordingly, our
equity in income from joint ventures, fees for services provided to joint ventures and receipt of dividend
distributions from our joint ventures. In addition, if the European sovereign debt crisis continues or
worsens, the value of the Euro could deteriorate, which could negatively impact the business, operating
results and financial condition of us and our joint ventures in light of the substantial operations of our
joint ventures and the revenues our joint ventures derive from customers in the European Union.
Tightening of the credit and financial markets could negatively impact the ability of companies to borrow
money from their existing lenders, obtain credit from other sources or raise financing to fund their
operations. This could negatively impact the ability of our customers and the customers of our joint

ventures to purchase our products, suppliers’ ability to provide us and our joint ventures with materials
and components and the ability of us and our joint ventures, if needed, to finance operations on
commercially reasonable terms, or at all. Any or all of these events could negatively impact our business,
operating results and financial condition.

Adverse worldwide economic conditions may adversely affect NTIC’s business, operating results and
financial condition.

Apart from the European sovereign debt crisis, the U.S. and other global economies have experienced
adverse economic conditions that have affected all sectors of the economy, resulting in declines in
economic growth and consumer confidence, increases in unemployment rates and uncertainty about
economic stability and the possibility of a “double-dip” or another worldwide economic recession.
Recessionary factors and adverse worldwide economic conditions have adversely affected NTIC’s
business, operating results and financial condition in the past. NTIC’s operating results for fiscal 2009
were adversely affected by worldwide economic conditions, particularly adverse conditions affecting the
worldwide automobile industry at that time. Since a significant portion of NTIC’s ZERUST® rust and
corrosion inhibiting products and services are sold to customers in the automotive industry, adverse
economic conditions affecting the automotive industry again in particular may result in another adverse
effect on NTIC’s net sales and its other operating results.

Global credit and financial markets also have experienced disruptions, including diminished liquidity and
credit availability and rapid fluctuations in market valuations. NTIC’s business also has been affected by
these conditions and is likely to be affected by them in the future, and there is no certainty that recent
improvements in economic conditions will continue, or that economic conditions will not deteriorate
further. These uncertainties affect businesses such as NTIC’s in a number of ways, making it difficult to
accurately forecast and plan its future business activities and financial performance. For example, the
ability of NTIC’s customers to borrow money from their existing lenders or to obtain credit from other
sources to purchase NTIC’s products has been and may continue to be impaired. In addition, although
NTIC maintains allowances for doubtful accounts for estimated losses resulting from the inability of its
customers, distributors and joint ventures to make required payments and such losses historically have
been within NTIC’s expectations and the provisions established, NTIC cannot guarantee that it will
continue to experience the same loss rates that it has in the past, especially if continued weaknesses in the
worldwide economy persist or worsen. A significant change in the liquidity or financial condition of
NTIC’s customers, distributors or joint ventures could cause unfavorable trends in NTIC’s receivable
collections and additional allowances may be required, which could adversely affect NTIC’s operating
results. In addition, weaknesses in the worldwide economy may adversely impact the ability of suppliers
to provide NTIC with materials and components, which could adversely affect NTIC’s business and
operating results. NTIC is unable to predict the prospects for a global economic recovery, but the longer
the duration of such adverse and uncertain economic conditions, the greater the risks NTIC faces in
operating its business.

NTIC’s liquidity and financial position rely on the receipt of fees for services provided to its joint
ventures and dividend distributions from its joint ventures. No assurance can be provided that NTIC
will continue to receive such fees and dividend distributions in amounts NTIC historically has received
or anticipates to receive.

NTIC conducts business, either directly or indirectly through several joint venture arrangements that
operate in North America, Europe and Asia. Each of these joint ventures manufactures, markets and sells
finished products in the geographic territory that it is assigned. NTIC’s receipt of funds as a result of sales
by its joint ventures is dependent upon NTIC’s receipt of fees for services that NTIC provides to its joint
ventures based primarily on the revenues of the joint ventures and NTIC’s receipt of dividend

distributions from its joint ventures based on the profitability of its joint ventures. NTIC’s liquidity and
financial position rely on NTIC’s receipt of fees for services that NTIC provides to its joint ventures and
dividend distributions from its joint ventures. During fiscal 2011, NTIC received $6,129,979 in fees and
$2,838,437 in dividend distributions from its joint ventures. During fiscal 2010, NTIC received
$4,690,450 in fees and $840,996 in dividend distributions from its joint ventures. Because NTIC
typically owns only 50% or less of each of its joint venture entities, NTIC does not control the decisions
of these entities regarding whether to pay dividends and, if paid, how much they should be 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 or the failure of NTIC to receive fees for
services provided to joint ventures in amounts typically expected by NTIC could adversely affect NTIC’s
liquidity and financial position.

Since a significant portion of NTIC’s earnings results from NTIC’s equity income of joint ventures
and since NTIC’s equity income of joint ventures varies from quarter to quarter, NTIC’s earnings are
subject to quarterly fluctuations.

A significant portion of NTIC’s earnings results from NTIC’s equity income of joint ventures. NTIC’s
equity in income of joint ventures consists of NTIC’s share of equity in income of its joint ventures based
on the overall profitability of the joint ventures. Such profitability varies from quarter to quarter. Since
NTIC’s management typically receives quarterly joint venture financial information after the completion
of each fiscal quarter, it is impossible for NTIC’s management to cut costs and expenses to make up for
any unanticipated shortfall in NTIC’s equity income of joint ventures. Accordingly, the variability in
NTIC’s equity income of joint ventures, in turn, subjects NTIC’s earnings to quarterly fluctuations.

NTIC faces intense competition in almost all of its product lines, including from competitors that have
substantially greater resources than NTIC does. No assurance can be provided that NTIC will be able
to compete effectively, which would harm its business and operating results.

NTIC’s products are sold in intense competitive markets throughout the world. This intense competition
could result in pricing pressures, lower sales, reduced margins and lower market share. The principal
competitive factors in NTIC’s corrosion prevention solutions markets are pricing, product innovation,
quality and reliability, product support, customer service and reputation. Additional competitive factors
present in NTIC’s bioplastics business are brand awareness, distribution network, product availability,
product offering, shelf life and place of manufacture. NTIC often competes with numerous
manufacturers, many of which have substantially greater financial, marketing, and other resources than
NTIC. As a result, they may be able to adapt more quickly than NTIC to new or emerging technologies,
industry trends, and changes in customer requirements, or to devote greater resources to the promotion
and sale of their products than NTIC. In addition, competition could increase if new companies enter the
markets in which NTIC competes, especially when the barriers to entry are low, which may be true with
respect to NTIC’s rust and corrosion prevention business, 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. No assurance can be provided that NTIC will be able to
compete effectively, which would harm its business and operating results. In particular, NTIC has
experienced more intense competition with respect to many of its traditional ZERUST® rust and corrosion
inhibiting products and services, which have led to decreased pricing and smaller margins for NTIC.
NTIC anticipates that such intense competition likely will continue and that new competitors may
emerge, including plastic extrusion companies, which would continue to adversely affect NTIC’s
operating results.

NTIC’s ZERUST® rust and corrosion inhibiting products and services generate a significant portion of
NTIC’s net sales and the net sales of NTIC’s joint ventures. Accordingly, if sales of these products and
services were to decline, NTIC’s operating results would be adversely affected.

NTIC’s ZERUST® rust and corrosion inhibiting products and services generate a significant portion of
NTIC’s net sales and the net sales of NTIC’s joint ventures. During fiscal 2011, 95.0% of NTIC’s
consolidated net sales were derived from sales of ZERUST® rust and corrosion inhibiting products and
services. While the net sales of NTIC’s joint venture are not included in NTIC’s net sales on NTIC’s
consolidated financial statements, NTIC’s receipt of fees for services that NTIC provides to its joint
ventures and NTIC’s receipt of dividend distributions from its joint ventures is based primarily on the
revenues and profitability of the joint ventures. Accordingly, if sales of these products and services were
to decline due to increased competition, the introduction of a new disruptive technology or otherwise,
NTIC’s operating results would be adversely affected.

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 or alternative technologies in the markets in which it
competes. Product development requires significant research and development, 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, no assurance can be provided
that NTIC will be able to continue to do so in the future. Product 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 has invested and intends to continue to invest additional research and development and
marketing efforts and resources into the application of its corrosion prevention solutions into the oil
and gas industry and the continued launch of its Natur-Tec® resin compounds and finished products.
No assurance can be provided, however, that NTIC’s investments in these new markets and products
will be successful and result in additional revenue to NTIC.

In an effort to increase net sales, NTIC has expanded the marketing of its corrosion prevention solutions
into the oil and gas industry, and expanded its product lines to include its Natur-Tec® resin compounds
and finished products. The majority of NTIC’s research and development expense in fiscal 2011 was
spent in connection with research and development activities related to these two strategic initiatives.
NTIC expects to continue to invest additional research and development and marketing efforts and
resources into these strategic initiatives. No assurance can be provided, however, that such strategic
initiatives will be successful or that NTIC will be successful in obtaining additional revenue as a result of
them. The introduction of new products into new markets takes significant resources and there can be no
assurance that NTIC is dedicating a sufficient amount of resources to ensure the success of these strategic
initiatives. NTIC believes that the sale of its ZERUST® rust and corrosion inhibiting products and
services into the oil and gas industry, in particular, will involve a long sales cycle, likely including a one-

to two-year trial period with each customer and a slow integration process thereafter. This long sales
cycle may cause NTIC’s management, stockholders and investors to lose faith in the business
opportunities for NTIC’s ZERUST® rust and corrosion inhibiting products and services in the oil and gas
industry.

The expansion of NTIC’s corrosion prevention solutions into the oil and gas industry and the
continued launch of NTIC’s Natur-Tec® resin compounds and finished products may require
additional capital in the future, which may not be available or may be available only on unfavorable
terms. In addition, any equity financings may be dilutive to NTIC’s stockholders.

The expansion of NTIC’s corrosion prevention solutions into the oil and gas industry and the continued
launch of NTIC’s Natur-Tec® resin compounds and finished products will continue to require significant
resources during fiscal 2012 and beyond. To the extent that NTIC’s existing capital, including amounts
available under its revolving line of credit or other then existing financing arrangements, is insufficient to
meet these requirements, NTIC may raise additional capital through financings or additional borrowings.
Any equity or debt financing, if available at all, may be on terms that are not favorable to NTIC and any
equity financings could result in dilution to NTIC’s stockholders.

NTIC’s strategy of expanding its corrosion prevention solutions into the oil and gas industry and
continuing its launch of its Natur-Tec® bioplastics resin compounds and finished products is risky and
may not prove to be successful, which could harm NTIC’s operating results and financial condition.

During fiscal 2012, NTIC intends to continue its current strategy of expanding its corrosion prevention
solutions into the oil and gas industry and continuing its launch its Natur-Tec® bioplastics resin
compounds and finished products, either directly or indirectly through joint ventures and independent
distributors and agents. Such a strategy is risky and subject to all of the risks inherent in the
establishment of a new business enterprise, including:

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the absence of a significant operating history;
the lack of commercialized products;
the lack of market acceptance of new products;
expected substantial and continual losses for such businesses for the foreseeable future;
the lack of manufacturing experience and limited marketing experience;
an expected reliance on third parties for the manufacture and commercialization of some of the
products;
a competitive environment characterized by numerous, well-established and well-capitalized
competitors;
insufficient capital and other resources; and
reliance on key personnel.

If NTIC is unable to sell excess inventory related to its Natur-Tec® bioplastics business at certain
prices, NTIC may be required to record additional future write-downs, which would have an adverse
effect NTIC’s operating results.

NTIC anticipated greater demand for its Natur-Tec® bioplastics finished products during fiscal 2010 than
NTIC actually experienced, and accordingly, was unable to sell its Natur-Tec® inventory at the times and
prices and in the volumes that NTIC initially anticipated. As a result, NTIC recorded a $360,577 write-
down of its Natur-Tec® inventory during fourth quarter of fiscal 2010 to its market value, which adversely
affected NTIC’s cost of goods sold for fiscal 2010. The Natur-Tec® raw material and finished goods
inventory was purchased and manufactured previously when the base resins were significantly more

expensive. As of August 31, 2011, $902,507 of Natur-Tec® inventory remained on NTIC’s consolidated
balance sheet. If NTIC is unable to sell its remaining Natur-Tec® inventory at the times and prices and in
the volumes at which it currently anticipates, additional future write-downs may be necessary, which
would again adversely affect NTIC’s cost of goods sold, and in turn, NTIC’s operating results.

NTIC relies on others for its production and any interruptions of these arrangements could disrupt
NTIC’s ability to fill its customers’ orders.

NTIC utilizes contract manufacturers for substantially all of its production requirements. The majority of
NTIC’s manufacturing is conducted in China and India by contract manufacturers that also perform
services for numerous other companies. NTIC does not have a guaranteed level of production capacity
with any of its contract manufacturers. Qualifying new contract manufacturers is time consuming and
might result in unforeseen manufacturing and operations problems. The loss of NTIC’s relationships with
its contract manufacturers or their inability to conduct their manufacturing and assembly services for
NTIC as anticipated in terms of capacity, cost, quality and timeliness could adversely affect NTIC’s
ability to fill customer orders in accordance with required delivery, quality, and performance
requirements, and thus adversely affect NTIC’s net sales and other operating results.

NTIC’s dependence on key suppliers puts NTIC at risk of interruptions in the availability of its
products, which could reduce its net sales and adversely affect its operating results and harm its
reputation.

NTIC relies on suppliers for certain raw materials and components used in its products. For reasons of
quality assurance, cost effectiveness or availability, NTIC procures certain raw materials and components
from sole or limited source suppliers. NTIC generally acquires such raw materials and components
through purchase orders placed in the ordinary course of business, and as a result, NTIC does not have a
significant inventory of these materials and components and does not have any guaranteed or contractual
supply arrangements with many of these suppliers for these materials and components. NTIC’s
dependence on third-party suppliers involves several risks, including limited control over pricing,
availability, quality and delivery schedules, as well as manufacturing yields and costs. Suppliers of such
raw materials and components may decide, or be required, for reasons beyond NTIC’s control to cease
supplying such raw materials and components to NTIC or to raise their prices. Shortages of raw
materials, quality control problems, production capacity constraints or delays by suppliers could
negatively affect NTIC’s ability to meet its production obligations and result in increased prices for
affected parts. Any such shortage, constraint or delay may result in delays in shipments of products or
components, which could adversely affect NTIC’s net sales and other operating results, and its reputation.
From time to time, materials and components used in NTIC’s products are subject to allocation because
of shortages of these materials and components. With respect to NTIC’s Natur-Tec® resin compounds
and finished products, there are a limited number of suppliers of the base resins used to manufacture
NTIC’s Natur-Tec® resin compounds and finished products, and NTIC has experienced some delay in
obtaining such base resins. In addition, a number of raw materials and purchased parts used in NTIC’s
rust and corrosion inhibiting products and Natur-Tec® finished products are sourced from suppliers who
currently serve as NTIC’s sole source of supply for these components. Future shortages of materials and
components could cause delayed shipments and customer dissatisfaction and adversely affect net sales.

Increases in prices for raw materials and components used in NTIC’s products could adversely affect
NTIC’s operating results.

NTIC uses certain raw materials and components in its products, including in particular plastic resins,
which are subject to price increases. Increases in prices for raw materials and components used in
NTIC’s products could adversely affect NTIC’s gross margins and other operating results.

The commercial success of NTIC’s Natur-Tec® resin compounds and finished products depends on the
widespread market acceptance of products manufactured with bio-based and biodegradable resins.

Although there is a developed market for petroleum-based plastics, the market for “bio-plastics” which
are plastics produced with bio-based resins, which are derived from renewable resources such as corn or
cellulosic/plant material or blends thereof, or plastics that are engineered to be fully biodegradable or
both, is still developing. The commercial success of NTIC’s Natur-Tec® resin compounds and finished
products depends on the widespread market acceptance of products manufactured with bio-based and
biodegradable resins. It is currently difficult to assess or predict with any assurance the potential size,
timing and viability of market opportunities for NTIC’s Natur-Tec® resin compounds and finished
products. The traditional plastics market sector is well-established with entrenched competitors with
whom NTIC competes. Pricing for traditional plastics has been highly volatile in recent years, which
drive, to some extent, the commercial and other support for bioplastics. While NTIC expects to be able to
command a premium price for its Natur-Tec® resin compounds and finished products, a widening gap in
the pricing for bioplastics versus petroleum-based plastics may reduce the size of the addressable market
for NTIC’s Natur-Tec® resin compounds and finished products. In addition, the growth of the market will
create some pressure on price for applications today considered commodities, including in particular
NTIC’s current Natur-Tec® finished products.

NTIC’s international business, which is conducted primarily through its joint ventures, requires
management attention and financial resources and exposes NTIC to difficulties and risks presented by
international economic, political, legal, accounting and business factors.

NTIC sells products and services directly and via a network of joint ventures, independent distributors,
manufacturer’s sales representatives and agents in over 55 countries, including countries in North
America, Europe, Asia and the Middle East. One of NTIC’s strategic objectives is the continued
expansion of its international operations. The expansion of NTIC’s existing international operations and
entry into additional international markets require management attention and financial resources.

The sale and shipping of products and services across international borders subject NTIC to extensive
U.S. and foreign governmental trade regulations. Compliance with such regulations is costly and exposes
NTIC to penalties for non-compliance. Other laws and regulations that can significantly impact NTIC
include various anti-bribery laws, including the U.S. Foreign Corrupt Practices Act, laws restricting
business with suspected terrorists and anti-boycott laws. Any failure to comply with applicable legal and
regulatory obligations could impact NTIC in a variety of ways that include, but are not limited to,
significant criminal, civil and administrative penalties, including imprisonment of individuals, fines and
penalties, denial of export privileges, seizure of shipments and restrictions on certain business activities.
Also, the failure to comply with applicable legal and regulatory obligations could result in the disruption
of NTIC’s shipping and sales activities.

Many of the countries in which NTIC sells its products directly or indirectly through its joint ventures,
distributors, representatives and agents are, to some degree, subject to political, economic and/or social
instability. NTIC’s international operations expose NTIC and its joint venture partners, distributors,
representatives and agents to risks inherent in operating in foreign jurisdictions. These risks include:

• difficulties in managing and staffing international operations and the required infrastructure costs

including legal, tax, accounting and 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 joint ventures, distributors, representatives and agents 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;

• multiple, changing and often inconsistent enforcement of laws and regulations; and

•

the potential payment of U.S. income taxes on certain earnings of joint ventures upon
repatriation.

Failure to comply with the U.S. Foreign Corrupt Practices Act could subject NTIC to, among other
things, penalties and legal expenses that could harm its reputation and have a material adverse effect
on its business, financial condition and results of operations.

NTIC is subject to the U.S. Foreign Corrupt Practices Act, or the FCPA, which generally prohibits
covered entities and their intermediaries from engaging in bribery or making other prohibited payments to
foreign officials for the purpose of obtaining or retaining business or other benefits. In addition, the
FCPA imposes accounting standards and requirements on U.S. publicly traded corporations and their
foreign affiliates, which are intended to prevent the diversion of corporate funds to the payment of bribes
and other improper payments, and to prevent the establishment of “off books” slush funds from which
such improper payments can be made. NTIC also is subject to similar anticorruption legislation
implemented in Europe under the Organization for Economic Co-operation and Development’s
Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.
NTIC and its joint ventures, distributors, independent representatives and agents operate in a number of
jurisdictions that pose a high risk of potential violations of the FCPA and other anticorruption laws, based
on measurements such as Transparency International’s Corruption Perception Index, and NTIC utilizes a
number of joint ventures, distributors, independent representatives and agents for whose actions NTIC
could be held liable under the FCPA. NTIC informs its personnel, joint ventures, distributors,
independent representatives and agents of the requirements of the FCPA and other anticorruption laws,
including, but not limited to their reporting requirements. NTIC also has developed and will continue to
develop and implement systems for formalizing contracting processes, performing due diligence on
agents and improving its recordkeeping and auditing practices regarding these regulations. However,
there is no guarantee that NTIC’s employees, joint ventures, distributors, independent representatives or
other agents have not or will not engage in conduct undetected by NTIC’s processes and for which NTIC
might be held responsible under the FCPA or other anticorruption laws.

If NTIC’s employees, joint ventures, distributors, third-party sales representatives or other agents are
found to have engaged in such practices, NTIC could suffer severe penalties, including criminal and civil
penalties, disgorgement and other remedial measures, including further changes or enhancements to its
procedures, policies and controls, as well as potential personnel changes and disciplinary actions. The
Securities and Exchange Commission has increased its enforcement of the FCPA during the past several
years. Although NTIC does not believe it is currently a target in any such enforcement action, any
investigation of any potential violations of the FCPA or other anticorruption laws by U.S. or foreign
authorities also could have an adverse impact on NTIC’s business, financial condition and results of
operations.

Certain private and foreign companies, including some of NTIC’s competitors, are not subject to
prohibitions as strict as those under the FCPA or, even if subjected to strict prohibitions, such prohibitions
may be laxly enforced in practice. If NTIC’s competitors engage in corruption, extortion, bribery, pay-
offs, theft or other fraudulent practices, they may receive preferential treatment from personnel of some
companies or from government officials, giving NTIC’s competitors an advantage in securing business
and which would put NTIC at a disadvantage.

