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Note 13 - Segment and Geographic Information
 6 Months Ended
Feb. 28, 2022
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 and six months ended February 28, 2022 and 2021 by segment:

 

  

Three Months Ended February 28,

  

Six Months Ended February 28,

 
  

2022

  

2021

  

2022

  

2021

 

ZERUST® net sales

 $13,117,777  $10,284,116  $27,541,562  $20,504,667 

Natur-Tec® net sales

  3,630,862   2,498,766   7,400,490   5,057,327 

Total net sales

 $16,748,639  $12,782,882  $34,942,052  $25,561,994 

 

The following table sets forth the Company’s cost of goods sold for the three and six months ended February 28, 2022 and 2021 by segment:

 

  

Three Months Ended February 28,

  

Six Months Ended February 28,

 
  

2022

  

% of

Product

Sales*

  

2021

  

% of

Product

Sales*

  

2022

  

% of

Product

Sales*

  

2021

  

% of

Product

Sales*

 

Direct cost of goods sold

                                

ZERUST®

 $8,151,274   62.1% $6,065,963   59.0% $16,857,941   61.2% $11,837,052   57.7%

Natur-Tec®

  2,775,436   76.4%  1,684,180   67.4%  5,697,533   77.0%  3,451,810   68.3%

Indirect cost of goods sold

  837,594   —   781,536   —   1,699,313   —   1,556,138   — 

Total net cost of goods sold

 $11,764,304      $8,531,679      $24,254,787      $16,845,000     

 

*         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 six months ended February 28, 2022 and 2021 were as follows:

 

  

Three Months Ended February 28,

  

Six Months Ended February 28,

 
  

2022

  

2021

  

2022

  

2021

 

Inside the U.S.A. to unaffiliated customers

 $5,115,963  $4,619,130  $11,272,285  $9,480,485 

Outside the U.S.A. to:

                

Joint ventures in which the Company is a shareholder directly and indirectly

  883,513   526,942   1,723,952   1,107,246 

Unaffiliated customers

  10,749,163   7,636,810   21,945,815   14,974,262 
  $16,748,639  $12,782,882  $34,942,052  $25,561,994 

 

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 six months ended February 28, 2022 and 2021 were as follows:

 

  

Three Months Ended February 28,

 
  

2022

  

% of Total Fees for Services Provided to Joint Ventures

  

2021

  

% of Total Fees for Services Provided to Joint Ventures

 

Germany

 $216,992   17.4% $231,917   15.9%

Poland

  172,700   13.9%  210,943   14.4%

Japan

  151,933   12.2%  181,493   12.4%

France

  115,663   9.3%  97,638   6.7%

Sweden

  99,178   8.0%  146,896   10.0%

United Kingdom

  86,736   7.0%  71,759   4.9%

Thailand

  87,918   7.1%  107,377   7.3%

Finland

  85,426   6.9%  71,496   4.9%

Czech Republic

  69,386   5.6%  89,538   6.1%

South Korea

  64,173   5.1%  78,220   5.3%

Other

  96,804   7.5%  175,407   12.0%
  $1,246,909   100.0% $1,462,684   100.0%

 

  

Six Months Ended February 28,

 
  

2022

  

% of Total Fees for Services Provided to Joint Ventures

  

2021

  

% of Total Fees for Services Provided to Joint Ventures

 

Germany

 $435,422   17.4% $460,744   16.5%

Poland

  349,626   14.0%  400,353   14.3%

Japan

  318,740   12.7%  361,455   12.9%

France

  231,958   9.3%  203,545   7.3%

Sweden

  207,248   8.3%  237,385   8.5%

Thailand

  181,663   7.2%  133,674   4.8%

South Korea

  175,472   7.0%  197,309   7.0%

Finland

  165,599   6.6%  147,779   5.3%

Czech Republic

  139,483   5.6%  158,891   5.7%

United Kingdom

  126,800   5.1%  163,298   5.8%

Other

  173,756   6.8%  334,811   12.0%
  $2,505,767   100.0% $2,799,245   100.0%

 

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

 

  

As of

February 28, 2022

  

As of

August 31, 2021

 

China

 $5,615,383  $5,110,071 

Other

  655,837   453,199 

United States

  6,783,284   6,967,761 

Total property and equipment and intangible assets, net

 $13,054,504  $12,531,031 

 

  

Three Months Ended February 28,

 
  

2022

  

2021

 

China

 $4,163,741  $4,443,656 

Brazil

  936,089   804,569 

India

  4,068,781   1,295,006 

Other

  2,464,066   1,620,521 

United States

  5,115,962   4,619,130 

Total net sales

 $16,748,639  $12,782,882 

 

  

Six Months Ended February 28,

 
  

2022

  

2021

 

China

 $8,221,593  $8,987,634 

Brazil

  2,232,306   1,518,422 

India

  8,545,765   2,495,474 

Other

  4,670,103   3,079,978 

United States

  11,272,285   9,480,486 

Total net sales

 $34,942,052  $25,561,994 

 

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.