SEGMENT REPORTING AND GEOGRAPHIC INFORMATION


(a)	General Information

As of December 31, 2013, the Company’s operations are based upon four operating segments:


(1)	Energy & Security Sonar Solutions. We provide sonar and acoustic related solutions for energy, defense and commercial markets with a focus on underwater site security for strategic energy installations and other advanced acoustic systems and real-time embedded hardware and software development and production through our DSIT Solutions Ltd. ("DSIT") subsidiary.


(2)	Smart Grid Distribution Automation. These products and services are provided by our GridSense^TM subsidiaries (GridSense Inc. in the United States and GridSense Pty Ltd. and CHK GridSense Pty Ltd. in Australia - collectively "GridSense") which develop, market and sell remote monitoring and control systems to electric utilities and industrial facilities worldwide.


(3)	Oil and Gas Sensor Systems (formerly known as Energy and Security Sensor Systems). These products and services are provided by our US Seismic Systems, Inc. subsidiary ("USSI") which develops and produces “state of the art” fiber optic sensing systems for the energy, commercial security and defense markets.

(4)

Power Generation (PG) Monitoring. These products and services are provided by our OmniMetrix^TM, LLC (“OmniMetrix”) subsidiary, acquired in February 2012. OmniMetrix's PG products and services deliver critical, real-time machine information to customers and provide remote diagnostics that give users real-time visibility of their equipment. As these activities were acquired in February 2012 (see Note 3(a)), there are no comparative results reported for these activities for the year ended 2011.

During 2013, each of the abovementioned activities represented a reportable segment. In addition, our “Other” segment represents certain IT activities (protocol management software for cancer patients and billing software) and outsourced consulting activities performed by our DSIT subsidiary as well as Cathodic Protection activities in our OmniMetrix subsidiary, that do not meet the quantitative thresholds and which may be combined for reporting under applicable accounting principles.

The Company’s reportable segments are strategic business units, offering different products and services and are managed separately as each business requires different technology and marketing strategies. Similar operating segments are aggregated into one reportable segment.


(b)	Information about Profit or Loss and Assets

The accounting policies of all the segments are those described in the summary of significant accounting policies. The Company evaluates performance based on net income or loss before taxes.

The Company does not systematically allocate assets to the divisions of the subsidiaries constituting its consolidated group, unless the division constitutes a significant operation. Accordingly, where a division of a subsidiary constitutes a segment that does not meet the quantitative thresholds of applicable accounting principles, depreciation expense is recorded against the operations of such segment, without allocating the related depreciable assets to that segment. However, where a division of a subsidiary constitutes a segment that does meet the quantitative thresholds, related depreciable assets, along with other identifiable assets, are allocated to such division.

The following tables represent segmented data for the years ended December 31, 2013, 2012 and 2011:



	Energy & Security Sonar Solutions			GridSense			Oil & Gas Sensor Systems			Power Generation Monitoring			Other			Total
Year ended December 31, 2013:
Revenues from external customers	11,815			5,026			1,468			1,671			1,776			21,756
Intersegment revenues	—			—			39			—			—			39
Segment gross profit (loss)	3,817			1,828			(2,347		)	867			991			5,156
Impairment of goodwill and intangibles	—			—			—			5,341			1,390			6,731
Restructuring and related charges	—			594			—			—			—			594
Depreciation and amortization	247			342			385			252			128			1,354
Stock compensation expense	148			—			133			—			12			293
Segment net loss before income taxes	(243		)	(4,336		)	(9,646		)	(7,011		)	(1,266		)	(22,502		)
Segment assets	11,219			6,400			8,081			2,300			870			28,870
Expenditures for segment assets	333			14			1,998			—			—			2,345

Year ended December 31, 2012:
Revenues from external customers	$	12,229		$	3,662		$	1,464		$	502		$	1,562		$	19,419
Intersegment revenues	—			—			—			—			—			—
Segment gross profit (loss)	4,465			968			(1,021		)	129			662			5,203
Depreciation and amortization	226			390			322			309			145			1,392
Stock compensation expense	—			—			323			—			—			323
Segment net income (loss) before income taxes	809			(5,378		)	(8,427		)	(1,033		)	(62		)	(14,091		)
Segment assets	9,512			8,382			7,759			7,495			2,442			35,590
Expenditures for segment assets	144			140			224			—			29			537
Year ended December 31, 2011:
Revenues from external customers	$	9,104		$	7,119		$	1,316		$	—		$	1,389		$	18,928
Intersegment revenues	—			—			—			—			—			—
Segment gross profit (loss)	3,019			3,327			(98		)	—			665			6,913
Depreciation and amortization	220			375			224			—			28			847
Stock compensation expense	—			—			—			—			—			—
Segment net income (loss) before income taxes	(244		)	(1,448		)	(2,775		)	—			298			(4,169		)
Segment assets	7,871			7,757			5,515			—			482			21,625
Expenditures for segment assets	103			74			276			—			22			475

