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Intangible assets were amortized based on the straight-line method or acceleration method, at the following weighted average&#160;annual rates:</div> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt">&#160;</div> <div style="line-height: 1.25"> <table id="z75b0479ebdc74cf58d7309cbf2c7bd14" cellspacing="0" cellpadding="0" align="center" border="0" style="font: 10pt Times New Roman, Times, serif; width: 75%"> <tr> <td style="vertical-align: bottom; width: 56.69%">&#160;</td> <td style="vertical-align: bottom; border-bottom: #000000 2px solid; width: 43.31%"> <div style="font: bold 10pt/1.25 Times New Roman, Times, serif; text-align: center; margin-left: 2.85pt">%</div> </td> </tr> <tr> <td style="vertical-align: bottom; width: 56.69%">&#160;</td> <td style="vertical-align: bottom; width: 43.31%">&#160;</td> </tr> <tr> <td style="vertical-align: bottom; width: 56.69%; background-color: #cceeff"> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: left; margin-left: 8.5pt; text-indent: -8.5pt">Patents</div> </td> <td style="vertical-align: bottom; width: 43.31%; background-color: #cceeff"> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: center">10</div> </td> </tr> <tr> <td style="vertical-align: bottom; width: 56.69%; background-color: #ffffff"> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: left; margin-left: 8.5pt; text-indent: -8.5pt">Technology</div> </td> <td style="vertical-align: bottom; width: 43.31%; background-color: #ffffff"> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: center">12.5-20</div> </td> </tr> <tr> <td style="vertical-align: bottom; width: 56.69%; background-color: #cceeff"> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: left; margin-left: 8.5pt; text-indent: -8.5pt">Customer relationships</div> </td> <td style="vertical-align: bottom; width: 43.31%; background-color: #cceeff"> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: center">10.3-25</div> </td> </tr> <tr> <td style="vertical-align: bottom; width: 56.69%; background-color: #ffffff"> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: left; margin-left: 8.5pt; text-indent: -8.5pt">Backlog</div> </td> <td style="vertical-align: bottom; width: 43.31%; background-color: #ffffff"> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: center">100</div> </td> </tr> </table> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt">During 2014, the Company recorded an impairment charge for intangible assets allocated to the reporting unit within the Cyber security segment in the amount of $&#160;325, which was recorded as part of the impairment of goodwill and intangible assets in the statements of operations (see Note 6).</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt">During the years ended December 31, 2015 and 2016, the Company did not record any impairment charges relate to its intangible assets.</div></div> <div><div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt"></div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="text-align: justify; line-height: 1.25"> <table id="zc09643effe8f45a6a4a5f2a489381213" class="DSPFListTable" cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, serif; width: 100%"> <tr> <td style="width: 56.7pt"></td> <td style="font: 10pt Times New Roman, Times, serif; vertical-align: top; width: 28.35pt">j.</td> <td style="vertical-align: top; text-align: justify; width: auto"> <div style="font: 10pt Times New Roman, Times, serif">Impairment of long-lived assets:</div> </td> </tr> </table> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt">The Company's long-lived assets and certain identifiable intangibles are reviewed for impairment in accordance with ASC 360, "Property, Plant, and Equipment" whenever events or changes in circumstances indicate that the carrying amount of a group of assets may not be recoverable. Recoverability of a group of assets to be held and used is measured by a comparison of the carrying amount of the group to the future undiscounted cash flows expected to be generated by the group. If such group of assets is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds their fair value. In 2014, 2015 and 2016, the Company did not record any impairment charges attributable to property and equipment.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt">During 2014, the Company recorded an impairment charge for intangible assets allocated to the reporting unit within the Cyber security segment in the amount of $&#160;325 (see Note 2i).</div></div> <div><div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt"></div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="text-align: justify; line-height: 1.25"> <table id="z12f3a6970626489eb1b2444b29ee5809" class="DSPFListTable" cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, serif; width: 100%"> <tr> <td style="width: 56.7pt"></td> <td style="font: 10pt Times New Roman, Times, serif; vertical-align: top; width: 28.35pt">k.</td> <td style="vertical-align: top; text-align: justify; width: auto"> <div style="font: 10pt Times New Roman, Times, serif">Goodwill:</div> </td> </tr> </table> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt">Goodwill has been recorded as a result of acquisitions and represents excess of the costs over the net fair value of the assets of the businesses acquired.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt">Goodwill is allocated to three reporting units: one unit within the Products segment and the Cyber security reporting unit and Video reporting unit, both within the Video and Cyber security segment.