Note 11 - Segment and Geographic Information

3 Months Ended

Nov. 30, 2020

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

11.     SEGMENT AND GEOGRAPHIC INFORMATION

Segment Information

The Company’s chief operating decision maker 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 40 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 months ended November 30, 2020 and 2019 by segment:

	Three Months Ended
	November 30, 2020		November 30, 2019
ZERUST® net sales	$	10,220,551	$	9,949,512
Natur-Tec® net sales		2,558,561		4,681,888
Total net sales	$	12,779,112	$	14,631,400

The following table sets forth the Company’s cost of goods sold for the three months ended November 30, 2020 and 2019 by segment:

	November 30, 2020		% of Product Sales*			November 30, 2019		% of Product Sales*
Direct cost of goods sold
ZERUST®	$	5,771,089		56.5	%	$	5,543,354		55.7	%
Natur-Tec®		1,767,630		69.1	%		3,614,419		77.2	%
Indirect cost of goods sold		774,602	NA				647,311	NA
Total net cost of goods sold	$	8,313,321				$	9,805,084

* 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 months ended November 30, 2020 and 2019 were as follows:

	Three Months Ended
	November 30, 2020		November 30, 2019
Inside the U.S.A. to unaffiliated customers	$	4,861,355	$	6,147,086
Outside the U.S.A. to:
Joint ventures in which the Company is a shareholder directly and indirectly		580,304		585,616
Unaffiliated customers		7,337,453		7,898,698
	$	12,779,112	$	14,631,400

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 months ended November 30, 2020 and 2019 were as follows:

	Three Months Ended
	November 30, 2020		% of Total Fees for Services Provided to Joint Ventures			November 30, 2019		% of Total Fees for Services Provided to Joint Ventures
Germany	$	228,826		17.1	%	$	212,101		15.6	%
Poland		189,410		14.2	%		194,978		14.4	%
Japan		179,962		13.5	%		163,929		12.1	%
France		105,907		7.9	%		93,631		6.9	%
Sweden		90,489		6.8	%		109,506		8.1	%
Thailand		89,932		6.7	%		102,334		7.5	%
India		88,208		6.6	%		82,960		6.1	%
South Korea		85,079		6.4	%		76,032		5.6	%
Finland		76,283		5.7	%		67,942		5.0	%
Czech Republic		69,353		5.2	%		89,014		6.6	%
United Kingdom		61,915		4.6	%		85,478		6.3	%
Other		71,197		5.3	%		80,421		5.9	%
	$	1,336,561		100.0	%	$	1,358,325		100.0	%

The geographical distribution of total long-lived assets and net sales is as follows:

	At November 30, 2020		At August 31, 2020
China	$	367,953	$	376,088
Other		420,228		172,833
United States		6,436,116		6,561,868
Total long-lived assets	$	7,224,297	$	7,110,789

	Three Months Ended
	November 30, 2020		November 30, 2019
China	$	4,543,978	$	3,861,572
Brazil		713,853		891,978
India		1,200,468		2,036,210
Other		1,459,458		1,694,554
United States		4,861,355		6,147,086
Total net sales	$	12,779,112	$	14,631,400

Long-lived assets located in China, Brazil, Germany, and India consist of property and equipment. These assets 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.

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 recognized directly by the Company and sold in that geographic territory.

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