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

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 resin compounds and finished products under the Natur-Tec

brand.

The following tables present the Company’s business segment information in fiscal

2017

and fiscal

2016:

	Fiscal 2017		Fiscal 2016
ZERUST ® net sales	$	32,789,283	$	27,577,566
Natur-Tec ® net sales		6,779,840		5,355,999
Total net sales	$	39,569,123	$	32,933,565

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

2017

and fiscal

2016

by segment:

	Fiscal 2017		Fiscal 2016
Direct cost of goods sold
ZERUST®	$	18,996,264	$	15,588,133
Natur-Tec®		4,925,061		4,076,249
Indirect cost of goods sold		2,395,186		2,655,774
Total net cost of goods sold	$	26,316,511	$	22,320,156

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,
	2017		2016
Inside the U.S.A. to unaffiliated customers	$	21,787,694	$	20,304,480
Outside the U.S.A. to:
Joint ventures in which the Company is a shareholder directly and indirectly		3,222,478		2,721,905
Unaffiliated customers		14,558,951		9,907,180
	$	39,569,123	$	32,933,565

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

2017

and fiscal

2016,

respectively, were as follows:

	Fiscal 2017		Fiscal 2016
Germany	$	838,628	$	845,857
Poland		661,226		599,391
Japan		641,699		646,015
Sweden		472,819		265,745
Thailand		448,013		537,212
France		410,842		329,805
South Korea		376,002		352,393
India		322,677		300,506
Czech		314,834		237,062
United Kingdom		295,761		386,761
Finland		292,225		252,578
Other		377,962		384,385
	$	5,452,687	$	5,137,710

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, 2017		At August 31, 2016
China	$	228,458	$	253,931
Brazil		54,646		66,938
Germany		14,171		—
India		14,712		13,645
United States		7,047,675		8,219,955
Total long-lived assets	$	7,359,662	$	8,554,469

	Fiscal Year Ended August 31, 2017		Fiscal Year Ended August 31, 2016
China	$	7,225,659	$	4,114,288
Brazil		2,394,730		2,172,297
Germany		711,923		—
India		1,417,955		1,104,947
Other		6,031,162		5,237,553
United States		21,787,694		20,304,480
Total net sales	$	39,569,123	$	32,933,565

Total 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.

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

products and services.