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt">The Company follows ASC 350, "Intangibles - Goodwill and Other."</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt">ASC 350 requires goodwill to be tested for impairment, at the reporting unit level.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt">ASC 350 allows an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. If the qualitative assessment does not result in a more likely than not indication of impairment, no further impairment testing is required. If it does result in a more likely than not indication of impairment, the two-step impairment test is performed. Alternatively, ASC 350 permits an entity to bypass the qualitative assessment for any reporting unit and proceed directly to performing the first step of the goodwill impairment test. The Company elects to perform an annual impairment test of goodwill as of December 31 of each year, or more frequently if impairment indicators are present.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt">ASC 350 prescribes a two phase process for impairment testing of goodwill. The first phase screens for impairment, while the second phase (if necessary) measures impairment. In the first phase of impairment testing, goodwill attributable to each of the reporting units is tested for impairment by comparing the fair value of each reporting unit with its carrying value. If the carrying value of the reporting unit exceeds its fair value, the second phase is then performed. The second phase of the goodwill impairment test compares the implied fair value of the reporting unit's goodwill with the carrying amount of that goodwill.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt">If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. Fair value is determined using discounted cash flows, based on the income approach, as the Company believes that this approach best approximates the reporting unit's fair value at this time. Significant estimates used in the methodologies include estimates of future cash flows, future short-term and long-term growth rates and weighted average cost of capital for each of the reporting units.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt"><u>Goodwill annual impairment test for the Products segment:</u></div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt">The material assumptions used for the goodwill annual impairment test for the Products segment, according to the income approach for 2016 were five years of projected net cash flows, a weighted average cost of capital rate of 14% and a long-term growth rate of 3%. The Company considered historical rates and current market conditions when determining the discount and growth rates to use in its analyses. If these estimates or their related assumptions change in the future, the Company may be required to record impairment charges for its goodwill.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt">As required by ASC 820, "Fair Value Measurements and Disclosures," the Company applies assumptions that marketplace participants would consider in determining the fair value of its reporting unit.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt">During the years ended December 31, 2014, 2015 and 2016, the Company did not record any impairment charges relates to the goodwill allocated to the reporting units within the Products segment.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt"><u>Goodwill annual impairment test for the Cyber security reporting unit within the Video and Cyber security segment:</u></div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt">The material assumptions used for the goodwill annual impairment test for the Cyber security segment, according to the income approach for 2016 were five years of projected net cash flows, a weighted average cost of capital rate of 17% and a long-term growth rate of 3%. The Company considered current market conditions when determining the discount and growth rates to use in its analyses.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt">As required by ASC 820, "Fair Value Measurements and Disclosures," the Company applies assumptions that marketplace participants would consider in determining the fair value of its reporting unit.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt">In 2014, the first step which used the DCF approach to measure the fair value of the reporting unit within the Cyber security segment indicated that the carrying amount of such reporting unit, including goodwill, exceeded its fair value. The second step was then conducted in order to measure the amount of impairment loss, by means of a comparison between the implied fair value of the goodwill and the carrying amount of the goodwill. In the second step, the Company assigned the fair value of the reporting unit within the Cyber security segment, as determined in the first step, to the reporting unit's individual assets and liabilities, including intangible assets. The excess of the fair value of the reporting unit over the amounts assigned to its assets and liabilities represented the amount of the implied fair value of goodwill. The carrying amount of the goodwill over its implied fair value represented an impairment loss of goodwill in the amount of $ 2,114 which was recorded as part of the impairment of goodwill and intangible assets in the statements of operations.