v3.26.1
Note 12 - Segment and Geographic Information
 9 Months Ended
May 31, 2026
Notes to Financial Statements  
Segment Reporting [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 nine months ended May 31, 2026 and 2025, respectively:

 

   

Three Months Ended May 31,

   

Nine Months Ended May 31,

  
   

2026

    

2025

    

2026

    

2025

  

ZERUST® net sales

   $ 18,145,611     $ 15,728,637     $ 52,095,200     $ 45,316,457  

Natur-Tec® net sales

     6,070,051       5,779,926       17,426,065       16,602,565  

Total net sales

   $ 24,215,662     $ 21,508,563     $ 69,521,265     $ 61,919,022  

 

The following table sets forth the Company’s cost of goods sold by segment for the three and nine months ended May 31, 2026 and 2025, respectively:

 

   

Three Months Ended May 31,

    

Nine Months Ended May 31,

 
   

2026

    

% of Product Sales*

    

2025

    

% of Product Sales*

    

2026

    

% of Product Sales*

    

2025

    

% of Product Sales*

  

Direct cost of goods sold

                                                                

ZERUST®

   $ 10,833,295       59.7 %   $ 9,119,330       58.0 %   $ 30,628,650       58.8 %   $ 25,894,213       57.1 %

Natur-Tec®

     4,184,642       68.9 %     3,557,167       61.5 %     11,926,040       68.4 %     10,484,204       63.1 %

Indirect cost of goods sold

     1,054,561       —       572,626       —       2,581,899       —       2,322,628       —  

Total net cost of goods sold

   $ 16,072,498             $ 13,249,123             $ 45,136,589             $ 38,701,045          

 

 

The following table sets forth the Company’s gross profit by segment for the three and nine months ended May 31, 2026 and 2025, respectively:

 

   

Three Months Ended May 31,

    

Nine Months Ended May 31,

  
   

2026

    

2025

    

2026

    

2025

  

ZERUST® gross profit

   $ 7,312,316     $ 6,609,307     $ 21,466,550     $ 19,422,244  

Natur-Tec® gross profit

     1,885,409       2,222,759       5,500,025       6,118,361  

Total segment gross profit

     9,197,725       8,832,066       26,966,575       25,540,605  

Indirect cost of goods sold

     (1,054,561 )     (572,626 )     (2,581,899 )     (2,322,628 )

Total gross profit

   $ 8,143,164     $ 8,259,440     $ 24,384,676     $ 23,217,977  

Total joint venture operations

     2,550,960       2,272,912       6,868,902       6,377,617  

Selling expenses

     (4,647,548 )     (4,593,226 )     (13,732,822 )     (13,071,122 )

General and administrative expenses

     (4,324,275 )     (3,933,696 )     (12,085,935 )     (11,113,008 )

Research and development expenses

     (1,206,971 )     (1,138,243 )     (3,603,085 )     (3,770,539 )

Interest income

     64,089       37,821       166,899       273,544  

Interest expense

     (203,872 )     (162,096 )     (600,489 )     (421,471 )

Other income

     —       —       —       1,139,756  

Income before income tax expense

   $ 375,547     $ 742,912     $ 1,398,146     $ 2,632,754  

 

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, 2026 and 2025 were as follows:

 

   

Three Months Ended May 31,

    

Nine Months Ended May 31,

  
   

2026

    

2025

    

2026

    

2025

  

Inside the U.S. to unaffiliated customers

   $ 7,657,885     $ 7,341,392     $ 22,081,992     $ 21,492,193  

Outside the U.S. to:

                                

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

     569,342       630,653       1,590,646       1,802,906  

Unaffiliated customers

     15,988,435       13,536,518       45,848,628       38,623,923  
    $ 24,215,662     $ 21,508,563     $ 69,521,265     $ 61,919,022  

 

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, 2026 and 2025, respectively, were as follows:

 

   

Three Months Ended May 31,

  
   

2026

    

% of Total Fees for Services Provided to Joint Ventures

    

2025

    

% of Total Fees for Services Provided to Joint Ventures

  

Poland

   $ 228,036       22.1 %   $ 232,064       17.8 %

Japan

     158,629       15.3 %     158,434       12.2 %

Finland

     124,349       12.0 %     95,142       7.3 %

Thailand

     115,384       11.2 %     87,957       6.8 %

United Kingdom

     92,325       8.9 %     93,108       7.2 %

Sweden

     90,791       8.8 %     111,138       8.5 %

Czech Republic

     89,434       8.6 %     110,844       8.5 %

South Korea

     43,091       4.2 %     83,697       6.4 %
Germany     —       —       218,943       16.8 %

Other

     91,747       8.9 %     111,271       8.5 %
    $ 1,033,786       100.0 %   $ 1,302,598       100.0 %

 

   

Nine Months Ended May 31,

  
   

2026

    

% of Total Fees for Services Provided to Joint Ventures

    

2025

    

% of Total Fees for Services Provided to Joint Ventures

  

Poland

   $ 650,926       21.5 %   $ 637,574       17.4 %

Japan

     427,787       14.1 %     429,520       11.7 %

Finland

     375,096       12.4 %     276,028       7.6 %

Thailand

     344,965       11.4 %     242,212       6.6 %

United Kingdom

     289,228       9.6 %     237,734       6.5 %

Sweden

     271,539       9.0 %     295,873       8.1 %

Czech Republic

     243,323       8.0 %     251,018       6.9 %

South Korea

     114,630       3.8 %     217,668       6.0 %
Germany     74,081       2.4 %     626,999       17.1 %

Other

     237,367       7.8 %     442,354       12.1 %
    $ 3,028,942       100.0 %   $ 3,656,980       100.0 %

 

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

May 31, 2026

    

At

August 31, 2025

  

China

   $ 5,462,047     $ 5,355,918  

Other

     2,021,711       1,296,988  

United States

     7,380,178       8,531,012  

Total property and equipment, net

   $ 14,863,936     $ 15,183,918  

 

 

   

Three Months Ended May 31,

   

Nine Months Ended May 31,

  
   

2026

    

2025

    

2026

    

2025

  

China

   $ 4,480,033     $ 4,510,490     $ 13,839,998     $ 12,240,359  

Brazil

     2,058,788       1,517,904       5,955,542       4,418,778  

India

     6,570,057       5,684,908       17,428,202       16,600,711  

Other

     3,448,899       2,453,869       10,215,532       7,166,981  

United States

     7,657,885       7,341,392       22,081,992       21,492,193  

Total net sales

   $ 24,215,662     $ 21,508,563     $ 69,521,265     $ 61,919,022  

 

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.