Fluctuations in foreign currency exchange rates could result in declines in NTIC’s earnings and
changes in NTIC’s foreign currency translation adjustments.

Because the functional currency of NTIC’s foreign operations is the applicable local currency, NTIC is
exposed to foreign currency exchange rate risk arising from transactions in the normal course of business.
NTIC’s principal exchange rate exposure is with the Euro, the Japanese yen, Indian Rupee, Chinese yuan,
Korean won and the English pound against the U.S. dollar. NTIC’s fees for services provided to its joint
ventures and dividend distributions from these foreign entities are paid in foreign currencies and thus
fluctuations in foreign currency exchange rates could result in declines in NTIC’s earnings. Any changes
in foreign currency exchange rates would be reflected as a foreign currency translation adjustment and
would not change NTIC’s equity in income of joint ventures reflected in its consolidated statements of
operations. NTIC does not hedge against its foreign currency exchange rate risk.

NTIC’s business, properties and products are subject to governmental regulation and taxes,
compliance with which may require NTIC to incur expenses or modify its products or operations, and
which may expose NTIC to penalties for non-compliance. Governmental regulation also may
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 NTIC’s financial condition and operating results. NTIC is also subject to other
international, federal and state laws, rules and regulations, the future non-compliance with 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.

Fluctuations in NTIC’s effective tax rate could have a significant impact on NTIC’s financial position,
results of operations or cash flows.

The mix of pre-tax income or loss among the tax jurisdictions in which NTIC operates that have varying
tax rates could impact NTIC’s effective tax rate. NTIC is subject to income taxes as well as non-income
based taxes, in both the United States and various foreign jurisdictions. Judgment is required in
determining the worldwide provision for income taxes, other tax liabilities, interest and penalties. Future
events could change management’s assessment. NTIC operates within multiple taxing jurisdictions and is
subject to tax audits in these jurisdictions. These audits can involve complex issues, which may require
an extended period of time to resolve. NTIC also has made assumptions about the realization of deferred
tax assets. Changes in these assumptions could result in a valuation allowance for these assets. Final
determination of tax audits or tax disputes may be different from what is currently reflected by NTIC’s
income tax provisions and accruals.

NTIC intends to grow its business through additional joint ventures, alliances and acquisitions, which
could be risky and 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 a new joint venture or acquired
business or in realizing projected efficiencies, cost savings and revenue synergies;

• potential loss of key employees or customers of the new joint venture or acquired business or

adverse effects on existing business relationships with suppliers and customers;

•

adverse impact on overall profitability if the new joint venture or acquired business does 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 joint venture capital contribution or the
acquisition purchase price, which could in turn restrict NTIC’s 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 new joint venture or acquisition; and

incorrect estimates made in the accounting for acquisitions, occurrence of non-recurring charges
and write-off of significant amounts of goodwill that could adversely affect NTIC’s operating
results.

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 joint ventures, distributors, manufacturer’s sales representatives and other agents to
market and sell its products.

In addition to its direct sales force, NTIC relies on its joint ventures, distributors, manufacturer’s sales
representatives and other agents to market and sell its products in the United States and internationally.
NTIC’s joint ventures, distributors, manufacturer’s sales representatives and other agents might terminate
their relationship with NTIC, or devote insufficient sales efforts to NTIC’s products. NTIC does not
control its joint ventures, distributors, manufacturer’s sales representatives and other agents and they may
not be successful in implementing NTIC’s marketing plans. NTIC’s failure to maintain its existing
relationships with these entities, or its failure to recruit and retain additional skilled joint venture partners,
distributors, manufacturer’s sales representatives and other agents could have an adverse effect on NTIC’s
operations. It is anticipated that several of NTIC’s joint venture partners will retire during the next
several years which will require a transition on the part of the joint venture as well as NTIC and could
harm NTIC’s relationship with the joint venture and NTIC’s business.

The sale of ZERUST® rust and corrosion inhibiting products into the oil and gas industry is especially
risky in light of the hazards typically associated with such operations and the significant amount of
potential liability involved, which could adversely affect our business if our ZERUST® rust and
corrosion inhibiting products are involved, even if the cause of such events was not related to our
products.

Because we sell our ZERUST® rust and corrosion inhibiting products into the oil and gas industry, we
are subject to some of the risks and hazards typically associated with such operations, including hazards
such as fire, explosion, blowouts, cratering, unplanned gas releases and spills, each of which could be
claimed to be attributed to the failure of our products to perform as anticipated. If such events occur and
our products are involved, our business and operating results may suffer even if the cause of such events
was not related to our products.

NTIC has 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 group of employees.
NTIC’s future success will depend in large part on its ability to retain its key employees and identify,
attract and retain other highly qualified managerial, technical, research and development, sales and
marketing and customer service personnel when needed. Competition for these individuals may be
intense, especially in the markets in which NTIC operates. NTIC may not succeed in identifying,
attracting and retaining these personnel. NTIC’s current management, other than its President and Chief
Executive Officer, does not have any material stock ownership in NTIC. In addition, none of NTIC’s
employees has any contractual obligation to maintain his or her employment with NTIC. The loss or
interruption of services of any of NTIC’s key personnel, including in particular its technical 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 expects to transition the manufacturing of certain select ZERUST® rust and corrosion inhibiting
products in house at its corporate headquarters location in Circle Pines, Minnesota during fiscal 2012
which could adversely affect the supply of such products if the transition does not proceed smoothly.

During fiscal 2012, NTIC expects to transition the manufacturing of certain select ZERUST® rust and
corrosion inhibiting products in house at its corporate headquarters location in Circle Pines, Minnesota in
order to improve the speed and quality of product development and technical support. If such transition

does not proceed smoothly, it could affect the supply of such products and adversely affect NTIC’s
business 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 its patents or if it initiates any proceedings to protect its proprietary rights and if
the outcome of any such litigation is unfavorable to NTIC, its business and operating results could be
materially adversely affected.

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.

NTIC may not achieve projected goals and objectives in the time periods that NTIC anticipates or
announces publicly, which could have an adverse effect on NTIC’s business and could cause its stock
price to decline.

NTIC sets goals and objectives for, and makes public statements regarding, the timing of certain
accomplishments and milestones regarding its business, such as its progress in selling its ZERUST® rust
and corrosion inhibiting products and services to customers in the oil and gas industry, the progress and
timing of its various field trials with prospective customers in the oil and gas industry, its ability to
increase sales of its Natur-Tec® resin compounds and finished products, and other developments and

milestones. The actual timing of these events can vary dramatically due to a number of factors including
without limitation delays or failures in current field trials, the amount of time, effort and resources
committed to the sales and marketing of NTIC’s products and services by NTIC and its current and
potential future distributors and agents and the uncertainties inherent in introducing new products and
services. As a result, there can be no assurance that NTIC will succeed in achieving its projected goals
and objectives in the time periods that NTIC anticipates or announces publicly. The failure to achieve
such projected goals and objectives in the time periods that NTIC anticipates or announces publicly could
have an adverse effect on NTIC’s business and could cause its stock price to decline.

NTIC also discloses from time to time projected financial information, including its anticipated annual net
sales and net earnings. These financial projections are based on management’s current expectations and
do not contain any margin of error or cushion for any specific uncertainties, or for the uncertainties
inherent in all financial forecasting.

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

Changing laws, regulations and standards relating to corporate governance and public disclosure,
including the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Sarbanes-Oxley Act
of 2002 and related and other recent regulations implemented by the SEC and the NASDAQ Stock
Market, are creating challenges for publicly-held companies, including NTIC. NTIC’s efforts to comply
with evolving laws, 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 NTIC’s assessment
of its internal control over financial reporting have required and will continue to require the expenditure
of significant financial and managerial resources. Although NTIC’s management concluded that NTIC’s
internal control over financial reporting was effective as of August 31, 2011, no assurance can be
provided that NTIC’s management will reach a similar conclusion as of any later date or that NTIC’s
independent registered public accounting firm will agree with management’s conclusions in the event
NTIC becomes an “accelerated filer” under SEC rules and NTIC’s independent registered public
accounting firm is required to attest to management’s report on its internal control over financial
reporting.

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 joint ventures or subject them to compliance with the internal control provisions
of the Sarbanes-Oxley Act of 2002 could adversely affect NTIC’s operating results and financial
condition.

If there were a change in accounting rules and NTIC were required to fully consolidate its joint ventures
or if NTIC’s joint ventures otherwise would be required to be consolidated with NTIC to be in
compliance with the internal control provisions of the Sarbanes-Oxley Act of 2002, NTIC and the
individual joint venture would incur significant additional costs. In addition, other accounting
pronouncements issued in the future could have a material cost associated with NTIC’s implementation of
such new accounting pronouncements.

If NTIC becomes an “accelerated filer” under SEC rules, NTIC will be subject to additional
burdensome SEC disclosure and other rules and regulations, which may cause NTIC to incur
additional costs to comply with such rules and regulations and the non-compliance of which may have
an adverse effect on NTIC’s operating results.

If NTIC becomes an “accelerated filer” under SEC rules, NTIC will be subject to additional burdensome
SEC disclosure and other rules and regulations, such as the requirement of NTIC’s independent registered
public accounting firm to attest to NTIC’s management’s report on the effectiveness of NTIC’s internal
control over financial reporting and the requirement of NTIC to comply with certain additional
disclosures rules and regulations, including the requirement to include additional executive compensation
disclosures in NTIC’s proxy statement in connection with its annual meeting of stockholders. If NTIC
does not comply with such additional rules and regulations, the results may have an adverse effect on
NTIC’s operating results.

NTIC’s business is subject to a number of other miscellaneous risks that may adversely affect NTIC’s
operating results, financial condition or business.

NTIC’s business is subject to a number of other miscellaneous risks that may adversely affect NTIC’s
operating results, financial condition or business, such as natural or man-made disasters or global
pandemics that may result in shortages of raw materials, higher commodity costs, an increase in insurance
premiums and other adverse effects on NTIC’s business; the continued threat of terrorist acts and war that
may result in heightened security and higher costs for import and export shipments of components or
finished goods; and the ability of NTIC’s management to adapt to unplanned events.

Risks Related to NTIC’s Common Stock

The trading volume of NTIC’s common stock is typically very low, leaving NTIC’s common stock open
to risk of high volatility.

The number of shares of NTIC’s common stock being traded on a daily basis is often very low and on
some trading days, there is no trading volume at all. Any stockholder wishing to sell his, her or its stock
may cause a significant fluctuation in the trading price of NTIC’s common stock. In addition, low trading
volume of a stock increases the possibility that, despite rules against such activity, the price of the stock
may be manipulated by persons acting in their own self-interest. NTIC may not have adequate market
makers and market making activity to prevent manipulation in its common stock.

The price and trading volume of NTIC’s common stock has been, and may continue to be, volatile.

The market price and trading volume of NTIC’s common stock price has fluctuated over a wide range
during the past year or so. During fiscal 2011, the sale price of NTIC’s common stock ranged from a low
of $9.00 per share to a high of $20.87 per share, and the daily trading volume ranged from zero shares to
41,500 shares. It is likely that the price and trading volume of NTIC’s common stock will continue to
fluctuate in the future. The securities of small capitalization companies, including NTIC, from time to
time experience significant price and volume fluctuations, often unrelated to the operating performance of
these companies. Securities class action litigation is sometimes brought against a company following
periods of volatility in the market price of its securities or for other reasons. NTIC may become the target
of similar litigation. Securities litigation, whether with or without merit, could result in substantial costs
and divert management’s attention and resources, which could harm NTIC’s business, financial condition,
and operating results, as well as the market price of its common stock.

A large percentage of NTIC’s outstanding common stock is held by insiders, and, as a result, the
trading market for NTIC’s common stock is not as liquid as the stock of other public companies.

As of November 18, 2011, NTIC had 4,397,324 shares of common stock outstanding, of which 17.8

% of these outstanding shares were beneficially owned by directors, executive officers, principal
stockholders and their respective affiliates. The stock of companies with a substantial amount of stock
held by insiders is usually not as liquid as the stock of other public companies where insider ownership is
not as concentrated. Thus, the trading market for shares of NTIC’s common stock may not be as liquid as
the stock of other public companies. If securities or industry analysts do not publish research or reports
about NTIC’s business, or if they adversely change their recommendations regarding NTIC’s common
stock, the market price for NTIC’s common stock and trading volume could decline.

The trading market for NTIC’s common stock has been influenced by research or reports that industry or
securities analysts publish about NTIC or its business. If one or more analysts who cover NTIC
downgrade NTIC’s common stock, the market price for NTIC’s common stock would likely decline. If
one or more of these analysts cease coverage of NTIC or fail to regularly publish reports on NTIC, NTIC
could lose visibility in the financial markets, which, in turn, could cause the market price or trading
volume for NTIC’s common stock to decline.

NTIC does not intend to pay dividends for the foreseeable future.

Although in the past NTIC has paid dividends on its common stock, NTIC has not done so since fiscal
2005. The payment of any future dividends will be determined by NTIC’s Board of Directors in light of
conditions then existing, including NTIC’s earnings (if any), financial condition, cash requirements,
restrictions in financing agreements, business conditions and other factors. NTIC’s Board of Directors
currently does not anticipate paying a dividend on NTIC’s common stock in the near future, but rather
intends to retain all of its earnings for the foreseeable future to finance the operation and expansion of its
business. As a result, NTIC’s stockholders will only receive a return on their investment in NTIC’s
common stock if the market price of the common stock increases.

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

As of November 18, 2011, Inter Alia Holding Company, or Inter Alia, beneficially owned approximately
13.7% of NTIC’s outstanding common stock. Inter Alia is an entity partially owned by G. Patrick Lynch,
NTIC’s President and Chief Executive Officer and a director, as well as three other members of the Lynch
family. Mr. Lynch shares voting and dispositive power of shares of NTIC’s common stock held by Inter
Alia with the other owners. 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. 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 Mr. 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.

Future equity issuances by NTIC may have dilutive and other effects on NTIC’s existing stockholders.

As of November 18, 2011 there were 4,397,324 shares of NTIC’s common stock outstanding, and in
addition, security holders held options, which, if vested and exercised, would obligate NTIC to issue up to
213,839 additional shares of common stock. It is expected that such shares, when NTIC issues them upon
exercise, will be available for immediate resale in the public market. The market price of NTIC’s
common stock could fall as a result of sales of these shares of common stock due to the increased number
of shares available for sale in the market. In addition, NTIC has a shelf registration statement, which
subject to certain limitations, permits NTIC to sell shares of its common stock or securities convertible
into or exercisable for shares of its common stock, and all of which would be available for resale in the
public market. Of the initial $50,000,000 in equity securities registered under this shelf registration
statement, approximately $46,500,000 in equity securities remains available for issuance. Any issuances
by NTIC of equity securities either under this shelf registration statement or otherwise may be at or below
the prevailing market price of NTIC’s common stock and may have a dilutive impact on NTIC’s existing
stockholders. These issuances or other dilutive issuances also would cause NTIC’s net income per share,
if any, to decrease in future periods. As a result, the market price of NTIC’s common stock could
decrease.

I tem 1B . UNR E SOL V E D STA F F C OM M E NT S

This Item 1B is inapplicable to NTIC as a smaller reporting company.

I tem 2.

PR OPE R T I E S

NTIC’s principal executive offices, production facilities and domestic research and development
operations are located at 4201 Woodland Road, Circle Pines, Minnesota 55014. NTIC purchased the real
estate and 40,000 square feet building in which its corporate headquarters is located in September 2006.
To finance the purchase, Northern Technologies Holding Company, LLC (NTI LLC) obtained a term loan
from PNC Bank, National Association (PNC Bank) with a principal amount of $1,275,000 that was to
mature on May 1, 2011. On January 10, 2011, NTI LLC refinanced the term loan in the then principal
amount of approximately $1,141,788. The term loan matures on January 10, 2016, bears interest at an
annual rate based on the daily LIBOR rate plus 2.15% and is payable in 59 consecutive monthly
installments equal to approximately $6,343 (inclusive of principal but exclusive of interest). The term
loan is secured by a first lien on the real estate and building owned by NTI LLC and all of the assets of
NTIC and is guaranteed by NTIC.

A subsidiary of NTIC, NTI Facilities, Inc., leases approximately 17,000 square feet of office,
manufacturing, laboratory and warehouse space located at 23205 Mercantile Road, Beachwood, Ohio.
The monthly rental payments are $17,500, which are adjusted annually according to the annual consumer
price index, through November 2014. Additionally, NTIC has contract warehousing agreements in place
in California and Indiana to hold and release stock products to customers.

NTIC’s management considers NTIC’s current properties suitable and adequate for its current and
foreseeable needs.

I tem 3.

L E G A L PR OC E E DI NG S

From time to time, NTIC is subject to various claims and legal actions in the ordinary course of its
business. NTIC is not currently involved in any legal proceeding in which NTIC believes, based on
information currently available, that there is a reasonable possibility of a material loss.

I tem 4.

[R E M OV E D A ND R E SE R V E D]

I tem 4A . E X E C UT I V E OF F I C E R S OF T H E R E G I ST R A NT

The two individuals named below have been designated by NTIC’s Board of Directors as “executive
officers” of NTIC. Their ages and the offices held, as of November 18, 2011, are as follows:

Name

G. Patrick Lynch

Age
44

President and Chief Executive Officer

Position with NTIC

Matthew C. Wolsfeld

Chief Financial Officer and Corporate Secretary

G. Patrick Lynch, an employee of NTIC since 1995, has been President since July 2005 and Chief
Executive Officer since January 2006 and was appointed a director of NTIC in February 2004. From July
2005 to January 2006, Mr. Lynch served as Chief Operating Officer of NTIC. Mr. Lynch served as
President of North American Operations of NTIC from May 2004 to July 2005. Prior to May 2004,
Mr. Lynch held various positions with NTIC, including Vice President of Strategic Planning, Corporate
Secretary and Project Manager. Mr. Lynch is also an officer and director of Inter Alia Holding Company,
a holding company that is a significant stockholder of NTIC. Prior to joining NTIC, Mr. Lynch held
positions in sales management for Fuji Electric Co., Ltd. in Tokyo, Japan and programming project
management for BMW AG in Munich, Germany. Mr. Lynch received an M.B.A. degree from the
University of Michigan Business School in Ann Arbor, Michigan.

Matthew C. Wolsfeld, an employee of NTIC since February 2001, has been NTIC’s Chief Financial
Officer since November 2001 and Corporate Secretary since November 2004. Mr. Wolsfeld was
Controller of NTIC from May 2001 through November 2001. Prior to joining NTIC, Mr. Wolsfeld held
an auditing position with PricewaterhouseCoopers LLP in Minneapolis, Minnesota from 1997 to 2001.
Mr. Wolsfeld received a B.A. degree in Accounting from the University of Notre Dame and received his
M.B.A. degree at the University of Minnesota, Carlson School of Business. Mr. Wolsfeld is a Certified
Public Accountant.

Other corporate officers of NTIC, their ages and the offices held, as of November 18, 2011, are as
follows:

Name

Prof. Efim Ya. Lyublinski

Age
73 Vice President and Director of New Technologies and

Position with NTIC

Applications Engineering

Vineet R. Dalal

41 Vice President and Director – Global Market Development –

Natur-Tec®

Gautam Ramdas

37 Vice President and Director – Global Market Development –

Oil & Gas

Prof. Efim Ya. Lyublinski has been employed by NTIC since March 2000 in the position of Vice
President and Director of New Technologies and Applications Engineering. Prof. Lyublinski is a
Member of the Russian Academy of Natural Sciences and NACE International the Corrosion Society.
From 1984 to 1999, Prof. Lyublinski was Head of Laboratory of Complex Methods of Corrosion
Protection at the Central Research Institute of Structural Materials, St. Petersburg, Russia. Prof.
Lyublinski also held a Senior Consulting Position with Osmos Technology, Boston, Massachusetts from
1995 to 1999. Prof. Lyublinski holds several patents, is responsible for several inventions and has

authored several books and articles and lectured at more than 100 symposiums, conferences and
congresses in the areas of materials science and corrosion.

Vineet R. Dalal, an employee of NTIC since 2004, has served as Vice President and Director – Global
Market Development – Natur-Tec® since November 2005. Prior to joining NTIC, Mr. Dalal was a
Principal in the Worldwide Product Development Practice of PRTM, a management consultancy to
technology based companies. In this position, Mr. Dalal consulted to several Fortune 500 companies, in
the areas of product strategy, Product Lifecycle Management (PLM) and technology management. Prior
to that, Mr. Dalal held positions in program management and design engineering at National
Semiconductor Corporation in Santa Clara, California. Mr. Dalal received an M.B.A. degree from the
University of Michigan Business School in Ann Arbor, Michigan. He also holds an M.S. degree in
Electrical and Computer Engineering from Oregon State University, and a B.Eng. degree in Electronics
Engineering from Karnatak University, India.

