NOTE M

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SEGMENT INFORMATION

Description of segments:

The Company operates under

three

reportable segments.

The Company's segment information has been prepared in accordance with ASC

280,

"Segment Reporting." Operating segments are defined as components of an enterprise engaging in business activities about which separate financial information is available that is evaluated regularly by the Company's chief operating decision-maker ("CODM") in deciding how to allocate resources and assess performance. The Company's CODM is its Chief Executive Officer, who evaluates the Company's performance and allocates resources based on segment revenues and operating income.

The Company's operating segments are as follows: Home, Office and SmartVoice. The classification of the Company’s business segments is based on a number of factors that management uses to evaluate, view and run its business operations, which include, but are

not

limited to, customer base, homogeneity of products and technology.

A description of the types of products provided by each business segment is as follows:

Home - Wireless chipset solutions for converged communication at home. Such solutions include integrated circuits targeted for cordless phones sold in retail or supplied by telecommunication service providers, home gateway devices supplied by telecommunication service providers which integrate the DECT/CAT-iq functionality, integrated circuits addressing home automation applications, as well as fixed-mobile convergence solutions. During

2017,

we consolidated our home gateway and home automation products into a new product line called SmartHome. In this segment (i) revenues from cordless telephony products exceeded

10%

of the Company’s total revenues and amounted to

49%

and

56%

of the Company’s total revenues for the

first

half of

2018

and

2017,

respectively, and

48%

and

53%

of the Company’s total revenues for the

second

quarter of

2018

and

2017,

respectively, and (ii) revenues from SmartHome products amounted to

13%

and

16%

of the Company’s total revenues for the

first

six

months of

2018

and

2017,

respectively, and

12%

and

17%

of the Company’s total revenues for the

second

quarter of

2018

and

2017,

respectively.

Office - Comprehensive solution for Voice-over-IP (VoIP) office products, including office solutions that offer businesses of all sizes low-cost VoIP terminals with converged voice and data applications. Revenues from the Company’s VoIP products represented

31%

and

26%

of its total revenues for the

first

half of

2018

and

2017,

respectively and

32%

and

28%

of the Company’s revenues for the

second

quarter of

2018

and

2017,

respectively.

revenues derived from other products in the office segment exceeded

10%

of the Company’s total revenues for the

first

six

months of

2018

and

2017.

SmartVoice - Products that provide voice activation and recognition, voice enhancement, always-on and far-end noise elimination that target mobile phones, SmartSpeakers, wearables, mobile headsets and other devices that incorporate the Company’s noise suppression and voice quality enhancement HDClear technology. Revenues derived from products in the SmartVoice segment represented

and

of the Company’s total revenues for the

first

half of

2018

and

2017,

respectively, and

and

of the Company’s total revenues for the

second

quarter of

2018

and

2017,

respectively.

revenues derived from other products in the mobile segment exceeded

10%

of the Company’s total consolidated revenues for both the

first

six

months of

2018

and

2017.

Segment data:

The Company derives the results of its business segments directly from its internal management reporting system and by using certain allocation methods. The accounting policies the Company uses to derive business segment results are substantially the same as those the Company uses for consolidation of its financial statements. The CODM measures the performance of each business segment based on several metrics, including earnings from operations. The CODM uses these results, in part, to evaluate the performance of, and to assign resources to, each of the business segments. The Company does

not

allocate to its business segments certain operating expenses, which it manages separately at the corporate level. These unallocated costs include primarily amortization of purchased intangible assets, equity-based compensation expenses, and certain corporate governance costs.

Selected operating results information for each business segment was as follows for the

three

months ended

June

30,

2018

and

2017

(unaudited):

	Three months ended June 30,
	Revenues				Income (loss) from operations
	2018		2017		2018			2017
Home	$	18,658	$	21,789	$	3,955		$	4,564
Office	$	9,791	$	8,620	$	3,110		$	2,429
SmartVoice	$	2,202	$	892	$	(5,096	)	$	(5,461	)
Total	$	30,651	$	31,301	$	1,969		$	1,532

Selected operating results information for each business segment was as follows for the

six

months ended

June30,

2018

and

2017

(unaudited):

	Six months ended June 30,
	Revenues				Income (loss) from operations
	2018		2017		2018			2017
Home	$	36,839	$	42,744	$	7,762		$	7,909
Office	$	18,144	$	15,219	$	5,263		$	3,044
SmartVoice	$	3,779	$	1,271	$	(10,771	)	$	(10,482	)
Total	$	58,762	$	59,234	$	2,254		$	471

The reconciliation of segment operating results information to the Company’s consolidated financial information was as follows for the

three

and

six

months periods ended

June 30, 2018:

	Three months			Six months
Income from operations	$	1,969		$	2,254
Unallocated corporate, general and administrative expenses		(577	)		(1,096	)
Equity-based compensation expenses		(1,660	)		(3,359	)
Intangible assets amortization expenses		(425	)		(850	)
Financial income, net		403			799
Total consolidated loss before taxes	$	(290	)	$	(2,252	)

The reconciliation of segment operating results information to the Company’s consolidated financial information was as follows for the

three

and

six

months ended

June 30, 2017:

	Three months			Six months
Income from operations	$	1,532		$	471
Unallocated corporate, general and administrative expenses		(441	)		(854	)
Equity-based compensation expenses		(1,557	)		(3,088	)
Intangible assets amortization expenses		(425	)		(850	)
Financial income, net		418			834
Total consolidated income before taxes	$	(473	)	$	(3,487	)