Northern Technologies International Corp 10-K for FY2020

About this 10-K

Headline figures

Northern Technologies International Corp (NTIC)

10-K 2020-11-13 For: 2020-08-31

Added on April 06, 2026

Northern Technologies International Corp filed this 10-K on November 13, 2020, covering the fiscal year ended August 31, 2020 (FY2020).

Position with NTIC

G. Patrick Lynch

President and Chief Executive Officer

Matthew C. Wolsfeld

Chief Financial Officer and Corporate Secretary

Fiscal year ended August 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $47.64M; down 14.5% from $55.75M a year earlier
Net loss: $1.34M; compared with net income of $5.21M a year earlier
Diluted EPS: -$0.15; compared with $0.55 a year earlier

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Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.02 per share	NTIC	Nasdaq Global Market

Large accelerated filer ☐	Accelerated filer ☐	Non-accelerated filer ☒	Smaller reporting company ☒
Emerging growth company ☐

	Page
PART I	1
Item 1. BUSINESS	1
Item 1A. RISK FACTORS	13
Item 1B. UNRESOLVED STAFF COMMENTS	27
Item 2. PROPERTIES	27
Item 3. LEGAL PROCEEDINGS	27
Item 4. MINE SAFETY DISCLOSURES	27
Item 4A. Information about our Executive Officers	27

PART II	29
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	29
Item 6. SELECTED FINANCIAL DATA	30
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	31
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	48
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	49
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	77
Item 9A. CONTROLS AND PROCEDURES	77
Item 9B. OTHER INFORMATION	77

PART III	78
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	78
Item 11. EXECUTIVE COMPENSATION	78
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	78
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	79
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES	80

PART IV	81
Item 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES	81
Item 16. FORM 10-K SUMMARY	85

Subsidiary Name	Country	NTIC Percent (%) Ownership
NTIC (Shanghai) Co., Ltd	China		100%
NTI Asean LLC	United States		60%
Zerust Prevenção de Corrosão S.A.	Brazil		85%
ZERUST-EXCOR MEXICO, S. de R.L. de C.V	Mexico		100%
Natur-Tec India Private Limited	India		75%
Natur Tec Lanka (Pvt) Ltd	Sri Lanka⁽¹⁾		75%
NTIC Europe GmbH	Germany		100%
Zerust Singapore Pte Ltd	Singapore⁽²⁾		60%
Zerust Vietnam Co. Ltd	Vietnam⁽²⁾		60%

Joint Venture Name	Country	NTIC Percent (%) Ownership
TAIYONIC LTD.	Japan		50%
ACOBAL SAS	France		50%
EXCOR KORROSIONSSCHUTZ – TECHNOLOGIEN UND PRODUKTE GMBH	Germany		50%
ZERUST AB	Sweden		50%
MOSTNIC-ZERUST	Russia		50%
ZERUST OY	Finland		50%
HARITA-NTI LTD	India		50%
ZERUST (U.K.) LTD.	United Kingdom		50%
EXCOR-ZERUST S.R.O.	Czech Republic		50%
EXCOR SP. Z.O.O.	Poland		50%
ZERUST A.Ş.	Turkey		50%
ZERUST CONSUMER PRODUCTS, LLC	United States		50%
ZERUST – DNEPR	Ukraine		50%
KOREA ZERUST CO., LTD.	South Korea ⁽¹⁾		30%
ZERUST-NIC (TAIWAN) CORP.	Taiwan ⁽¹⁾		30%
PT. CHEMINDO – NTIA	Indonesia ⁽¹⁾		30%
ZERUST SPECIALTY TECH CO. LTD.	Thailand ⁽¹⁾		30%
CHONG WAH-NTIA SDN. BHD.	Malaysia ⁽¹⁾		30%
NTIA ZERUST PHILIPPINES, INC.	Philippines ⁽¹⁾		30%

Declaration Date	Amount		Record Date	Payable Date
October 22, 2019		$0.065	November 6, 2019	November 20, 2019
January 22, 2020		$0.065	February 5, 2020	February 19, 2020

