Except for the historical information contained herein, the matters addressed in this Item 2 contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements can be identified by the use of forward-looking words such as "may", "will", "expect", "anticipate", "intend", "estimate", "continue", "behave" and similar words. Financial information contained herein, to the extent it is predictive of financial condition and results of operations that would have occurred on the basis of certain stated assumptions, may also be characterized as forward-looking statements. Although forward-looking statements are based on assumptions made, and information believed by management to be reasonable, no assurance can be given that such statements will prove to be correct. Such statements are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties occur, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated.

These forward-looking statements are not guarantees of future performance. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. This discussion should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Company's Annual Report on Form 10-K for the year ended January 31, 2008 and the condensed consolidated financial statements included elsewhere in this report.

GENERAL

The Company is a diversified business to business services organization that supplies technical services and solutions to a variety of industries including aerospace, defense, automotive, power products, electronics, computers and telecommunications. Through its wide range of testing facilities, solutions and certification services, the Company provides its customers the ability to sell their products globally and enhance their overall competitiveness. NTS is accredited by numerous national and international technical organizations which allow the Company to have its test data accepted in most countries.

The Company operates in two segments: "Engineering & Evaluation" and "Technical Solutions". The business of the Company is conducted by a number of operating units, each with its own organization. Each segment is under the direction of its own executive and operational management team. In making financial and operational decisions, NTS relies on an internal management reporting process that provides revenues and operating cost information for each of its operating units. Revenues and booking activities are also tracked by market type.

The Engineering & Evaluation segment is one of the largest independent conformity assessment and management system registration organizations in the U.S., with facilities throughout the United States and in Japan, Canada and Germany, serving a large variety of high technology industries, including aerospace, defense, automotive, power products, electronics, computers and telecommunications. This segment provides highly trained technical personnel for product certification, product safety testing and product evaluation to allow customers to sell their products in world markets. In addition, it performs management registration and certification services to ISO related standards.

The Technical Solutions segment provides professional and specialty staffing services, including contract services, temporary and full time placements and specialty solutions services to its customers specifically in the areas of information technology, information systems, software engineering and construction. Technical Solutions supplies professionals in support of customers who need help-desk analysts and managers, relational database administrators and developers, application and systems programmers, configuration and project managers, engineering personnel and multiple levels of system operations personnel.

The following discussion should be read in conjunction with the consolidated quarterly financial statements and notes thereto. All information is based upon operating results of the Company for the six month period ended July 31, 2008.

RESULTS OF OPERATIONS


          REVENUES
          Six months ended July 31,      2008      % Change      2007      Diff
                                      ------------------------------------------
          (Dollars in thousands)

          Engineering & Evaluation    $ 50,523         14.2 % $ 44,224   $ 6,299
          Technical Solutions           17,213          3.7 %   16,605       608
                                      - ------                - ------ - - -----
          Total revenues              $ 67,736         11.4 % $ 60,829   $ 6,907
                                      - ------                - ------ - - -----

For the six months ended July 31, 2008, consolidated revenues increased by $6,907,000 or 11.4% when compared to the same period in fiscal 2008.

Engineering & Evaluation:

For the six months ended July 31, 2008, Engineering & Evaluation segment revenues increased by $6,299,000 or 14.2% when compared to the same period in fiscal 2008, primarily due to an increase in revenues from the aerospace and power markets and additional revenues of approximately $3,662,000 from new acquisitions, partially offset by a decrease in revenues in the defense and automotive markets.

Technical Solutions:

For the six months ended July 31, 2008, Technical Solutions segment revenues increased by $608,000 or 3.7% when compared to the same period in fiscal 2008, primarily due to an increase in revenues from two major customers partially offset by a decrease in automotive related revenues.