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt">During the years ended December 31, 2015 and 2016, the Company did not record any impairment charges relates to the goodwill allocated to the Cyber security reporting unit within the Video and Cyber security segment.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt"><u>Goodwill annual impairment test for the Video reporting unit within the Video and Cyber security segment:</u></div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt">The material assumptions used for the goodwill annual impairment test for the Video reporting unit, according to the income approach for 2016 were five years of projected net cash flows, a weighted average cost of capital rate of 16% and a long-term growth rate of 3%. The Company considered historical rates and current market conditions when determining the discount and growth rates to use in its analyses. If these estimates or their related assumptions change in the future, the Company may be required to record impairment charges for its goodwill.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt">As required by ASC 820, "Fair Value Measurements and Disclosures," the Company applies assumptions that marketplace participants would consider in determining the fair value of its reporting unit.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt">During the year ended December 31, 2016, the Company did not record any impairment charges relates to the goodwill allocated to the Video reporting unit within the Video and Cyber security segment.</div></div> <div><div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt"></div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="text-align: justify; line-height: 1.25"> <table id="z7b5eb75e5bff49d88d00ba55efde1c4e" class="DSPFListTable" cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, serif; width: 100%"> <tr> <td style="width: 56.7pt"></td> <td style="font: 10pt Times New Roman, Times, serif; vertical-align: top; width: 28.35pt">l.</td> <td style="vertical-align: top; text-align: justify; width: auto"> <div style="font: 10pt Times New Roman, Times, serif">Business combinations:</div> </td> </tr> </table> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt">The Company accounts for business combinations in accordance with ASC No. 805, "Business Combinations". ASC No. 805 requires recognition of assets acquired, liabilities assumed, and any non-controlling interest at the acquisition date, measured at their fair values as of that date. Any excess of the fair value of net assets acquired over purchase price and any subsequent changes in estimated contingencies are to be recorded in consolidated statements of operations.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt">Acquisition related costs are expensed in the statement of operations in the period incurred.</div></div> <div><div style="text-align: justify; margin-left: 85.05pt; line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="text-align: justify; line-height: 1.25"> <table id="zc721fabc5ed2417abc56260865fef5a8" class="DSPFListTable" cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, serif; width: 100%"> <tr> <td style="width: 56.7pt"></td> <td style="font: 10pt Times New Roman, Times, serif; vertical-align: top; width: 28.35pt">m.</td> <td style="vertical-align: top; text-align: justify; width: auto"> <div style="font: 10pt Times New Roman, Times, serif">Revenue recognition:</div> </td> </tr> </table> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt">The Company generates its revenues mainly from (1) installation of comprehensive security systems for which revenues are generated from long-term fixed price contracts; (2) sales of security products; (3) services and maintenance, which are performed either on a fixed-price basis or as time-and-materials based contracts; and (4) software license fees.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt">Revenues from installation of comprehensive security systems are generated from fixed-price contracts according to which the time between the signing of the contract and the final customer acceptance is usually over one year. Such contracts require significant customization for each customer's specific needs and, as such, revenues from this type of contract are recognized in accordance with ASC 605-35, "Revenue Recognition -Construction-Type and Production-Type Projects," using contract accounting on a percentage of completion method. Accounting for long-term contracts using the percentage-of-completion method stipulates that revenue and expense are recognized throughout the life of the contract, even though the project is not completed and the purchaser does not have possession of the project. Percentage of completion is calculated based on the "Input Method."</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt">Project costs include materials purchased to produce the system, related labor and overhead expenses and subcontractor's costs. 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The Company expects to complete the evaluation of the impact of the accounting and disclosure changes on its business processes, controls and systems throughout 2017, design any changes to such business processes, controls and systems, and implement the changes before the end of 2017.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt">Currently, the Company identified issues related to variable consideration, contract accounting, incremental costs of obtaining a contract that relate to sales commission and allocating contract consideration to performance obligation&#160; for which the adoption of the standard may have an effect on the Company's accounting policy.