Note 11 - Segment and Geographic Information

9 Months Ended

May 31, 2020

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 over

40

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, 2020

and

2019

by segment:

	Three Months Ended				Nine Months Ended
	May 31, 2020		May 31, 2019		May 31, 2020		May 31, 2019
ZERUST ® net sales	$	7,356,781	$	10,077,203	$	26,322,515	$	29,250,772
Natur-Tec ® net sales		2,388,042		4,815,914		11,287,491		13,051,801
Total net sales	$	9,744,823	$	14,893,117	$	37,610,006	$	42,302,573

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

three

and

nine

months ended

May 

31,

2020

and

2019

by segment:

	Three Months Ended								Nine Months Ended
		May 31, 2020	% of Segment Sales*			May 31, 2019	% of Segment Sales*			May 31, 2020	% of Segment Sales*			May 31, 2019	% of Segment Sales*
Direct cost of goods sold
ZERUST ®	$	4,011,244	54.5	%	$	5,725,220	56.8	%	$	14,193,113	53.9	%	$	16,596,536	56.7	%
Natur-Tec ®		1,842,539	77.2	%		3,670,282	76.2	%		8,733,016	77.4	%		10,181,050	78.0	%
Indirect cost of goods sold		645,319	—			742,851	—			2,065,358	—			2,106,003	—
Total net cost of goods sold	$	6,499,102			$	10,138,353			$	24,991,487			$	28,883,589

* 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, 2020

and

2019

were as follows:

	Three Months Ended				Nine Months Ended
	May 31, 2020		May 31, 2019		May 31, 2020		May 31, 2019
Inside the U.S. to unaffiliated customers	$	5,019,363	$	6,172,882	$	19,546,708	$	19,564,756
Outside the U.S. to:
Joint ventures in which the Company is a shareholder directly and indirectly		673,751		1,112,313		1,504,997		2,304,455
Unaffiliated customers		4,051,709		7,607,922		16,558,301		20,433,362
	$	9,744,823	$	14,893,117	$	37,610,006	$	42,302,573

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, 2020

and

2019

were as follows:

	Three Months Ended
	May 31, 2020		% of Total Fees for Services Provided to Joint Ventures			May 31, 2019		% of Total Fees for Services Provided to Joint Ventures
Germany	$	199,877		22.8	%	$	212,825		14.8	%
Poland		75,118		8.6	%		181,057		12.6	%
Japan		139,268		15.9	%		164,136		11.5	%
Sweden		51,767		5.9	%		137,642		9.6	%
India		24,842		2.8	%		114,705		8.0	%
France		61,716		7.0	%		112,063		7.8	%
Thailand		67,919		7.8	%		109,427		7.6	%
South Korea		54,951		6.3	%		85,732		6.0	%
Czech Republic		46,709		5.3	%		83,086		5.8	%
Finland		52,870		6.0	%		75,135		5.2	%
United Kingdom		52,484		6.0	%		70,972		5.0	%
Other		49,185		5.6	%		87,043		6.1	%
	$	876,706		100.0	%	$	1,433,823		100.0	%

	Nine Months Ended
	May 31, 2020		% of Total Fees for Services Provided to Joint Ventures			May 31, 2019		% of Total Fees for Services Provided to Joint Ventures
Germany	$	620,106		17.8	%	$	643,154		15.0	%
Poland		441,011		12.6	%		551,430		12.8	%
Japan		453,347		13.0	%		501,432		11.6	%
Sweden		259,671		7.4	%		417,635		9.7	%
France		241,056		6.9	%		328,395		7.6	%
Thailand		261,132		7.5	%		313,075		7.3	%
India		187,826		5.4	%		294,833		6.9	%
Czech Republic		215,923		6.2	%		266,706		6.2	%
United Kingdom		202,241		5.8	%		261,961		6.1	%
South Korea		206,272		5.9	%		259,612		6.0	%
Finland		194,813		5.6	%		221,599		5.2	%
Other		207,846		5.9	%		239,200		5.6	%
	$	3,491,244		100.0	%	$	4,299,032		100.0	%

The geographical distribution of key financial statement data is as follows:

	At May 31, 2020		At August 31, 2019
China	$	377,959	$	337,162
Brazil		64,540		101,548
Germany		25,384		14,791
India		65,472		61,748
United States		6,430,613		6,842,910
Total property and equipment	$	6,963,968	$	7,358,159

	Three Months Ended				Nine Months Ended
	May 31, 2020		May 31, 2019		May 31, 2020		May 31, 2019
China	$	3,089,135	$	3,691,220	$	9,975,091	$	9,864,479
Brazil		365,222		792,299		2,080,418		2,343,894
India		631,551		2,283,346		4,727,325		6,159,136
Other		1,607,206		1,953,370		4,268,871		4,370,308
United States		4,051,709		6,172,882		16,558,301		19,564,756
Total net sales	$	9,744,823	$	14,893,117	$	37,610,006	$	42,302,573

Total property and equipment 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. Total assets located in the United States include the Company’s investments in joint ventures.

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.

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

®

products and services.