          GROSS PROFIT
          Six months ended July 31,      2008      % Change      2007      Diff
          (Dollars in thousands)      ------------------------------------------

          Engineering & Evaluation    $ 14,365         17.6 % $ 12,217   $ 2,148
          % to segment revenue            28.4 %                  27.6 %     0.8 %
          Technical Solutions            3,025          3.3 %    2,927        98
          % to segment revenue            17.6 %                  17.6 %    (0.1 )%
                                      - ------                - ------ - - -----

          Total                       $ 17,390         14.8 % $ 15,144   $ 2,246
                                      - ------                - ------ - - -----
          % to total revenue              25.7 %                  24.9 %     0.8 %

Total gross profit for the six months ended July 31, 2008 increased by $2,246,000 or 14.8% when compared to the same period in fiscal 2008.

Engineering & Evaluation:

For the six months ended July 31, 2008, gross profit for the Engineering & Evaluation segment increased by $2,148,000 or 17.6% when compared to the same period in fiscal 2008. This was primarily due to additional gross profit from new acquisitions and an increase in revenues from higher margin contracts.

Technical Solutions:

For the six months ended July 31, 2008, gross profit increased by $98,000 or 3.3% in the Technical Solutions segment when compared to the same period in fiscal 2008. This increase was primarily due to the increase in revenues discussed above.

SELLING, GENERAL & ADMINISTRATIVE


           Six months ended July 31,     2008     % Change      2007      Diff
                                       -------- - --------- - -------- - -------
           (Dollars in thousands)

           Engineering & Evaluation    $ 10,707      15.2 %   $  9,293   $ 1,414
           % to segment revenue            21.2 %    21.0 %        0.2 %

           Technical Solutions            2,619     (6.1% )      2,789      (170 )
           % to segment revenue            15.2 %    16.8 %      (1.6% )
                                       - ------               - ------ - - -----

           Total                       $ 13,326      10.3 %   $ 12,082   $ 1,244
                                       - ------               - ------ - - -----
           % to total revenue              19.7 %    19.9 %      (0.2% )

Total selling, general and administrative expenses increased $1,244,000 or 10.3% for the six months ended July 31, 2008 when compared to the same period in fiscal 2008.

Engineering & Evaluation:

For the six months ended July 31, 2008, selling, general and administrative expenses increased by $1,414,000 or 15.2% when compared to the same period in fiscal 2008, primarily due to higher compensation costs and sales and marketing costs associated with the increased revenues discussed above, additional sales and marketing costs related to the development of the engineering services group and higher amortization expense related to the USTL and Elliott acquisitions.

Technical Solutions:

For the six months ended July 31, 2008, selling, general and administrative expenses decreased by $170,000 or 6.1% when compared to the same period in fiscal 2008, primarily due to a recovery of bad debt expense and a decrease in depreciation expense.

Equity Income from Non-Consolidated Subsidiary:

Engineering & Evaluation:

For the six months ended July 31, 2008, equity loss from XXCAL Japan was $4,000, compared to equity income of $71,000 for the same period in fiscal 2008. This decrease was primarily due to generally weaker economic conditions in Japan. XXCAL Japan is 50% owned by NTS and is accounted for under the equity method since NTS does not have management or board control.

OPERATING INCOME


             Six months ended July 31,    2008     % Change     2007     Diff
                                         ------- - --------- - ------- - -----
             (Dollars in thousands)

             Engineering & Evaluation    $ 3,654      22.0 %   $ 2,995   $ 659
             % to segment revenue            7.2 %     6.8 %       0.5 %

             Technical Solutions             406     194.2 %       138     268
             % to segment revenue            2.4 %     0.8 %       1.5 %
                                         - -----               - ----- - - ---
             Total                       $ 4,060      29.6 %   $ 3,133   $ 927
                                         - -----               - ----- - - ---
             % to total revenue              6.0 %     5.2 %       0.8 %

Operating income for the six months ended July 31, 2008 increased by $927,000 or 29.6% when compared to the same period in fiscal 2008.

Engineering & Evaluation:

For the six months ended July 31, 2008, operating income in the Engineering & Evaluation segment increased by

$659,000 or 22.0% when compared to the same period in fiscal 2008, primarily as a result of the increase in gross profit, partially offset by the increase in selling, general and administrative expenses and the decrease in equity income from non-consolidated subsidiary.

