Note 11 - Segment and Geographic Information

6 Months Ended

Feb. 28, 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 six months ended February 28, 2023 and 2022 by segment:

	Three Months Ended February 28,				Six Months Ended February 28,
	2023		2022		2023		2022
ZERUST® net sales	$	14,458,747	$	13,117,777	$	29,828,748	$	27,541,562
Natur-Tec® net sales		3,812,078		3,630,862		8,394,843		7,400,490
Total net sales	$	18,270,825	$	16,748,639	$	38,223,591	$	34,942,052

The following table sets forth the Company’s cost of goods sold for the three and six months ended February 28, 2023 and 2022 by segment:

	Three Months Ended February 28,										Six Months Ended February 28,
	2023 (Restated)		% of Product Sales*			2022		% of Product Sales*			2023 (Restated)		% of Product Sales*			2022		% of Product Sales*
Direct cost of goods sold
ZERUST®	$	8,115,451		56.1	%	$	8,151,274		62.1	%	$	17,294,705		58.0	%	$	16,857,941		61.2	%
Natur-Tec®		2,931,036		76.9	%		2,775,436		76.4	%		6,501,709		77.4	%		5,697,533		77.0	%
Indirect cost of goods sold		921,270		—			837,594		—			1,770,985		—			1,699,313		—
Total net cost of goods sold	$	11,967,757				$	11,764,304				$	25,567,399				$	24,254,787

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* 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, 2023 and 2022 were as follows:

	Three Months Ended February 28,				Six Months Ended February 28,
	2023		2022		2023		2022
Inside the U.S.A. to unaffiliated customers	$	6,750,997	$	5,115,963	$	14,229,158	$	11,272,285
Outside the U.S.A. to:
Joint ventures in which the Company is a shareholder directly and indirectly		1,529,763		883,513		2,163,228		1,723,952
Unaffiliated customers		9,990,065		10,749,163		21,831,205		21,945,815
	$	18,270,825	$	16,748,639	$	38,223,591	$	34,942,052

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, 2023 and 2022 were as follows:

	Three Months Ended February 28,
	2023		% of Total Fees for Services Provided to Joint Ventures			2022		% of Total Fees for Services Provided to Joint Ventures
Germany	$	202,964		16.2	%	$	216,992		17.4	%
Poland		199,927		16.0	%		172,700		13.9	%
Japan		153,795		12.3	%		151,933		12.2	%
France		118,938		9.5	%		115,663		9.3	%
Sweden		112,615		9.0	%		99,178		8.0	%
Finland		91,620		7.3	%		85,426		6.9	%
Thailand		91,601		7.3	%		87,918		7.1	%
Czech Republic		91,001		7.3	%		69,386		5.6	%
South Korea		65,803		5.3	%		64,173		5.1	%
United Kingdom		65,648		5.2	%		86,736		7.0	%
Other		58,834		4.6	%		96,803		7.5	%
	$	1,252,746		100.0	%	$	1,246,908		100.0	%

	Six Months Ended February 28,
	2023		% of Total Fees for Services Provided to Joint Ventures			2022		% of Total Fees for Services Provided to Joint Ventures
Germany	$	396,792		16.3	%	$	435,422		17.4	%
Poland		386,623		15.9	%		349,626		14.0	%
Japan		301,715		12.4	%		318,740		12.7	%
France		228,295		9.4	%		231,958		9.3	%
Sweden		213,051		8.8	%		207,248		8.3	%
Finland		182,052		7.5	%		165,599		6.6	%
Thailand		174,557		7.2	%		175,472		7.0	%
Czech Republic		171,333		7.0	%		139,483		5.6	%
South Korea		129,197		5.3	%		126,800		5.1	%
United Kingdom		123,339		5.1	%		181,663		7.2	%
Other		127,597		5.1	%		173,756		6.8	%
	$	2,434,551		100.0	%	$	2,505,767		100.0	%

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

	At February 28, 2023		At August 31, 2021
China	$	5,885,664	$	5,826,898
Other		668,910		565,022
United States		6,891,392		5,778,573
Total property and equipment, net	$	13,445,966	$	12,170,493

	Three Months Ended February 28,
	2023		2022
China	$	2,871,795	$	4,163,741
Brazil		1,206,790		936,089
India		4,364,358		4,068,781
Other		3,076,885		2,464,066
United States		6,750,997		5,115,962
Total net sales	$	18,270,825	$	16,748,639

	Six Months Ended February 28,
	2023		2022
China	$	6,618,435	$	8,221,593
Brazil		2,574,208		2,232,306
India		9,211,285		8,545,765
Other		5,590,505		4,670,103
United States		14,229,158		11,272,285
Total net sales	$	38,223,591	$	34,942,052

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.