Note 12 - Segment and Geographic Information

9 Months Ended

May 31, 2025

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

12. 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 50 years and, more recently, has also expanded into the oil and gas industry. The Company also sells a portfolio of proprietary bio-based and compostable (fully biodegradable) polymer resins and finished products under the Natur-Tec® brand.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies. There are no intersegment sales and no operating segments have been aggregated.

The following table sets forth the Company’s net sales for the three and nine months ended May 31, 2025 and 2024 by segment:

	Three Months Ended				Nine Months Ended
	May 31, 2025		May 31, 2024		May 31, 2025		May 31, 2024
ZERUST® net sales	$	15,728,637	$	14,837,235	$	45,316,457	$	45,461,075
Natur-Tec® net sales		5,779,926		5,848,962		16,602,565		16,249,335
Total net sales	$	21,508,563	$	20,686,197	$	61,919,022	$	61,710,410

The following table sets forth the Company’s cost of goods sold for the three and nine months ended May 31, 2025 and 2024 by segment:

	Three Months Ended										Nine Months Ended
	May 31, 2025		% of Product Sales*			May 31, 2024		% of Product Sales*			May 31, 2025		% of Product Sales*			May 31, 2024		% of Product Sales*
Direct cost of goods sold
ZERUST®	$	9,119,330		58.0	%	$	8,168,215		55.1	%	$	25,894,213		57.1	%	$	24,994,401		55.0	%
Natur-Tec®		3,557,167		61.5	%		3,768,921		64.4	%		10,484,204		63.1	%		10,566,223		65.0	%
Indirect cost of goods sold		572,626		—			855,967		—			2,322,628		—			2,583,254		—
Total net cost of goods sold	$	13,249,123				$	12,793,103				$	38,701,045				$	38,143,878

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

	Three Months Ended						Nine Months Ended
	May 31, 2025			May 31, 2024			May 31, 2025			May 31, 2024
ZERUST® gross profit	$	6,609,307		$	6,669,020		$	19,422,244		$	20,466,674
Natur-Tec® gross profit		2,222,759			2,080,041			6,118,361			5,683,112
Total segment gross profit		8,832,066			8,749,061			25,540,605			26,149,786
Indirect cost of goods sold		(572,626	)		(855,967	)		(2,322,628	)		(2,583,254	)
Total gross profit	$	8,259,440		$	7,893,094		$	23,217,977		$	23,566,532
Total joint venture operations		2,272,912			2,609,228			6,377,617			7,441,476
Selling expenses		(4,375,956	)		(4,232,887	)		(12,515,638	)		(12,053,839	)
General and administrative expenses		(4,150,966	)		(3,500,113	)		(11,668,492	)		(10,253,966	)
Research and development expenses		(1,138,243	)		(1,245,405	)		(3,770,539	)		(3,593,582	)
Interest income		37,821			23,744			273,544			99,396
Interest expense		(162,096	)		(59,939	)		(421,471	)		(248,835	)
Other income		—			—			1,139,756			—
Income before income tax expense	$	742,912		$	1,487,722		$	2,632,754		$	4,957,182

The Company utilizes product net sales, direct and indirect cost of goods sold, and gross profit 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. The CODM uses gross profit and considers budget-to-actual variances on a quarterly basis when making decisions about the allocation of operating and capital resources to each segment. The CODM also uses segment gross profit for evaluating pricing strategy to assess the performance of each segment by comparing the results of each segment with one another and in determining the compensation of certain employees. The CODM has ultimate responsibility for enterprise decisions and making resource allocation decisions for the company and the segments. Asset information, including capital expenditures are reviewed by the CODM at the consolidated entity level and not by segment. Refer to total assets on the consolidated balance sheets.

Geographic Information

Net sales by geographic location for the three and nine months ended May 31, 2025 and 2024 were as follows:

	Three Months Ended May 31,				Nine Months Ended May 31,
	2025		2024		2025		2024
Inside the U.S. to unaffiliated customers	$	7,341,392	$	7,086,859	$	21,492,193	$	21,160,095
Outside the U.S. to:
Joint ventures in which the Company is a shareholder directly and indirectly		630,653		441,067		1,802,906		1,904,444
Unaffiliated customers		13,536,518		13,158,271		38,623,923		38,645,871
	$	21,508,563	$	20,686,197	$	61,919,022	$	61,710,410

Net sales by geographic location are based on the location of the customer. No single customer accounted for more than 10% of consolidated revenue.

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, 2025 and 2024 were as follows:

	Three Months Ended
	May 31, 2025		% of Total Fees for Services Provided to Joint Ventures			May 31, 2024		% of Total Fees for Services Provided to Joint Ventures
Poland	$	232,064		17.8	%	$	213,102		17.6	%
Germany		218,943		16.8	%		205,853		17.0	%
Japan		158,434		12.2	%		118,606		9.8	%
Sweden		111,138		8.5	%		110,542		9.1	%
Czech Republic		110,844		8.5	%		101,111		8.3	%
Finland		95,142		7.3	%		97,437		8.0	%
United Kingdom		93,108		7.1	%		96,872		8.0	%
Thailand		87,957		6.8	%		77,206		6.4	%
South Korea		83,697		6.4	%		58,732		4.8	%
France		76,459		5.9	%		47,206		3.9	%
Other		34,812		2.7	%		85,830		7.1	%
	$	1,302,598		100.0	%	$	1,212,497		100.0	%

	Nine Months Ended
	May 31, 2025		% of Total Fees for Services Provided to Joint Ventures			May 31, 2024		% of Total Fees for Services Provided to Joint Ventures
Poland	$	637,574		17.4	%	$	628,905		16.7	%
Germany		626,999		17.1	%		618,236		16.4	%
Japan		429,520		11.7	%		366,682		9.7	%
France		312,520		8.5	%		364,348		9.7	%
Sweden		295,873		8.1	%		324,062		8.6	%
Finland		276,028		7.5	%		296,929		7.9	%
Czech Republic		251,018		6.9	%		263,712		7.0	%
Thailand		242,212		6.6	%		246,908		6.6	%
United Kingdom		237,734		6.5	%		215,123		5.7	%
South Korea		217,668		6.0	%		197,070		5.2	%
Other		129,834		3.7	%		242,539		6.5	%
	$	3,656,980		100.0	%	$	3,764,514		100.0	%

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

	At May 31, 2025		At August 31, 2024
China	$	5,367,112	$	5,627,202
Other		1,238,453		1,217,400
United States		8,853,664		9,421,051
Total property and equipment, net	$	15,459,229	$	16,265,653

	Three Months Ended				Nine Months Ended
	May 31, 2025		May 31, 2024		May 31, 2025		May 31, 2024
China	$	4,510,490	$	3,540,570	$	12,240,359	$	10,674,939
Brazil		1,517,904		1,508,680		4,418,778		4,365,170
India		5,684,908		5,814,829		16,600,711		16,401,624
Other		2,453,869		2,735,259		7,166,981		9,108,582
United States		7,341,392		7,086,859		21,492,193		21,160,095
Total net sales	$	21,508,563	$	20,686,197	$	61,919,022	$	61,710,410

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.