Gautam Ramdas, an employee of NTIC since 2005, has served as Vice President and Director – Global
Market Development – Oil & Gas since 2005. Prior to joining NTIC, Mr. Ramdas was a Manager in the
Strategic Change group of IBM Business Consulting Services. In this position, Mr. Ramdas led
consulting engagements at several Fortune 500 companies, in the areas of service strategy, global supplier
relationship management and supply chain streamlining. Mr. Ramdas held positions in the E-Commerce
and Supply Chain strategy groups at PricewaterhouseCoopers Management Consulting, again providing
consulting services for Fortune 500 clients. Prior to management consulting, Mr. Ramdas worked as a
program manager and design engineer with Kinhill Engineers in Australia. He has also been involved in
the start-up stage of successful small businesses in the U.S. and in India. Mr. Ramdas received an M.B.A.
from the University of Michigan Business School in Ann Arbor, Michigan. He also holds a bachelor’s
degree in Mechanical Engineering from the College of Engineering, Guindy (Chennai), India.

PART II

I tem 5. M A R K E T F OR R E G I ST R A NT ’ S C OM M ON E QUI T Y, R E L AT E D ST OC K H OL DE R

M AT T E R S A ND I SSUE R PUR C H A SE S OF E QUI T Y SE C UR I T I E S

Market Information

NTIC’s common stock is listed for trading on the NASDAQ Global Market under the symbol “NTIC.”
The following table sets forth the high and low daily sales prices for NTIC’s common stock, as reported
by the NASDAQ Global Market, for the fiscal quarter indicated:

High

Low

Fiscal 2011

Fourth Quarter ...........................................
Third Quarter .............................................
Second Quarter ..........................................
First Quarter ..............................................

$ 20.87
16.77
16.50
15.00

$ 15.05
13.18
12.27
9.00

Fiscal 2010

$ 14.36
10.97
10.74
9.00

$ 9.25
8.72
7.52
7.00

Dividends

Although NTIC’s Board of Directors has declared cash dividends to NTIC’s stockholders in the past, the
payment of any future dividends will be determined by NTIC’s Board of Directors in light of conditions
then existing, including NTIC’s earnings, financial condition, cash requirements, restrictions in financing
agreements, business conditions and other factors. The Board of Directors currently does not anticipate
paying a dividend on NTIC’s common stock in the near future, but rather intends to retain all of its
earnings for the foreseeable future to finance the operation and expansion of its business.

Number of Record Holders

As of August 31, 2011, there were 243 record holders of NTIC’s common stock. This does not include
shares held in “street name” or beneficially owned.

Recent Sales of Unregistered Equity Securities

NTIC did not issue any shares of its common stock or any other equity securities of NTIC that were not
registered under the Securities Act of 1933, as amended, during the fourth quarter of fiscal year ended
August 31, 2011.

Issuer Purchases of Equity Securities

NTIC did not purchase any shares of its common stock or any other equity securities of NTIC during the
fourth quarter of fiscal year ended August 31, 2011.

I tem 6.

SE L E C T E D F I NA NC I A L DATA

This Item 6 is inapplicable to NTIC as a smaller reporting company and has been omitted pursuant to
Item 301(c) of SEC Regulation S-K.

I tem 7. M A NA G E M E NT ’ S DI SC USSI ON A ND A NA L Y SI S OF F I NA NC I A L C ONDI T I ON

A ND R E SUL T S OF OPE R AT I ONS

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 “Part I. Item 1. Business—Forward-Looking Statements” and under the
heading “Part I. Item 1A. Risk Factors.” 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 II. Item 8. Financial Statements and Supplementary
Data.”

This Management’s Discussion and Analysis is organized in the following major sections:

• Business Overview. This section provides a brief overview description of NTIC’s business,

focusing in particular on developments during the most recent fiscal year.

• NTIC’s Joint Venture Network. This section provides a brief overview of NTIC’s joint

venture network, the joint ventures which are considered individually significant to NTIC’s
consolidated assets and income and how NTIC’s joint ventures are accounted for by NTIC.

• Financial Overview. This section provides a brief summary of NTIC’s financial results and

financial condition for fiscal 2011.

• Sales and Expense Components. This section provides a brief description of the significant line

items in NTIC’s consolidated statements of operations.

• Results of Operations. This section provides an analysis of the significant line items in NTIC’s

consolidated statements of operations.

• Liquidity and Capital Resources. This section provides an analysis of NTIC’s liquidity and

cash flows and a discussion of NTIC’s outstanding debt and other commitments.

• Off-Balance Sheet Arrangements. This section describes NTIC’s material off-balance sheet

arrangements.

•

Inflation and Seasonality. This section describes the effects of inflation and seasonality, if any,
on NTIC’s business and operating results.

• Market Risk. This section describes material market risks to which NTIC is subject.

• Related Party Transactions. This section describes any material related party transactions to

which NTIC is a party.

• Critical Accounting Policies and Estimates. This section discusses the accounting policies and
estimates that are considered important to NTIC’s financial condition and results of operations

and require NTIC to exercise subjective or complex judgments in their application. All of NTIC’s
significant accounting policies, including its critical accounting estimates, are summarized in
Note 1 to NTIC’s consolidated financial statements.

• Recent Accounting Pronouncements. This section discusses recently issued accounting

pronouncements that have had or may affect NTIC’s results of operations and financial condition
and references Note 2 to NTIC’s consolidated financial statements, which summarizes such
pronouncements.

Business Overview

NTIC develops and markets proprietary environmentally beneficial products and services in over 55
countries either directly or via a network of joint ventures, independent distributors and agents. NTIC’s
primary business is corrosion prevention marketed mainly under the ZERUST® brand. NTIC has been
selling its proprietary ZERUST® rust and corrosion inhibiting products and services to the automotive,
electronics, electrical, mechanical, military and retail consumer markets for over 35 years, and more
recently, has targeted and expanded into the oil and gas industry. NTIC also sells a portfolio of bio-based
and biodegradable (compostable) polymer resin compounds and finished products marketed under the
Natur-Tec® brand. These products are intended to reduce NTIC’s customers’ carbon footprint and
provide environmentally sound disposal options.

NTIC’s ZERUST® rust and corrosion inhibiting products include plastic and paper packaging, liquids and
coatings, rust removers and cleaners, diffusers and variations of these products designed specifically for
the oil and gas industry. NTIC’s also offers worldwide on-site technical consulting for rust and corrosion
prevention issues. NTIC’s technical service consultants work directly with the end users of NTIC’s
ZERUST® rust and corrosion inhibiting products to analyze their specific needs and develop systems to
meet their technical requirements. In North America, NTIC sells its ZERUST® corrosion prevention
solutions through a direct sales force as well as a network of independent distributors and agents.
Internationally, NTIC sells its ZERUST® corrosion prevention solutions through its majority owned
Brazilian subsidiary, Zerust Prevenção de Corrosão S.A. (Zerust Brazil), and joint venture arrangements
in North America, Europe and Asia.

One of NTIC’s strategic initiatives is to expand into and penetrate other markets for its ZERUST®
corrosion prevention solutions. For the past several years, NTIC has focused its sales and marketing
efforts on the oil and gas industry since the infrastructure that supports that industry is typically
constructed using metals that are highly susceptible to corrosion and NTIC believes that its ZERUST®
corrosion prevention solutions will minimize maintenance downtime on critical oil and gas industry
infrastructure, extend the life of such infrastructure and reduce the risk of environmental pollution due to
corrosion leaks. Petroleo Brasileiro S.A. (Petrobras), an oil company located in Brazil, has conducted
extensive multi-year product field trials of NTIC’s ZERUST® rust and corrosion inhibiting products
against competitive alternatives. During fiscal 2010, Zerust Brazil received a Phase I contract for an
initial implementation of $1.4 million (BRL$ 2.5 million) in ZERUST® products. During fiscal 2011,
Zerust Brazil signed a Phase 2 expanded contract with Petrobras to supply an additional $2.6 million
(BRL$ 4.21 million) in ZERUST® products. NTIC is also pursuing opportunities to market its ZERUST®
rust and corrosion prevention solutions to other targeted potential customers in the oil and gas industry
across several countries through NTIC’s joint venture partners and other strategic partners. NTIC
believes the sale of its ZERUST® corrosion prevention solutions 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.

Natur-Tec® bio-based and 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 biopolymer resin compounds which are available in several grades
tailored for a variety of applications, such as blown-film extrusion, extrusion coating, injection molding
and rigid, engineered plastics, and finished products, including shopping and grocery bags, lawn and leaf
bags, can liners, pet waste collection bags, cutlery, packaging foam and coated paper products, which are
engineered to be fully biodegradable in a composting environment. In North America, NTIC markets its
Natur-Tec® resin compounds and finished products primarily through a network of independent
distributors and agents. Internationally, NTIC sells its Natur-Tec® resin compounds and finished products
both directly and through some of its joint venture arrangements, including in particular its joint venture
in India, Harita NTI Limited (HNTI).

In fiscal 2011, NTIC and HNTI signed a memorandum of understanding with the Indian conglomerate
ITC Limited to jointly develop and commercialize biopolymer extrusion coated paper products targeted at
the consumer goods packaging market in India. The two companies will jointly develop solutions in the
Indian market towards providing biodegradable/compostable products such as food service ware, food
packaging, personal care product packaging and other fast-moving consumer goods packaging. The
biopolymer resin compounds will be manufactured by HNTI for integration with paper manufactured by
ITC’s Paperboards and Specialty Papers Division. In addition, during fiscal 2011, NTIC entered into an
agreement with Italy-based Naturfuels s.r.l. to distribute its Natur-Tec® bioplastic materials and products
in the Italian and Swiss markets. Under the terms of the distribution agreement, NTIC will supply
Naturfuels with NTIC’s patented high-strength Natur-Tec® compostable film grade resin compounds to
be used for the production of bio-plastic shopping and garbage bags on conventional plastic film
production equipment.

NTIC’s Joint Venture Network

NTIC participates, either directly or indirectly, in 24 active joint venture arrangements in North America,
Europe and Asia. Each of these joint ventures generally manufactures and markets products in the
geographic territory to which it is assigned. While most of NTIC’s joint ventures exclusively sell rust and
corrosion inhibiting products, some of the joint ventures sell NTIC’s Natur-Tec® resin compounds and
finished products and NTIC’s Polymer Energy LLC joint venture manufactures and sells Polymer
Energy™ equipment that converts waste plastic into diesel, gasoline and heavy fractions. NTIC
historically has funded its joint venture investments with cash generated from operations.

NTIC’s receipt of funds from its joint ventures is dependent upon fees for services that NTIC provides to
its joint ventures based primarily on the revenues of the joint ventures and NTIC’s receipt of dividend
distributions from the joint ventures. NTIC receives fees for services provided to its joint ventures based
primarily on the net sales of the individual joint ventures. The fees for services provided to joint ventures
are determined based on either a flat fee or a percentage of sales depending on local laws and tax
regulations. With respect to NTIC’s primary joint venture in Germany (EXCOR), NTIC recognizes an
agreed upon quarterly fee for such services. With respect to NTIC’s ASEAN joint venture holding
company (NTI ASEAN), NTIC does not receive a fee for such services, but rather receives a bi-annual
dividend based on available cash. NTIC recognizes equity income from its joint ventures based on the
overall profitability of its joint ventures. Such profitability is subject to variability from quarter to quarter
which, in turn, subjects NTIC’s earnings to variability from quarter to quarter. The profits of NTIC’s
joint ventures are shared by the respective joint venture owners in accordance with their respective
ownership percentages. NTIC typically owns only 50% or less of each of its joint venture entities and
thus does not control the decisions of these entities regarding whether to pay dividends and, if paid, how
much they should be in a given year. The payment of a dividend by an entity is determined by a joint
vote of the owners and is not at the sole discretion of NTIC.

NTIC does not consolidate the results of its joint ventures on its consolidated financial statements.
NTIC’s investments in its joint ventures are accounted for using the equity method. Although Zerust
Brazil originated as a joint venture of NTIC, it is no longer considered a joint venture, but rather it is a
majority owned subsidiary of NTIC and thus unlike NTIC’s joint ventures, its results are consolidated on
NTIC’s consolidated financial statements. NTIC holds 85% of the equity and 85% of the voting rights of
Zerust Brazil. Prior to the fourth quarter of fiscal 2010 and the preparation of NTIC’s fiscal 2010
financial statements, NTIC accounted for its Zerust Brazil investment under the equity method. NTIC
owned only 50%, which it considered to be less than a majority, of the equity and voting rights of Zerust
Brazil prior to September 2006. NTIC acquired an additional 35% ownership interest in Zerust Brazil in
September 2006 and held 85% of the equity and voting rights thereafter. Prior to the fourth quarter of
fiscal 2010, NTIC held the additional 35% ownership interest in Zerust Brazil with the intent of finding
an acquiring party, believing its majority control of Zerust Brazil would be temporary and determined not
to consolidate Zerust Brazil because the impact on NTIC’s consolidated financial statements was
immaterial. During the fourth quarter of fiscal 2010, NTIC stopped pursuing a buyer of the 35%
ownership interest and decided to consolidate the financial results of Zerust Brazil as of and for the fiscal
year ended August 31, 2010. NTIC believes that the impact of not consolidating Zerust Brazil on NTIC’s
consolidated financial statements for periods prior to the fourth quarter of fiscal 2010 was immaterial to
NTIC’s consolidated financial statements.

NTIC has not consolidated the Polymer Energy LLC joint venture in NTIC’s consolidated financial
statements for fiscal 2011 or fiscal 2010 or any prior period since Polymer Energy LLC has had limited
activity since its inception in 2003 and NTIC believes that the impact of not consolidating this entity on
NTIC’s consolidated financial statement has been immaterial. Prior to fiscal 2010 and during fiscal 2011,
Polymer Energy LLC did not have any financial activity including assets, liabilities, capital contributions,
revenues or expenses. During fiscal 2010, the only financial activity of Polymer Energy LLC was the
receipt of license fees which were distributed to its owners in proportion to their respective ownership
percentages. Since NTIC owns a 62.5% ownership interest in Polymer Energy LLC, NTIC received and
recorded a portion of these fees for services provided to joint ventures in its fiscal 2010 consolidated
financial statements. No license fees were received by Polymer Energy LLC and no other financial
activity took place during fiscal 2011. Accordingly, during fiscal 2011, NTIC received and recorded no
fees for services provided to joint ventures in its consolidated financial statements attributable to its
ownership interest in Polymer Energy LLC.

NTIC considers EXCOR and NTI ASEAN to be individually significant to NTIC’s consolidated assets
and income; and therefore, provides certain additional information regarding these entities in the notes to
NTIC’s consolidated financial statements and in this section of this report.

Financial Overview

NTIC’s management, including its chief executive officer who is NTIC’s chief operating decision maker,
reports and manages NTIC’s operations in two reportable business segments based on products sold,
customer base and distribution center: ZERUST® products and services and Natur-Tec® products.

NTIC’s consolidated net sales increased 35.7% during fiscal 2011 compared to fiscal 2010. This increase
was primarily a result of increased sales of ZERUST® rust and corrosion inhibiting products and services
and sales to NTIC’s joint ventures. During fiscal 2011, 95.0% of NTIC’s consolidated net sales were
derived from sales of ZERUST® products and services, which increased 34.2% to $18,542,523 during
fiscal 2011 compared to $13,814,101 during fiscal 2010 due to increased demand primarily as a result of
the economic recovery of the domestic manufacturing sector and the addition of new customers, partially
offset by decreased pricing due to increased competition. NTIC has focused its sales efforts of ZERUST®
products and services by strategically targeting customers with specific corrosion issues in new market

areas, including the oil and gas industry and other industrial sectors that offer sizable growth
opportunities. NTIC’s consolidated net sales for fiscal 2011 included $3,359,463 of sales made by Zerust
Brazil, and of those sales, $997,426 in sales were made to Petrobras in Brazil. Overall demand for
ZERUST® products and services depends heavily on the overall health of the markets in which NTIC
sells its products, including in particular the automotive market.

During fiscal 2011, $984,004, or 5.0%, of NTIC’s consolidated net sales were derived from sales of
Natur-Tec® products compared to 4.0% during fiscal 2010. Net sales of Natur-Tec® products increased
71.8% during fiscal 2011 compared to fiscal 2010. This increase was due to the addition of new Natur-
Tec® distributors on the West Coast of the United States. NTIC is continuing to strengthen and expand its
West Coast distribution network in California, while expanding its industrial distribution reach to
geographical “green” hotspots such as Oregon, Washington, Minnesota and New England. Additionally,
NTIC is targeting key national and regional retailers utilizing independent sales agents. Demand for the
Natur-Tec® products depends primarily on market acceptance and the extent of NTIC’s distribution
network.

Cost of goods sold as a percentage of net sales increased to 65.4% during fiscal 2011 compared to 65.2%
during fiscal 2010 primarily as a result of a slight increase in shipping cost, production overhead, raw
material prices and a higher percentage of sales of Natur-Tec® products, which generally carry smaller
margins than ZERUST® products and services.

NTIC’s equity in income of joint ventures increased 41.3% to $5,536,243 during fiscal 2011 compared to
$3,919,084 during fiscal 2010. NTIC recognized a 30.7% increase in fees for services provided to joint
ventures during fiscal 2011 compared to fiscal 2010. Both of these increases were primarily a result of a
40.4% increase in total net sales of NTIC’s joint ventures during fiscal 2011 to $119,276,553 compared to
fiscal 2010. This increase in total net sales of NTIC’s joint ventures was primarily a result of the
economic recovery of the international manufacturing sector that the NTIC joint venture network serves.

NTIC’s total operating expenses increased 23.3% or $2,606,810 to $13,798,672 during fiscal 2011
compared to fiscal 2010 primarily as a result of an increase in research and development expense,
personnel expenses and annual bonus accrual.

NTIC expenses all costs related to product research and development as incurred. NTIC incurred
$4,364,109 and $3,333,683 of expense during fiscal 2011 and 2010, respectively, in connection with its
research and development activities. These represent net amounts after being reduced by reimbursements
related to certain research and development contracts. Such reimbursements totaled $219,175 and
$600,023 for fiscal 2011 and fiscal 2010, respectively. NTIC anticipates that it will spend between
$4,300,000 and $4,500,000 in total during fiscal 2012 on research and development activities related to its
new technologies. This estimate is a net range after being reduced by anticipated reimbursements related
to certain research and development contracts.

Net income attributable to NTIC increased 50.9% to $3,900,120, or $0.89 per diluted common share, for
fiscal 2011 compared to $2,583,756, or $0.61 per diluted common share, for fiscal 2010. This increase
was primarily the result of increased income from NTIC’s joint ventures and gross profit, partially offset
by an increase in operating expenses. NTIC anticipates that its quarterly net income will remain subject
to significant volatility primarily due to the financial performance of its joint ventures and sales of its
ZERUST® products and services into the oil and gas industry and Natur-Tec® bioplastics products, which
sales fluctuate more on a quarterly basis than the traditional ZERUST® business.

NTIC’s working capital was $9,085,748 at August 31, 2011, including $3,266,362 in cash and cash
equivalents compared to $5,918,923 at August 31, 2010, including $1,776,162 in cash and cash

equivalents. 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 service fees to NTIC from its joint ventures and funds available through existing or
anticipated financing arrangements. NTIC also may decide to raise additional financing to help fund its
new businesses through the issuance of debt or equity securities.

Sales and Expense Components

The following is a description of the primary components of net sales and expenses:

Net Sales, Excluding Joint Ventures. NTIC derives net sales from the sale of its ZERUST® products and
services and its Natur-Tec® products. NTIC sells its ZERUST® products and services and its Natur-Tec®
products either directly or via a network of joint ventures, independent distributors and agents. Net sales,
excluding joint ventures represents net sales by NTIC either directly to end users or to distributors
worldwide, but not sales to NTIC’s joint ventures and not sales by NTIC’s joint ventures. NTIC
recognizes revenue from the sale of its products either directly or to distributors 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, all of which criteria are generally met upon
shipment when risk of loss and title passes to the customer or distributor. NTIC records all amounts
billed to customers and distributors in a sales transaction related to shipping and handling as sales and
records costs related to shipping and handling in cost of goods sold.

Net Sales, To Joint Ventures. Net sales, to joint ventures represents net sales by NTIC to NTIC’s joint
ventures, but not sales by NTIC either directly to end users or to distributors or sales by NTIC’s joint
ventures. NTIC’s revenue recognition policy for sales to its joint ventures is the same as NTIC’s policy
for sales to unaffiliated customers. NTIC recognizes revenue from the sale of its products to joint
ventures 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, all of which
criteria are generally met upon shipment when risk of loss and title passes to the joint venture.

Cost of Goods Sold. Most of NTIC’s products are manufactured by third parties and its cost of goods
sold for those products consists primarily of the price invoiced by its third-party vendors. For the small
portion of products that NTIC manufactures, NTIC’s cost of goods sold for those products consists
primarily of direct labor, allocated manufacturing overhead, raw materials and components. NTIC’s
margins on its Natur-Tec® resin compounds and finished products are generally smaller than its margins
on its ZERUST® products and services, and NTIC’s margins on its ZERUST® products and services sold
into the oil and gas industry are generally greater than its margins on its traditional ZERUST® products
and services.

Equity in Income of Joint Ventures. NTIC’s equity in income of joint ventures consists of NTIC’s share
of equity in income of its joint ventures based on the overall profitability of the joint ventures. Such
profitability is subject to variability from quarter to quarter which, in turn, subjects NTIC’s earnings to
variability from quarter to quarter. Traditionally, a portion of the equity income recorded in a given fiscal
year is paid to the owners of the joint venture entity during the following fiscal year through a dividend.
The payment of a dividend by a joint venture entity is determined by a vote of the joint venture owners
and is not at the sole discretion of NTIC. NTIC typically owns only 50% or less of its joint venture
entities and thus does not control the decisions of these entities regarding whether to pay dividends and, if
paid, how much they should be in a given year.