	Fiscal Year Ended August 31,
	2020			2019			2018			2017			2016
Statements of Operations Data:
Net sales, excluding joint ventures	$	45,666,045		$	53,142,583		$	48,516,749		$	36,346,645		$	30,211,660
Net sales, to joint ventures		1,972,646			2,607,554			2,908,072			3,222,478			2,721,905
Total net sales		47,638,691			55,750,137			51,424,821			39,569,123			32,933,565
Cost of goods sold		31,609,274			37,970,244			34,165,440			26,316,511			22,320,156
Gross profit		16,029,417			17,779,893			17,259,381			13,252,612			10,613,409
Equity in income from joint ventures		4,270,327			7,225,518			7,527,383			5,898,908			4,743,831
Fees for services provided to joint ventures		4,612,885			5,727,579			6,142,139			5,452,687			5,137,710
Total joint venture operations		8,883,212			12,953,097			13,669,522			11,351,595			9,881,541
Selling expenses		10,656,689			10,968,592			10,886,011			9,283,310			6,255,353
General and administrative expenses		8,688,309			9,349,559			8,500,490			7,807,563			8,232,369
Research and development expenses		3,979,455			3,822,070			3,524,953			2,912,393			4,724,596
Total operating expenses		23,324,453			24,140,221			22,911,454			20,003,266			19,212,318
Operating income		1,588,176			6,592,769			8,017,449			4,600,941			1,282,632
Interest income		167,733			78,257			99,463			43,539			42,115
Interest expense		(16,034	)		(13,567	)		(17,962	)		(20,382	)		(13,261	)
Impairment on investment at carrying value		—			—			—			—			(1,883,668	)
Other income		—			—			—			—			—
Income (loss) before income taxes		1,739,875			6,657,459			8,098,950			4,624,098			(572,182	)
Less: Income tax expense		2,674,635			841,837			876,103			699,519			626,120
Net (loss) income		(934,760	)		5,815,622			7,222,847			3,924,579			(1,198,302	)
Less: Net income (loss) attributable to non-controlling interests		402,949			606,000			521,481			502,453			(330,788	)
Net (loss) income attributable to NTIC	$	(1,337,709	)	$	5,209,622		$	6,701,366		$	3,422,126		$	(867,514	)
Net (loss) income attributable to NTIC per common share:
Basic	$	(0.15	)	$	0.57		$	0.74		$	0.38		$	(0.10	)
Diluted	$	(0.15	)	$	0.55		$	0.72		$	0.38		$	(0.10	)
Weighted-average common shares assumed outstanding:
Basic		9,096,981			9,085,584			9,077,676			9,057,222			9,075,008
Diluted		9,096,981			9,415,974			9,370,404			9,154,718			9,075,008
Balance Sheet Data:
Cash and cash equivalents	$	6,403,032		$	5,856,758		$	4,163,023		$	6,360,201		$	3,395,274
Available for sale securities		5,544,722			3,565,258			3,300,110			3,766,984			2,243,864
Total current assets		33,202,350			33,302,362			30,567,773			26,067,618			20,942,171
Total assets		66,074,488			67,511,087			63,549,236			56,612,693			51,070,050
Total current liabilities		6,097,604			7,841,532			7,730,182			4,894,617			3,994,102
Total long-term liabilities		272,443			—			—			—			—
Non-controlling interests		3,045,026			3,074,679			2,742,309			2,857,448			2,540,973
Total stockholders’ equity		56,659,415			56,594,615			53,076,745			48,860,628			44,543,975
Total equity		59,704,441			59,669,294			55,819,054			51,718,076			47,075,948

	Fiscal Year Ended August 31,
	2020			2019			2018			2017			2016
Other Financial Data:
Net cash provided by (used in) operating activities	$	4,912,070		$	5,477,022		$	608,687		$	5,735,691		$	2,055,607
Net cash provided by (used in) investing activities		(2,784,682	)		(1,339,921	)		(300,109	)		(2,607,915	)		(955,240	)
Net cash provided by (used in) financing activities		(1,518,005	)		(2,393,664	)		(2,372,124	)		(226,690	)		(270,247	)
Effect of exchange rate changes on cash and cash equivalents		(63,109	)		(49,702	)		(133,632	)		63,839			(18,826	)

