Note 11 - Segment and Geographic Information

9 Months Ended

May 31, 2023

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 almost 50 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, 2023 and 2022 by segment:

	Three Months Ended May 31,				Nine Months Ended May 31,
	2023		2022		2023		2022
ZERUST® net sales	$	16,100,674	$	14,446,832	$	45,929,422	$	41,988,394
Natur-Tec® net sales		4,869,052		4,518,089		13,263,895		11,918,579
Total net sales	$	20,969,726	$	18,964,921	$	59,193,317	$	53,906,973

The following table sets forth the Company’s cost of goods sold for the three and nine months ended May 31, 2023 and 2022 by segment:

	Three Months Ended May 31,										Nine Months Ended May 31,
	2023		% of Product Sales*			2022		% of Product Sales*			2023		% of Product Sales*			2022		% of Product Sales*
Direct cost of goods sold
ZERUST®	$	9,116,091		56.6	%	$	8,409,392		58.2	%	$	26,410,796		57.5	%	$	25,267,333		60.2	%
Natur-Tec®		3,576,676		73.5	%		3,432,152		76.0	%		10,078,385		76.0	%		9,129,686		76.6	%
Indirect cost of goods sold		587,817		—			881,289		—			2,258,684		—			2,580,601		—
Total net cost of goods sold	$	13,280,584				$	12,722,833				$	38,747,865				$	36,977,620

______________________

* 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, 2023 and 2022 were as follows:

	Three Months Ended May 31,				Nine Months Ended May 31,
	2023		2022		2023		2022
Inside the U.S.A. to unaffiliated customers	$	7,729,820	$	6,884,726	$	21,958,978	$	18,157,010
Outside the U.S.A. to:
Joint ventures in which the Company is a shareholder directly and indirectly		732,437		528,665		2,895,665		2,252,618
Unaffiliated customers		12,507,469		11,551,530		34,338,674		33,497,345
	$	20,969,726	$	18,964,921	$	59,193,317	$	53,906,973

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, 2023 and 2022 were as follows:

	Three Months Ended May 31,
	2023		% of Total Fees for Services Provided to Joint Ventures			2022		% of Total Fees for Services Provided to Joint Ventures
Poland	$	224,288		16.5	%	$	171,181		12.9	%
Germany		209,398		15.4	%		204,316		15.4	%
Japan		152,593		11.2	%		168,075		12.6	%
Sweden		144,981		10.7	%		130,681		9.8	%
France		128,149		9.4	%		123,869		9.3	%
Finland		103,879		7.6	%		92,036		6.9	%
Czech Republic		99,090		7.3	%		84,797		6.4	%
Thailand		82,725		6.1	%		95,574		7.2	%
United Kingdom		83,586		6.1	%		89,363		6.7	%
South Korea		61,669		4.5	%		78,542		5.9	%
Other		70,953		5.2	%		91,554		6.9	%
	$	1,361,311		100.0	%	$	1,329,988		100.0	%

	Nine Months Ended May 31,
	2023		% of Total Fees for Services Provided to Joint Ventures			2022		% of Total Fees for Services Provided to Joint Ventures
Poland	$	610,911		16.1	%	$	520,807		13.6	%
Germany		606,189		16.0	%		639,738		16.7	%
Japan		454,308		12.0	%		486,815		12.7	%
Sweden		358,032		9.4	%		337,929		8.8	%
France		356,444		9.4	%		355,827		9.3	%
Finland		285,931		7.5	%		257,635		6.7	%
Czech Republic		270,422		7.1	%		224,280		5.8	%
Thailand		257,282		6.8	%		271,046		7.1	%
United Kingdom		206,925		5.5	%		271,027		7.1	%
South Korea		190,866		5.0	%		205,342		5.4	%
Other		198,552		5.2	%		265,309		6.8	%
	$	3,795,862		100.0	%	$	3,835,755		100.0	%

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

	At May 31, 2023		At August 31, 2022
China	$	5,805,738	$	5,826,898
Other		770,863		565,022
United States		7,234,329		5,778,573
Total property and equipment, net	$	13,810,930	$	12,170,493

	Three Months Ended May 31,				Nine Months Ended May 31,
	2023		2022		2023		2022
China	$	3,318,373	$	3,624,396	$	9,936,808	$	11,845,989
Brazil		1,488,510		1,554,364		4,062,718		3,786,670
India		5,145,423		4,824,004		14,356,708		13,369,769
Other		3,287,600		2,077,431		8,878,105		6,747,535
United States		7,729,820		6,884,726		21,958,978		18,157,010
Total net sales	$	20,969,726	$	18,964,921	$	59,193,317	$	53,906,973

Long-lived assets 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.