Technical Solutions:
For the six months ended July 31, 2008, operating income in the Technical Solutions segment increased by $268,000 or 194.2% when compared to the same period in fiscal 2008, primarily as a result of the increase in gross profit and the decrease in selling, general and administrative expenses.

INTEREST EXPENSE

Net interest expense increased by $166,000 to $1,098,000 in the six months ended July 31, 2008 when compared to the same period in the prior year, primarily due to additional borrowings for the USTL acquisition on December 5, 2007, partially offset by lower interest rates in the current year.

OTHER INCOME

Other income was $235,000 for the six months ended July 31, 2008, compared to $127,000 for the same period in the prior year. Other income in the current year includes gains from securities sold.

INCOME TAXES

The income tax provision rate for the six months ended July 31, 2008 was 41.0% compared to the 40.5% income tax rate in the prior year. Management has determined that it is more likely than not that the deferred tax assets will be realized on the basis of offsetting them against the reversal of deferred tax liabilities. It is the Company's intention to assess the need for a valuation account by evaluating the realizability of the deferred tax asset quarterly based upon projected future taxable income of the Company.

NET INCOME

Net income for the six months ended July 31, 2008 was $1,858,000 compared to $1,361,000 for the same period in fiscal 2008, an increase of $497,000 or 36.5%. This increase was primarily due to the higher operating income, partially offset by higher interest expense and higher income taxes.

The following discussion should be read in conjunction with the consolidated quarterly financial statements and notes thereto. All information is based upon operating results of the Company for the three month period ended July 31, 2008.

REVENUES


          Three months ended July 31,     2008     % Change      2007      Diff
                                        -------- - --------- - -------- - -------
          (Dollars in thousands)

          Engineering & Evaluation      $ 27,210      19.3 %   $ 22,815   $ 4,395
          Technical Solutions              8,794       7.1 %      8,210       584
                                        - ------               - ------ - - -----
          Total revenues                $ 36,004      16.0 %   $ 31,025   $ 4,979
                                        - ------               - ------ - - -----

For the three months ended July 31, 2008, consolidated revenues increased by $4,979,000 or 16.0% when compared to the same period in fiscal 2008.

Engineering & Evaluation:
For the three months ended July 31, 2008, Engineering & Evaluation segment revenues increased by $4,395,000 or 19.3% when compared to the same period in fiscal 2008, primarily due to an increase in revenues from the power and aerospace markets and additional revenues of approximately $2,705,000 from new acquisitions, partially offset by a decrease in revenues in the defense and automotive markets.

Technical Solutions:

For the three months ended July 31, 2008, Technical Solutions segment revenues increased by $584,000 or 7.1% when compared to the same period in fiscal 2008, primarily due to an increase in revenues from two major customers, partially offset by a decrease in revenues related to the automotive industry.

GROSS PROFIT


           Three months ended July 31,    2008     % Change     2007      Diff
                                         ------- - --------- - ------- - -------
           (Dollars in thousands)

           Engineering & Evaluation      $ 8,149      21.6 %   $ 6,700   $ 1,449
           % to segment revenue             29.9 %                29.4 %     0.6 %
           Technical Solutions             1,565       9.5 %     1,429       136
           % to segment revenue             17.8 %                17.4 %     0.4 %
                                         - -----               - ----- - - -----
           Total                         $ 9,714      19.5 %   $ 8,129   $ 1,585
                                         - -----               - ----- - - -----
           % to total revenue               27.0 %                26.2 %     0.8 %

Total gross profit for the three months ended July 31, 2008 increased by $1,585,000 or 19.5% when compared to the same period in fiscal 2008.

Engineering & Evaluation:

For the three months ended July 31, 2008, gross profit for the Engineering & Evaluation segment increased by $1,449,000 or 21.6% when compared to the same period in fiscal 2008. This was primarily due to additional gross profit from the USTL and Elliott acquisitions and the increase in revenues discussed above.

Technical Solutions:

For the three months ended July 31, 2008, gross profit increased by $136,000 or 9.5% in the Technical Solutions segment when compared to the same period in fiscal 2008. This increase was primarily due to the higher revenues in the quarter.