	Fiscal 2020		% of Net Sales			Fiscal 2019		% of Net Sales			$ Change			% Change
Net sales, excluding joint ventures	$	45,666,045		95.9	%	$	53,142,583		95.3	%	$	(7,476,538	)		(14.1	)%
Net sales, to joint ventures		1,972,646		4.1	%		2,607,554		4.7	%		(634,908	)		(24.3	)%
Cost of goods sold		31,609,274		66.4	%		37,970,244		68.1	%		(6,360,970	)		(16.8	)%
Equity in income from joint ventures		4,270,327		9.0	%		7,225,518		13.0	%		(2,955,191	)		(40.9	)%
Fees for services provided to joint ventures		4,612,885		9.7	%		5,727,579		10.3	%		(1,114,694	)		(19.5	)%
Selling expenses		10,656,689		22.4	%		10,968,592		19.7	%		(311,903	)		(2.8	)%
General and administrative expenses		8,688,309		18.2	%		9,349,559		16.8	%		(661,250	)		(7.1	)%
Research and development expenses		3,979,455		8.4	%		3,822,070		6.9	%		157,385			4.1	%

	Payments Due by Period
Contractual Obligations	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
Rent obligations	$	674,689	$	386,345	$	288,344	$	-0-	$	-0-

Total	$	674,689	$	386,345	$	288,344	$	-0-	$	-0-

		Page

Report of Independent Registered Public Accounting Firm		50
Consolidated Balance Sheets as of August 31, 2020 and 2019		51
Consolidated Statements of Operations for the years ended August 31, 2020 and 2019		52
Consolidated Statements of Comprehensive (Loss) Income for the years ended August 31, 2020 and 2019		53
Consolidated Statements of Equity for the years ended August 31, 2020 and 2019		54
Consolidated Statements of Cash Flows for the years ended August 31, 2020 and 2019		55
Notes to Consolidated Financial Statements		56-76

	August 31, 2020			August 31, 2019
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	6,403,032		$	5,856,758
Available for sale securities		5,544,722			3,565,258
Receivables:
Trade excluding joint ventures, less allowance for doubtful accounts of $90,000 as of August 31, 2020 and $65,000 as of August 31, 2019		8,072,212			9,779,518
Trade joint ventures		475,900			824,473
Fees for services provided to joint ventures		927,286			1,268,000
Income taxes		19,907			457,018
Inventories		10,961,796			10,488,728
Prepaid expenses		797,495			1,062,609
Total current assets		33,202,350			33,302,362

PROPERTY AND EQUIPMENT, NET		7,110,789			7,358,159

OTHER ASSETS:
Investments in joint ventures		24,090,826			24,207,339
Deferred income taxes		209,729			1,634,258
Patents and trademarks, net		802,006			1,008,969
Operating lease right of use asset		658,788			—
Total other assets		25,761,349			26,850,566
Total assets	$	66,074,488		$	67,511,087

LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable	$	3,205,241		$	4,505,531
Income taxes payable		310,922			6,759
Accrued liabilities:
Payroll and related benefits		1,314,978			1,857,971
Other		880,118			1,471,532
Current portion of operating lease		386,345			—
Total current liabilities		6,097,604			7,841,793
LONG-TERM LIABILITIES:
Operating lease, less current portion		272,443			—
Total long-term liabilities		272,443			—

COMMITMENTS AND CONTINGENCIES (Note 15)

EQUITY:
Preferred stock, no par value; authorized 10,000 shares; none issued and outstanding		—			—
Common stock, $0.02 par value per share; authorized 15,000,000 shares as of August 31, 2020 and August 31, 2019; issued and outstanding 9,099,990 and 9,086,816, respectively		182,000			181,736
Additional paid-in capital		17,415,043			16,013,338
Retained earnings		42,472,810			44,992,719
Accumulated other comprehensive loss		(3,410,438	)		(4,593,178	)
Stockholders’ equity		56,659,415			56,594,615
Non-controlling interests		3,045,026			3,074,679
Total equity		59,704,441			59,669,294
Total liabilities and equity	$	66,074,488		$	67,511,087

	2020			2019
NET SALES:
Net sales, excluding joint ventures	$	45,666,045		$	53,142,583
Net sales, to joint ventures		1,972,646			2,607,554
Total net sales		47,638,691			55,750,137
Cost of goods sold		31,609,274			37,970,244
Gross profit		16,029,417			17,779,893

JOINT VENTURE OPERATIONS:
Equity in income from joint ventures		4,270,327			7,225,518
Fees for services provided to joint ventures		4,612,885			5,727,579
Total joint venture operations		8,883,212			12,953,097

