9. Segment Reporting and Geographic Information

ASC 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 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 to its chief operating decision makers (“CODM”). The Company’s CODM is its CEO.

The Company is organized into four reportable operating segments: Physical Access Control Systems (“PACS”), previously referred to as Premises, Identity, Credentials and All Other.

The CODM reviews financial information and business performance for each operating segment. The Company evaluates the performance of its operating segments at the revenue and gross profit levels. The CODM does not review operating expenses or asset information by operating segment for purposes of assessing performance or allocating resources.

Net revenue and gross profit information by segment for the three and six months ended June 30, 2017 and 2016 is as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
PACS:
Net revenue	$	5,824		$	5,542		$	11,188		$	10,655
Gross profit		3,045			3,035			6,144			5,910
Gross profit margin		52	%		55	%		55	%		55	%
Identity:
Net revenue		4,058			2,909			7,147			5,415
Gross profit		1,313			1,014			2,437			1,965
Gross profit margin		32	%		35	%		34	%		36	%
Credentials:
Net revenue		4,959			4,875			9,894			9,311
Gross profit		1,323			1,213			2,793			2,427
Gross profit margin		27	%		25	%		28	%		26	%
All Other:
Net revenue		(1	)		150			3			580
Gross profit		2			7			6			261
Gross profit margin		-200	%		5	%		200	%		45	%
Total:
Net revenue		14,840			13,476			28,232			25,961
Gross profit		5,683			5,269			11,380			10,563
Gross profit margin		38	%		39	%		40	%		41	%
Operating expenses:
Research and development		1,511			1,432			2,988			3,517
Selling and marketing		3,315			3,279			6,694			7,495
General and administrative		2,085			2,982			3,872			7,559
Restructuring and severance		—			201			—			2,940
Total operating expenses:		6,911			7,894			13,554			21,511
Loss from operations		(1,228	)		(2,625	)		(2,174	)		(10,948	)
Non-operating income (expense):
Interest expense, net		(678	)		(519	)		(1,352	)		(1,289	)
Gain on extinguishment of debt		—			—			977			—
Foreign currency gains (losses), net		1			45			(151	)		274
Loss before income taxes and noncontrolling interest	$	(1,905	)	$	(3,099	)	$	(2,700	)	$	(11,963	)

Geographic net revenue is based on the customer’s ship-to location. Information regarding net revenue by geographic region for the three and six months ended June 30, 2017 and 2016 is as follows (in thousands):

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2017			2016			2017			2016
Americas	$	9,495		$	9,198		$	18,603		$	17,419
Europe and the Middle East		2,117			1,752			3,996			3,820
Asia-Pacific		3,228			2,526			5,633			4,722
Total	$	14,840		$	13,476		$	28,232		$	25,961
Revenues:
Americas		64	%		68	%		66	%		67	%
Europe and the Middle East		14	%		13	%		14	%		15	%
Asia-Pacific		22	%		19	%		20	%		18	%
Total		100	%		100	%		100	%		100	%

Long-lived assets by geographic location as of June 30, 2017 and December 31, 2016 are as follows (in thousands):

	June 30,		December 31,
	2017		2016
Property and equipment, net:
Americas	$	935	$	1,100
Europe and the Middle East		144		162
Asia-Pacific		926		1,154
Total property and equipment, net	$	2,005	$	2,416