SELLING, GENERAL & ADMINISTRATIVE


          Three months ended July 31,    2008     % Change     2007      Diff
                                        ------- - --------- - ------- - -------
          (Dollars in thousands)

          Engineering & Evaluation      $ 5,889     20.5 %    $ 4,887   $ 1,002
          % to segment revenue             21.6 %                21.4 %     0.2 %
          Technical Solutions             1,329     (5.9 )%     1,413       (84 )
          % to segment revenue             15.1 %                17.2 %    (2.1 )%
                                        - -----               - ----- - - -----
          Total                         $ 7,218     14.6 %    $ 6,300   $   918
                                        - -----               - ----- - - -----
          % to total revenue               20.0 %                20.3 %    (0.3 )%

Total selling, general and administrative expenses increased $918,000 or 14.6% for the three months ended July 31, 2008 when compared to the same period in fiscal 2008.

Engineering & Evaluation:

For the three months ended July 31, 2008, selling, general and administrative expenses increased by $1,002,000 or 20.5% when compared to the same period in fiscal 2008, primarily due to higher compensation costs and sales and marketing costs associated with the increased revenues discussed above, additional sales and marketing costs related to

the development of the engineering services group and higher amortization expense related to the USTL and Elliott Laboratories acquisitions.

Technical Solutions:

For the three months ended July 31, 2008, selling, general and administrative expenses decreased by $84,000 or 5.9% when compared to the same period in fiscal 2008, primarily due to a decrease in depreciation expense and a decrease in sales related compensation expense.

Equity Income from Non-Consolidated Subsidiary:

Engineering & Evaluation:

For the three months ended July 31, 2008, equity income from XXCAL Japan was $28,000, compared to an equity income of $15,000 for the same period in fiscal 2008. XXCAL Japan is 50% owned by NTS and is accounted for under the equity method since NTS does not have management or board control.

OPERATING INCOME


            Three months ended July 31,    2008     % Change     2007     Diff
                                          ------- - --------- - ------- - -----
            (Dollars in thousands)

            Engineering & Evaluation      $ 2,288      25.2 %   $ 1,828   $ 460
            % to segment revenue              8.4 %                 8.0 %   0.4 %
            Technical Solutions               236    1375.0 %        16     220
            % to segment revenue              2.7 %                 0.2 %   2.5 %
                                          - -----               - ----- - - ---
            Total                         $ 2,524      36.9 %   $ 1,844   $ 680
                                          - -----               - ----- - - ---
            % to total revenue                7.0 %                 5.9 %   1.1 %

Operating income for the three months ended July 31, 2008 increased by $680,000 or 36.9% when compared to the same period in fiscal 2008.

Engineering & Evaluation:

For the three months ended July 31, 2008, operating income in the Engineering & Evaluation segment increased by $460,000 or 25.2% when compared to the same period in fiscal 2008, primarily as a result of the increase in gross profit, partially offset by the increase in selling, general and administrative expenses.

Technical Solutions:

For the three months ended July 31, 2008, operating income in the Technical Solutions segment increased by $220,000 when compared to the same period in fiscal 2008, primarily as a result of the increase in gross profit, and decrease in selling, general and administrative expenses.

INTEREST EXPENSE

Net interest expense increased by $97,000 to $575,000 in the three months ended July 31, 2008 when compared to the same period in the prior year, primarily due to additional borrowings for the USTL and Elliott Laboratories acquisitions, partially offset by lower interest rates in the current quarter.

OTHER INCOME

Other income was $34,000 for the three months ended July 31, 2008, compared to other expense of $29,000 for the same period in the prior year.

INCOME TAXES

The income tax provision rate for the three months ended July 31, 2008 was 41.4% compared to the 41.1% income tax rate in the prior year. Management has determined that it is more likely than not that the deferred tax assets will be realized on the basis of offsetting them against the reversal of deferred tax liabilities. It is the Company's intention to assess the need for a valuation account by evaluating the realizability of the deferred tax asset quarterly based upon projected future taxable income of the Company.