OPERATING EXPENSES:
Selling expenses		10,656,689			10,968,592
General and administrative expenses		8,688,309			9,349,559
Research and development expenses		3,979,455			3,822,070
Total operating expenses		23,324,453			24,140,221

OPERATING INCOME		1,588,176			6,592,769

INTEREST INCOME		167,733			78,257
INTEREST EXPENSE		(16,034	)		(13,567	)

INCOME BEFORE INCOME TAX EXPENSE		1,739,875			6,657,459

INCOME TAX EXPENSE		2,674,635			841,837

NET (LOSS) INCOME		(934,760	)		5,815,622

NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTERESTS		402,949			606,000

NET (LOSS) INCOME ATTRIBUTABLE TO NTIC	$	(1,337,709	)	$	5,209,622

NET (LOSS) INCOME ATTRIBUTABLE TO NTIC PER COMMON SHARE:
Basic	$	(0.15	)	$	0.57
Diluted	$	(0.15	)	$	0.55

WEIGHTED AVERAGE COMMON SHARES ASSUMED OUTSTANDING:
Basic		9,096,981			9,085,584
Diluted		9,096,981			9,415,974

CASH DIVIDENDS DECLARED PER COMMON SHARE	$	0.13		$	0.24

	STOCKHOLDERS’ EQUITY
											Accumulated
					Additional						Other			Non-
	Common Stock				Paid-in			Retained			Comprehensive			Controlling			Total
	Shares		Amount		Capital			Earnings			Loss			Interests			Equity

BALANCE AT AUGUST 31, 2018		9,082,606		181,652		14,528,951			41,963,341			(3,597,199	)		2,742,309			55,819,054
Stock issued for employee stock purchase plan		4,210		84		52,462			—			—			—			52,546
Stock option expense		—		—		1,431,925			—			—			—			1,431,925
Investment by non-controlling Interest		—		—		—			—			—			134,034			134,034
Dividends paid to stockholders		—-		—		—			(2,180,244	)		—-			—			(2,180,244	)
Dividend received by non-controlling interest		—		—		—			—			—			(400,000	)		(400,000	)
Net income		—		—		—			5,209,622			—			606,000			5,815,622
Other comprehensive loss		—		—		—			—			(995,979	)		(7,664	)		(1,003,643	)
BALANCE AT AUGUST 31, 2019		9,086,816	$	181,736	$	16,013,338		$	44,992,719		$	(4,593,178	)	$	3,074,679		$	59,669,294
Stock options exercised		6,823		137		(137	)		—			—			—			—
Stock issued for employee stock purchase plan		6,351		127		64,068			—			—			—			64,195
Stock option expense		—		—		1,337,774			—			—			—			1,337,774
Dividends paid to stockholders		—-		—		—			(1,182,200	)		—-			—			(1,182,200	)
Dividend received by non-controlling interest		—		—		—			—			—			(400,000	)		(400,000	)
Net (loss) income		—		—		—			(1,337,709	)		—			402,949			(934,760	)
Other comprehensive income (loss)		—		—		—			—			1,182,740			(32,602	)		1,150,138
BALANCE AT AUGUST 31, 2020		9,099,990	$	182,000	$	17,415,043		$	42,472,810		$	(3,410,438	)	$	3,045,026		$	59,704,441

	2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$	(934,760	)	$	5,815,622
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Stock-based compensation		1,337,774			1,431,925
Depreciation expense		836,601			841,236
Amortization expense		231,624			261,724
Change in allowance for doubtful accounts		25,000			—
Equity in income from joint ventures		(4,270,327	)		(7,225,518	)
Dividends received from joint ventures		5,672,099			5,039,041
Loss (gain) on disposal of property and patents		173,810			(36,098	)
Deferred income taxes		1,424,529			(89,637	)
Changes in current assets and liabilities:
Receivables:
Trade, excluding joint ventures		1,680,611			(50,315	)
Trade, joint ventures		348,573			(62,967	)
Fees for services provided to joint ventures		340,714			89,255
Income taxes		424,002			(189,226	)
Inventories		(435,712	)		(1,486,833	)
Prepaid expenses and other		279,312			744,323
Accounts payable		(1,229,510	)		682,786
Income tax payable		302,641			(65,344	)
Accrued liabilities		(1,294,911	)		(222,952	)
Net cash provided by operating activities		4,912,070			5,477,022

