Northern Technologies International Corp. (NTIC), a maker of rust and corrosion inhibiting products, has left investors to wonder about the accuracy of its financial statements and disclosures due to an apparent discrepancy in its latest annual report.

The inconsistency is related to the company’s application for Employee Retention Credits (ERCs), the refundable tax credits against certain employment taxes provided for by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) passed during the pandemic in March 2020.

Northern Technologies— citing an opinion by tax advisors at a Big 4 accounting firm— says wages it paid in the first and second quarters of 2021 qualified for the credits.

The credits totaled more than $1.1 million and in its latest annual report, Northern Technologies disclosed:

“...the associated income was inappropriately recognized.”

Twenty pages later tough, Northern Technologies appears to contradict the earlier admission stating it:

“...did not recognize the credits on the Company’s financial statements as there was not reasonable assurances that the Company would receive the credits.”

It appears the second disclosure is a reference to the company’s financial statements included in the latest annual filing as the company acknowledged eight-and-a-half hours earlier on the same day it had misstated its financials for the three and six months ended February 28, 2023 and three and nine months ended May 31, 2023.

The restated financials reveal Northern Technologies:

—Overstated net income attributable to NTIC by $474,000, or 115.2% during the three months ended February 28, 2023
—Overstated net income attributable to NTIC by $466,000, or 43.9% during the three months ended May 31, 2023

In September 2023, the Internal Revenue Service (IRS) stopped processing new ERC claims after a surge in questionable claims fueled by aggressive marketing that prompted a Department of Justice (DOJ) fraud probe.

Northern Technologies did not file for the credits until two years after it says qualifying wages were paid.

The company did not immediately respond when DuDil asked about the delay or whether it has considered withdrawing the claim.