11.

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

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 tables present the Company’s business segment information in fiscal

2018

and fiscal

2017:

	Fiscal 2018		Fiscal 2017
ZERUST ® net sales	$	41,374,305	$	32,789,283
Natur-Tec ® net sales		10,050,516		6,779,840
Total net sales	$	51,424,821	$	39,569,123

The following table sets forth the Company’s cost of goods sold for fiscal

2018

and fiscal

2017

by segment:

	Fiscal 2018		Fiscal 2017
Direct cost of goods sold
ZERUST®	$	24,326,493	$	18,996,264
Natur-Tec®		7,303,439		4,925,061
Indirect cost of goods sold		2,535,508		2,395,186
Total net cost of goods sold	$	34,165,440	$	26,316,511

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.

Sales to the Company’s joint ventures are included in the foregoing geographic and segment information, however, sales by the Company’s joint ventures to other parties are

not

included. The foregoing geographic and segment information represents only sales and cost of goods sold recognized directly by the Company.

All joint venture operations including equity in income, fees for services and related dividends are related to ZERUST

products and services.

Geographic Information

Net sales by geographic location were as follows:

	Fiscal Year Ended August 31,
	2018		2017
Inside the U.S.A. to unaffiliated customers	$	25,301,243	$	21,787,694
Outside the U.S.A. to:
Joint ventures in which the Company is a shareholder directly and indirectly		2,908,072		3,222,478
Unaffiliated customers		23,215,506		14,558,951
	$	51,424,821	$	39,569,123

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 fiscal

2018

and fiscal

2017,

respectively, were as follows:

	Fiscal 2018		Fiscal 2017
Germany	$	900,316	$	838,628
Poland		775,319		661,226
Japan		759,418		641,699
Sweden		600,336		472,819
France		532,565		410,842
Thailand		429,319		448,013
Czech		377,844		314,834
South Korea		370,171		376,002
India		365,018		322,677
United Kingdom		352,585		295,761
Finland		320,501		292,225
Other		358,747		377,961
	$	6,142,139	$	5,452,687

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 and cost of goods sold recognized directly by the Company.

See Note

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

The geographical distribution of total long-lived assets and net sales is as follows:

	At August 31, 2018		At August 31, 2017
China	$	205,490	$	228,458
Brazil		71,677		54,646
Germany		7,058		14,171
India		22,220		14,712
United States		6,862,381		7,047,675
Total long-lived assets	$	7,168,826	$	7,359,662

	Fiscal Year Ended August 31, 2018		Fiscal Year Ended August 31, 2017
China	$	12,507,039	$	7,225,659
Brazil		3,093,697		2,394,730
India		3,052,741		1,816,929
Other		7,470,101		6,344,111
United States		25,301,243		21,787,694
Total net sales	$	51,424,821	$	39,569,123

Long-lived assets located in China, Brazil, Germany and India 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 related to ZERUST

products and services.