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of property and equipment		2,190			—
Purchase of available for sale securities		(4,000,000	)		(3,365,146	)
Proceeds from the sale of available for sale securities		2,020,536			3,100,000
Purchases of property and equipment		(711,412	)		(960,339	)
Investments in patents		(95,996	)		(114,436	)
Net cash used in investing activities		(2,784,682	)		(1,339,921	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Dividend received by non-controlling interest		(400,000	)		(400,000	)
Investment by non-controlling interest		—			134,034
Dividends paid on NTIC common stock		(1,182,200	)		(2,180,244	)
Proceeds from employee stock purchase plan		64,195			52,546
Proceeds from exercise of stock options		—			—
Net cash used in financing activities		(1,518,005	)		(2,393,664	)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		(63,109	)		(49,702	)

NET INCREASE IN CASH AND CASH EQUIVALENTS		546,274			1,693,735
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		5,856,758			4,163,023

CASH AND CASH EQUIVALENTS AT END OF YEAR	$	6,403,032		$	5,856,758

	Buildings and improvements		5-30 years
	Machinery and equipment		3-10 years

	August 31, 2020		August 31, 2019
Production materials	$	3,866,791	$	1,980,816
Finished goods		7,095,006		8,507,912
	$	10,961,796	$	10,488,728

	August 31, 2020			August 31, 2019
Land	$	310,365		$	310,365
Buildings and improvements		8,167,783			7,749,980
Machinery and equipment		4,940,912			4,903,664
		13,419,060			12,964,009
Less accumulated depreciation		(6,308,271	)		(5,605,850	)
	$	7,110,789		$	7,358,159

	August 31, 2020			August 31, 2019
Patents and trademarks	$	2,907,852		$	2,938,876
Less accumulated amortization		(2,105,846	)		(1,929,907	)
	$	802,006		$	1,008,969

	As of August 31, 2020
	Total		EXCOR		FRANCE		FINLAND		INDIA		THAILAND		OTHER
Current assets	$	55,825,418	$	25,742,619	$	4,099,160	$	1,955,879	$	4,010,855	$	4,022,399	$	15,994,506
Total assets		60,295,587		28,449,772		4,873,484		2,261,147		4,242,660		4,055,451		16,413,073
Current liabilities		11,002,867		2,424,565		2,073,710		415,496		1,007,529		993,332		4,088,235
Noncurrent liabilities		365,274		—		—		—		32,999		—		332,275
Joint ventures’ equity		48,927,446		26,025,207		2,799,774		1,845,651		3,202,132		3,062,119		11,992,563
Northern Technologies International Corporation’s share of joint ventures’ equity		24,090,826		13,012,606		1,399,887		922,814		1,603,013		1,531,060		5,621,446
Northern Technologies International Corporation’s share of joint ventures’ undistributed earnings		21,855,747		12,981,701		1,399,887		902,814		738,191		1,429,060		4,404,094

	Fiscal Year Ended August 31, 2020
	Total		EXCOR		FRANCE		FINLAND		INDIA		THAILAND		OTHER
Net sales	$	87,030,062	$	32,546,402	$	8,133,294	$	3,088,865	$	5,481,303	$	6,471,831	$	31,308,367
Gross profit		39,532,750		18,739,471		3,061,433		1,916,001		2,498,196		2,046,478		11,271,171
Net income		8,545,473		5,266,541		473,137		419,728		697,349		503,884		1,184,834
Northern Technologies International Corporation’s share of equity in income of joint ventures		4,270,327		2,622,423		237,490		209,972		349,218		253,192		598,032
Northern Technologies International Corporation’s dividends received from joint ventures		5,672,099		4,675,850		—		325,635		261,220		160,074		249,320

	As of August 31, 2019
	Total		EXCOR		All Other
Current assets	$	59,162,834	$	29,139,787	$	30,023,047
Total assets		63,326,703		31,666,841		31,659,862
Current liabilities		14,145,499		3,573,160		10,572,339
Noncurrent liabilities		20,797		—		20,797
Joint ventures’ equity		49,160,407		28,093,681		21,066,726
Northern Technologies International Corporation’s share of joint ventures’ equity		24,207,339		14,046,842		10,160,497
Northern Technologies International Corporation’s share of joint ventures’ undistributed earnings		22,178,126		14,015,937		8,162,189