Fees for Services Provided To Joint Ventures. NTIC provides certain services to its joint ventures
including technical consulting, travel, insurance, technical and marketing services. NTIC receives fees

for these services it provides to its joint ventures based primarily on the net sales by NTIC’s joint
ventures, the latter of which are not included in NTIC’s net sales reflected on NTIC’s consolidated
statements of operations. The fees for services received by NTIC from its joint ventures are generally
determined based on either a flat fee or a percentage of net sales by NTIC’s joint ventures depending on
local laws and tax regulations. With respect to EXCOR, NTIC receives an agreed upon fixed quarterly
fee for such services. With respect to NTI ASEAN, NTIC does not receive a fee for such services, but
rather receives a bi-annual dividend based on available cash. NTIC records revenue related to fees for
services provided to joint ventures when earned, amounts are determinable and collectability is
reasonably assured. Under NTIC’s agreements with its joint ventures in which the fees for services is
described, fees are earned when the joint venture recognizes the revenue.

NTIC sponsors a worldwide joint venture conference approximately every three to four years in which all
of NTIC’s joint ventures are invited to participate. The next joint venture conference is scheduled to be
held in the summer of 2012. NTIC defers a portion of its fees for services provided to 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 amount deferred is based on the historical experience of
NTIC, current conditions and the intentions of NTIC’s management. 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.

In prior years, fees for services provided to joint ventures also included license fees received by Polymer
Energy LLC and distributed by Polymer Energy LLC to NTIC.

Selling Expenses. Selling expenses consist primarily of sales commissions and support costs for NTIC’s
direct sale and distribution system, and marketing costs.

General and Administrative Expenses. General and administrative expenses consist primarily of salaries
and benefits, and other costs for NTIC’s executives, accounting, finance, legal, information technology
and human resources functions.

Expenses Incurred in Support of Joint Ventures. NTIC incurs direct expenses related to its joint
ventures and in connection with NTIC’s provision of support and services to its joint ventures. Such
expenses include items such as employee compensation and benefits, travel, consulting, legal and
laboratory supplies and testing expenses.

Research and Development Expenses. Research and development expenses include costs associated
with the design, development, market analysis, lab testing and field trials and enhancements of NTIC’s
products and services. NTIC expenses all costs related to product research and development as incurred.
Research and development expenses reflect the net amount after being reduced by reimbursements related
to certain research and development contracts. With respect to such research and development contracts,
NTIC accrues proceeds received under the contracts and offsets research and development expenses
incurred in equal installments over the timelines associated with completion of the contracts’ specific
objectives and milestones.

Interest Income. Interest income consists of interest earned on investments in investment-grade, interest-
bearing securities and money market accounts.

Interest Expense. Interest expense results primarily from interest associated with NTIC’s term loan with
PNC Bank and any borrowings under NTIC’s line of credit with PNC Bank.

Income Tax Expense (Benefit). Income tax expense (benefit) includes federal income taxes, income tax
in foreign jurisdictions, state income tax and changes to NTIC’s deferred tax valuation allowance. NTIC
utilizes the liability method of accounting for income taxes which requires an asset and liability approach
to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are
computed annually for differences between the financial statement and tax basis of assets and liabilities
that will result in taxable or deductible amounts in the future, based on enacted tax laws and rates
applicable to the periods in which the differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax assets to the amount expected to be
realized. NTIC records a tax valuation allowance when it is more likely than not that some portion or all
of its deferred tax assets will not be realized. NTIC makes this determination based on all available
evidence, including historical data and projections of future results. 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.

Results of Operations

Fiscal Year 2011 Compared to Fiscal Year 2010

The following table sets forth NTIC’s results of operations for fiscal 2011 and fiscal 2010.

Fiscal 2011
Net sales, excluding joint ventures ................. $16,594,004
Net sales, to joint ventures ............................
2,932,523
12,768,640
Cost of goods sold .............................................
5,536,243
Equity in income of joint ventures .....................
6,129,979
Fees for services provided to joint ventures .......
Selling expenses .........................................
4,090,704
General and administrative expenses...............
4,343,283
Expenses incurred in support of joint ventures ..
1,000,576
Research and development expenses ...............
4,364,109

% of
Net
Sales
85.0%
15.0%
65.4%
28.4%
31.4%
21.0%
22.2%
5.1%
22.4%

Fiscal 2010
$12,190,171
2,196,593
9,384,866
3,919,084
4,690,450
3,059,207
3,923,103
875,869
3,333,683

% of
Net Sales
84.7%
15.3%
65.2%
27.2%
32.6%
21.3%
27.3%
6.1%
23.2%

$
Change
$4,403,833
735,930
3,383,774
1,617,159
1,439,529
1,031,497
420,180
124,707
1,030,426

%
Change
36.1%
33.5%
36.1%
41.3%
30.7%
33.7%
10.7%
14.2%
30.9%

Net Sales. NTIC’s consolidated net sales increased 35.7% to $19,526,527 during fiscal 2011 compared to
fiscal 2010. NTIC’s consolidated net sales to customers excluding NTIC’s joint ventures increased
36.1% to $16,594,004 during fiscal 2011 compared to fiscal 2010. Net sales to joint ventures increased
33.5% to $2,932,523 in fiscal 2011 compared to fiscal 2010. These increases were due primarily to an
increase in sales of ZERUST® rust and corrosion inhibiting products and services primarily as a result of
increased demand due to the recovery to some extent of the manufacturing sector and the addition of new
customers, partially offset by slightly decreased pricing due to increased competition.

The following table sets forth additional detail regarding NTIC’s net sales by product category and
segment for fiscal 2011 and fiscal 2010:

ZERUST® net sales ........................
Natur-Tec® net sales ........................
Total net sales ..................................

Fiscal 2011

Fiscal 2010

$18,542,523
984,004
$19,526,527

$13,814,101
572,663
$14,386,764

$
Change

$4,728,422
411,341
$5,139,763

%
Change

34.2%
71.8%
35.7%

During fiscal 2011, 95.0% of NTIC’s consolidated net sales were derived from sales of ZERUST®
products and services, which increased 34.2% to $18,542,523 during fiscal 2011 compared to
$13,814,101 during fiscal 2010. This increase was primarily due to increased demand as a result of the
economic recovery of the domestic manufacturing sector and the addition of new customers, partially
offset by decreased pricing due to increased competition. Overall demand for ZERUST® products and
services depends heavily on the overall health of the industrial markets in which NTIC sells its products,
including in the automotive market. NTIC has focused its sales efforts of ZERUST® products and services
by strategically targeting customers with specific corrosion issues in new market areas, including the oil
and gas industry and other industrial sectors that offer sizable growth opportunities.

NTIC’s consolidated net sales during fiscal 2011 included $3,359,463 of sales made by Zerust Brazil, and
of those sales, $997,426 in sales were made to Petrobras compared to $1,925,819 of sales made by Zerust
Brazil during fiscal 2010, including of those sales, $774,928 to Petrobras. As previously disclosed,
during the second quarter of fiscal 2011, Zerust Brazil received a contract for ZERUST® products from
Petrobras representing an aggregate of $2.6 million. NTIC anticipates sales to Petrobras under this
contract mostly during fiscal 2012. NTIC also anticipates that its sales of ZERUST® products and
services into the oil and gas industry will remain subject to significant volatility from quarter to quarter as
sales are converted and purchase orders are filled

Net sales of Natur-Tec® products increased 71.8% to $984,004 during fiscal 2011 compared to $572,663
in fiscal 2010. This increase was primarily due to the addition of new Natur-Tec® distributors on the
West Coast of the United States. NTIC anticipates additional revenue in future periods from anticipated
sales of film-grade resin compounds to customers in both the North American and European markets,
primarily to meet anticipated demand for biodegradable plastic bags that comply with various recently
enacted governmental regulations. Additionally, NTIC is continuing to strengthen and expand its West
Coast distribution network in California, while expanding its industrial distribution reach to geographical
“green” hotspots such as Oregon, Washington, Minnesota and New England. NTIC is also targeting key
national and regional retailers utilizing independent sales agents. Demand for the Natur-Tec® products
depends primarily on market acceptance of the products and the extent of NTIC’s distribution network,
which as of August 31, 2011 consisted of 22 national and regional distributors and independent
manufacturer’s sales representatives.

Cost of Goods Sold. Cost of goods sold increased 36.1% in fiscal 2011 compared to fiscal 2010 primarily
as a result of the increase in net sales. Cost of goods sold as a percentage of net sales increased to 65.4%
during fiscal 2011 compared to 65.2% during fiscal 2010 primarily as a result a slight increase in shipping
cost, production overhead, raw material prices and a higher percentage of sales of Natur-Tec® products,
which generally carry smaller margins than ZERUST® products and services. Cost of goods sold in fiscal
2010 was effected by a $360,577 write-down of Natur-Tec® inventory to its market value. There were no
significant write-downs in fiscal 2011.

NTIC anticipated greater demand for its Natur-Tec® products than it experienced during fiscal 2010.
Accordingly, NTIC had been unable to sell its Natur-Tec® inventory at the times and prices and in the
volumes that NTIC initially anticipated. As a result, NTIC reduced the value of its Natur-Tec® inventory
during fiscal 2010 to reflect its net realizable value by $360,577. The Natur-Tec® raw material and
finished goods inventory was purchased and manufactured previously when the base resins were
significantly more expensive. As of August 31, 2011, $902,507 of Natur-Tec® inventory remained on
NTIC’s consolidated balance sheet. If NTIC is unable to sell its remaining Natur-Tec® inventory at the
times and prices and in the volumes at which it currently anticipates, future additional write-downs may
be necessary, which could adversely affect NTIC’s cost of goods sold.

Equity in Income of Joint Ventures. NTIC had equity in income of joint ventures of $5,536,243 during
fiscal 2011 compared to equity in income of joint ventures of $3,919,084 during fiscal 2010. This
increase in equity in income was due to increased sales and profitability of NTIC’s joint ventures. Of the
total equity in income of joint ventures, NTIC had equity in income of joint ventures of $3,274,333
attributable to EXCOR during fiscal 2011 and $2,113,872 attributable to EXCOR during fiscal 2010. Of
the total equity in income of joint ventures, NTIC had equity in income of joint ventures of $1,212,250
attributable to NTI ASEAN during fiscal 2011 and $902,935 attributable to NTI ASEAN during fiscal
2010. NTIC had equity in income of all other joint ventures of $1,049,660 during fiscal 2011 and
$902,278 during fiscal 2010.

Fees for Services Provided to Joint Ventures. NTIC recognized fee income for services provided to joint
ventures of $6,129,979 during fiscal 2011 compared to $4,690,450 during fiscal 2010, representing an
increase of 30.7%. This increase in fees for services provided to joint ventures was due primarily to the
40.4% increase in net sales of NTIC’s joint ventures to $119,276,553 in fiscal 2011 compared to
$84,973,646 in fiscal 2010. Sales of NTIC’s joint ventures are not included in NTIC’s sales and are not
combined with NTIC’s sales in NTIC’s consolidated financial statements or in any description of NTIC’s
sales.

Of the total fee income for services provided to its joint ventures, fees of $1,066,659 were attributable to
EXCOR during fiscal 2011 compared to $1,000,037 attributable to EXCOR during fiscal 2010. This
increase was primarily the result of foreign currency exchange rate fluctuations. NTIC does not receive
fees attributable to NTI ASEAN. NTIC receives dividend payments based on fees paid from the joint
ventures that comprise the ASEAN investments. NTIC received fee income for services provided to all
of its other joint ventures of $5,063,320 during fiscal 2011 compared to $3,690,413 during fiscal 2010.

NTIC sponsors a worldwide joint venture conference periodically in which all of NTIC’s joint ventures
and subsidiaries are invited to participate. NTIC defers a portion of its fees for services provided to 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 joint venture conference is scheduled to be
held in summer of 2012 or 2013. No additional income during fiscal 2011 or fiscal 2010 was deferred
related to this future conference since $288,000 had been accrued prior to such time during fiscal 2007 to
fiscal 2009, which represents the amount that NTIC expects to spend to hold the next conference. This
amount is based on the historical experience of NTIC, current conditions and the intentions of NTIC’s
management. NTIC does not anticipate deferring any additional fees for services provided to joint
ventures until after the next 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.

Selling Expenses. NTIC’s selling expenses increased 33.7% in fiscal 2011 compared to fiscal 2010
primarily due to increases in compensation and employee benefits, lab testing related expenses,
commissions expenses, travel and related expenses, consulting expenses and selling expenses incurred at
Zerust Brazil. Selling expenses as a percentage of net sales decreased to 21.0% in fiscal 2011 compared
to 21.3% in fiscal 2010 due to smaller proportional increases in selling expenses compared to the increase
in net sales.

General and Administrative Expenses. NTIC’s general and administrative expenses increased 10.7% in
fiscal 2011 compared to fiscal 2010 primarily as a result of an increase in compensation and benefits
expenses, partially offset by a decrease in consulting expenses and a loan write-off. As a percentage of
net sales, general and administrative expenses decreased to 22.2% in fiscal 2010 compared to 27.3% in
fiscal 2010 due to fixed general and administrative expenses spread over increased net sales.

Expenses Incurred in Support of Joint Ventures. Expenses incurred in support of NTIC’s joint ventures
were $1,000,576 during fiscal 2011 compared to $875,869 during fiscal 2010, representing an increase of
14.2%. This increase was due to an increase in consulting expense and legal and lab testing.

Research and Development Expenses. NTIC’s research and development expenses increased 30.9% in
fiscal 2011 compared to fiscal 2010 due to increases in salary and benefits expense and lab testing,
partially offset by a decrease in consulting expenses.

Interest Income. NTIC’s interest income increased to $108,692 in fiscal 2011 compared to $30,939 in
fiscal 2010 primarily due to increased cash balances earning interest during fiscal 2011 compared to fiscal
2010.

Interest Expense. NTIC’s interest expense decreased to $59,541 in fiscal 2011 compared to $97,676 in
fiscal 2010 primarily due to the refinancing of NTIC’s term loan in fiscal 2011 and its decreased term
loan balance during fiscal 2011 compared to fiscal 2010.

Income Before Income Tax Expense (Benefit). Income before income tax expense (benefit) increased to
$4,768,155 for fiscal 2011 compared to $2,303,756 for fiscal 2010.

Income Tax Expense (Benefit). Income tax expense for fiscal 2011 was $706,000 compared to a benefit
of $(230,000) for fiscal 2010. Income tax expense (benefit) was calculated based on management’s
estimate of NTIC’s annual effective income tax rate. NTIC’s annual effective income tax rate during
fiscal 2011 and fiscal 2010 was lower than the statutory rate primarily due to NTIC’s equity in income of
joint ventures being recognized based on after-tax earnings of these entities. To the extent undistributed
earnings of NTIC’s joint ventures are distributed to NTIC, it is not expected to result in any material
additional income tax liability after the application of foreign tax credits. NTIC records a tax valuation
allowance when it is more likely than not that some portion or all of its deferred tax assets will not be
realized to reduce deferred tax assets to the amount expected to be realized. NTIC determined based on
all available evidence, including historical data and projections of future results, that it is more likely than
not that all of its deferred tax assets, except for its foreign tax credit carryforwards and Minnesota state
research and development credit carryforwards, will be fully realized and that NTIC’s deferred tax asset
related to foreign tax credit carryforwards will not be realized due to insufficient federal taxable income
within the carryforward period and the fact that for ordering purposes the foreign tax credit carryforwards
are not allowed to be used until after any current year foreign tax credits are utilized.

Liquidity and Capital Resources

Sources of Cash and Working Capital. As of August 31, 2011, NTIC’s working capital was $9,085,748,
including $3,266,362 in cash and cash equivalents, compared to working capital of $5,918,923, including
$1,776,162 in cash and cash equivalents, as of August 31, 2010.

In connection with the purchase of its corporate headquarters, in September 2006, Northern Technologies
Holding Company, LLC (NTI LLC) obtained a term loan from PNC Bank, National Association (PNC
Bank) with a principal amount of $1,275,000 that was to mature on May 1, 2011. On January 10, 2011,
NTI LLC refinanced its term loan in the then principal amount of approximately $1,141,788. The term
loan matures on January 10, 2016, bears interest at an annual rate based on the daily LIBOR rate plus
2.15% and is payable in 59 consecutive monthly installments equal to approximately $6,343 (inclusive of
principal but exclusive of interest) commencing in February 2011. The term loan is secured by a first lien
on the real estate and building owned by NTI LLC and all of the assets of NTIC and is guaranteed by
NTIC.

As of August 31, 2011, NTIC had a revolving line of credit with PNC Bank of $3,000,000 with no
amounts outstanding as of such date. The line of credit is evidenced by an amended and restated
committed line of credit note in the principal amount of up to $3,000,000. The line of credit has a
$1,200,000 standby letter of credit subfacility, with any standby letters of credit issued thereunder being
at the sole discretion of PNC Bank. Any standby letters of credit issued under the subfacility are subject
to customary fees and charges payable by NTIC. Advances made under the line of credit are due and
payable on January 10, 2012. NTIC anticipates renewing the line of credit prior to the January 10, 2012
maturity date. At the option of NTIC, outstanding advances under the line of credit bear interest at either
(a) an annual rate based on LIBOR plus 2.15% for the applicable LIBOR interest period selected by NTIC
or (b) at the rate publicly announced by PNC Bank from time to time as its prime rate. Interest is payable
in arrears (a) for the portion of advances bearing interest under the prime rate on the last day of each
month during the term thereof and (b) for the portion of advances bearing interest under the LIBOR
option on the last day of the respective LIBOR interest period selected for such advance. Any unpaid
interest is payable on the maturity date.

The term loan and the line of credit are governed under two separate loan agreements. The loan
agreements contain standard covenants, including affirmative financial covenants, such as the
maintenance of a minimum fixed charge coverage ratio, and negative covenants, which, among other
things, limit the incurrence of additional indebtedness, loans and equity investments, disposition of assets,
mergers and consolidations and other matters customarily restricted in such agreements. Under the loan
agreements, NTIC is subject to a minimum fixed charge coverage ratio of 1.10:1.00. Under the fixed
charge coverage ratio financial covenant, NTIC shall not, as of the last calendar day of any fiscal quarter,
on a rolling four quarters basis, suffer or permit the ratio of its adjusted EBITDA (defined as the
aggregate of (a) its net income for that period, plus (b) its interest expense for that period, plus (c) its
federal, state, and local income taxes, if any, for that period, plus (d) its depreciation and amortization
charges for that period, plus (e) other non-recurring non-cash expenses reducing net income, minus (f)
non-recurring non-cash items increasing net income, plus (g) increases to paid-in capital on stockholders’
equity, minus (h) decreases to paid-in capital on stockholder’s equity) to the aggregate (without
duplication) of (i) its interest expense for that period, plus (ii) capital expenditures paid for from NTIC’s
funds other than funds borrowed as term debt to finance such capital expenditures during that period, plus
(iii) all dividends and distributions paid during that period, plus (iv) taxes paid in cash plus, plus (v)
payments made under all capital leases, plus (vi) an amount equal to the aggregate of all scheduled
payments of principal on all indebtedness for borrowed money having an original term of more than one
year, as shown on NTIC’s consolidated financial statements as current liabilities as of one year prior to
the date of determination to be less than 1.10:1.00. The fixed charge coverage ratio is to be computed and
determined on a consolidated basis for NTIC and its subsidiaries in accordance with generally accepted
accounting principles applied on a consistent basis (subject to normal year-end adjustments). The loan
agreements also contain customary events of default, including, without limitation, payment defaults,
material inaccuracy of representations and warranties, covenant defaults, bankruptcy and involuntary
proceedings, and monetary judgment defaults.

NTIC believes that a combination of its existing cash and cash equivalents, forecasted cash flows from
future operations, anticipated distributions of earnings, anticipated fees to NTIC for services provided to
its joint ventures, and funds available through existing or anticipated financing arrangements, will be
adequate to fund its existing operations, investments in new or existing joint ventures, capital
expenditures, debt repayments and any stock repurchases for at least the next 12 months. During fiscal
2012, NTIC expects to continue to invest in research and development and in marketing efforts and
resources into its new businesses, product lines and markets, including in particular the application of its
corrosion prevention technology into the oil and gas industry. In order to take advantage of such new
product and market opportunities to expand its business and increase its revenues, NTIC may decide to
finance such opportunities by borrowing under its revolving line of credit or raising additional financing

through the issuance of debt or equity securities. There is no assurance that any financing transaction will
be available on terms acceptable to NTIC or at all, or that any financing transaction will not be dilutive to
NTIC’s current stockholders.

NTIC traditionally has used the cash generated from its operations, distributions of earnings and fees for
services provided to its joint ventures to fund NTIC’s new technology investments and capital
contributions to new and existing joint ventures. NTIC’s joint ventures traditionally have operated with
little or no debt and have been self-financed with minimal initial capital investment and minimal
additional capital investment from their respective owners. Therefore, NTIC believes it is not likely that
there exists any exposure to debt by NTIC’s joint ventures that could materially impact their respective
operations and/or liquidity.

