Operating Segments

9 Months Ended

Sep. 30, 2012

Operating Segments

5. Operating Segments

Our operations are divided into two operating segments—”Technology Development” and “Products and Licensing”.

The Technology Development segment provides applied research to customers in our areas of focus. Our engineers and scientists collaborate with our network of government, academic and industry experts to identify technologies and ideas with promising market potential. We then compete to win fee-for-service contracts from government agencies and industrial customers who seek innovative solutions to practical problems that require new technology. The Technology Development segment derives its revenue primarily from services.

The Products and Licensing segment derives its revenue from product sales, funded product development and technology licenses.

Through September 30, 2012, our Chief Executive Officer and his direct reports collectively represented our chief operating decision makers, and they evaluated segment performance based primarily on revenue and operating income or loss. The accounting policies of our segments are the same as those described in the summary of significant accounting policies (see Note 1 to our Financial Statements, “Organization and Summary of Significant Accounting Policies,” presented in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 29, 2012).

The table below presents revenues and operating loss for reportable segments:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
	(unaudited)						(unaudited)
Revenues:
Technology development revenues	$	4,874,826		$	6,161,826		$	15,868,642		$	17,406,515
Products and licensing revenues		3,155,953			2,681,184			8,715,630			10,058,709
Total revenues	$	8,030,779		$	8,843,010		$	24,584,272		$	27,465,224
Technology development operating Income/(loss)	$	(345,777	)	$	548,027		$	(662,048	)	$	(996,831	)
Products and licensing operating (loss)/income		171,775			(235,285	)		23,378			200,957
Total operating loss	$	(174,002	)	$	312,742		$	(638,670	)	$	(795,874	)
Depreciation, technology development	$	167,478		$	170,833		$	520,668		$	477,774
Depreciation, products and licensing	$	37,046		$	78,098		$	72,017		$	279,819
Amortization, technology development	$	24,405		$	57,303		$	56,341		$	179,802
Amortization, products and licensing	$	57,458		$	26,197		$	165,472		$	105,305

The table below presents assets for reportable segments:

	September 30, 2012		December 31, 2011
Total segment assets:
Technology development	$	14,273,238	$	14,427,172
Products and licensing		7,839,377		8,492,249
Total	$	22,112,615	$	22,919,421
Property plant and equipment, and intangible assets, Technology development	$	1,884,929	$	2,112,663
Property plant and equipment, and intangible assets, Products and licensing	$	1,035,271	$	1,243,574

There are no material inter-segment revenues for any period presented.

The United States Government accounted for approximately 66% and 70% of total consolidated revenues for the three months ended September 30, 2012 and 2011, respectively, and 66% and 64% of total consolidated revenues for the nine months ended September 30, 2012 and 2011, respectively.

International revenues (customers outside the United States) accounted for approximately 17% and 6% of total consolidated revenues for the three months ended September 30, 2012 and 2011, respectively, and 15% and 12% for the nine months ended September 30, 2012 and 2011, respectively.