Segment Reporting, Geographic Information and Major Customers

6 Months Ended

Jun. 30, 2011

Segment Reporting, Geographic Information and Major Customers

11. Segment Reporting, Geographic Information and Major Customers

ASC Topic 280 — Segment Reporting (“ASC 280”) establishes standards for the reporting by public business enterprises of information about operating segments, products and services, geographic areas, and major customers. The method for determining what information to report is based on the way that management organizes the operating segments within the Company for making operating decisions and assessing financial performance. An operating segment is defined as a component of an enterprise that engages in business activities from which it may earn revenue and incur expenses and about which separate financial information is available. The Company’s chief operating decision makers (“CODM”) are considered to be its Chief Executive Officer and Chief Financial Officer.

The Company currently has two business segments that reflect the Company’s current organizational structure and focus on providing secure identification solutions. The Company’s reportable segments are Identity Management and ID Products. Each business segment is comprised of two or more businesses within the Company that focus on specific markets and technologies. Business units in the Identity Management segment include Hirsch, idOnDemand and Multicard; business units in the ID Products segment include SCM Microsystems, TagStar Systems, Smartag, ACiG Technology and Syscan ID.

The CODM reviews financial information and business performance along the Identity Management and ID Products segments. The Company evaluates the performance of its segments at the revenue and gross margin level. The Company’s reporting systems do not track or allocate operating expenses by segment.

Summary information by segment for the three and six months ended June 30, 2011 and 2010 is as follows (in thousands):

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Identity Management:
Revenues from external customers	$	14,476		$	13,238		$	27,100		$	21,341
Intersegment revenue		259			25			317			153
Total revenue for reportable segment		14,735			13,263			27,417			21,494
Elimination of intersegment revenues		(259	)		(25	)		(317	)		(153	)
Total Identity Management revenue	$	14,476		$	13,238		$	27,100		$	21,341
Gross profit		6,329			6,911			12,155			11,277
Gross profit %		44	%		52	%		45	%		53	%
ID Products:
Revenues from external customers	$	11,136		$	7,940		$	20,932		$	15,183
Intersegment revenue		1,690			141			3,709			317
Total revenue for reportable segment		12,826			8,081			24,641			15,500
Elimination of intersegment revenues		(1,690	)		(141	)		(3,709	)		(317	)
Total ID Product revenue	$	11,136		$	7,940		$	20,932		$	15,183
Gross profit		3,885			2,933			7,439			5,304
Gross profit %		35	%		37	%		36	%		35	%
Total:
Net revenue	$	25,612		$	21,178		$	48,032		$	36,524
Gross profit	$	10,214		$	9,844		$	19,594		$	16,581
Gross profit %		40	%		46	%		41	%		45	%

Geographic net revenue is based on selling location. Information regarding net revenue by geographic region is as follows (in thousands):

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Net revenue
Europe and Middle-East	$	9,113		$	5,190		$	18,645		$	10,333
United States		12,058			13,972			21,792			22,587
Asia-Pacific		4,441			2,016			7,595			3,604
Total	$	25,612		$	21,178		$	48,032		$	36,524
% of net revenue
Europe and Middle-East		36	%		24	%		39	%		28	%
United States		47	%		66	%		45	%		62	%
Asia-Pacific		17	%		10	%		16	%		10	%

No customers exceeded 10% of total revenue during the three or six months ended June 30, 2011 or 2010. No customer represented 10% of the Company’s accounts receivable balance at June 30, 2011 or December 31, 2010.

Long-lived assets by geographic location as of June 30, 2011 and December 31, 2010, are as follows (in thousands):

	June 30,		December 31,
	2011		2010
Property and equipment, net:
Americas	$	641	$	411
Europe		3,714		3,695
Asia-Pacific		1,406		1,267
Total	$	5,761	$	5,373