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Note 12 - Segment and Geographic Information | 9 Months Ended
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May 31, 2025
Notes to Financial Statements |
Segment Reporting Disclosure [Text Block] |
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 50 years and, more recently, has also expanded into the oil and gas industry. The Company also sells a portfolio of proprietary bio-based and compostable (fully biodegradable) polymer resins and finished products under the Natur-Tec® brand. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. There are no intersegment sales and no operating segments have been aggregated. The following table sets forth the Company’s net sales for the three and nine months ended May 31, 2025 and 2024 by segment:
|  | Three Months Ended |  |  | Nine Months Ended |
|  | May 31, 2025 |  |  | May 31, 2024 |  |  | May 31, 2025 |  |  | May 31, 2024 |
ZERUST® net sales |  | $ | 15,728,637 |  |  | $ | 14,837,235 |  |  | $ | 45,316,457 |  |  | $ | 45,461,075 |
Natur-Tec® net sales |  |  | 5,779,926 |  |  |  | 5,848,962 |  |  |  | 16,602,565 |  |  |  | 16,249,335 |
Total net sales |  | $ | 21,508,563 |  |  | $ | 20,686,197 |  |  | $ | 61,919,022 |  |  | $ | 61,710,410 |
The following table sets forth the Company’s cost of goods sold for the three and nine months ended May 31, 2025 and 2024 by segment:
|  | Three Months Ended |  |  | Nine Months Ended |
|  | May 31, 2025 |  |  | % of Product Sales* |  |  | May 31, 2024 |  |  | % of Product Sales* |  |  | May 31, 2025 |  |  | % of Product Sales* |  |  | May 31, 2024 |  |  | % of Product Sales* |
Direct cost of goods sold |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
ZERUST® |  | $ | 9,119,330 |  |  |  | 58.0 | % |  | $ | 8,168,215 |  |  |  | 55.1 | % |  | $ | 25,894,213 |  |  |  | 57.1 | % |  | $ | 24,994,401 |  |  |  | 55.0 | %
Natur-Tec® |  |  | 3,557,167 |  |  |  | 61.5 | % |  |  | 3,768,921 |  |  |  | 64.4 | % |  |  | 10,484,204 |  |  |  | 63.1 | % |  |  | 10,566,223 |  |  |  | 65.0 | %
Indirect cost of goods sold |  |  | 572,626 |  |  |  | — |  |  |  | 855,967 |  |  |  | — |  |  |  | 2,322,628 |  |  |  | — |  |  |  | 2,583,254 |  |  |  | — |
Total net cost of goods sold |  | $ | 13,249,123 |  |  |  |  |  |  | $ | 12,793,103 |  |  |  |  |  |  | $ | 38,701,045 |  |  |  |  |  |  | $ | 38,143,878 |  |  |  |  |
* The percent of product sales is calculated by dividing the direct cost of goods sold for each individual segment category by the net sales for each segment category.
