Note 16 – Segment, Customer and Geographical Reporting

Segment Financial Information

Operating segments are based upon Dynasil’s internal organizational structure, the manner in which the operations are managed, the criteria used by the Chief Operating Decision Makers (CODM) to evaluate segment performance and the availability of separate financial information. Dynasil reports three reportable segments: optics (“Optics”), innovation and development (formerly Contract Research, now “Innovation and Development”), and biomedical (“Biomedical”). Within these segments, there is a segregation of operating segments based upon the organizational structure used to evaluate performance and make decisions on resource allocation, as well as availability and materiality of separate financial results consistent with that structure. Dynasil’s Optics segment aggregates four operating segments – Dynasil Fused Silica, Optometrics, Hilger Crystals, and Evaporated Metal Films – that manufacture commercial products, including optical crystals for sensing in the security and medical imaging markets, as well as optical components, optical coatings and optical materials for scientific instrumentation and other applications. The Innovation and Development segment is one of the largest small business participants in U.S. government-funded research. The Biomedical segment consists of a single operating segment, Dynasil Biomedical Corporation (“Dynasil Biomedical”), a medical technology incubator which owns rights to certain early stage medical technologies. Dynasil Biomedical holds the Company’s stock of the Xcede joint venture which is developing a tissue sealant technology and currently has no other operations.

The Company’s segment information is summarized below:


Results of Operations for the Fiscal Year Ended September 30,
2019
				Innovation and
				Development
				(formerly
				Contract
	Optics			Research)			Biomedical		Total
Revenue	$	23,250,000		$	20,451,000		$	—	$	43,701,000
Gross profit		7,939,000			8,135,000			—		16,074,000
GM %		34	%		40	%		—		37	%
Operating expenses		7,853,000			8,086,000			123,000		16,062,000
Impairment of long-lived assets		—			—			—		—
Operating income (loss)		86,000			49,000			(123,000)		12,000

Depreciation and amortization		1,165,000			241,000			14,000		1,420,000
Capital expenditures		716,000			177,000			—		893,000

Intangibles, net		307,000			128,000			192,000		627,000
Goodwill		882,000			4,939,000			—		5,821,000
Total assets	$	20,520,000		$	10,112,000		$	195,000	$	30,827,000


Results of Operations for the Fiscal Year Ended September 30,
2018
				Innovation and
	Optics			Development			Biomedical		Total
Revenue	$	23,053,000		$	17,628,000		$	—	$	40,681,000
Gross profit		7,667,000			7,569,000			—		15,236,000
GM %		33	%		43	%		—		37	%
Operating expenses		7,003,000			7,072,000			817,000		14,892,000
Impairment of long-lived assets		—			—			182,000		182,000
Operating income (loss)		664,000			497,000			(999,000)		162,000

Depreciation and amortization		1,006,000			237,000			14,000		1,257,000
Capital expenditures		2,033,000			211,000			73,000		2,317,000

Intangibles, net		390,000			162,000			203,000		755,000
Goodwill		961,000			4,939,000			—		5,900,000
Total assets	$	22,946,000		$	8,376,000		$	210,000	$	31,532,000

Customer Financial Information

For both the years ended September 30, 2019 and September 30, 2018, there was one customer that represented 10% of the total Optics segment revenue.

For the years ended September 30, 2019 and 2018, the top three customers for the Innovation and Development segment were each various agencies of the U.S. Government. For the years ended September 30, 2019 and 2018, these customers made up 61% and 60%, respectively, of Innovation and Development revenue.

The Biomedical segment did not have any revenue in the years ending September 30, 2019 and 2018.

Geographic Financial Information

Revenue by geographic location in total and as a percentage of total revenue, for the years ended September 30, 2019 and 2018 are as follows:


	2019				2018
Geographic Location	Revenue		% of Total		Revenue		% of Total
United States	$	34,421,000	79	%	$	30,777,000	76	%
Asia		3,206,000	7	%		3,017,000	7	%
Europe		5,167,000	12	%		6,486,000	16	%
Other		907,000	2	%		401,000	1	%
	$	43,701,000	100	%	$	40,681,000	100	%