	Fiscal Year Ended August 31, 2019
	Total		EXCOR		All Other
Net sales	$	114,635,435	$	47,015,841	$	67,619,594
Gross profit		51,312,013		25,622,261		25,689,752
Net income		14,688,999		10,827,448		3,861,551
Northern Technologies International Corporation’s share of equity in income of joint ventures		7,225,518		5,415,362		1,810,156
Northern Technologies International Corporation’s dividends received from joint ventures		5,039,041		3,345,600		1,693,441

Numerator:	August 31, 2020			August 31, 2019
Net (loss) income attributable to NTIC	$	(1,337,709	)	$	5,209,622

Denominator:
Basic-weighted shares outstanding		9,096,981			9,085,584
Weighted shares assumed upon exercise of stock options		-			330,390
Diluted – weighted shares outstanding		9,096,981			9,415,974

Basic net (loss) income per share:	$	(0.15	)	$	0.57
Diluted net (loss) income per share:	$	(0.15	)	$	0.55

	Fiscal Year 2020			Fiscal Year 2019
Dividend yield		2.41	%		1.32	%
Expected volatility		45.2	%		45.8	%
Expected life of option (years)		10			10
Weighted average risk-free interest rate		1.40	%		2.75	%

	Number of Shares (#)			Weighted Average Exercise Price		Aggregate Intrinsic Value
Outstanding at August 31, 2018		697,406		$	7.29
Options granted		141,767			18.23
Options exercised		—			—
Options terminated		—			—

Outstanding at August 31, 2019		839,173		$	9.13
Options granted		300,770			10.87
Options exercised		(11,975	)		5.13
Options terminated		—			—

	Fiscal 2020		Fiscal 2019
ZERUST^® net sales	$	34,474,535	$	38,174,712
Natur-Tec^® net sales		13,164,156		17,575,425
Total net sales	$	47,638,691	$	55,750,137

	Fiscal 2020		Fiscal 2019
Direct cost of goods sold
ZERUST®	$	18,717,684	$	21,505,335
Natur-Tec®		10,168,051		13,691,038
Indirect cost of goods sold		2,723,539		2,773,871
Total net cost of goods sold	$	31,609,274	$	37,970,244

	At August 31, 2020		At August 31, 2019
China	$	376,088	$	337,162
Other		172,833		178,087
United States		6,561,868		6,842,910
Total long-lived assets	$	7,110,789	$	7,358,159

	Fiscal Year Ended August 31, 2020		Fiscal Year Ended August 31, 2019
China	$	13,409,770	$	13,030,298
Brazil		2,753,930		3,151,509
India		5,655,797		8,109,468
Other		5,600,982		6,898,403
United States		20,218,212		24,560,459
Total net sales	$	47,638,691	$	55,750,137

	August 31,
	2020			2019
Accrued compensation	$	173,500		$	153,400
Inventory costs		64,000			60,900
Other accrued expenses		74,900			39,700
Lease liability		147,500			-
Goodwill and other intangible assets		581,200			688,400
Stock-based compensation		397,300			299,300
Foreign tax credit carryforward		5,790,500			5,790,500
Other credit and loss carryforwards		4,824,200			3,631,700
Total deferred tax assets		12,053,100			10,663,900
Valuation allowance		(11,561,700	)		(8,764,300	)
Total deferred tax assets after valuation allowance		491,400			1,899,600
Property and equipment		(50,700	)		(111,900	)
Right-of-use asset		(147,500	)		-
Other		(83,400	)		(153,400	)
Total deferred tax liabilities		(281,600	)		(265,300	)
Net deferred tax assets	$	209,800		$	1,634,300

(in thousands):	August 31, 2020
Right-of-use assets, net	$	658,788

Current portion of lease liability		386,345
Lease liability, less current portion		272,443
Total lease liability	$	658,788

Fiscal 2021	$	386,345
Fiscal 2022		208,419
Fiscal 2023		59,993
Fiscal 2024		19,932
Total future minimum lease payments		674,689
Less amount representing interest		(15,901	)
Present value of obligations under operating leases		658,788
Less current portion		(386,345	)
Long-term operating lease obligations	$	272,443