Uses of Cash and Cash Flows. Net cash used in operating activities during fiscal 2011 was $1,136,223
which resulted principally from NTIC’s equity in income from joint ventures and increases in receivables,
inventories and prepaid expenses, partially offset by NTIC’s net income, depreciation, amortization, and
increases in accounts payable, accrued liabilities, income taxes payable and accrued liabilities. Net cash
used in operating activities during fiscal 2010 was $1,175,892 which resulted principally from NTIC’s
equity in income from joint ventures and increases in inventories, trade receivables and deferred income
taxes, partially offset by NTIC’s net income, depreciation and amortization expense, and decreases in
services receivables from joint ventures, accrued liabilities and accounts payable.

NTIC’s cash flows from operations are impacted by significant changes in certain components of NTIC’s
working capital, including inventory turnover and changes in receivables. NTIC considers internal and
external factors when assessing the use of its available working capital, specifically when determining
inventory levels and credit terms of customers. Key internal factors include existing inventory levels,
stock reorder points, customer forecasts and customer requested payment terms, and key external factors
include the availability of primary raw materials and sub-contractor production lead times. NTIC’s
typical contractual terms for trade receivables excluding joint ventures are traditionally 30 days and for
trade receivables from its joint ventures are 90 days. Before extending unsecured credit to customers,
excluding NTIC’s joint ventures, NTIC reviews customers’ credit histories and will establish an
allowance for uncollectible accounts based upon factors surrounding the credit risk of specific customers
and other information. Accounts receivable over 30 days are considered past due for most customers.
NTIC does not accrue interest on past due accounts receivable. If accounts receivables in excess of the
provided allowance are determined uncollectible, they are charged to selling expense in the period that
determination is made. Accounts receivable are deemed uncollectible based on NTIC exhausting
reasonable efforts to collect. NTIC’s typical contractual terms for receivables for services provided to its
joint ventures are 90 days. NTIC records receivables for services provided to its joint ventures on an
accrual basis, unless circumstances exist that make the collection of the balance uncertain in which case
the fee income will be recorded on a cash basis until there is consistency in payments. This determination
is handled on a case by case basis.

NTIC experienced an increase in receivables and inventory as of August 31, 2011 compared to August
31, 2010 due to the increase in net sales and requests from customers to stock more products to shorten
lead times and meet customer demand. Trade receivables excluding joint ventures as of August 31, 2011
increased $287,547 compared to August 31, 2010, primarily related to the increase in NTIC’s net sales.

Outstanding trade receivables excluding joint ventures balances as of August 31, 2011 increased nine
days to an average of 49 days from balances outstanding from these customers as of August 31, 2010.

Outstanding trade receivables from joint ventures as of August 31, 2011 decreased $66,415 compared to
August 31, 2010, primarily due to the timing of payments, which resulted in a decrease of outstanding

balances from trade receivables from joint ventures as of August 31, 2011 of 116 days from an average of
123 days from balances outstanding from these customers compared to August 31, 2010. The significant
average days outstanding of trade receivables from joint ventures as of August 31, 2011 were primarily
due to the current receivable balance at NTIC’s joint venture in India. NTIC has made separate
arrangements for payments on product that NTIC’s joint venture in India has purchased from NTIC until
the product is sold.

Outstanding services fees receivable from joint ventures as of August 31, 2011 increased $829,097 as
compared to August 31, 2010, primarily resulting from an extension of terms mostly associated with
NTIC’s joint venture in India which resulted in a increase of 21 days of fees receivable outstanding as of
the August 31, 2011 to an average of 117 days as compared to August 31, 2010.

Net cash provided by investing activities during fiscal 2011 was $2,184,915 which was comprised of
dividends received from joint ventures and proceeds from sale of property and equipment partially offset
by additions to property and equipment, additions to patents and investments in joint ventures. Net cash
provided by investing activities during fiscal 2010 was $594,418, which was comprised of dividends
received from joint ventures and cash received on loans made, partially offset by investment in joint
ventures and additions to property and equipment and patents.

Net cash provided by financing activities during fiscal 2011 was $408,719, which resulted from proceeds
from option exercises and NTIC’s employee stock purchase plan, partially offset by principal payments
on the bank loan for NTIC’s corporate headquarters buildings. Net cash provided by financing activities
during fiscal 2010 was $2,218,751, which resulted primarily from proceeds from NTIC’s September 2009
registered directed offering and from NTIC’s employee stock purchase plan and option exercises,
partially offset by bank overdrafts and principal payments on the bank loan for NTIC’s corporate
headquarters building.

Capital Expenditures and Commitments. NTIC had no material lease or other material capital
commitments as of August 31, 2011, 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 spent approximately $567,257 on capital expenditures during fiscal 2011 and expects to spend
approximately $1,200,000 on capital expenditures during fiscal 2012. Such anticipated capital
expenditures for fiscal 2012 relate primarily to the expansion of its laboratory facilities in Circle Pines,
Minnesota and the purchase of new equipment.

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.

Inflation and Seasonality

Inflation in the U.S. and abroad historically has 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.

Because the functional currency of NTIC’s foreign operations and investments in its foreign joint
ventures is the applicable local currency, NTIC is exposed to foreign currency exchange rate risk arising
from transactions in the normal course of business. NTIC’s principal exchange rate exposure is with the
Euro, the Japanese yen, Indian Rupee, Chinese yuan, Korean won and the English pound against the U.S.
dollar. NTIC’s fees for services provided to joint ventures and dividend distributions from these foreign
entities are paid in foreign currencies and thus fluctuations in foreign currency exchange rates could result
in declines in NTIC’s reported net income. Since NTIC’s investments in its joint ventures 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 NTIC’s equity in income of joint ventures
reflected in its consolidated statements of income. NTIC does not hedge against its foreign currency
exchange rate risk.

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.

At the option of NTIC, outstanding advances under NTIC’s $3,000,000 revolving line of credit with PNC
Bank bear interest at either (a) an annual rate based on LIBOR plus 2.15% for the applicable LIBOR
interest period selected by NTIC or (b) at the rate publicly announced by PNC Bank from time to time as
its prime rate, and thus may subject NTIC to some market risk on interest rates. As of August 31, 2011,
NTIC had no borrowings under the line of credit.

Related Party Transactions

Since NTIC’s joint ventures are considered related parties, NTIC records sales to its joint ventures as a
separate line item on the face of NTIC’s consolidated statements of operations and records fees for
services provided to its joint ventures and expenses incurred in support of its joint ventures as separate
line items on the face of NTIC’s consolidated statements of operations. NTIC also records as separate
line items trade receivables from joint ventures, receivables for fees for services provided to joint ventures
and NTIC’s investments in joint ventures on its consolidated balance sheets.

NTIC established its joint venture network approximately 25 years ago as a method to increase its
worldwide distribution network for its rust and corrosion inhibiting products and services. NTIC
participates, either directly or indirectly, in 24 active joint venture arrangements in North America,
Europe and Asia. Each of these joint ventures generally manufactures and markets finished products in
the geographic territory 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. NTIC’s revenue
recognition policy for sales to its joint ventures is the same as its policy for sales to unaffiliated
customers.

The fees for services received by NTIC from its joint ventures are generally determined based on either a
flat fee or a percentage of net sales by NTIC’s joint ventures depending on local laws and tax regulations.
With respect to NTIC’s German joint venture, NTIC receives an agreed upon quarterly fee for such
services. With respect to NTIC’s ASEAN joint venture holding company, NTIC does not receive a fee
for such services, but rather receives a bi-annual dividend based on available cash. NTIC records revenue
related to fees for services provided to joint ventures when earned, amounts are determinable and

collectability is reasonably assured. Under NTIC’s agreements with its joint ventures, fee amounts are
earned when product is shipped from joint venture facilities. NTIC reviews the financial situation of each
joint venture to assist in the likelihood of collections on amounts earned. From time to time, NTIC elects
to account for such fees on a cash basis for certain joint ventures when uncertainty exists surrounding the
collections of such fees, there are no fees being accounted for in this manner at present. The expenses
incurred in support of its joint ventures are direct expenses that NTIC incurs related to its joint ventures
and include such items as employee compensation and benefit expenses, travel expense, insurance,
consulting expense, legal expense and lab supplies and testing expense.

See Note 12 to NTIC’s consolidated financial statements for other related party transaction disclosures.

Critical Accounting Policies and Estimates

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.

Principles of Consolidation

The Company evaluates its voting and variable interests in entities on a qualitative and quantitative basis.
The Company consolidates entities in which it concludes it has the power to direct the activities that most
significantly impact an entity’s economic success and has the obligation to absorb losses or the right to
receive benefits that could be significant to the entity. All such relationships are evaluated on an ongoing
basis. The consolidated financial statements include the accounts of Northern Technologies International
Corporation, its wholly owned subsidiaries, NTI Facilities, Inc., Northern Technologies Holding
Company, LLC and NTIC’s majority owned subsidiary in Brazil, Zerust Prevenção de Corrosão S.A.
NTIC’s consolidated financial statements do not include the accounts of any of its joint ventures. NTIC’s
consolidated financial statements do not include Polymer Energy LLC, in which NTIC holds a 62.5%
ownership interest. Polymer Energy LLC had immaterial activity in fiscal 2011 and fiscal 2010.

Investments in Joint Ventures and Recoverability of Investments in Joint Ventures

NTIC’s investments in its joint ventures are accounted for using the equity method. NTIC assesses its
joint ventures for impairment on an annual basis as of August 31 of each year as part of its fiscal year end
analysis. In addition to the annual review for impairment, NTIC reviews the operating results of each
joint venture on a quarterly basis in comparison to its historical operating results and its accrual for fees
for services provided to joint ventures. If the operating results of a joint venture do not meet NTIC’s
financial performance expectations, an additional evaluation is performed on the joint venture. In
addition to the annual assessments for impairment, non-periodic assessments for impairment may occur if
cash remittances are less than accrued balances, a joint venture’s management requests capital or other
events occur suggesting an other than temporary decline in value. 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 joint ventures requires NTIC to make assumptions about future
cash flows of its joint ventures. These assumptions require significant judgment and actual results may

differ from assumed or estimated amounts. NTIC’s investments in joint ventures were $20,559,509 as of
August 31, 2011 and $16,055,943 as of August 31, 2010. NTIC’s investments in EXCOR and NTI
ASEAN were $10,931,819 and $2,803,194, respectively, as of August 31, 2011 and $7,938,751 and
$2,467,412, respectively, as of August 31, 2010.

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, distributor or joint venture entity.

With respect to recording revenue related to fees earned for services provided to NTIC’s joint ventures,
NTIC recognizes revenue related to support of joint ventures when earned, amounts are determinable and
collectability is reasonably assured. The support and services NTIC provides its joint ventures include
consulting, travel, insurance, 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
receives fees for these services it provides to its joint ventures based primarily on the net sales by NTIC’s
joint ventures. The fees for support services received by NTIC from its joint ventures are generally
determined based on either a flat fee or a percentage of net sales by NTIC’s joint ventures depending on
local laws and tax regulations. Under NTIC’s agreements with its joint ventures, amounts are earned
when product is shipped from joint venture facilities. NTIC reviews the financial situation of each of its
joint ventures to assist in the likelihood of collections on amounts earned. NTIC elects to account for
these fees on a cash basis for certain joint ventures when uncertainty exists surrounding the collections of
such fees.

Accounts and Notes Receivable

Trade receivables arise from sales of NTIC’s products and services to NTIC’s joint ventures and to
unaffiliated customers. Trade receivables from joint ventures arise from sales NTIC makes to its joint
ventures of products and the essential additives required to make ZERUST® industrial corrosion
inhibiting products functional. Receivables for services to NTIC’s joint ventures are contractually based
primarily on a percentage of the sales of the joint ventures and are intended to compensate NTIC for
services NTIC provides to its joint ventures, including consulting, legal, travel, insurance, technical and
marketing services.

Payment terms for NTIC’s unaffiliated customers are determined based on credit risk and vary by
customer. NTIC typically offers standard payments terms to unaffiliated customers of net 30 days.
Payment terms for NTIC’s joint ventures also are determined based on credit risk; however, additional
consideration also is given to the individual joint venture due to the transportation time associated with
ocean delivery of most products and certain other factors. NTIC typically offers payment terms to joint
ventures of net 90 days. NTIC does not accrue interest on past due accounts receivable. NTIC reviews
the credit histories of its customers, including its joint ventures, before extending unsecured credit. 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 its joint ventures, 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.
Deterioration in the financial condition of any key customer or joint venture or a significant slowdown 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 or joint ventures, 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 $20,000 as of August 31, 2011 and August 31, 2010.

Recoverability of Long-Lived Assets

NTIC reviews its long-lived assets whenever events or changes in circumstances indicate the carrying
amount of the assets may not be recoverable and 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. If the sum of the expected undiscounted future net cash flows were
less than the carrying value, NTIC 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.

Foreign Currency Translation (Accumulated Other Comprehensive Income)

The functional currency of each international 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 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.

NTIC conducts all foreign transactions based on the U.S. dollar, except for its investments in various
foreign joint ventures. Since NTIC’s investments in its joint ventures 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 reflected in NTIC’s
consolidated statement of operations.

Stock-Based Compensation

NTIC recognizes compensation cost relating to share-based payment transactions, including grants of
employee stock options and transactions under NTIC’s employee stock purchase plan in its consolidated
financial statements. That cost is measured based on the fair value of the equity or liability instruments
issued. NTIC measures the cost of employee services received in exchange for stock options or other
stock-based awards based on the grant-date fair value of the award, and recognizes the cost over the
period the employee is required to provide services for the award.

Inventory Valuation

NTIC’s inventories consist primarily of production materials and finished goods. NTIC purchases
production materials and finished goods based on forecasted demand and records inventory at the lower
of cost or market. Cost is determined by the first-in, first-out (FIFO) method. Management regularly
assesses inventory valuation based on current and forecasted usage, demand and pricing, customer
inventory-related contractual obligations and other considerations. If actual results differ from
management estimates with respect to the actual or projected selling of inventories at amounts less than

their carrying amounts, NTIC would adjust its inventory balances accordingly. NTIC anticipated greater
demand for certain Natur-Tec® products than it experienced during fiscal 2010. Accordingly, NTIC had
been unable to sell its Natur-Tec® inventory at the times and prices and in the volumes that NTIC initially
anticipated. As a result, NTIC recorded a $360,577 write-down of certain Natur-Tec® inventory during
fiscal 2010 to its market value, which adversely affected NTIC’s cost of goods sold for fiscal 2010. The
Natur-Tec® raw material and finished goods inventory was purchased and manufactured previously when
the base resins were significantly more expensive. As of August 31, 2011, $902,507 of Natur-Tec®
inventory remained on NTIC’s consolidated balance sheet. If NTIC is unable to sell its remaining Natur-
Tec® inventory at the times and prices and in the volumes at which it currently anticipates, future
additional write-downs may be necessary, which would again adversely affect NTIC’s cost of goods sold.

Recent Accounting Pronouncements

See Note 2 to NTIC’s consolidated financial statements for a discussion of recent accounting
pronouncements.

I tem 7A . QUA NT I TAT I V E A ND QUA L I TAT I V E DI SC L OSUR E S A B OUT M A R K E T R I SK

This Item 7A is inapplicable to NTIC as a smaller reporting company and has been omitted pursuant to
Item 305(e) of SEC Regulation S-K.

I tem 8.

F I NA NC I A L STAT E M E NT S A ND SUPPL E M E NTA R Y DATA

I NDE X T O C ONSOL I DA T E D F I NA NC I A L ST A T E M E NT S

The following items are included herein:

Financial Statements:

Page

Report of Independent Registered Public Accounting Firm ............................................................. 53
Consolidated Balance Sheets as of August 31, 2011 and 2010 ......................................................... 54
Consolidated Statements of Operations for the years ended August 31, 2011 and 2010 .................. 55
Consolidated Statements of Equity for the years ended August 31, 2011 and 2010 ......................... 56
Consolidated Statements of Cash Flows for the years ended August 31, 2011 and 2010 ................. 57
Notes to Consolidated Financial Statements ..................................................................................... 60-80

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders, Audit Committee and Board of Directors
Northern Technologies International Corporation and Subsidiaries

We have audited the accompanying consolidated balance sheets of Northern Technologies International
Corporation and Subsidiaries as of August 31, 2011 and 2010, and the related consolidated statements of
operations, equity and cash flows for the years then ended. These consolidated financial statements are
the responsibility of the company’s management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of the Company’s internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the Company’s internal control over
financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit
also includes assessing the accounting principles used and significant estimates made by management as
well as evaluating the overall consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of Northern Technologies International Corporation and Subsidiaries as of
August 31, 2011 and 2010 and the results of their operations and their cash flows for the years then
ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ Baker Tilly Virchow Krause, LLP
Minneapolis, Minnesota
November 18, 2011

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - AUGUST 31, 2011 AND 2010

ASSETS
CURRENT ASSETS:

Cash and cash equivalents
Receivables:

Trade excluding joint ventures, less allowance for doubtful accounts

of $20,000 at August 31, 2011 and 2010

Trade joint ventures
Fees for services provided to joint ventures

Inventories
Prepaid expenses
Deferred income taxes

Total current assets

PROPERTY AND EQUIPMENT, net

OTHER ASSETS:

Investments in joint ventures
Deferred income taxes
Patents and trademarks, net
Other

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:

Current portion of note payable (Note 7)
Accounts payable
Income tax payable
Accrued liabilities:

Payroll and related benefits
Deferred joint venture royalties
Other

Total current liabilities

NOTE PAYABLE, NET OF CURRENT PORTION (Note 7)

COMMITMENTS AND CONTINGENCIES (Note 14)

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 4,353,058 and 4,259,321, respectively

Additional paid-in capital
Retained earnings
Accumulated other comprehensive income
Stockholders’ equity
Non-controlling interests
Total equity

See notes to consolidated financial statements.

August 31, 2011

August 31, 2010

3,266,362

1,776,162

2,515,316
1,149,666
2,129,911
3,842,854
364,805
221,600
13,490,514

3,636,335

20,559,509
1,410,700
903,038
39,646
22,912,893
40,039,742

76,119
2,032,614
195,762

1,629,355
288,000
182,916
4,404,766

1,009,533

—

87,061
10,137,809
21,811,838
2,496,940
34,533,648
91,795
34,625,443
40,039,742

2,227,769
1,216,081
1,300,814
3,639,169
143,980
448,600
10,752,575

3,452,530

16,055,943
1,505,300
912,718
18,234
18,492,195
32,697,300

1,144,922
1,721,237
174,502

1,155,277
288,000
349,714
4,833,652

—

85,186
9,140,936
17,911,718
704,473
27,842,313
21,335
27,863,648
32,697,300

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED AUGUST 31, 2011 AND 2010

NET SALES:
Net sales, excluding joint ventures
Net sales, to joint ventures
NET SALES

Cost of goods sold
Gross profit

JOINT VENTURE OPERATIONS:

Equity in income of joint ventures
Fees for services provided to joint ventures

OPERATING EXPENSES:

Selling expenses
General and administrative expenses
Expenses incurred in support of joint ventures
Research and development expenses

OPERATING INCOME

INTEREST INCOME
INTEREST EXPENSE
OTHER INCOME

INCOME BEFORE INCOME TAX EXPENSE (BENEFIT)

INCOME TAX EXPENSE (BENEFIT)

NET INCOME

NET INCOME ATTRIBUTABLE TO NON CONTROLLING INTEREST

2011

2010

16,594,004
2,932,523
19,526,527

12,190,171
2,196,593
14,386,764

12,768,640
6,757,887

5,536,243
6,129,979
11,666,222

4,090,704
4,343,283
1,000,576
4,364,109
13,798,672

4,625,437

108,692
(59,541)
27,300

4,701,888

706,000

3,995,888

95,768

9,384,866
5,001,898

3,919,084
4,690,450
8,609,534

3,059,207
3,923,103
875,869
3,333,683
11,191,862

2,419,570

30,939
(97,676)
25,094

2,377,927

(230,000)

2,607,927

24,171

NET INCOME ATTRIBUTABLE TO NTIC

3,900,120

2,583,756

NET INCOME PER COMMON SHARE:

Basic
Diluted

WEIGHTED AVERAGE COMMON SHARES

ASSUMED OUTSTANDING:
Basic
Diluted

See notes to consolidated financial statements.

