Note 13 - Segment and Geographic Information

3 Months Ended

Nov. 30, 2021

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

13. 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 45 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 months ended November 30, 2021 and 2020 by segment:

	Three Months Ended
	November 30, 2021		November 30, 2020
ZERUST® net sales	$	14,423,785	$	10,220,551
Natur-Tec® net sales		3,769,628		2,558,561
Total net sales	$	18,193,413	$	12,779,112

The following table sets forth the Company’s cost of goods sold for the three months ended November 30, 2021 and 2020 by segment:

	November 30, 2021		% of Product Sales*			November 30, 2020		% of Product Sales*
Direct cost of goods sold
ZERUST®	$	8,706,667		60.4	%	$	5,771,089		56.5	%
Natur-Tec®		2,922,098		77.5	%		1,767,630		69.1	%
Indirect cost of goods sold		861,718	NA				774,602	NA
Total net cost of goods sold ….	$	12,490,483				$	8,313,321

* 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 months ended November 30, 2021 and 2020 were as follows:

	Three Months Ended
	November 30, 2021		November 30, 2020
Inside the U.S.A. to unaffiliated customers	$	6,156,322	$	4,861,355
Outside the U.S.A. to:
Joint ventures in which the Company is a shareholder directly and indirectly		840,439		580,304
Unaffiliated customers		11,196,652		7,337,453
	$	18,193,413	$	12,779,112

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 months ended November 30, 2021 and 2020 were as follows:

	Three Months Ended
	November 30, 2021		% of Total Fees for Services Provided to Joint Ventures			November 30, 2020		% of Total Fees for Services Provided to Joint Ventures
Germany	$	218,430		17.3	%	$	228,826		17.1	%
Poland		176,927		14.1	%		189,410		14.2	%
Japan		166,807		13.3	%		179,962		13.5	%
France		116,292		9.2	%		105,907		7.9	%
Sweden		108,070		8.6	%		90,489		6.8	%
United Kingdom		94,927		7.5	%		61,915		4.6	%
Thailand		87,554		7.0	%		89,932		6.7	%
Finland		80,173		6.4	%		76,283		5.7	%
Czech Republic		70,098		5.6	%		69,353		5.2	%
South Korea		62,626		5.0	%		85,079		6.4	%
Other		76,954		6.0	%		71,197		5.3	%
	$	1,258,858		100.0	%	$	1,336,561		100.0	%

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

	As of November 30, 2021		As of August 31, 2021
China	$	5,380,922	$	5,110,071
Other		668,393		453,199
United States		6,145,359		6,258,188
Total property and equipment, net	$	12,194,674	$	11,821,458

	Three Months Ended
	November 30, 2021		November 30, 2020
China	$	4,057,853	$	4,543,978
Brazil		1,296,217		713,853
India		4,476,984		1,200,468
Other		2,206,037		1,459,458
United States		6,156,322		4,861,355
Total net sales	$	18,193,413	$	12,779,112

Long-lived assets consist of property and equipment and intangible assets. 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.