Note 10 – Segment, Customer and Geographical Reporting

Segment Financial Information

Dynasil reports three reportable segments: innovation and development (“Innovation and Development”), (formerly known as the Contract Research segment), 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 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 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 June 30, 2019 and 2018 is summarized below:

Results of Operations for the Three Months Ended June 30,

2019


				Innovation and
	Optics			Development*			Biomedical		Total
Revenue	$	5,899,000		$	5,191,000		$	—	$	11,090,000
Gross profit		2,112,000			1,994,000			—		4,106,000
GM %		36	%		38	%		—		37	%
Operating expenses		2,237,000			1,992,000			23,000		4,252,000
Operating income (loss)		(125,000)			2,000			(23,000)		(146,000)

Depreciation and amortization		297,000			63,000			3,000		363,000
Capital expenditures		90,000			29,000			—		119,000

Intangibles, net		334,000			136,000			195,000		665,000
Goodwill		925,000			4,939,000			—		5,864,000
Total assets	$	21,084,000		$	10,805,000		$	201,000	$	32,090,000

Results of Operations for the Three Months Ended June 30,

2018


				Innovation and
	Optics			Development*			Biomedical		Total
Revenue	$	6,159,000		$	4,383,000		$	—	$	10,542,000
Gross profit		2,299,000			1,876,000			—		4,175,000
GM %		37	%		43	%		—		40	%
Operating expenses		1,721,000			1,760,000			84,000		3,565,000
Operating income (loss)		578,000			116,000			(84,000)		610,000

Depreciation and amortization		261,000			53,000			3,000		317,000
Capital expenditures		707,000			76,000			20,000		803,000

Intangibles, net		408,000			171,000			380,000		959,000
Goodwill		968,000			4,939,000			—		5,907,000
Total assets	$	21,117,000		$	8,018,000		$	507,000	$	29,642,000

*Formerly Contract Research

The Company’s segment information for the nine months ended June 30, 2019 and 2018 is summarized below:

Results of Operations for the Nine Months Ended June 30,

2019


				Innovation and
	Optics			Development*			Biomedical		Total
Revenue	$	17,846,000		$	14,804,000		$	—	$	32,650,000
Gross profit		6,121,000			6,035,000			—		12,156,000
GM %		34	%		41	%		—		37	%
Operating expenses		5,993,000			6,012,000			98,000		12,103,000
Operating income (loss)		128,000			23,000			(98,000)		53,000

Depreciation and amortization		863,000			183,000			10,000		1,056,000
Capital expenditures		586,000			93,000			—		679,000

Intangibles, net		334,000			136,000			195,000		665,000
Goodwill		925,000			4,939,000			—		5,864,000
Total assets	$	21,084,000		$	10,805,000		$	201,000	$	32,090,000

Results of Operations for the Nine Months Ended June 30,

2018


				Innovation and
	Optics			Development*			Biomedical		Total
Revenue	$	17,011,000		$	12,974,000		$	—	$	29,985,000
Gross profit		6,038,000			5,621,000			—		11,659,000
GM %		35	%		43	%		—		39	%
Operating expenses		5,154,000			5,297,000			724,000		11,175,000
Operating income (loss)		884,000			324,000			(724,000)		484,000

Depreciation and amortization		738,000			179,000			10,000		927,000
Capital expenditures		1,635,000			153,000			65,000		1,853,000

Intangibles, net		408,000			171,000			380,000		959,000
Goodwill		968,000			4,939,000			—		5,907,000
Total assets	$	21,117,000		$	8,018,000		$	507,000	$	29,642,000

*Formerly Contract Research

Customer Financial Information

For three and nine months ended June 30, 2019, one customer in the Optics segment represented more than 10% of the total segment revenue. For the three and nine months ended June 30, 2018, no customer in the Optics segment represented more than 10% of the total segment revenue.

For the three and nine months ended June 30, 2019, three customers of the Innovation and Development segment, all various agencies of the U.S. Government, each represented more than 10% of the total segment revenue. For the three months ended June 30, 2018, four customers of the Innovation and Development segment, three various agencies of the U.S. Government and one commercial customer, each represented more than 10% of the total segment revenue. For the nine months ended June 30, 2018, three customers of the Innovation and Development 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 June 30, 2019 and 2018 are as follows:


	Three Months Ended				Three Months Ended
	June 30, 2019				June 30, 2018
Geographic Location		Revenue	% of Total			Revenue	% of Total
United States	$	8,669,000	78	%	$	7,512,000	71	%
Asia		667,000	6	%		877,000	9	%
Europe		1,468,000	13	%		2,029,000	19	%
Other		286,000	3	%		124,000	1	%
	$	11,090,000	100	%	$	10,542,000	100	%

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


	Nine Months Ended				Nine Months Ended
	June 30, 2019				June 30, 2018
Geographic Location		Revenue	% of Total			Revenue	% of Total
United States	$	24,901,000	76	%	$	22,993,000	76	%
Asia		2,462,000	8	%		877,000	3	%
Europe		4,705,000	14	%		4,662,000	16	%
Other		582,000	2	%		1,453,000	5	%
	$	32,650,000	100	%	$	29,985,000	100	%