NET INCOME

Net income for the three months ended July 31, 2008 was $1,130,000 compared to $770,000 for the same period in fiscal 2008, an increase of $360,000 or 46.8%. This increase was primarily due to the higher operating income, partially offset by higher interest expense and higher income taxes.

OFF BALANCE SHEET ARRANGEMENTS

None.

BUSINESS ENVIRONMENT

The defense and aerospace markets generate approximately 55% of the Company's overall Engineering and Evaluation revenues. In recent years, domestic and worldwide political and economic developments have impacted positively the market demands for defense and advanced technology systems. The demand for testing aerospace components and systems as well as munitions and ordnance remains strong. In addition, it is anticipated that both the commercial and military aerospace markets will continue to grow for the next several years. Also, the increase in government outsourcing activity has created additional opportunities for NTS. An example of the outsourcing activity is the increase in munitions and ordnance work NTS has received this year from government bases. This type of work was historically done by the government directly. The Company has purchased additional property in Camden, AK and will be building two additional test ranges to handle this anticipated increase in demand.

The trend in the telecommunications market appears to be stable in the short term and is expected to grow in the future. Carriers are deploying voice, video and data using fiber networks. This may increase the demand for certification of suppliers' premises equipment, and certification of additional central office equipment. The Company expects an increase in business demand as carriers upgrade networks packet-based Voice Over Internet Protocol (VOIP) devices. The Company is currently evaluating the overall compliance requirements for the deployment of broadband wireless products and how best to position NTS to service the anticipated growth of this technology. The Company anticipates a moderate increase in the telecom business and the acquisition of Elliott Laboratories will provide additional growth opportunity for this market.

The computer and electronics markets have been stable. The Company anticipates growth in these markets as it captures additional market share due to the planned international expansion. Currently NTS is developing compliance and interoperabiltiy testing for emerging technologies; Multimedia over Coax Cable (MoCA), Video Electronics Standards (VESA), WiMedia, satellite radio and electronic product compliance for Zune applications. In addition, the Company believes demand will increase for certification of "ZigBee" platforms and "ZigBee" Alliance-recognized products. The Company believes these compliance activities will have applicability in both the Asian and U.S. markets.

The transportation market and power markets have been stable with the Company continuing to experience a decrease in the transportation business at its Detroit facility, while the Company has recently experienced a moderate increase in the power business.

In the Technical Solutions segment (TS), the Company provides a variety of staffing and workforce management services and solutions with a focus on IT and engineering. Over the past few years, the IT general services business transferred to off-shore facilities and became a commodity service for some of the Company's largest competitors. TS is positioning itself to provide its clients with resources and solutions from product concept to market entry by leveraging the Engineering & Evaluation aerospace, defense and telecommunications customers and aligning its services with the Engineering & Evaluation sales team.

Notwithstanding the foregoing, and because of factors affecting the Company's operating results, past financial performance should not be considered to be a reliable indicator of future performance.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities of $3,471,000 in the six months ended July 31, 2008 primarily consisted of net income of $1,858,000 adjusted for non-cash items of $3,599,000 in depreciation and amortization, share based compensation of $139,000, partially offset by changes in working capital of $929,000, and other non cash items of $1,196,000. Net cash provided by operating activities of $2,618,000 in the six months ended July 31, 2007 primarily consisted of net income of $1,361,000 adjusted for non-cash items of $3,013,000 in depreciation and amortization, share based compensation of $195,000, partially offset by changes in working capital of $1,819,000 and other non cash items of $132,000.

Cash used for investing activities in the six months ended July 31, 2008 of $8,617,000 was primarily attributable to capital spending of $3,892,000, cash used to acquire businesses of $4,478,000, investment in retirement funds of $348,000 and investment in life insurance of $94,000, partially offset by net proceeds from sale of securities of $195,000. Cash used for investing activities in the six months ended July 31, 2007 of $2,693,000 was primarily attributable to capital spending of $2,229,000, cash used to acquire businesses of $471,000 and investment in life insurance of $90,000, partially offset by net proceeds from insurance claim of $97,000.

Net cash provided by financing activities in the six months ended July 31, 2008 of $5,721,000 consisted primarily of proceeds from current and long-term debt of . . .