$
$

0.90
0.89

$
$

0.61
0.61

4,325,863
4,404,100

4,223,605
4,269,350

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
AUGUST 31, 2011 AND 2010

STOCKHOLDERS’ EQUITY

Common Stock

Amount

Additional

Paid-in

Capital

Accumulated

Other

Non-

Retained

Earnings

Comprehensive

Controlling

Income

Interests

Total

Equity

BALANCE AT AUGUST 31,
2009

Stock issued, net of expenses of
$356,387

Exercise of stock options
Stock issued for employee stock
purchase plan

Stock option expense
COMPREHENSIVE INCOME,
2010:
Foreign currency translation
adj. (net of tax)

Net income
COMPREHENSIVE INCOME,
2010

BALANCE AT AUGUST 31,
2010

Stock issued in lieu of accrued
payroll

Exercise of stock options
Stock issued for employee stock
purchase plan

Stock option expense
Dividend paid to non-controlling
interest
COMPREHENSIVE INCOME,
2011:
Foreign currency translation
adj. (net of tax)

Net income
COMPREHENSIVE INCOME,
2011

BALANCE AT AUGUST 31,
2011

3,756,596

$75,132

$5,631,767

$15,327,962

$1,706,942

480,000

17,500

5,225

9,600

3,186,013

350

104

97,915

36,820

188,421

(1,002,417)

2,583,756

(2,836)

24,171

$22,741,803

3,195,613

98,265

36,924

188,421

$ (1,005,305)

2,607,927

$ 1,612,622

4,259,321

85,186

9,140,936

17,911,718

704,473

21,335

27,863,648

22,686

66,633

4,418

454

1,333

319,195

463,103

36,638

177,937

1,792,467

3,900,120

319,649

464,436

36,726

177,937

(33,173)

7,865

95,768

$ 1,800,332

3,995,888

$ 5,796,220

4,353,058

$ 87,061

$10,137,809

$ 21,811,838

$2,496,940

$91,795

$34,625,443

See notes to consolidated financial statements.

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED AUGUST 31, 2011 and 2010

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
Adjustments to reconcile net income to net cash used in operating activities:

2011

2010

3,995,888

2,607,927

Expensing of fair value of stock options vested
Change in allowance for doubtful accounts
Depreciation expense
Amortization expense
Loss on disposal of assets
Equity in income from joint ventures

Deferred income taxes
Receivables:

Trade, excluding joint ventures
Trade, joint ventures
Fees for services receivables, joint ventures
Income taxes

Inventories
Prepaid expenses and other
Accounts payable
Income tax payable
Accrued liabilities

Net cash used in operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Investment in joint ventures

Dividends received from joint ventures
Cash received on loans made

Effect of Zerust Brazil consolidation on cash (Note 1)

Additions to property and equipment

Proceeds from sale of property and equipment

Additions to patents

Net cash provided by investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of note payable
Net borrowings/(repayments) made on line of credit
Dividend paid to noncontrolling interest

Proceeds from the issuance of common stock
Proceeds from employee stock purchase plan
Proceeds from exercise of stock options
Net cash provided by financing activities

EFFECT OF EXCHANGE RATE CHANGES ON CASH:

NET INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

177,937
—
335,877
157,728
(52,425)
(5,536,243)
321,600

(287,547)
66,415
(829,097)
—
(203,685)
(242,237)
311,377
21,260
626,929
(1,136,223)

(38,217)
2,838,437
—
—
(567,257)
100,000
(148,048)
2,184,915

(59,270)
—
(33,173)
—
36,726
464,436
408,719

32,789

1,490,200
1,776,162

188,421
(59,000)
382,594
155,669
—
(3,919,084)
(398,300)

(520,013)
(553,127)
459,788
235,653
(1,514,855)
26,018
857,705
121,834
752,878
(1,175,892)

(30,101)
836,882
140,000
59,966
(232,007)
—
(180,322)
594,418

(35,051)
(1,077,000)
—
3,195,613
36,924
98,265
2,218,751

—

1,637,277
138,885

CASH AND CASH EQUIVALENTS AT END OF YEAR

3,266,362

1,776,162

See notes to consolidated financial statements.

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED AUGUST 31, 2011 AND 2010

NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Nature of Business – Northern Technologies International Corporation and Subsidiaries (the “Company”)
develops and markets proprietary environmentally beneficial products and services in over 55 countries
either directly or via a network of joint ventures, independent distributors and agents. The Company’s
primary business is corrosion prevention marketed mainly under the ZERUST® brand. The Company has
been selling its proprietary ZERUST® rust and corrosion inhibiting products and services to the
automotive, electronics, electrical, mechanical, military and retail consumer markets for over 35 years,
and more recently, has targeted and expanded into the oil and gas industry. The Company’s ZERUST®
rust and corrosion inhibiting products include plastic and paper packaging, liquids and coatings, rust
removers and cleaners, and diffusers. The Company also offers worldwide on-site technical consulting
for rust and corrosion prevention issues. The Company also sells a portfolio of bio-based and/or
biodegradable (compostable) polymer resin compounds and finished products marketed under the Natur-
Tec® brand. Natur-Tec® resin compounds are available in several grades tailored for a variety of
applications, such as blown-film extrusion, extrusion coating, injection molding and rigid, engineered
plastics, and the finished products, which are marketed under the Natur-Bag® or Natur-Ware® brands,
include shopping and grocery bags, lawn and leaf bags, can liners, pet waste collection bags, cutlery,
packaging foam and coated paper products. These products are intended to reduce customers’ carbon
footprint and provide environmentally sound disposal options.

The Company participates, either directly or indirectly, in 24 active joint venture arrangements in North
America, Europe, and Asia. Each of these joint ventures generally manufactures and markets products in
the geographic territory to which it is assigned. While most of the Company’s joint ventures exclusively
sell rust and corrosion inhibiting products, some of the joint ventures sell the Company’s Natur-Tec®
resin compounds and finished products. The Company’s Polymer Energy LLC joint venture
manufactures and sells Polymer Energy™ equipment that converts waste plastic into diesel, gasoline and
heavy fractions. The profits of the Company’s joint ventures are shared by the respective joint venture
owners in accordance with their respective ownership percentages. The Company typically owns 50% or
less 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.

The Company has evaluated subsequent events occurring after the date of the consolidated financial
statements for events requiring recording or disclosure in the financial statements.

Principles of Consolidation - The Company evaluates its voting and variable interests in entities on a
qualitative and quantitative basis. The Company consolidates entities in which it concludes it has the
power to direct the activities that most significantly impact an entity’s economic success and has the
obligation to absorb losses or the right to receive benefits that could be significant to the entity. All such
relationships are evaluated on an ongoing basis. The consolidated financial statements include the
accounts of Northern Technologies International Corporation and its wholly owned subsidiaries, NTI
Facilities, Inc. and Northern Technologies Holding Company, LLC, and its majority owned Brazilian
subsidiary, Zerust Prevenção de Corrosão S.A. (Zerust Brazil). All significant intercompany transactions
and balances have been eliminated in consolidation. The consolidated financial statements do not include
the accounts of any of the Company’s joint ventures.

Noncontrolling interest – The Company owns 85% of Zerust Brazil. The remaining 15% is accounted for
as a noncontrolling interest and reported as part of equity in the consolidated financial statements. The
Company allocates gains and losses to the noncontrolling interest even when such allocation might result
in a deficit balance, reducing the losses attributed to the controlling interest, changes in ownership
interests would be treated as equity transactions if control is maintained.

Net Sales –The Company includes as separate line items on its consolidated statements of operations net
sales to its joint ventures and net sales to unaffiliated customers. There are no sales originating from the
Company’s joint ventures included in the amount, as the Company’s investments in its joint ventures are
accounted for using the equity method.

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 price is fixed and determinable and
collection of the resulting receivable is reasonably assured. These criteria are met when risk of loss and
title pass to the customer, distributor or joint venture entity.

Fees for Services Provided to Joint Ventures – The Company provides certain services to its joint
ventures including consulting, legal, travel, insurance, technical and marketing services. The Company
receives fees for the services it provides to its joint ventures. The fees for services received by the
Company from its joint ventures are generally based on either a flat fee or a percentage of net sales by the
Company’s joint ventures depending on local laws and tax regulations. The Company recognizes
revenues related to fees for services provided to its joint ventures when earned, amounts are determinable
and collectability is reasonably assured. Under the Company’s agreements with its joint ventures,
amounts are earned when product is shipped from joint venture facilities. The Company reviews the
financial situation of each of its joint ventures to assist in the likelihood of collections on amounts earned.
The Company elects to account for these fees on a cash basis for certain joint ventures if uncertainty
exists surrounding the collection of such fees.

Deferred Joint Venture Revenue – The Company sponsors a worldwide joint venture conference
approximately every three to four years, in which all of its joint ventures are invited to participate. It
defers a portion of its service fees received from its joint ventures in each accounting period leading up to
the next conference, reflecting that the Company has not earned portions of the payments received. The
next joint venture conference is scheduled to be held in the summer of 2012. At both August 31, 2011
and 2010, the Company had deferred $288,000 of joint venture fees for services related to this future
conference, which represents the amount that the Company expects to spend to hold the conference. This
amount is based on the historical experience of the Company, current conditions, and the intentions of the
Company’s management. The Company does not anticipate deferring any additional service fees until
after the next conference.

Accounts Receivable – Payment terms for the Company’s unaffiliated customers are determined based on
credit risk and vary by customer. The Company typically offers standard payments terms to unaffiliated
customers of net 30 days. The Company does not accrue interest on past due accounts receivable. The
Company reviews the credit histories of its customers before extending unsecured credit. The Company
presents accounts and notes receivable, net of an allowance for doubtful accounts. Each quarter, the
Company prepares an analysis of its ability to collect outstanding receivables that provides a basis for an
allowance estimate for doubtful accounts. In doing so, the Company evaluates the age of its receivables,
past collection history, current financial conditions of key customers and its joint ventures, and economic
conditions. Based on this evaluation, the Company 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. Deterioration in the financial condition of any key customer or a significant
slowdown in the economy could have a material negative impact on the Company’s ability to collect a

portion or all of the accounts and notes receivable. The Company believes that an analysis of historical
trends and its current knowledge of potential collection problems provide the Company with sufficient
information to establish a reasonable estimate for an allowance for doubtful accounts. However, since the
Company cannot predict with certainty future changes in the financial stability of its customers or joint
ventures, the Company’s actual future losses from uncollectible accounts may differ from its estimates.
In the event the Company determined that a smaller or larger uncollectible accounts reserve is
appropriate, the Company 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 $20,000 at August 31, 2011 and 2010. Accounts are considered past due based on terms agreed upon
between the Company and the customer. Accounts receivable are written-off only after all collection
attempts have failed and are based on individual credit evaluation and specific circumstances of the
customer.

Receivables from Joint Ventures – Trade receivables from joint ventures arise from sales the Company
makes to its joint ventures of products and the essential additives required to make ZERUST® industrial
corrosion inhibiting products functional. Receivables for services to the Company’s joint ventures are
based primarily on a contractual percentage of the sales of the joint ventures and are intended to
compensate the Company for services the Company provides to its joint ventures, including consulting,
legal, travel, insurance, technical and marketing services. Payment terms for the Company’s joint
ventures also are determined based on credit risk; however, additional consideration also is given to the
individual joint venture due to the transportation time associated with ocean delivery of most products
and certain other factors. Generally, accounts receivable from the Company’s joint ventures unpaid after
90 days are considered past due. The Company does not accrue interest on past due accounts receivable.
The Company periodically reviews amounts due from its joint ventures for collectability, and based on
past experience and continuous review of the balances due, has determined an allowance for doubtful
accounts related to its joint venture receivables is not necessary.

Cash and Cash Equivalents - The Company includes as cash and cash equivalents highly liquid, short-
term investments with maturity of three months or less when purchased, which are readily convertible
into known amounts of cash. The Company maintains its cash in high quality financial institutions. The
balances, at times, may exceed federally insured limits.

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
Machinery and equipment

5-30 years
3-10 years

Investments in Joint Ventures - Investments in the Company’s joint ventures are accounted for using the
equity method. Under the equity method, investments are initially recorded at cost and are adjusted for
dividends, distributed and undistributed earnings and losses, changes in foreign currency exchange rates
and additional investments. In the event the Company’s share of joint venture’s cumulative losses exceed
the Company’s investment balance, the balance is reported at zero value until proportionate income
exceeds the losses. The Company assesses its joint ventures for impairment on an annual basis as of
August 31 of each year as part of its fiscal year end analysis. In addition to the annual review for
impairment, the Company reviews the operating results of each joint venture on a quarterly basis in
comparison to its historical operating results and its accrual of fees for services provided to joint ventures.
If the operating results of a joint venture do not meet financial performance expectations, an additional
evaluation is performed on the joint venture. If an investment were determined to be impaired, then a

reserve is created to reflect the impairment on the financial results of the Company. The Company’s
evaluation of its investments in joint ventures requires the Company to make assumptions about future
cash flows of its joint ventures. These assumptions require significant judgment and actual results may
differ from assumed or estimated amounts. The Company’s investments in joint ventures were
$20,559,509 as of August 31, 2011 and $16,055,943 as of August 31, 2010. The Company’s investments
in its primary joint venture in Germany, Excor Korrosionsschutz – Technologien und Produkte GmbH
(EXCOR) and the Company’s joint venture holding company in the Association of Southeast Asian
Nations, or ASEAN, region, NTI ASEAN, LLC (NTI ASEAN) were $10,931,819 and $2,803,194,
respectively, as of August 31, 2011 and $7,938,751 and $2,467,412, respectively, as of August 31, 2010.

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. If the
sum of the expected undiscounted future net cash flows is less than the carrying value, the Company
evaluates if an impairment loss should be recognized. An impairment loss is measured by comparing the
amount by which the carrying value exceeds the fair value of the asset.

Income Taxes - The Company utilizes the liability method of accounting for income taxes which requires
an asset and liability approach to financial accounting and reporting for income taxes. Deferred income
tax assets and liabilities are computed annually for differences between the financial statement and tax
basis of assets and liabilities that will result in taxable or deductible amounts in the future, based on
enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable
income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount
expected to be realized. The Company records a tax valuation allowance when it is more likely than not
that some portion or all of its deferred tax assets will not 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) - The functional currency of
Zerust Brazil and each unconsolidated international 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 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 other
comprehensive income.

The Company (excluding Zerust Brazil and its joint ventures) conducts all foreign transactions based on
the U.S. dollar. Since investments in joint ventures are accounted for using the equity method, any
changes in foreign currency exchange rates are reflected as a foreign currency translation adjustment and
does not change the equity in income of joint ventures reflected in the Company’s consolidated
statements of operations.

Fair Value of Financial Instruments – The carrying value of cash, short-term accounts and notes
receivable, notes payable, trade accounts payables, and other accrued expenses approximate fair value
because of the short maturity of those instruments. The fair value of the Company’s long-term debt
approximates the carrying values based upon current market rates of interest.

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.

Research and Development - The Company expenses all costs related to product research and
development as incurred. The costs related to product research and development are the net amount after
being reduced by reimbursements related to certain research and development contracts of $219,175 and
$600,023 for fiscal 2011 and fiscal 2010, respectively. The Company accrues proceeds received under
such contracts and offsets research and development expenses incurred in equal installments over the
timelines associated with completion of the contracts’ specific objectives and milestones. At August 31,
2011, the Company did not have any deferred amounts in other accrued liabilities, compared to $130,196
that was deferred at August 31, 2010 as the Company had not yet performed under the obligations of the
contract at that time.

Stock-Based Compensation – The Company recognizes compensation cost relating to share-based
payment transactions, including grants of employee stock options and transactions under the Company’s
employee stock purchase plan, in its consolidated financial statements. That cost is measured based on
the fair value of the equity or liability instruments issued. The Company measures the cost of employee
services received in exchange for stock options and other stock-based awards based on the grant-date fair
value of the award, and recognizes the cost over the period the employee is required to provide services
for the award.

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.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update
(ASU) No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure
Requirements in U.S. GAAP and International Financial Reporting Standards (IFRS).” This
pronouncement was issued to provide a consistent definition of fair value and ensure that the fair value
measurement and disclosure requirements are similar between U.S. GAAP and IFRS. ASU 2011-04
changes certain fair value measurement principles and enhances the disclosure requirements particularly
for Level 3 fair value measurements. This pronouncement is effective for reporting periods beginning on
or after December 15, 2011, with early adoption prohibited. The new guidance will require prospective
application. The Company will adopt this guidance at the beginning of its fiscal 2013. Adoption of this
guidance is not expected to have a material impact on the Company’s consolidated results of operations or
financial position.

In June 2011, the FASB issued ASU No. 2011-05, “Presentation of Comprehensive Income” which was
issued to enhance comparability between entities that report under U.S. GAAP and IFRS, and to provide a
more consistent method of presenting non-owner transactions that affect an entity’s equity. ASU 2011-05
eliminates the option to report other comprehensive income and its components in the statement of
changes in stockholders’ equity and requires an entity to present the total of comprehensive income, the
components of net income and the components of other comprehensive income either in a single
continuous statement or in two separate but consecutive statements. This pronouncement is effective for
fiscal years, and interim periods within those years, beginning after December 15, 2011. Early adoption of
the new guidance is permitted and full retrospective application is required. The Company will adopt this
guidance at the beginning of its third quarter of fiscal 2012. Adoption of this guidance is not expected to
have any impact on the Company’s financial position, results of operations or cash flows.

INVENTORIES

Inventories consisted of the following:

Production materials
Finished goods

PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of the following:

Land
Buildings and improvements
Machinery and equipment

Less accumulated depreciation

PATENTS AND TRADEMARKS, NET

Patents and trademarks, net consisted of the following:

Patents and trademarks
Less accumulated amortization

August 31, 2011
1,320,082
2,522,772
3,842,854

August 31, 2010

1,189,988
2,449,181
3,639,169

August 31, 2011
$ 310,365
3,110,867
2,213,269
5,634,501
(1,998,166)
$ 3,636,335

August 31, 2010
310,365
3,099,186
1,717,625
5,127,176
(1,674,646)
3,452,530

August 31, 2011
$ 1,758,722
(855,684)
$ 903,038

August 31, 2010

$ 1,610,674
(697,956)
912,718

Patent and trademark costs are amortized over seven years. Costs incurred related to patents and
trademarks are capitalized until filed and approved, at which time the amounts capitalized to date are
amortized and any further costs, including maintenance costs, are expensed as incurred. Amortization
expense is estimated to approximate $160,000 in each of the next five fiscal years.

INVESTMENTS IN JOINT VENTURES

The financial statements of the Company’s foreign joint ventures are initially prepared using the
accounting principles accepted in the respective joint ventures’ countries of domicile. Amounts related to
foreign joint ventures reported in the below tables and the accompanying financial statements have
subsequently been adjusted to conform with accounting principles generally accepted in the United States
of America in all material respects. All material profits recorded on sales from the Company to its joint
ventures have been eliminated for financial reporting purposes.

Financial information from the audited and unaudited financial statements of EXCOR and NTI ASEAN,
and all of the Company’s other joint ventures, are summarized as follows:

August 31, 2011

Current assets
Total assets
Current liabilities
Noncurrent liabilities
Joint ventures’ equity
Northern Technologies International Corporation’s

share of joint ventures’ equity in income of joint ventures
Northern Technologies International Corporation's share of joint
ventures' undistributed earnings

TOTAL
$ 66,956,061
73,155,916
24,712,555
4,605,837
43,752,524

EXCOR
$ 24,411,880
27,093,874
5,145,239

21,948,635

NTI ASEAN

$ 14,565,219
14,759,582
6,123,684
1,020,034
7,615,864

All Other
$ 27,978,962
31,302,460
13,443,632
3,585,803
14,273,025

20,559,509

10,931,819

2,803,194

6,824,496

$ 18,967,125

$ 10,900,914

$ 2,432,235

$ 5,633,976

August 31, 2010

Current assets
Total assets
Current liabilities
Noncurrent liabilities
Joint ventures’ equity
Northern Technologies International Corporation’s

share of joint ventures’ equity in income of joint ventures
Northern Technologies International Corporation's share of joint
ventures' undistributed earnings

TOTAL
$ 50,031,107
55,918,090
16,478,695
4,454,280
34,985,115

EXCOR
$ 16,567,240
18,967,090
3,089,590
—
15,877,500

NTI ASEAN
$ 12,637,967
12,901,522
4,721,652
868,902
7,310,968

All Other
$ 20,825,900
24,049,478
8,667,454
3,585,378
11,796,646

16,055,943

7,938,751

2,467,412

5,649,780

$ 14,447,831

$ 7,907,847

$ 2,096,454

$ 4,443,530

Net sales
Gross profit
Net income
Northern Technologies International Corporation’s

share of equity in income of joint ventures

Net sales
Gross profit
Net income
Northern Technologies International Corporation’s

share of equity in income of joint ventures

Fiscal Year Ended August 31, 2011

TOTAL
$119,276,553
54,135,274
10,517,984

EXCOR
$39,038,653
19,080,420
6,804,175

NTI ASEAN

$18,938,928
8,812,415
1,444,304

All Other
$61,298,972
26,242,439
2,269,505

$5,536,243

$3,274,333

$1,212,250

$1,049,660

Fiscal Year Ended August 31, 2010

TOTAL
$ 84,973,646
39,900,088
7,213,975

EXCOR
$ 25,957,762
13,943,045
4,260,222

NTI ASEAN
$ 14,777,730
7,237,621
1,234,546

All Other
$44,238,153
18,719,422
1,719,207

3,919,084

$ 2,113,872

902,935

902,278

The Company records expenses that are directly attributable to the joint ventures on its consolidated
statements of operations on the line “Expenses incurred in support of joint ventures”. The expenses
include items such as employee compensation and benefit expenses, travel expense, consulting expense
and legal expense.

During fiscal 2011 and fiscal 2010, the Company invested $38,217 and $30,101, respectively, in a new
joint venture in Russia to specifically engage in the oil and gas industry. The Company has a 50%
ownership interest in the new Russian joint venture. The Company did not make any other joint venture
investments during fiscal 2011 and fiscal 2010.

