875582--11/25/2008--NORTHERN_TECHNOLOGIES_INTERNATIONAL

related topics

{regulation, change, law}

{stock, price, share}

{acquisition, growth, future}

{condition, economic, financial}

{customer, product, revenue}

{product, market, service}

{operation, international, foreign}

{stock, price, operating}

{property, intellectual, protect}

{control, financial, internal}

{investment, property, distribution}

{personnel, key, retain}

{cost, operation, labor}

Current worldwide economic conditions may adversely affect NTIC s business, operating results and financial condition, as well as further decrease its stock price. The automotive industry in the United States has experienced a significant downturn in recent years thus resulting in decreased demand for NTIC s ZERUST products in the United States, which has adversely affected and may continue to adversely affect NTIC s net sales from North American operations and net income. NTIC s liquidity and financial position rely on the receipt of fees for technical and other support services and dividend distributions from its corporate joint ventures. No assurance can be provided that NTIC will continue to receive such fees and dividend distributions in amounts NTIC historically has received. NTIC intends to invest additional research and development and marketing efforts and resources to expand its existing product lines and the distribution of its products into new target markets, such as the oil and gas industry. No assurance can be provided, however, that NTIC s investments in such new products and markets will be successful and result in additional revenue. NTIC s emerging 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 emerging new businesses are risky and may not prove to be successful, which could harm NTIC s operating results and financial condition. A significant portion of NTIC s earnings is the result of NTIC s income from its international corporate joint ventures and holding companies. NTIC s international business conducted through its corporate joint ventures and holding companies requires management attention and financial resources and exposes NTIC to difficulties and risks presented by international economic, political, legal, accounting and business factors. Fluctuations in foreign currency exchange rates could result in declines in NTIC s reported net income and changes in NTIC s foreign currency translation adjustments. 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 corporate 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 may also adversely affect the demand for some of NTIC s products and NTIC s operating results. 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 independent distributors, manufacturer s sales representatives and corporate joint ventures to market and sell its products. NTIC has very 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 currently involved in several litigation matters and an audit matter with the U.S. Internal Revenue Service, which are costly to defend and the resolution of which could have a material adverse effect on NTIC s operating results and financial position. 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. 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. NTIC does not intend to pay dividends for the foreseeable future. One of NTIC s principal stockholders beneficially owns 24.3% of NTIC s outstanding common stock and is affiliated with NTIC s President and Chief Executive Officer and thus may be able 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 Holding Company or its pledgees if Inter Alia is subject to margin calls could adversely affect NTIC s stock price.

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875582--11/25/2008--NORTHERN_TECHNOLOGIES_INTERNATIONAL_CORP