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt">The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the cumulative catch-up transition method). 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Disclosures of credit quality indicators in relation to the amortized cost of financing receivables are further disaggregated by year of origination. The new accounting guidance is effective for interim and annual periods beginning after December 15, 2019 with early adoption permitted for interim and annual periods beginning after December 15, 2018. The amendments will be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company is analyzing the impact of this new standard and, at this time, cannot estimate the impact of adoption on its net income. 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Since 2008, the results for tax purposes are measured in nominal values, excluding certain adjustments for changes in the Israeli CPI carried out in the period up to December 31, 2007. Adjustments relating to capital gains such as for sale of property (betterment) and securities continue to apply until disposal. 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Recoverability of a group of assets to be held and used is measured by a comparison of the carrying amount of the group to the future undiscounted cash flows expected to be generated by the group. If such group of assets is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds their fair value. 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In the first phase of impairment testing, goodwill attributable to each of the reporting units is tested for impairment by comparing the fair value of each reporting unit with its carrying value. If the carrying value of the reporting unit exceeds its fair value, the second phase is then performed. The second phase of the goodwill impairment test compares the implied fair value of the reporting unit's goodwill with the carrying amount of that goodwill.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt">If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. Fair value is determined using discounted cash flows, based on the income approach, as the Company believes that this approach best approximates the reporting unit's fair value at this time. 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The Company considered current market conditions when determining the discount and growth rates to use in its analyses.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt">As required by ASC 820, "Fair Value Measurements and Disclosures," the Company applies assumptions that marketplace participants would consider in determining the fair value of its reporting unit.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt">In 2014, the first step which used the DCF approach to measure the fair value of the reporting unit within the Cyber security segment indicated that the carrying amount of such reporting unit, including goodwill, exceeded its fair value. The second step was then conducted in order to measure the amount of impairment loss, by means of a comparison between the implied fair value of the goodwill and the carrying amount of the goodwill. In the second step, the Company assigned the fair value of the reporting unit within the Cyber security segment, as determined in the first step, to the reporting unit's individual assets and liabilities, including intangible assets. The excess of the fair value of the reporting unit over the amounts assigned to its assets and liabilities represented the amount of the implied fair value of goodwill. The carrying amount of the goodwill over its implied fair value represented an impairment loss of goodwill in the amount of $ 2,114 which was recorded as part of the impairment of goodwill and intangible assets in the statements of operations.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt">During the years ended December 31, 2015 and 2016, the Company did not record any impairment charges relates to the goodwill allocated to the Cyber security reporting unit within the Video and Cyber security segment.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt"><u>Goodwill annual impairment test for the Video reporting unit within the Video and Cyber security segment:</u></div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt">The material assumptions used for the goodwill annual impairment test for the Video reporting unit, according to the income approach for 2016 were five years of projected net cash flows, a weighted average cost of capital rate of 16% and a long-term growth rate of 3%. 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The Company granted registration rights to the recipients of the warrants.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="text-align: justify; line-height: 1.25"> <table id="zc6118fb8fed545bb94c55f4c6a75abfd" class="DSPFListTable" cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, serif; width: 100%"> <tr> <td style="width: 56.7pt"></td> <td style="font: 10pt Times New Roman, Times, serif; vertical-align: top; width: 28.35pt">e.</td> <td style="vertical-align: top; text-align: justify; width: auto"> <div style="font: 10pt Times New Roman, Times, serif">Dividends:</div> </td> </tr> </table> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="font: 10pt/1.25 Times New Roman, Times, serif; text-align: justify; margin-left: 85.05pt">Dividends, if any, will be declared and paid in U.S. dollars. 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