16. Segment Information

In accordance with FASB ASC 280, “Disclosures about Segments of an Enterprise and related information”, the Company determined it has two reportable segments - avionics government and avionics commercial. There are no inter-segment revenues.

The Company is organized primarily on the basis of its avionics products. The avionics government segment consists primarily of the design, manufacture, and sale of test equipment to the U.S. and foreign governments and militaries either directly or through distributors. The avionics commercial segment consists of design, manufacture, and sale of test equipment to domestic and foreign airlines, directly or through commercial distributors, and to general aviation repair and maintenance shops. The Company develops and designs test equipment for the avionics industry and as such, the Company’s products and designs cross segments.

Management evaluates the performance of its segments and allocates resources to them based on gross margin. The Company’s general and administrative costs and sales and marketing expenses, and engineering costs are not segment specific. As a result, all operating expenses are not managed on a segment basis. Net interest includes expenses on debt and income earned on cash balances, both maintained at the corporate level. Segment assets include accounts receivable and work-in-process inventory. Asset information, other than accounts receivable and work-in-process inventory, is not reported, since the Company does not produce such information internally. All long-lived assets are located in the U.S.

The tables below present information about reportable segments for the years ended March 31:

	Avionics		Avionics		Avionics		Corporate/
2017	Government		Commercial		Total		Reconciling Items			Total
Net sales	$	16,531,913	$	2,213,543	$	18,745,456	$	-		$	18,745,456
Cost of Sales		10,363,318		1,698,023		12,061,341		-			12,061,341

Gross Margin		6,168,595		515,520		6,684,115		-			6,684,115

Engineering, research, and development						2,430,322		-			2,430,322
Selling, general, and administrative						1,260,388		1,320,697			2,581,085
Litigation expenses								1,244,639			1,244,639
Legal damages								2,800,000			2,800,000
Amortization of deferred financing costs						-		5,429			5,429
Change in fair value of common stock warrant						-		(321,203	)		(321,203	)
Interest expense, net						-		59,167			59,167
						3,690,710		5,108,729			8,799,439
Income (loss) before income taxes					$	2,993,405	$	(5,108,729	)	$	(2,115,324	)

Segment Assets	$	4,264,168	$	1,500,393	$	5,764,561	$	671,387		$	6,435,948

	Avionics		Avionics		Avionics		Corporate/
2016	Government		Commercial		Total		Reconciling Items			Total
Net sales	$	23,011,016	$	1,793,809	$	24,804,825	$	-		$	24,804,825
Cost of Sales		15,446,232		1,373,003		16,819,235		-			16,819,235

Gross Margin		7,564,784		420,806		7,985,590		-			7,985,590

Engineering, research, and development						2,038,126		-			2,038,126
Selling, general, and administrative						1,218,327		1,700,838			2,919,165
Litigation expenses								448,379			448,379
Amortization of deferred financing costs						-		5,429			5,429
Change in fair value of common stock warrant						-		617,241			617,241
Interest expense, net						-		101,129			101,129
						3,256,453		2,873,016			6,129,469
Income (loss) before income taxes					$	4,729,137	$	(2,873,016	)	$	1,856,121

Segment Assets	$	5,644,551	$	488,842	$	6,133,393	$	3,974,726		$	10,108,119