(c) The following tables represent a reconciliation of the segment data to consolidated statement of operations and balance sheet data for the years ended and as of December 31, 2011, 2012 and 2013:



	Year ended December 31,
	2011			2012			2013
Revenues:
Total consolidated revenues for reportable segments	$	17,539		$	17,857		$	19,980
Other operational segment revenues	1,389			1,562			1,776
Total consolidated revenues	$	18,928		$	19,419		$	21,756

	Year ended December 31,
	2011			2012			2013
Income (loss):
Total net loss before income taxes for reportable segments	$	(4,467	)	$	(14,029	)	$	(21,236	)
Other operational segment net income (loss) before income taxes	298			(62		)	(1,266		)
Total segment net income (loss) before income taxes	(4,169		)	(14,091		)	(22,502		)
Unallocated net cost of corporate headquarters*	(3,891		)	(5,114		)	(5,016		)
Unallocated net cost of DSIT headquarters	—			(14		)	(53		)
Unallocated net cost of OmniMetrix headquarters	—			(1,472		)	(3,262		)
Gain on sale of HangXing (see Note 6)	492			—			—
Consolidated net loss before tax	$	(7,568	)	$	(20,691	)	$	(30,833	)

* Includes $458, $532, and $926 of stock compensation expense for the years ending December 31, 2011, 2012 and 2013, respectively.



	As of December 31,
	2011		2012		2013
Assets:
Total assets for reportable segments	$	21,625	$	35,590	$	28,870
Unallocated assets of DSIT headquarters	6,181		6,156		5,519
Unallocated assets of OmniMetrix headquarters	—		1,072		640
Assets of corporate headquarters *	57,999		24,518		15,927
Total consolidated assets	$	85,805	$	67,336	$	50,956

* In 2013, includes $15,829 of unrestricted cash. In 2012, includes $22,676 of unrestricted cash. In 2011, includes $33,666 of unrestricted cash, $18,000 of short-term deposits and $5,961 of funds held in escrow.



Other Significant Items	Segment Totals		Adjustments			Consolidated Totals
Year ended December 31, 2013
Depreciation and amortization	$	1,354	$	102	*	$	1,456
Stock compensation expense	293		926			1,219
Expenditures for assets	2,345		1,121		**	3,466
Year ended December 31, 2012
Depreciation and amortization	$	1,392	$	14	*	$	1,406
Stock compensation expense	323		532			855
Expenditures for assets	537		147		**	684
Year ended December 31, 2011
Depreciation and amortization	$	847	$	4		$	851
Stock compensation expense	—		458			458
Expenditures for assets	475		27			502

* Includes $100 and $11 of unallocated depreciation and amortization with respect to OmniMetrix for the years ended December 31, 2013 and 2012.

** Includes $985 and $106 of unallocated expenditures for assets with respect to OmniMetrix for the years ended December 31, 2013 and 2012.

Other reconciling items are primarily corporate headquarters data, which are not included in the segment information. None of the other adjustments are significant.



	December 31,
	2011		2012		2013
Revenues based on location of customer:
United States	$	4,856	$	3,344	$	5,866
Israel	4,268		3,773		8,164
Asia	6,280		10,010		5,908
Oceania	3,190		1,734		1,589
Other	334		558		229
	$	18,928	$	19,419	$	21,756



	December 31,
	2011		2012		2013
Long-lived assets located in the following countries:
United States	$	350	$	602	$	1,850
Israel	235		282		582
Australia	50		43		—
	$	635	$	927	$	2,432


(d)	Revenues from Major Customers



		Consolidated Revenues
		2011			2012			2013
Customer	Segment	Revenues	% of Total Revenues		Revenues	% of Total Revenues		Revenues	% of Total Revenues
A	Energy & Security Sonar Solutions	89	—	%	309	2	%	2,948	14	%
B	Energy & Security Sonar Solutions	2,094	11	%	1,504	8	%	361	2	%
C	Energy & Security Sonar Solutions	2,155	11	%	7,434	38	%	2,336	11	%
D	GridSense	2,436	13	%	187	1	%	87	—	%