Note 13 - Segment and Geographic Information

9 Months Ended

May 31, 2022

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

13.         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 45 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 nine months ended May 31, 2022 and 2021 by segment:

	Three Months Ended May 31,				Nine Months Ended May 31,
	2022		2021		2022		2021
ZERUST® net sales	$	14,446,832	$	12,378,215	$	41,988,394	$	32,882,882
Natur-Tec® net sales		4,518,089		3,040,309		11,918,579		8,097,636
Total net sales	$	18,964,921	$	15,418,524	$	53,906,973	$	40,980,518

The following table sets forth the Company’s cost of goods sold for the three and nine months ended May 31, 2022 and 2021 by segment:

	Three Months Ended May 31,										Nine Months Ended May 31,
	2022		% of Product Sales*			2021		% of Product Sales*			2022		% of Product Sales*			2021		% of Product Sales*
Direct cost of goods sold
ZERUST®	$	8,409,392		58.2	%	$	7,091,220		57.3	%	$	25,267,333		60.2	%	$	18,928,272		57.6	%
Natur-Tec®		3,432,152		76.0	%		2,251,996		74.1	%		9,129,686		76.6	%		5,703,807		70.4	%
Indirect cost of goods sold		881,289		—			809,366		—			2,580,601		—			2,365,503		—
Total net cost of goods sold	$	12,722,833				$	10,152,582				$	36,977,620				$	26,997,582

*         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 nine months ended May 31, 2022 and 2021 were as follows:

	Three Months Ended May 31,				Nine Months Ended May 31,
	2022		2021		2022		2021
Inside the U.S.A. to unaffiliated customers	$	6,884,726	$	6,717,886	$	18,157,010	$	16,198,372
Outside the U.S.A. to:
Joint ventures in which the Company is a shareholder directly and indirectly		528,665		1,253,919		2,252,618		2,361,165
Unaffiliated customers		11,551,530		7,446,719		33,497,345		22,420,981
	$	18,964,921	$	15,418,524	$	53,906,973	$	40,980,518

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 nine months ended May 31, 2022 and 2021 were as follows:

	Three Months Ended May 31,
	2022		% of Total Fees for Services Provided to Joint Ventures			2021		% of Total Fees for Services Provided to Joint Ventures
Germany	$	204,316		15.4	%	$	232,026		14.6	%
Poland		171,181		12.9	%		226,174		14.2	%
Japan		168,075		12.6	%		200,270		12.6	%
France		123,869		9.3	%		119,172		7.5	%
Sweden		130,681		9.8	%		127,710		8.0	%
United Kingdom		89,363		6.7	%		113,886		7.2	%
Thailand		95,574		7.2	%		108,842		6.8	%
Finland		92,036		6.9	%		75,577		4.8	%
Czech Republic		84,797		6.4	%		109,680		6.9	%
South Korea		78,542		5.9	%		78,507		4.9	%
Other		91,554		6.9	%		197,777		12.4	%
	$	1,329,988		100.0	%	$	1,589,621		100.0	%

	Nine Months Ended May 31,
	2022		% of Total Fees for Services Provided to Joint Ventures			2021		% of Total Fees for Services Provided to Joint Ventures
Germany	$	639,738		16.7	%	$	692,770		15.8	%
Poland		520,807		13.6	%		626,527		14.3	%
Japan		486,815		12.7	%		561,725		12.8	%
France		355,827		9.3	%		322,717		7.4	%
Sweden		337,929		8.8	%		365,095		8.3	%
United Kingdom		271,027		7.1	%		247,560		5.6	%
Thailand		271,046		7.1	%		306,151		7.0	%
Finland		257,635		6.7	%		223,356		5.1	%
Czech Republic		224,280		5.8	%		268,571		6.1	%
South Korea		205,342		5.4	%		241,805		5.5	%
Other		265,309		6.9	%		532,589		12.1	%
	$	3,835,755		100.0	%	$	4,388,866		100.0	%

The geographical distribution of total property and equipment and net sales is as follows:

	As of May 31, 2022		As of August 31, 2021
China	$	5,528,663	$	5,110,071
Other		617,674		453,199
United States		6,642,735		6,967,761
Total property and equipment and patents	$	12,789,072	$	12,531,031

	Three Months Ended May 31,				Nine Months Ended May 31,
	2022		2021		2022		2021
China	$	3,624,396	$	4,037,493	$	11,845,989		13,025,127
Brazil		1,554,364		1,237,586		3,786,670		2,756,008
India		4,824,004		1,540,734		13,369,769		4,036,208
Other		2,077,431		1,884,825		6,747,535		4,964,803
United States		6,884,726		6,717,886		18,157,010		16,198,372
Total net sales	$	18,964,921	$	15,418,524	$	53,906,973	$	40,980,518

Long-lived assets consist of property and equipment and patents. 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.