16. OPERATING SEGMENT INFORMATION

12 Months Ended

Sep. 30, 2019

Segment Reporting [Abstract]

OPERATING SEGMENT INFORMATION

NOTE 16        OPERATING SEGMENT INFORMATION

The Company, post IPS acquisition, conducts its business through two operating segments, which are also its reportable segments:

· Distribution and

· Design

The Distribution segment sources and distributes carry and protective product solutions, primarily for hand held electronic devices. Products sourced by this segment include carrying cases and other accessories for medical monitoring and diagnostic kits, portable consumer electronic devices (such as smartphones, tablets, personnel computers, notebooks, and GPS devices), and a variety of other portable electronic and non-electronic products (such as firearms, sporting, and other recreational products). This segment operates in geographic regions that include the EMEA Region, the Americas and the APAC Region. Geographic regions are defined by reference primarily to the location of the customer or its contract manufacturer.

The Design segment provides a full spectrum of hardware and software product design and engineering services. This segment operates predominantly in the Americas region. It should be noted that financial performance and results of operations in the design segment for the fiscal year ended September 30, 2018 covers the period following the closing of the acquisition of IPS on January 18, 2018 through fiscal year end on September 30, 2018.

Segment operating income (loss) and net income (loss) before taxes for the years ended September 30, 2019 and 2018 are shown in table below:

	For the Year Ended September 30,
	2019			2018
Revenue
Distribution	$	21,987,670		$	24,347,408
Design		15,421,360			10,152,095
Total revenue		37,409,030			34,499,503
Cost of sales
Distribution	$	18,612,881		$	20,286,446
Design		12,215,267			7,644,981
Total cost of sales	$	30,828,148		$	27,931,427
Segment operating income (loss)
Distribution	$	(1,376,675	)	$	(140,804	)
Design		(1,720,708	)		401,456
Total income (loss) from operations	$	(3,097,383	)	$	260,652
Other income (expenses)
Distribution	$	(437,809	)	$	401,779
Design		(73,000	)		(30,111	)
Total other income (expense)	$	(510,809	)	$	371,668
Income (loss) before income taxes
Distribution	$	(1,814,484	)	$	260,975
Design		(1,793,708	)		371,345
Total income (loss) before income taxes	$	(3,608,192	)	$	632,320

Revenues from External Customers

Consolidated

The following table sets forth our consolidated net revenues by geographic region for the fiscal years ended September 30, 2019 and 2018. All of design segment customer revenues are classified under the United States within the Americas region:

	(dollars in thousands)
	For the Fiscal Years Ended
	September 30,
	2019		2018
EMEA Region:
Germany	$	3,875	$	3,987
Poland		3,355		4,071
Switzerland		297		407
Austria		186		302
Other		166		553
Total EMEA Region		7,879		9,320
Americas:
United States [1]		21,730		17,307
Other		4		8
Total Americas		21,734		17,315
APAC Region:
Hong Kong		6,017		6,485
Malaysia		153		480
China		318		248
Singapore		564		338
Taiwan		164		195
Other		580		119
Total APAC Region		7,796		7,865
Total Net Revenues	$	37,409	$	34,500

[1] Includes $15.421 million of revenue attributed to IPS whose customers reside in the United States

Major Customers and Concentrations by Geographic Region

Distribution Segment

The following customers or their affiliates or contract manufacturers accounted for more than 10% of the distribution segment’s net revenues, by geographic region, and in segment total for the fiscal years ended September 30, 2019 and 2018.

	For the Fiscal Year Ended September 30, 2019
		EMEA	Americas	APAC	Total
Diabetic Products Customer A		49%	42%	–	30%
Diabetic Products Customer B		29%	22%	6%	19%
Diabetic Products Customer C		–	3%	76%	28%
Diabetic Products Customer D		13%	15%	3%	10%
Totals		91%	82%	85%	87%

	For the Fiscal Year Ended September 30, 2018
		EMEA	Americas	APAC	Total
Diabetic Products Customer A		42%	36%	–	20%
Diabetic Products Customer B		30%	28%	–	27%
Diabetic Products Customer C		–	–	82%	27%
Diabetic Products Customer D		13%	16%	2%	10%
Totals		85%	80%	84%	84%

Four customers (including their affiliates or contract manufacturers) accounted for approximately 90% and 86% of the Company's distribution segment accounts receivable at September 30, 2019 and 2018, respectively.

Design Segment

All of our design segment customers operate in the United States.

Four customers accounted for approximately 67% of the Company’s design segment accounts receivable at September 30, 2018. Two customers accounted for approximately 63% of the Company’s design segment accounts receivable at September 30, 2019.

Total Assets

The following table presents total assets by operating segment for the years ended September 30, 2019 and 2018:

	September 30,
	2019		2018
Distribution	$	9,554,465	$	12,010,344
Design		6,539,887		7,217,522
Total assets	$	16,094,352	$	19,227,866

Long-Lived Assets

Identifiable long-lived assets, consisting predominantly of property, plant and equipment, by operating segment are presented net of accumulated depreciation and amortization. All of the Company’s long-lived assets are geographically located in the United States or Americas region. See table below:

	September 30,
	2019						2018
	Consolidated		Distribution		Design		Consolidated		Distribution		Design
Americas	$	243,002	$	17,825	$	225,177	$	358,975	$	26,871	$	332,104
APAC		–		–		–		–		–		–
EMEA		–		–		–		–		–		–
Total long-lived assets (net)	$	243,002	$	17,825	$	225,177	$	358,975	$	26,871	$	332,104

Total Liabilities

The following table presents total liabilities by operating segment for the years ended September 30, 2019 and 2018:

	September 30,
	2019		2018
Distribution	$	6,061,472	$	6,568,918
Design		2,321,581		1,559,353
Total liabilities	$	8,383,053	$	8,128,271

Supplier Concentration

The Company procures all its supply of carrying solutions products for the distribution segment from independent suppliers in China through Forward China. Depending on the product, Forward China may require several different suppliers to furnish component parts or pieces. The Company purchased 100% of its OEM products from Forward China in Fiscal 2019 and 2018.

The Company procures materials and supplies used to build prototypes and “mock-ups” for design service projects. All of the design segment vendors are located in the United States.