CORPORATE DEBT

principal but exclusive of interest) commencing in February 2011. The term loan is secured by a first lien
on the real estate and building owned by NTI LLC and all of the assets of the Company and is guaranteed
by the Company.

The Company has a revolving line of credit with PNC Bank of $3,000,000 with no amounts outstanding
as of August 31, 2011. As of August 31, 2010, the Company had a demand line of credit of $2,300,000
with PNC Bank with no amounts outstanding as of such date. Any advances made under the revolving
line of credit are due and payable on January 10, 2012. At the option of the Company, outstanding
advances under the line of credit bear interest at either (a) an annual rate based on LIBOR plus 2.15% for
the applicable LIBOR interest period selected by the Company or (b) at the rate publicly announced by
PNC Bank from time to time as its prime rate. Interest is payable in arrears (a) for the portion of advances
bearing interest under the prime rate on the last day of each month during the term thereof and (b) for the
portion of advances bearing interest under the LIBOR option on the last day of the respective LIBOR
interest period selected for such advance. Any unpaid interest is payable on the maturity date. As of
August 31, 2011, the interest rate was 2.50% and the weighted average rate was 2.43% for fiscal 2011.
As of August 31, 2010, the interest rate was 2.51% and the weighted average rate was 2.50% for fiscal
2010. The revolving line of credit is secured by cash, receivables and inventory.

The term loan and the line of credit are governed under separate loan agreements (collectively, the “Loan
Agreements”). The Loan Agreements contain standard covenants, including affirmative financial
covenants, such as the maintenance of a minimum fixed charge coverage ratio, and negative covenants,
which, among other things, limit the incurrence of additional indebtedness, loans and equity investments,
disposition of assets, mergers and consolidations and other matters customarily restricted in such
agreements. Under the Loan Agreements, the Company is subject to a minimum fixed charge coverage
ratio of 1.10:1.00. Under the fixed charge coverage ratio financial covenant, the Company shall not, as of
the last calendar day of any fiscal quarter, on a rolling four quarters basis, suffer or permit the ratio of its
adjusted EBITDA (defined as the aggregate of (a) its net income for that period, plus (b) its interest
expense for that period, plus (c) its federal, state, and local income taxes, if any, for that period, plus (d)
its depreciation and amortization charges for that period, plus (e) other non-recurring non-cash expenses
reducing net income, minus (f) non-recurring non-cash items increasing net income, plus (g) increases to
paid-in capital on stockholders’ equity, minus (h) decreases to paid-in capital on stockholder’s equity) to
the aggregate (without duplication) of (i) its interest expense for that period, plus (ii) capital expenditures
paid for from the Company’s funds other than funds borrowed as term debt to finance such capital
expenditures during that period, plus (iii) all dividends and distributions paid during that period, plus (iv)
taxes paid in cash plus, plus (v) payments made under all capital leases, plus (vi) an amount equal to the
aggregate of all scheduled payments of principal on all indebtedness for borrowed money having an
original term of more than one year, as shown on the Company’s financial statements as current liabilities
as of one year prior to the date of determination to be less than 1.10:1.00. The fixed charge coverage ratio
is to be computed and determined on a consolidated basis for the Company in accordance with generally
accepted accounting principles applied on a consistent basis (subject to normal year-end adjustments).
The Loan Agreements also contain customary events of default, including, without limitation, payment
defaults, material inaccuracy of representations and warranties, covenant defaults, bankruptcy and
involuntary proceedings, and monetary judgment defaults.

STOCK-BASED COMPENSATION

The Company has two stock-based compensation plans under which stock options and other stock-based
awards have been granted, including the Northern Technologies International Corporation Amended and
Restated 2007 Stock Incentive Plan (2007 Plan) and the Northern Technologies International Corporation
Employee Stock Purchase Plan (ESPP). The Compensation Committee of the Board of Directors and the
Board of Directors administer these plans.

The 2007 Plan provides for the grant of incentive stock options, non-statutory stock options, stock
appreciation rights, restricted stock, stock unit awards, performance awards and stock bonuses to eligible
recipients to enable the Company and its subsidiaries to attract and retain qualified individuals through
opportunities for equity participation in the Company, and to reward those individuals who contribute to
the achievement of the Company’s economic objectives. To date, only stock options and stock bonuses
have been granted under the 2007 Plan. Subject to adjustment as provided in the 2007 Plan, up to a total
of 800,000 shares of the Company’s common stock have been reserved for issuance under the 2007 Plan,
plus the number of shares subject to stock options outstanding under the Company’s prior stock-based
compensation plan as of January 20, 2011 but only to the extent that such outstanding options are
forfeited, expire or otherwise terminate without the issuance of such shares. As of August 31, 2011,
513,734 shares of the Company’s common stock remain available for issuance under the 2007 Plan.
Options granted under the 2007 Plan generally have a term of five years and become exercisable over a
three- or four-year period beginning on the one-year anniversary of the date of 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 maximum number of shares of common stock of the Company available for issuance under the ESPP
is 100,000 shares, subject to adjustment as provided in the ESPP. The ESPP provides for six-month
offering periods beginning on September 1 and March 1 of each year. The purchase price of the shares is
90% of the lower of the fair market value of common stock at the beginning or end of the offering period.
This discount may not exceed the maximum discount rate permitted for plans of this type under Section
423 of the Internal Revenue Code of 1986, as amended. The ESPP is compensatory for financial
reporting purposes.

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 the risk free interest rate is based on U.S.
treasury rates appropriate for the expected term. 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. Based on these valuations, the Company recognized
compensation expense of $177,937 and $188,421 during fiscal 2011 and 2010, respectively, related to the
options that vested during such time period. As of August 31, 2011, the total compensation cost for
nonvested options not yet recognized in the Company’s consolidated statements of operations was
$152,846, net of estimated forfeitures which were $16,982 as of August 31, 2011. That cost is expected
to be recognized over an expected weighted-average period of 2 years. Stock-based compensation
expense of $124,770 and $28,076 are expected to be recognized during fiscal 2012 and fiscal 2013,
respectively, based on outstanding options as of August 31, 2011. Future option grants will impact the
compensation expense recognized.

The Company currently estimates a ten percent forfeiture rate for stock options, but will continue to
review this estimate in future periods.

The fair value of each option grant is estimated on the grant date using the Black-Scholes option-pricing
model with the following assumptions and results for the grants:

Dividend yield
Expected volatility
Expected life of option
Weighted average risk-free interest rate

August 31, 2011
0.00%
48.8%
5 years
0.71 %

August 31, 2010

0.00%
48.3%
5 years
2.34%

Stock option activity during the periods indicated is as follows:

Outstanding at August 31, 2009
Options granted
Options exercised
Options terminated

Outstanding at August 31, 2010
Options granted
Options exercised
Options terminated

Outstanding at August 31, 2011

Exercisable at August 31, 2011

Number of
Shares (#)
137,472
128,333
(17,500)
(15,833)

232,472
30,000
(66,633)
(6,000)

189,839

82,942

Weighted Average

Exercise Price

Aggregate
Intrinsic Value

8.42
7.94
5.62
8.70

8.42
9.76
6.97
8.83

$ 9.07

$ 9.57

$1,400,665

$570,366

The weighted average per share fair value of options granted during fiscal 2011 and fiscal 2010 were
$3.60 and $2.98, respectively. The weighted average remaining contractual life of the options
outstanding as of August 31, 2011 and 2010 was 2.80 years and 2.91 years, respectively.

The following is a reconciliation of the earnings per share computation:

Numerators:
Net income (loss)

Denominator:
Basic – weighted shares outstanding
Weighted shares assumed upon exercise of

stock options

Diluted – weighted shares outstanding

Basic earnings (loss) per share:
Diluted earnings (loss) per share:

August 31, 2011

August 31, 2010

$ 3,900,120

$ 2,583,756

4,325,863

78,237
4,404,100

$0.90
$0.89

4,223,605

45,745
4,269,350

$0.61
$0.61

The dilutive impact summarized above relates to the periods when the average market price of Company
stock exceeded the exercise price of the potentially dilutive option securities granted. Earnings per
common share were based on the weighted average number of common shares outstanding during the
periods when computing the basic earnings per share. When dilutive, stock options are included as
equivalents using the treasury stock market method when computing the diluted earnings per share.

Excluded from the computation of diluted earnings per share for the year ended August 31, 2010 were
options out of the money with rights to purchase approximately 27,333 common shares, respectively, with
an exercise price of $12.84, because the effect would have been anti-dilutive.

STOCKHOLDERS’ EQUITY

During fiscal 2011, the Company did not purchase or retire any shares of its common stock. The
following stock options to purchase shares of common stock were exercised during fiscal 2011:

Options
Exercised
40,000
3,300
666
8,000
4,000
1,334
4,000
5,333

Exercise
Price
$5.38
7.65
7.75
8.01
8.57
9.75
9.76
12.84

During fiscal 2011, the Company granted stock for payment of fiscal 2010 bonuses under the 2007 Plan
for an aggregate of 22,686 shares of its common stock to various employees. The fair value of the shares
of the Company’s common stock as of the date of grant of the stock bonuses was $319,649, based on the
closing sale price of a share of the Company’s common stock on the date of grant. The fair value of
common stock granted during fiscal 2011 was based on fiscal 2010 performance and was included in
accrued liabilities at August 31, 2010.

The total intrinsic value of the options exercised during the year ended August 31, 2011 was $480,203.

During fiscal 2010, the Company did not purchase or retire any shares of its common stock. The
following stock options to purchase shares of common stock were exercised during fiscal 2010:

Options
Exercised
1,500
8,000
8,000

Exercise
Price
$6.15
$5.38
$5.75

The total intrinsic value of the options exercised during the year ended August 31, 2010 was $64,180.

During fiscal 2010, the Company completed a $3,552,000 registered direct offering in which it sold an
aggregate of 480,000 shares of its common stock to institutional investors at a purchase price of $7.40 per
share, resulting in net proceeds of $3,195,613, after deducting placement agent fees and expenses and the
Company’s offering expenses.

10.

GEOGRAPHIC AND SEGMENT INFORMATION

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

Inside the U.S.A. to unaffiliated customers
Outside the U.S.A. to:

Joint ventures in which the Company is a
shareholder directly and indirectly

Unaffiliated customers

Fiscal Year Ended August 31,
2010
2011
68.5%
63.2%

16.5%
20.3%
100.0%

16.5%
15.0%
100.0%

Net sales by geographic location are based on the location of the customer.

Fees for services provided to joint ventures by geographic location as a percentage of total fees for
services provided to joint ventures during fiscal 2011 and fiscal 2010 were as follows:

% of Total Fees
for Services
Provided to Joint
Ventures in
Fiscal 2011

19.3%
17.4%
13.8%
11.9%
9.4%
8.7%
5.0%
14.5%
100.0%

Fiscal 2011
$ 1,184,205
1,066,659
844,147
727,653
575,271
535,913
306,586
889,545
$ 6,129,979

% of Total Fees
for Services
Provided to
Joint Ventures
in Fiscal 2010

20.5%
21.3%
11.7%
11.3%
8.3%
8.6%
5.9%
12.4%
100.0%

Fiscal 2010

$ 963,208
1,000,037
548,779
528,717
389,945
401,607
276,812
581,345
$ 4,690,450

Japan
Germany
India
France
Sweden
Finland
United Kingdom
Other

The following table sets forth the Company’s net sales for fiscal 2011 and fiscal 2010 by segment:

ZERUST® net sales
Natur-Tec® net sales

Fiscal 2011

Fiscal 2010

$
Change

%
Change

$18,542,523
984,004
$19,526,527

$13,814,101
572,663
$14,386,764

$4,728,422
411,341
$5,139,763

34.2%
71.8%
35.7%

The following table sets forth the Company’s cost of goods sold for fiscal 2011 and fiscal 2010 by
segment:

Direct cost of goods sold
ZERUST®
Natur-Tec®
Indirect cost of goods sold

Fiscal 2011

$10,087,637
702,608
1,978,395
$12,768,640

% of Product
Sales*

Fiscal 2010**

% of Product
Sales*

54.4%
71.4%
—
65.4%

$ 7,353,838
665,591
1,365,437
$ 9,384,866

53.2%
116.2%

—
65.2%

* The percent of segment sales is calculated by dividing the direct cost of sales for each individual segment category by the net

sales for each segment category.

** The direct cost of goods sold for Natur-Tec® includes $358,474 of inventory that was written down to the current market
value. This inventory was purchased when the primary raw material that makes up many of the Natur-Tec® products was
higher than current replacement prices and market value.

The Company’s management utilizes product net sales and direct and indirect cost of goods sold for each
product in reviewing the financial performance of a product type. Further allocation of Company
expenses or assets, aside from amounts presented in the tables above, is not utilized in evaluating product
performance, nor does such allocation occur for internal financial reporting.

Sales to the Company’s joint ventures are included in the foregoing geographic and segment information,
however, sales by the Company’s joint ventures to other parties are not included. The foregoing
geographic and segment information represents only sales and cost of goods sold recognized directly by
the Company.

The geographical distribution of long-lived assets is set forth as follows:

United States
Brazil
Consolidated

Fiscal Year Ended August 31,
2010
2011
$3,399,567
$3,499,518
52,963
136,817
$3,452,530
$3,636,335

Long-lived assets consist primarily of property and equipment. These assets are periodically reviewed to
assure the net realizable value from the estimated future production based on forecasted sales exceeds the
carrying value of the assets.

11.

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 typically contributes the
lesser of 50% of the participant’s contributions or 3.5% of the employee’s salary. In January 2009, as
part of its cost reduction efforts, the Company suspended its match of participant contributions. In
January 2010, the Company resumed its match of participant contributions. The Company recognized
expense for the savings plan of $150,223 and $67,743 for fiscal 2011 and fiscal 2010, respectively.

12.

RELATED PARTY TRANSACTIONS

During fiscal 2011 and fiscal 2010, the Company made consulting payments totaling $100,000 per year,
to Bioplastic Polymers LLC, an entity owned by Ramani Narayan, Ph.D., a director of the Company, and
paid royalties of $5,624 and $2,668, respectively, based on net sales of the Company’s bioplastics
products.

In May 2009, the Company entered into a technology transfer and consulting agreement with Sunggyu
Lee, Ph.D., a director of the Company, pursuant to which the Company paid Dr. Lee $30,000 payable in
six $5,000 monthly installments in exchange for an 18-month option to purchase certain technology
developed by Dr. Lee.

13.

INCOME TAXES

The provision for income taxes for the fiscal years ended August 31, 2011 and 2010 consists of the
following:

Fiscal Year Ended August 31,
2011

2010

Current:

Federal
State
Foreign

Deferred:
Federal
State
Foreign

$ -
40,000
344,000
384,000

303,000
19,000
-
322,000
$ 706,000

38,000
7,000
124,000
169,000

(375,000)
(24,000)
-
(399,000)
(230,000)

Reconciliations of the expected federal income tax at the statutory rate with the provisions for income
taxes for the fiscal years ended August 31, 2011 and 2010 are as follows:

Tax computed at statutory rates
State income tax, net of federal benefit
Tax effect on equity in income (loss) of international joint
ventures
Tax effect on dividends received from joint ventures
Benefit of foreign operations
Foreign tax credit
Research and development credit
Valuation allowance
Other

Fiscal Year Ended August 31,
2011
2010
$ 1,692,000
46,000

805,000
26,000

(1,705,000)
1,229,000
119,000
(1,440,000)
(205,000)
896,000
74,000
$ 706,000

(1,191,000)
166,000
74,000
-
(151,000)
50,000
(9,000)
(230,000)

The Company has not provided U.S. income taxes with respect to its portion of the cumulative
undistributed earnings of foreign joint ventures that are essentially permanent in duration. The
Company’s portion of the cumulative undistributed earnings of foreign joint ventures that are essentially
permanent in duration were $17,948,000 and $15,021,000 at August 31, 2011 and 2010, respectively. If
some or all of the undistributed earnings of the joint ventures are remitted to the Company in the future,
income taxes, if any, after the application of foreign tax credits will be provided at that time.

The tax effect of the temporary differences and tax carry forwards comprising the net deferred taxes
shown on the consolidated balance sheets at August 31, 2011 and 2010 are as follows:

August 31,

2011

2010

$ -

Current:
Accrued bonus
Allowance for doubtful accounts
Inventory costs
Prepaid expenses and other
Other accrued expenses
Deferred joint venture expenses

Total current

289,100
7,200
26,900
(23,500)
44,800
104,100
448,600

7,200
12,600
(24,900)
122,600
104,100
$ 221,600

Noncurrent:
Property and equipment
Goodwill
Other intangible assets
Nonqualified stock options
Foreign tax credit carryforward
Net operating loss carryforward
Research and development credit
New hire retention credit

Valuation allowance

Total noncurrent

August 31,

2011

2010

$ (141,100)
51,000
497,200
113,000
3,524,300
-
1,155,600
10,000
5,210,000
(3,799,300)
$ 1,410,700

(164,800)
58,900
286,900
83,100
3,013,500
557,200
950,900
-
4,785,700
(3,280,400)
1,505,300

At August 31, 2011, the Company had foreign tax credit carryforwards of approximately $3,524,000, of
which approximately $234,000 will expire if not utilized by August 31, 2012. In addition, the Company
had federal and state tax credit carryforwards of $1,165,600 at August 31, 2011 which begin to expire in
fiscal 2019. These federal and state tax credit carryforwards consist primarily of federal and Minnesota
state research and development credit carryforwards.

The Company has recorded a valuation allowance of $3,524,000 with respect to the foreign tax credit
carryforwards. In addition, the Company has recorded a valuation allowance of $275,000 with respect to
Minnesota state research and development credit carryforwards.

The Company records a tax valuation allowance to reduce deferred tax assets to the amount expected to
be realized when it is more likely than not that some portion or all of its deferred tax assets will not be
realized. The Company determined based on all available evidence, including historical data and
projections of future results, that it is more likely than not that all of its deferred tax assets, except for its
foreign tax credit carryforward and Minnesota state research and development credit carryforwards, will
be fully realized. The Company determined that its deferred tax asset related to foreign tax credit
carryforwards will not be realized due to insufficient federal taxable income within the carryforward
period and the fact that for ordering purposes the foreign tax credit carryforwards are not allowed to be
used until after any current year foreign tax credits are utilized. In addition, based on historical data and
future projections, the Company determined that it is more likely than not that its deferred tax asset
related to Minnesota state research and development credit carryforwards will not be realized due to
insufficient Minnesota apportioned taxable income within the carryforward period.

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits:

Gross unrecognized tax benefits – beginning balance
Gross increases - prior period tax positions
Gross increases – current period tax positions
Gross unrecognized tax benefits – ending balance

Fiscal Year Ended August 31,
2010
2011

105,000
11,000
15,000
131,000

100,000
5,000
-
105,000

The entire amount of unrecognized tax benefits would affect the effective tax rate. It is not expected that
the amount of unrecognized tax benefits will change significantly in the next 12 months.

The Company recognizes interest and penalties related to unrecognized tax benefits as a component of the
Company’s income tax provision. Accrued interest and penalties are included within the related tax
liability line in the consolidated balance sheet. The liability for the payment of interest and penalties was
$0 at both August 31, 2011 and August 31, 2010.

The Company is subject to taxation in the United States and various states and foreign jurisdictions. With
few exceptions, as of August 31, 2011, the Company is no longer subject to federal, state, local, or foreign
examinations by tax authorities for years prior to August 31, 2008.

14.

COMMITMENTS AND CONTINGENCIES

On August 27, 2010, the Company’s Board of Directors, upon recommendation of the Compensation
Committee, approved the material terms of an annual bonus plan for the Company’s executive officers
and certain employees for the fiscal year ending August 31, 2011, the purpose of which is to align the
interests of the Company, its 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:

• 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 purely discretionary and will be paid to executive
officer participants in both cash and stock, the exact amount and percentages of which will be
determined by the Company’s Board of Directors, upon recommendation of the Compensation
Committee.

There was $1,379,565 accrued for bonuses under this plan as of August 31, 2011. $756,000 was accrued
for bonuses under the prior fiscal year plan as of August 31, 2010.

On September 27, 2011, the Compensation Committee approved the material terms of an annual bonus
plan for the Company’s executive officers and certain officers and employees for the fiscal year ending
August 31, 2012. For fiscal 2012 as in past years, the total amount available under the bonus plan will be
up to 25% of the Company’s EBITOI and will be $0 if EBITOI is below 70% of a pre-established target
EBITOI for fiscal 2012. Each plan participant’s percentage of the overall bonus pool will be based upon
the number of plan participants, the individual’s annual base salary and the individual’s position and level
of responsibility within the company. In the case of each of the Company’s executive officer participants,
75% of the amount of their individual bonus payout will be determined based upon the Company’s actual
EBITOI for fiscal 2012 compared to the pre-established target EBITOI for fiscal 2012 and 25% of the
payout will be determined based upon such executive officer’s achievement of certain pre-established
individual performance objectives. The payment of bonuses under the plan are discretionary and may be
paid to executive officer participants in both cash and shares of NTIC common stock, the exact amount
and percentages of which will be determined by the Company’s Board of Directors, upon
recommendation of the Compensation Committee, after the completion of the Company’s consolidated
financial statements for fiscal 2012.