|  | Three Months Ended |  |  | Nine Months Ended |
|  | May 31, 2025 |  |  | May 31, 2024 |  |  | May 31, 2025 |  |  | May 31, 2024 |
ZERUST® gross profit |  | $ | 6,609,307 |  |  | $ | 6,669,020 |  |  | $ | 19,422,244 |  |  | $ | 20,466,674 |
Natur-Tec® gross profit |  |  | 2,222,759 |  |  |  | 2,080,041 |  |  |  | 6,118,361 |  |  |  | 5,683,112 |
Total segment gross profit |  |  | 8,832,066 |  |  |  | 8,749,061 |  |  |  | 25,540,605 |  |  |  | 26,149,786 |
Indirect cost of goods sold |  |  | (572,626 | ) |  |  | (855,967 | ) |  |  | (2,322,628 | ) |  |  | (2,583,254 | )
Total gross profit |  | $ | 8,259,440 |  |  | $ | 7,893,094 |  |  | $ | 23,217,977 |  |  | $ | 23,566,532 |
Total joint venture operations |  |  | 2,272,912 |  |  |  | 2,609,228 |  |  |  | 6,377,617 |  |  |  | 7,441,476 |
Selling expenses |  |  | (4,375,956 | ) |  |  | (4,232,887 | ) |  |  | (12,515,638 | ) |  |  | (12,053,839 | )
General and administrative expenses |  |  | (4,150,966 | ) |  |  | (3,500,113 | ) |  |  | (11,668,492 | ) |  |  | (10,253,966 | )
Research and development expenses |  |  | (1,138,243 | ) |  |  | (1,245,405 | ) |  |  | (3,770,539 | ) |  |  | (3,593,582 | )
Interest income |  |  | 37,821 |  |  |  | 23,744 |  |  |  | 273,544 |  |  |  | 99,396 |
Interest expense |  |  | (162,096 | ) |  |  | (59,939 | ) |  |  | (421,471 | ) |  |  | (248,835 | )
Other income |  |  | — |  |  |  | — |  |  |  | 1,139,756 |  |  |  | — |
Income before income tax expense |  | $ | 742,912 |  |  | $ | 1,487,722 |  |  | $ | 2,632,754 |  |  | $ | 4,957,182 |
The Company utilizes product net sales, direct and indirect cost of goods sold, and gross profit 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. The CODM uses gross profit and considers budget-to-actual variances on a quarterly basis when making decisions about the allocation of operating and capital resources to each segment. The CODM also uses segment gross profit for evaluating pricing strategy to assess the performance of each segment by comparing the results of each segment with one another and in determining the compensation of certain employees. The CODM has ultimate responsibility for enterprise decisions and making resource allocation decisions for the company and the segments. Asset information, including capital expenditures are reviewed by the CODM at the consolidated entity level and not by segment. Refer to total assets on the consolidated balance sheets. Geographic Information Net sales by geographic location for the three and nine months ended May 31, 2025 and 2024 were as follows:
|  | Three Months Ended May 31, |  |  | Nine Months Ended May 31, |
|  | 2025 |  |  | 2024 |  |  | 2025 |  |  | 2024 |
Inside the U.S. to unaffiliated customers |  | $ | 7,341,392 |  |  | $ | 7,086,859 |  |  | $ | 21,492,193 |  |  | $ | 21,160,095 |
Outside the U.S. to: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Joint ventures in which the Company is a shareholder directly and indirectly |  |  | 630,653 |  |  |  | 441,067 |  |  |  | 1,802,906 |  |  |  | 1,904,444 |
Unaffiliated customers |  |  | 13,536,518 |  |  |  | 13,158,271 |  |  |  | 38,623,923 |  |  |  | 38,645,871 |
|  | $ | 21,508,563 |  |  | $ | 20,686,197 |  |  | $ | 61,919,022 |  |  | $ | 61,710,410 |
Net sales by geographic location are based on the location of the customer. No single customer accounted for more than 10% of consolidated revenue. 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, 2025 and 2024 were as follows:
|  | Three Months Ended |
