Note 12 - Segment and Geographic Information

12 Months Ended

Aug. 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, general industrial, mechanical, mining, agricultural, 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 tables present the Company’s net sales by segment:

	Fiscal 2025		Fiscal 2024
ZERUST® net sales	$	62,488,397	$	63,092,575
Natur-Tec® net sales		21,746,077		21,966,942
Total net sales	$	84,234,474	$	85,059,517

The following table sets forth the Company’s cost of goods sold by segment:

	Fiscal 2025		Fiscal 2024
Direct cost of goods sold
ZERUST®	$	35,535,306	$	33,623,834
Natur-Tec®		13,994,302		14,148,145
Indirect cost of goods sold		3,028,311		3,501,176
Total net cost of goods sold	$	52,557,919	$	51,273,155

The following table sets forth the Company’s gross profit by segment:

	Fiscal 2025			Fiscal 2024
ZERUST® gross profit	$	26,953,091		$	29,468,741
Natur-Tec® gross profit		7,751,775			7,818,797
Total segment gross profit		34,704,866			37,287,538
Indirect cost of goods sold		(3,028,311	)		(3,501,176	)
Total gross profit	$	31,676,555		$	33,786,362
Total joint venture operations		8,545,207			9,475,078
Selling expenses		(17,820,196	)		(16,413,672	)
General and administrative expenses		(14,792,988	)		(14,176,494	)
Research and development expenses		(5,038,281	)		(4,802,791	)
Interest income		308,054			118,827
Interest expense		(599,927	)		(340,129	)
Other income		752,971			—
Income before income tax expense	$	3,031,395		$	7,647,181

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 fiscal 2025 and fiscal 2024 were as follows:

	Fiscal Year Ended August 31,
	2025		2024
Inside the U.S. to unaffiliated customers	$	29,547,889	$	30,492,665
Outside the U.S. to:
Joint ventures in which the Company is a shareholder directly and indirectly		2,368,099		2,228,894
Unaffiliated customers		52,318,486		52,337,958
	$	84,234,474	$	85,059,517

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 fiscal 2025 and fiscal 2024, respectively, were as follows:

	Fiscal 2025		% of Total Fees for Services Provided to Joint Ventures			Fiscal 2024		% of Total Fees for Services Provided to Joint Ventures
Germany	$	846,281		16.9	%	$	828,932		15.8	%
Poland		840,467		16.8	%		849,736		16.2	%
Japan		647,573		12.9	%		582,674		11.1	%
Finland		411,268		8.2	%		395,515		7.5	%
United Kingdom		404,342		8.1	%		375,150		7.1	%
Thailand		371,175		7.4	%		332,148		6.3	%
Sweden		330,205		6.6	%		445,560		8.5	%
France		320,546		6.4	%		485,627		9.2	%
Czech Republic		303,869		6.1	%		338,195		6.4	%
South Korea		186,669		3.7	%		258,314		4.9	%
Indonesia		137,125		2.7	%		166,053		3.2	%
Other		206,631		4.2	%		193,877		3.7	%
	$	5,006,151		100.0	%	$	5,251,782		100.0	%

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.

See Note 7 for additional details on geographical information regarding equity in income from joint ventures.

The geographical distribution of total property and equipment and net sales, which are based on the geographical location of the customer, is as follows:

	At August 31, 2025		At August 31, 2024
China	$	5,355,918	$	5,627,202
Other		1,296,988		1,217,400
United States		8,531,012		9,421,051
Total property and equipment	$	15,183,918	$	16,265,653

	Fiscal Year Ended August 31, 2025		Fiscal Year Ended August 31, 2024
China	$	16,239,889	$	14,245,238
Brazil		6,570,850		5,994,372
India		22,620,639		22,189,317
Other		9,255,207		12,137,925
United States		29,547,889		30,492,665
Total net sales	$	84,234,474	$	85,059,517

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.