A subsidiary of the Company, NTI Facilities, Inc., leases property located at 23205 Mercantile Road,
Beachwood, Ohio. Remaining rentals payable under such leases are as follows: fiscal 2012 - $238,500;
fiscal 2013 - $238,500; fiscal 2014 - $59,500 and thereafter - $0.

One customer accounted for 0% and 10.6% of the Company’s trade receivables, excluding joint ventures
at August 31, 2011 and 2010, respectively. One joint venture accounted for 53.5% and 36.4% of the
Company’s trade joint venture receivables at August 31, 2011 and 2010, respectively.

From time to time, the Company is subject to various claims and legal actions in the ordinary course of its
business. The Company is not currently involved in any legal proceeding in which the Company
believes, based on information currently available, that there is a reasonable possibility of a material loss.

15.

STATEMENTS OF CASH FLOWS

Supplemental disclosures of cash flow information for the fiscal years ended August 31, 2011 and 2010
consist of:

Cash paid during the year for income tax
Cash paid during the year for interest
Common stock issued in lieu of accrued payroll (22,686 and 0
shares, respectively)
Decrease in the Company’s investment in joint ventures and
accumulated other comprehensive income due to changes in
exchange rates

16.

QUARTERLY INFORMATION (UNAUDITED)

Fiscal Year Ended
August 31,

2011
$ —
59,541

319,650

2010
$ —
98,963

—

$1,792,467

$(1,005,305)

Fiscal year 2011:

Net sales
Gross profit
Income before income tax
expense
Income tax expense
Net income

Net income per share:

Basic
Diluted

Weighted average common
shares assumed outstanding:

Basic
Diluted

Fiscal year 2010:

Net sales
Gross profit

November 30

February 28

May 31

August 31

Fiscal Quarter Ended

$4,098,441
1,407,736

$ 4,778,118
1,771,886

$5,100,778
1,641,927

$ 5,549,190
1,936,338

1,016,874
122,000
894,874

1,141,219
140,000
1,001,219

1,250,155
228,000
1,022,155

1,293,640
216,000
1,077,640

$ 0.21
$ 0.21

$ 0.22
$ 0.22

$ 0.24
$ 0.23

$ 0.25
$ 0.24

4,264,187
4,324,757

4,340,934
4,419,921

4,343,601
4,427,097

4,352,558
4,442,452

November 30

February 28

May 31

August 31*

Fiscal Quarter Ended

$ 2,711,402
953,906

$ 2,876,478
1,035,831

$3,237,198
1,064,296

5,561,686
1,947,865

Income before income tax
benefit
Income tax benefit
Net income

Net income per share:

Basic
Diluted

Weighted average common
shares assumed outstanding:

Basic
Diluted

November 30

February 28

May 31

August 31*

Fiscal Quarter Ended

420,705
(15,000)
435,705

252,641
(94,000)
346,641

841,968
(110,000)
951,968

862,613
(11,000)
873,613

$
$

0.11
0.11

$
$

0.08
0.08

$
$

0.22
0.22

$
$

0.20
0.20

4,149,096
4,163,441

4,194,887
4,225,907

4,213,465
4,242,735

4,223,605
4,231,589

________________
* During the fourth quarter of fiscal 2010, the Company decided to consolidate the financial results of the Company’s majority
owned Brazilian subsidiary, Zerust Prevenção de Corrosão S.A., for the fiscal year ended August 31, 2010. As a result, all
revenues and expenses of Zerust Brazil for the fiscal year ended August 31, 2010 are included in the fourth quarter of fiscal
2010.

I tem 9.

C H A NG E S I N A ND DI SA G R E E M E NT S W I T H A C C OUNTA NT S ON
A C C OUNT I NG A ND F I NA NC I A L DI SC L OSUR E

None

I tem 9A . C ONT R OL S AND PR OC E DUR E S

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 provide reasonable assurance 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 officer
and principal financial officer, or persons performing similar functions, as appropriate to allow timely
decisions regarding required disclosure. 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 the reports that NTIC files or submits under the
Exchange Act is recorded, processed, summarized and reported within the time periods specified in the
SEC’s rules and forms, and that such information is accumulated and communicated to NTIC’s
management, including NTIC’s Chief Executive Officer and Chief Financial Officer, as appropriate, to
allow timely decisions regarding required disclosure.

Management’s Report on Internal Control over Financial Reporting

NTIC’s management is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the
supervision and with the participation of NTIC’s Chief Executive Officer and Chief Financial Officer,
NTIC’s management conducted an evaluation of the effectiveness of NTIC’s internal control over
financial reporting based on the framework in Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, NTIC’s
management concluded that NTIC’s internal control over financial reporting was effective as of
August 31, 2011.

This report does not include an attestation report of NTIC’s independent registered public accounting firm
regarding internal control over financial reporting. Management’s report was not subject to attestation by
NTIC’s independent registered public accounting firm pursuant to rules of the Securities and Exchange
Commission that permit NTIC to provide only management’s report in this report.

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 August 31, 2011 that has materially affected, or is reasonably likely to materially affect NTIC’s
internal control over financial reporting.

I tem 9B . OT H E R I NF OR M AT I ON

On November 18, 2011, NTIC entered into an employment agreement with each of G. Patrick Lynch,
NTIC’s President and Chief Executive Officer, and Matthew C. Wolsfeld, NTIC’s Chief Financial Officer
and Corporate Secretary. Although each of the executive’s employment with NTIC remains “at will,” the
employment agreements provide each of the executives certain severance benefits in the event the
executive’s employment is terminated by NTIC without “cause” or by the executive for “good reason”
and the executive executes and does not revoke a separation agreement and a release of all claims in favor
of NTIC and its affiliates.

If an executive’s employment is terminated by NTIC without “cause” or by the executive for “good
reason,” in addition to any accrued but unpaid salary and benefits through the date of termination, the
executive will be entitled to a severance cash payment from NTIC in an amount equal to two times (one
and one-half times, in the case of Mr. Wolsfeld) the executive’s average total annual compensation for the
two most recently completed fiscal years, plus a pro rata portion of the target bonus that the executive
otherwise would have been eligible to receive under NTIC’s bonus plan for the fiscal year during which
the executive’s employment is terminated, with such pro rata portion based on the number of complete
months during the fiscal year that the executive was employed with NTIC. The severance payment will
be paid in several installments in the form of salary continuation in accordance with the Company’s
normal payroll practices over a 24-month period (18-month period, in the case of Mr. Wolsfeld). If,
however, the termination event occurs within 24 months after a change in control of NTIC, the severance
payment will be paid in one lump sum. If the executive is eligible for and timely elects continued
coverage under NTIC’s group medical plan, group dental plan and/or group vision plan pursuant to
Section 4980B of the Internal Revenue Code of 1986, as amended (“COBRA”), for each of the first 18
months of the COBRA continuation period, NTIC also will reimburse the executive in an amount equal to
the difference between the amount the executive pays for such COBRA continuation coverage each
month and the amount paid by a full-time active employee each month for the same level of coverage
elected by the executive. In addition, all outstanding and unvested options to purchase shares of NTIC’s
common stock and other stock incentive awards granted to the executive under NTIC’s stock incentive
plan will become immediately vested and exercisable.

Under the employment agreements, “cause” is defined as (i) the executive’s material breach of any of the
executive’s obligations under the employment agreement, or the executive’s willful and continued failure
or refusal to perform his duties, responsibilities and obligations as an executive officer of NTIC, for
reasons other than the executive’s disability, to the satisfaction of the Board; (ii) the executive’s
commission of an act of dishonesty, fraud, embezzlement, misappropriation, or intentional and deliberate
injury or material breach of fiduciary duty, or material breach of the duty of loyalty related to or against
NTIC or its business, or any unlawful or criminal activity of a serious nature involving any felony, or
conviction by a court of competent jurisdiction of, or pleading guilty or nolo contendere to, any felony or
any crime involving moral turpitude; or (iii) the existence of any court order or settlement agreement
prohibiting the executive’s continued employment with the NTIC. “Good reason” is defined as (i) a
material diminution in the executive’s authority, duties or responsibilities; (ii) a material diminution in the
executive’s annual base salary; (iii) a material change in the geographic location at which NTIC requires
the executive to provide services, except for travel reasonably required in the performance of the
executive’s responsibilities; or (iv) any action or inaction that constitutes a material breach by NTIC of
the employment agreement. “Change in control” has the meaning assigned to such term in NTIC’s stock
incentive plan as in effect from time to time to the extent such change in control is a “change of control
event” as defined under Code Section 409A and applicable Internal Revenue Service regulations.

Also on November 18, 2011, NTIC entered into a confidential information, inventions assignment,
noncompetition and non-solicitation agreement with each of Mr. Lynch and Mr. Wolsfeld pursuant to

which the executive agreed to be bound by certain confidentiality, assignment of inventions, non-
competition and non-solicitation provisions both during and for a certain time period following the
termination of the executive’s employment with NTIC.

PART III

I tem 10. DI R E C T OR S, E X E C UT I V E OF F I C E R S A ND C OR POR AT E G OV E R NA NC E

Directors

The information in the “Proposal One – Election of Directors” section of NTIC’s definitive proxy
statement to be filed with the Securities and Exchange Commission with respect to NTIC’s next annual
meeting of stockholders, which involves the election of directors, is incorporated in this annual report on
Form 10-K by reference.

Executive Officers

Information concerning NTIC’s executive officers and officers is included in this annual report on Form
10-K under Item 4A of Part I under the heading “Executive Officers of the Registrant.”

Section 16(a) Beneficial Ownership Reporting Compliance

The information in the “Other Matters—Section 16(a) Beneficial Ownership Reporting Compliance”
section of NTIC’s definitive proxy statement to be filed with the Securities and Exchange Commission
with respect to NTIC’s next annual meeting of stockholders, which involves the election of directors, is
incorporated in this annual report on Form 10-K by reference.

Code of Ethics

NTIC has adopted a code of ethics that applies to its principal executive officer, principal financial
officer, principal accounting officer or controller or persons performing similar functions, as well as other
employees and NTIC’s directors and meets the requirements of the SEC and the NASDAQ Global
Market. A copy of NTIC’s Code of Ethics is filed as an exhibit to this report. NTIC intends to satisfy the
disclosure requirements of Item 5.05 of Form 8-K regarding amendments to or waivers from any
provision of its code of ethics by posting such information on its corporate website at www.ntic.com.

Changes to Nomination Procedures

During the fourth quarter of fiscal year ended August 31, 2011, NTIC made no material changes to the
procedures by which stockholders may recommend nominees to NTIC’s Board of Directors, as described
in NTIC’s most recent proxy statement.

Audit Committee Matters

The information in the “Corporate Governance—Audit Committee” section of NTIC’s definitive proxy
statement to be filed with the Securities and Exchange Commission with respect to NTIC’s next annual
meeting of stockholders, which involves the election of directors, is incorporated in this annual report on
Form 10-K by reference.

I tem 11. E X E C UT I V E C OM PE NSAT I ON

The information in the “Director Compensation” and “Executive Compensation” sections of NTIC’s
definitive proxy statement to be filed with the Securities and Exchange Commission with respect to
NTIC’s next annual meeting of stockholders, which involves the election of directors, is incorporated in
this annual report on Form 10-K by reference.

I tem 12. SE C UR I T Y OW NE R SH I P OF C E R TA I N B E NE F I C I A L OW NE R S A ND

M A NA G E M E NT A ND R E L AT E D ST OC K H OL DE R M AT T E R S

Stock Ownership

The information in the “Security Ownership of Principal Stockholders and Management” section of
NTIC’s definitive proxy statement to be filed with the Securities and Exchange Commission with respect
to NTIC’s next annual meeting of stockholders, which involves the election of directors, is incorporated
in this annual report on Form 10-K by reference.

Securities Authorized for Issuance under Equity Compensation Plans

The following table summarizes outstanding options under NTIC’s equity compensation plans as of
August 31, 2011. NTIC’s equity compensation plans as of August 31, 2011 were the Northern
Technologies International Corporation Amended and Restated 2007 Stock Incentive Plan and the
Northern Technologies International Corporation Employee Stock Purchase Plan.

Except for automatic annual grants of options to purchase 4,000 shares of NTIC common stock to NTIC’s
directors in consideration for their services as directors of NTIC and an automatic annual grant of an
option to purchase 2,000 shares of NTIC common stock to NTIC’s Chairman of the Board in
consideration for his services as Chairman on the first day of each fiscal year, options granted in the
future under the Northern Technologies International Corporation Amended and Restated 2007 Stock
Incentive Plan are within the discretion of the Board of Directors and the Compensation Committee of the
Board of Directors and therefore cannot be ascertained at this time.

(a)

(b)

Number of Securities to
be Issued Upon Exercise
of Outstanding Options,
Warrants and Rights

Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights

(c)
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation Plans
(excluding securities
reflected in column (a))

189,839(1)(2)

—
189,839(1)(2)

$9.07

—
$9.07

589,618(3)

—
589,618(3)

Plan Category

Equity compensation plans
approved by security holders

Equity compensation plans not
approved by security holders

Total

______________________
(1)

Amount includes shares of NTIC common stock issuable upon the exercise of stock options outstanding as
of August 31, 2011 under the Northern Technologies International Corporation Amended and Restated
2007 Stock Incentive Plan.

(2)

Excludes employee stock purchase rights accruing under the Northern Technologies International
Corporation Employee Stock Purchase Plan. Under such plan, each eligible employee may purchase up to
2,000 shares of NTIC common stock at semi-annual intervals on February 28th or 29th (as the case may be)
and August 31st each year at a purchase price per share equal to 90% of the lower of (i) the closing sales
price per share of NTIC common stock on the first day of the offering period or (ii) the closing sales price
per share of NTIC common stock on the last day of the offering period.

(3)

Amount includes 513,734 shares remaining available at August 31, 2011 for future issuance under
Northern Technologies International Corporation Amended and Restated 2007 Stock Incentive Plan and
75,884 shares remaining available at August 31, 2011 for future issuance under the Northern Technologies
International Corporation Employee Stock Purchase Plan.

I tem 13. C E R TA I N R E L AT I ONSH I PS A ND R E L AT E D T R A NSA C T I ONS, A ND DI R E C T OR

I NDE PE NDE NC E

The information in the “Related Party Relationships and Transactions” and “Corporate Governance—
Director Independence” sections of NTIC’s definitive proxy statement to be filed with the Securities and
Exchange Commission with respect to NTIC’s next annual meeting of stockholders, which involves the
election of directors, is incorporated in this annual report on Form 10-K by reference.

I tem 14. PR I NC I PA L A C C OUNT I NG F E E S A ND SE R V I C E S

The information in the “Proposal Two—Ratification of Selection of Independent Registered Public
Accounting Firm—Audit, Audit-Related, Tax and Other Fees” and “Proposal Two—Ratification of
Selection of Independent Registered Public Accounting Firm—Audit Committee Pre-Approval Policies
and Procedures” sections of NTIC’s definitive proxy statement to be filed with the Securities and
Exchange Commission with respect to NTIC’s next annual meeting of stockholders, which involves the
election of directors, is incorporated in this annual report on Form 10-K by reference.

PART IV

I tem 15. E X H I B I T S, F I NA NC I A L STAT E M E NT SC H E DUL E S

NTIC’s consolidated financial statements are included in Item 8 of Part III of this report.

The exhibits to this report are listed in the Exhibit Index to this report. A copy of any exhibits listed or
referred to herein will be furnished at a reasonable cost to any person who is a stockholder upon receipt
from any such person of a written request for any such exhibit. Such request should be sent to: Mr.
Matthew Wolsfeld, Corporate Secretary, Northern Technologies International Corporation, 4201
Woodland Road, P.O. Box 69, Circle Pines, Minnesota 55014 Attn: Stockholder Information.

The following is a list of each management contract or compensatory plan or arrangement required to be
filed as an exhibit to this annual report on Form 10-K:

A. Northern Technologies International Corporation Amended and Restated 2007 Stock Incentive
Plan (incorporated by reference to Exhibit 10.1 to NTIC’s Current Report on Form 8-K as filed
with the Securities and Exchange Commission on January 24, 2011).

B. Form of Incentive Stock Option Agreement for Northern Technologies International Corporation

Amended and Restated 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.2 to
NTIC’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on
January 24, 2011).

C. Form of Non-Qualified Stock Option Agreement for Northern Technologies International

Corporation Amended and Restated 2007 Stock Incentive Plan (incorporated by reference to
Exhibit 10.3 to NTIC’s Current Report on Form 8-K as filed with the Securities and Exchange
Commission on January 24, 2011).

D. Form of Restricted Stock Agreement for Northern Technologies International Corporation

Amended and Restated 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.4 to
NTIC’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on
January 24, 2011).

E. Northern Technologies International Corporation Employee Stock Purchase Plan (incorporated by
reference to Exhibit 10.11 to NTIC’s Annual Report on Form 10-KSB for the fiscal year ended
August 31, 2006).

F. Material Terms of Northern Technologies International Corporation Annual Bonus Plan for Fiscal
Year Ending August 31, 2012 (incorporated by reference to Item 5.02 to NTIC’s Current Report
on Form 8-K as filed with the Securities and Exchange Commission on September 27, 2011).

G. Form of Indemnification Agreement between Northern Technologies International Corporation
and its Directors and Officers (incorporated by reference to Exhibit 10.1 to NTIC’s Current
Report on Form 8-K as filed with the Securities and Exchange Commission on November 24,
2009).

H. Agreement dated as of May 25, 2009 between Northern Technologies International Corporation
and Sunggyu Lee, Ph.D. (incorporated by reference to Exhibit 10.2 to NTIC’s Quarterly Report
on Form 10-Q for the fiscal quarter ended February 28, 2009).

I. Description of Non-Employee Director Compensation Arrangements (filed herewith).

J. Executive Employment Agreement dated as of November 18, 2011 between Northern

Technologies International Corporation and G. Patrick Lynch (filed herewith).

K. Confidential Information, Inventions Assignment, Noncompetition and Non-Solicitation
Agreement dated as of November 18, 2011 between Northern Technologies International
Corporation and G. Patrick Lynch (filed herewith).

L. Executive Employment Agreement dated as of November 18, 2011 between Northern
Technologies International Corporation and Matthew C. Wolsfeld (filed herewith).

M. Confidential Information, Inventions Assignment, Noncompetition and Non-Solicitation
Agreement dated as of November 18, 2011 between Northern Technologies International
Corporation and Matthew C. Wolsfeld (filed herewith).

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION

November 18, 2011

s/ G. Patrick Lynch

By: /
G. Patrick Lynch

President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the Registrant on the dates and in the capacities indicated.

Name
/s/ G. Patrick Lynch
G. Patrick Lynch

Title
President and Chief Executive Officer and

Date
November 18, 2011

Director
(principal executive officer)

/s/ Matthew C. Wolsfeld, CPA
Matthew C. Wolsfeld, CPA

Chief Financial Officer and Corporate

November 18, 2011

Secretary
(principal financial and accounting officer)

Chairman of the Board

November 4, 2011

/s/ Pierre Chenu
Pierre Chenu

/s/ Soo Keong Koh
Soo Keong Koh

/s/ Sunggyu Lee, Ph.D.
Sunggyu Lee, Ph.D.

Director

/s/ Ramani Narayan, Ph.D.
Ramani Narayan, Ph.D.

Director

/s/ Richard J. Nigon
Richard J. Nigon

/s/ Mark J. Stone
Mark J. Stone

Director

November 4, 2011

Board of Directors
Mr. Pierre Chenu
Chairman of the Board

Mr. G. Patrick Lynch
President & CEO, NTIC

Mr. Mark J. Stone
President, Petrus International, Inc.

Dr. Ramani Narayan
Distinguished Professor in the Department
of Engineering & Materials Science, Michigan
State University

Dr. Sunggyu Lee
Professor of Chemical & Molecular Engineering,
Russ College of Engineering & Technology at
Ohio University

Mr. Soo-Keong Koh
Managing Director, EcoSave Pte Ltd.

Mr. Richard J. Nigon
Senior Vice President of
Cedar Point Capital, Inc.

Executive Officers
Mr. G. Patrick Lynch
President & CEO

Investor Relations
Northern Technologies International
Corporation welcomes inquiries from its
stockholders and other interested investors.
For further information on NTIC’S activities or
additional copies of this report, please contact:

Investor Relations
Northern Technologies International Corporation
4201 Woodland Road, P.O. Box 69
Circle Pines, Minnesota 55014
(763) 225-6600
www.ntic.com

Mr. Matthew C. Wolsfeld
Chief Financial Officer, Treasurer and
Corporate Secretary

Stock Listing
NTIC’s common stock is traded on the
NASDAQ Global Market under the symbol NTIC.

Independent Registered Public
Accounting Firm
Baker Tilly Virchow Krause, LLP
Minneapolis, Minnesota

Annual Meeting
The annual meeting of stockholders will be held
at 4:00 p.m. on Thursday, February 2, 2012 at
NTIC’s corporate headquarters:

Northern Technologies International Corp.
4201 Woodland Road
Circle Pines, MN 55014 USA

Transfer Agent and Registrar
For a response to questions regarding
misplaced stock certificates, changes of
address or the consolidation of accounts,
please contact NTIC’s transfer agent:

Broadridge Corporate Issuer Solutions, Inc.
1717 Arch Street, Suite 1300
Philadelphia, PA 19103
1-877-830-4936
shareholder@broadridge.com