v3.26.1
Note 12 - Segment and Geographic Information
 6 Months Ended
Feb. 28, 2026
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, general industrial, mechanical, mining, agricultural, 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 in the Company’s annual report on Form 10-K for the fiscal year ended August 31, 2025. There are no intersegment sales, and no operating segments have been aggregated.

 

The following table presents the Company’s net sales by segment for the three and six months ended February 28, 2026 and 2025, respectively:

 

   

Three Months Ended February 28,

    

Six Months Ended February 28,

  
   

2026

    

2025

    

2026

    

2025

  

ZERUST® net sales

   $ 16,633,456     $ 14,112,017     $ 33,949,652     $ 29,587,820  

Natur-Tec® net sales

     5,363,329       4,960,049       11,356,014       10,822,639  

Total net sales

   $ 21,996,785     $ 19,072,066     $ 45,305,666     $ 40,410,459  

 

The following table sets forth the Company’s cost of goods sold by segment for the three and six months ended February 28, 2026 and 2025, respectively:

 

   

Three Months Ended February 28,

   

Six Months Ended February 28,

  
   

2026

    

% of Product Sales

    

2025

    

% of Product Sales

    

2026

    

% of Product Sales

    

2025

    

% of Product Sales

  

Direct cost of goods sold

                                                                

ZERUST®

   $ 9,644,157       58.0 %   $ 8,096,177       57.4 %   $ 19,795,418       58.3 %   $ 16,774,883       56.7 %

Natur-Tec®

     3,748,739       69.9 %     3,237,854       65.3 %     7,741,398       68.2 %     6,927,037       64.0 %

Indirect cost of goods sold

     746,003       —       942,451       —       1,527,338       —       1,750,002       —  

Total net cost of goods sold

   $ 14,138,899             $ 12,276,482             $ 29,064,154             $ 25,451,922          

 

The following table sets forth the Company’s gross profit by segment for the three and six months ended February 28, 2026 and 2025, respectively:

 

   

Three Months Ended February 28,

    

Six Months Ended February 28,

  
   

2026

    

2025

    

2026

    

2025

  

ZERUST® gross profit

   $ 6,989,299     $ 6,015,840     $ 14,154,234     $ 12,812,937  

Natur-Tec® gross profit

     1,614,590       1,722,195       3,614,616       3,895,602  

Total segment gross profit

     8,603,889       7,738,035       17,768,850       16,708,539  

Indirect cost of goods sold

     (746,003 )     (942,451 )     (1,527,338 )     (1,750,002 )

Total gross profit

   $ 7,857,886     $ 6,795,584     $ 16,241,512     $ 14,958,537  

Total joint venture operations

     2,026,569       1,690,993       4,317,942       4,104,705  

Selling expenses

     (4,713,772 )     (4,210,242 )     (9,085,274 )     (8,477,896 )

General and administrative expenses

     (3,612,707 )     (3,320,369 )     (7,761,660 )     (7,179,312 )

Research and development expenses

     (1,175,202 )     (1,288,899 )     (2,396,114 )     (2,632,296 )

Interest income

     65,568       210,156       102,810       235,723  

Interest expense

     (196,651 )     (139,155 )     (396,617 )     (259,375 )

Other income

     —       1,139,756       —       1,139,756  

Income before income tax expense

   $ 251,691     $ 877,824     $ 1,022,599     $ 1,889,842  

 

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 six months ended February 28, 2026 and 2025 were as follows:

 

   

Three Months Ended February 28,

    

Six Months Ended February 28,

  
   

2026

    

2025

    

2026

    

2025

  

Inside the U.S. to unaffiliated customers

   $ 6,967,402     $ 6,668,183     $ 14,424,169     $ 14,150,801  

Outside the U.S. to:

                                

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

     599,610       545,484       1,021,305       1,172,245  

Unaffiliated customers

     14,429,773       11,858,399       29,860,192       25,087,413  
    $ 21,996,785     $ 19,072,066     $ 45,305,666     $ 40,410,459  

 

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 six months ended February 28, 2026 and 2025, respectively, were as follows:

 

   

Three Months Ended February 28,

  
   

2026

    

% of Total Fees for Services Provided to Joint Ventures

    

2025

    

% of Total Fees for Services Provided to Joint Ventures

  

Poland

   $ 208,588       22.5 %   $ 185,499       17.3 %

Japan

     135,508       14.6 %     122,548       11.5 %

Thailand

     118,522       12.8 %     86,721       8.1 %

Finland

     113,740       12.3 %     69,923       6.5 %

United Kingdom

     88,380       9.5 %     68,804       6.4 %

Sweden

     86,368       9.3 %     96,133       9.0 %

Czech Republic

     73,309       7.9 %     61,340       5.7 %

Germany

     —       0.0 %     201,728       18.8 %

South Korea

     26,550       2.9 %     27,320       2.6 %

Other

     74,934       8.2 %     150,247       14.1 %
    $ 925,899       100.0 %   $ 1,070,263       100.0 %

 

   

Six Months Ended February 28,

  
   

2026

    

% of Total Fees for Services Provided to Joint Ventures

    

2025

    

% of Total Fees for Services Provided to Joint Ventures

  

Poland

   $ 422,890       21.2 %   $ 405,510       17.2 %

Japan

     269,158       13.5 %     271,086       11.5 %

Finland

     250,747       12.6 %     201,382       8.6 %

Thailand

     229,580       11.5 %     180,886       7.7 %

United Kingdom

     196,903       9.9 %     185,029       7.9 %

Sweden

     180,748       9.1 %     163,061       6.9 %

Czech Republic

     153,889       7.7 %     133,972       5.7 %

Germany

     74,081       3.7 %     408,056       17.3 %

South Korea

     71,539       3.6 %     95,021       4.0 %

Other

     145,621       7.2 %     310,379       13.2 %
    $ 1,995,156       100.0 %   $ 2,354,382       100.0 %

 

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.

 

See Note 7 for additional details on geographical information regarding equity in income from joint ventures.

 

The geographical distribution of total property and equipment and net sales, which are based on the geographical location of the customer, is as follows:

 

   

At

February 28, 2026

    

At

August 31, 2025

  

China

   $ 5,453,544     $ 5,355,918  

Other

     1,975,508       1,296,988  

United States

     8,489,700       8,531,012  

Total property and equipment, net

   $ 15,918,752     $ 15,183,918  

 

   

Three Months Ended February 28,

  
   

2026

    

2025

  

China

   $ 4,425,027     $ 3,735,100  

Brazil

     1,770,584       1,515,680  

India

     5,393,334       4,870,068  

Other

     3,440,437       2,283,035  

United States

     6,967,403       6,668,183  

Total net sales

   $ 21,996,785     $ 19,072,066  

 

   

Six Months Ended February 28,

  
   

2026

    

2025

  

China

   $ 9,359,965     $ 7,729,869  

Brazil

     3,896,754       2,900,874  

India

     10,858,145       10,915,803  

Other

     6,766,633       4,713,112  

United States

     14,424,169       14,150,801  

Total net sales

   $ 45,305,666     $ 40,410,459  

 

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.