11.

SEGMENT AND GEOGRAPHIC INFORMATION

Segment Information

The Company’s chief operating decision maker (CODM) is its Chief Executive Officer. The Company’s business is organized into

two

reportable segments: ZERUST® and Natur-Tec®. 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

years and, more recently, has targeted and expanded into the oil and gas industry. The Company also sells a portfolio of bio-based and compostable (fully biodegradable) polymer resins and finished products under the Natur-Tec® brand.

The following table sets forth the Company’s net sales for the

three

and

six

months ended

February 28, 2019

and

2018

by segment:

	Three Months Ended				Six Months Ended
	February 28, 2019		February 28, 2018		February 28, 2019		February 28, 2018
ZERUST® net sales	$	9,108,395	$	10,191,459	$	19,173,569	$	19,719,196
Natur-Tec® net sales		4,207,009		2,022,516		8,235,887		4,037,817
Total net sales	$	13,315,404	$	12,213,975	$	27,409,456	$	23,757,013

The following table sets forth the Company’s cost of goods sold for the

three

and

six

months ended

February 28, 2019

and

2018

by segment:

	Three Months Ended										Six Months Ended
	February 28, 2019		% of Segment Sales*			February 28, 2018		% of Segment Sales*			February 28, 2019		% of Segment Sales*			February 28, 2018		% of Segment Sales*
Direct cost of goods sold
ZERUST®	$	5,249,617		57.6	%	$	6,005,262		58.9	%	$	10,871,316		56.7	%	$	11,809,242		59.9	%
Natur-Tec®		3,354,693		79.7	%		1,447,240		71.6	%		6,510,768		79.1	%		2,926,439		72.5	%
Indirect cost of goods sold		679,789		—			560,334		—			1,363,152		—			1,165,625		—
Total net cost of goods sold	$	9,284,099				$	8,012,836				$	18,745,236				$	15,901,306

The percent of segment sales is calculated by dividing the direct cost of goods sold for each individual segment category by the net sales for each segment category.

The Company 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.

Geographic Information

Net sales by geographic location for the

three

and

six

months ended

February 28, 2019

and

2018

were as follows:

	Three Months Ended				Six Months Ended
	February 28, 2019		February 28, 2018		February 28, 2019		February 28, 2018
Inside the U.S.A. to unaffiliated customers	$	6,467,940	$	6,079,835	$	13,391,874	$	12,336,040
Outside the U.S.A. to:
Joint ventures in which the Company is a shareholder directly and indirectly		708,955		814,122		1,192,142		1,321,753
Unaffiliated customers		6,138,509		5,320,018		12,825,440		10,099,220
	$	13,315,404	$	12,213,975	$	27,409,456	$	23,757,013

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 the

three

and

six

months ended

February 28, 2019

and

2018

were as follows:

	Three Months Ended
	February 28, 2019		% of Total Fees for Services Provided to Joint Ventures			February 28, 2018		% of Total Fees for Services Provided to Joint Ventures
Germany	$	215,337		15.0	%	$	236,700		14.7	%
Poland		188,529		13.1	%		207,038		12.9	%
Japan		167,496		11.7	%		172,032		10.7	%
Sweden		149,750		10.4	%		165,165		10.3	%
France		106,270		7.4	%		130,323		8.1	%
Thailand		105,299		7.3	%		111,779		6.9	%
United Kingdom		96,209		6.7	%		82,432		5.1	%
Czech Republic		93,928		6.6	%		98,726		6.1	%
South Korea		87,413		6.1	%		99,574		6.2	%
India		85,401		5.9	%		138,437		8.6	%
Finland		64,648		4.5	%		76,546		4.8	%
Other		76,494		5.3	%		90,138		5.6	%
	$	1,436,774		100.0	%	$	1,608,890		100.0	%

	Six Months Ended
	February 28, 2019		% of Total Fees for Services Provided to Joint Ventures			February 28, 2018		% of Total Fees for Services Provided to Joint Ventures
Germany	$	430,328		15.0	%	$	456,574		14.7	%
Poland		370,374		12.9	%		413,114		13.3	%
Japan		337,296		11.7	%		346,077		11.1	%
Sweden		279,993		9.8	%		293,119		9.4	%
France		216,332		7.6	%		269,964		8.7	%
Thailand		203,647		7.1	%		214,311		6.9	%
United Kingdom		190,990		6.7	%		194,207		6.2	%
Czech Republic		183,620		6.4	%		182,951		5.8	%
India		180,128		6.3	%		225,200		7.2	%
South Korea		173,880		6.1	%		183,062		5.9	%
Finland		146,464		5.1	%		166,172		5.3	%
Other		152,157		5.3	%		171,281		5.5	%
	$	2,865,209		100.0	%	$	3,116,032		100.0	%

The geographical distribution of key financial statement data is as follows:

	At February 28, 2019		At August 31, 2018
China	$	210,031	$	205,490
Brazil		124,008		71,677
India		47,852		22,220
Other		11,502		7,058
United States		6,836,005		6,862,381
Total property and equipment	$	7,229,398	$	7,168,826

	Six Months Ended
	February 28, 2019		February 28, 2018
China	$	6,173,259	$	6,106,942
Brazil		1,551,595		1,456,456
India		3,875,790		1,078,294
Other		2,416,938		1,607,953
United States		13,391,874		13,507,368
Total net sales	$	27,409,456	$	23,757,013

Total property and equipment 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. Total assets located in the United States include the Company’s investments in joint ventures.

Sales to the Company’s joint ventures are included in the foregoing segment and geographic information; however, sales by the Company’s joint ventures to other parties are

not

included. The foregoing segment and geographic information represents only sales and cost of goods sold recognized directly by the Company.

All joint venture operations, including equity in income, fees for services, and related dividends, are primarily related to ZERUST

products and services.