875582--11/23/2010--NORTHERN_TECHNOLOGIES_INTERNATIONAL

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{stock, price, share}

{regulation, change, law}

{acquisition, growth, future}

{stock, price, operating}

{customer, product, revenue}

{investment, property, distribution}

{product, market, service}

{product, liability, claim}

{condition, economic, financial}

{operation, international, foreign}

{loss, insurance, financial}

{control, financial, internal}

{property, intellectual, protect}

{personnel, key, retain}

{cost, operation, labor}

Adverse worldwide economic conditions have and may continue to adversely affect NTIC s business, operating results and financial condition. Although the automotive industry in the United States experienced a recovery in sales during fiscal 2010 compared to fiscal 2009, continued weakness in the U.S. and global economy could lead to another downturn in automotive sales and result in decreased demand for NTIC s ZERUST products and adversely affect NTIC s net sales and its other operating results. receipt of fees for services provided to its joint ventures and dividend distributions from its joint ventures. N o assurance can be provided that NTIC will continue to receive such fees and dividend distributions in amounts NTIC historically has received NTIC has invested and intends to invest additional research and development and marketing efforts and resources into its new businesses, such as the application of its corrosion prevention technology into the oil and gas industry, its Natur-Tec bioplastics products and its plastic recycling technology. No assurance can be provided, however, that NTIC s investments in such new businesses will be successful and result in additional revenue. NTIC s new businesses 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. NTIC s new businesses are risky and may not prove to be successful, which could harm NTIC s operating results and financial condition. Disruptions in the global financial markets could impact the ability of NTIC s counterparties and others to perform their obligations to NTIC and NTIC s ability to obtain any additional future financing if needed or desired. A significant portion of NTIC s earnings is the result of NTIC s income from its international joint ventures. NTIC s international business 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. 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. Fluctuations in foreign currency exchange rates could result in declines in NTIC s earnings (if any) and changes in NTIC s foreign currency translation adjustments. NTIC breached a financial covenant under the note governing its term loan obtained in connection with the purchase of its corporate headquarters and as a result the bank could demand the entire amount outstanding under the note immediately due and payable in full, which could have a material adverse effect on NTIC s financial position and liquidity. 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. 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. Fluctuations in NTIC s effective tax rate could have a significant impact on NTIC s financial position, results of operations or cash flows. NTIC intends to grow its business through additional joint ventures, alliances and acquisitions, which could be risky and harm its business. NTIC relies on its joint ventures, distributors, manufacturer s sales representatives and other agents to market and sell its products. NTIC has limited staffing and will continue to be dependent upon key employees. 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. 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. 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. 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 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. In addition, increases in prices for raw materials and components used in NTIC s products could adversely affect NTIC s operating results. 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. NTIC s business is subject to a number of other miscellaneous risks that may adversely affect NTIC s operating results, financial condition or business. Risks Related to NTIC s 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. The price and trading volume of NTIC s common stock has been, and may continue to be, volatile. The trading volume of NTIC s common stock is typically very low, leaving NTIC s common stock open to risk of high volatility. If securities or industry analysts do not publish research or reports about NTIC s business, or if they adversely change their recommendations regarding shares of NTIC s common stock, the market price for NTIC s common stock and trading volume could decline. NTIC does not intend to pay dividends for the foreseeable future. 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. Future sales of NTIC common stock by Inter Alia or its pledgees if Inter Alia is subject to foreclosure proceedings or margin calls could adversely affect the price of NTIC s common stock. Future equity issuances by NTIC may have dilutive and other effects on NTIC s existing stockholders.

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875582--11/23/2010--NORTHERN_TECHNOLOGIES_INTERNATIONAL_CORP