|  | May 31, 2025 |  |  | % of Total Fees for Services Provided to Joint Ventures |  |  | May 31, 2024 |  |  | % of Total Fees for Services Provided to Joint Ventures |
Poland |  | $ | 232,064 |  |  |  | 17.8 | % |  | $ | 213,102 |  |  |  | 17.6 | %
Germany |  |  | 218,943 |  |  |  | 16.8 | % |  |  | 205,853 |  |  |  | 17.0 | %
Japan |  |  | 158,434 |  |  |  | 12.2 | % |  |  | 118,606 |  |  |  | 9.8 | %
Sweden |  |  | 111,138 |  |  |  | 8.5 | % |  |  | 110,542 |  |  |  | 9.1 | %
Czech Republic |  |  | 110,844 |  |  |  | 8.5 | % |  |  | 101,111 |  |  |  | 8.3 | %
Finland |  |  | 95,142 |  |  |  | 7.3 | % |  |  | 97,437 |  |  |  | 8.0 | %
United Kingdom |  |  | 93,108 |  |  |  | 7.1 | % |  |  | 96,872 |  |  |  | 8.0 | %
Thailand |  |  | 87,957 |  |  |  | 6.8 | % |  |  | 77,206 |  |  |  | 6.4 | %
South Korea |  |  | 83,697 |  |  |  | 6.4 | % |  |  | 58,732 |  |  |  | 4.8 | %
France |  |  | 76,459 |  |  |  | 5.9 | % |  |  | 47,206 |  |  |  | 3.9 | %
Other |  |  | 34,812 |  |  |  | 2.7 | % |  |  | 85,830 |  |  |  | 7.1 | %
|  | $ | 1,302,598 |  |  |  | 100.0 | % |  | $ | 1,212,497 |  |  |  | 100.0 | %
|  | Nine Months Ended |
|  | May 31, 2025 |  |  | % of Total Fees for Services Provided to Joint Ventures |  |  | May 31, 2024 |  |  | % of Total Fees for Services Provided to Joint Ventures |
Poland |  | $ | 637,574 |  |  |  | 17.4 | % |  | $ | 628,905 |  |  |  | 16.7 | %
Germany |  |  | 626,999 |  |  |  | 17.1 | % |  |  | 618,236 |  |  |  | 16.4 | %
Japan |  |  | 429,520 |  |  |  | 11.7 | % |  |  | 366,682 |  |  |  | 9.7 | %
France |  |  | 312,520 |  |  |  | 8.5 | % |  |  | 364,348 |  |  |  | 9.7 | %
Sweden |  |  | 295,873 |  |  |  | 8.1 | % |  |  | 324,062 |  |  |  | 8.6 | %
Finland |  |  | 276,028 |  |  |  | 7.5 | % |  |  | 296,929 |  |  |  | 7.9 | %
Czech Republic |  |  | 251,018 |  |  |  | 6.9 | % |  |  | 263,712 |  |  |  | 7.0 | %
Thailand |  |  | 242,212 |  |  |  | 6.6 | % |  |  | 246,908 |  |  |  | 6.6 | %
United Kingdom |  |  | 237,734 |  |  |  | 6.5 | % |  |  | 215,123 |  |  |  | 5.7 | %
South Korea |  |  | 217,668 |  |  |  | 6.0 | % |  |  | 197,070 |  |  |  | 5.2 | %
Other |  |  | 129,834 |  |  |  | 3.7 | % |  |  | 242,539 |  |  |  | 6.5 | %
|  | $ | 3,656,980 |  |  |  | 100.0 | % |  | $ | 3,764,514 |  |  |  | 100.0 | %
The geographical distribution of total property and equipment and net sales is as follows:
|  | At May 31, 2025 |  |  | At August 31, 2024 |
China |  | $ | 5,367,112 |  |  | $ | 5,627,202 |
Other |  |  | 1,238,453 |  |  |  | 1,217,400 |
United States |  |  | 8,853,664 |  |  |  | 9,421,051 |
Total property and equipment, net |  | $ | 15,459,229 |  |  | $ | 16,265,653 |
|  | Three Months Ended |  |  | Nine Months Ended |
|  | May 31, 2025 |  |  | May 31, 2024 |  |  | May 31, 2025 |  |  | May 31, 2024 |
China |  | $ | 4,510,490 |  |  | $ | 3,540,570 |  |  | $ | 12,240,359 |  |  | $ | 10,674,939 |
Brazil |  |  | 1,517,904 |  |  |  | 1,508,680 |  |  |  | 4,418,778 |  |  |  | 4,365,170 |
India |  |  | 5,684,908 |  |  |  | 5,814,829 |  |  |  | 16,600,711 |  |  |  | 16,401,624 |
Other |  |  | 2,453,869 |  |  |  | 2,735,259 |  |  |  | 7,166,981 |  |  |  | 9,108,582 |
United States |  |  | 7,341,392 |  |  |  | 7,086,859 |  |  |  | 21,492,193 |  |  |  | 21,160,095 |
Total net sales |  | $ | 21,508,563 |  |  | $ | 20,686,197 |  |  | $ | 61,919,022 |  |  | $ | 61,710,410 |
Long-lived assets 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 primarily related to ZERUST® products and services.

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- Definition The entire disclosure for reporting segments including data and tables. 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