Note 10 – Segment, Customer and Geographical Reporting

Segment Financial Information

Dynasil reports three reportable segments: contract research (“Contract Research”), optics (“Optics”) 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. The Optics segment aggregates four operating segments – Dynasil Fused Silica, Optometrics, Hilger Crystals (“Hilger”), 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 Contract Research 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 common and preferred stock in the Xcede joint venture which is developing a tissue sealant technology and currently has no other operations.

The Company’s segment information for the three months ended December 31, 2017 and 2016 is summarized below:

Results of Operations for the Three Months Ended December 31,
2017
	Optics			Contract Research			Biomedical		Total
Revenue	$	4,942,000		$	4,247,000		$	-	$	9,189,000
Gross profit		1,724,000			1,851,000			-		3,575,000
GM %		35	%		44	%		-		39	%
Operating expenses		1,576,000			1,723,000			445,000		3,744,000
Operating income (loss)		148,000			128,000			(445,000)		(169,000)

Depreciation and amortization		231,000			65,000			3,000		299,000
Capital expenditures		590,000			19,000			16,000		625,000

Intangibles, net		453,000			188,000			337,000		978,000
Goodwill		1,012,000			4,939,000			-		5,951,000
Total assets	$	18,969,000		$	8,114,000		$	614,000	$	27,697,000

Results of Operations for the Three Months Ended December 31,
2016
	Optics			Contract Research			Biomedical		Total
Revenue	$	4,405,000		$	4,738,000		$	-	$	9,143,000
Gross profit		1,574,000			1,951,000			-		3,525,000
GM %		36	%		41	%		-		39	%
Operating expenses		1,328,000			1,740,000			381,000		3,449,000
Operating income (loss)		246,000			211,000			(381,000)		76,000

Depreciation and amortization		234,000			74,000			3,000		311,000
Capital expenditures		91,000			-			20,000		111,000

Intangibles, net		474,000			222,000			337,000		1,033,000
Goodwill		883,000			4,939,000			-		5,822,000
Total assets	$	18,785,000		$	8,407,000		$	1,060,000	$	28,252,000

Customer Financial Information

For both the three months ended December 31, 2017 and 2016, no customer in the Optics segment represented more than 10% of the total segment revenue.

For the three months ended December 31, 2017, four customers of the Contract Research segment, all various agencies of the U.S. Government, each represented more than 10% of the total segment revenue. For the three months ended December 31, 2016, three customers of the Contract Research segment, all various agencies of the U.S. Government, each represented more than 10% of the total segment revenue.

Geographic Financial Information

Revenue by geographic location in total and as a percentage of total revenue, for the three months ended December 31, 2017 and 2016 are as follows:

	Three Months Ended					Three Months Ended
	December 31, 2017					December 31, 2016
Geographic Location	Revenue		% of Total			Revenue		% of Total
United States	$	7,353,000		80	%	$	7,189,000		79	%
Europe		1,268,000		14	%		1,086,000		12	%
Other		568,000		6	%		868,000		9	%
	$	9,189,000		100	%	$	9,143,000		100	%