Note 11 – 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.

The table below presents information about reportable segments within the avionics business for the three and nine month periods ending December 31, 2017 and 2016:

Three Months Ended December 31, 2017	Avionics Government		Avionics Commercial		Avionics Total		Corporate Items			Total
Net sales	$	1,825,744	$	800,049	$	2,625,793	$	-		$	2,625,793
Cost of sales		1,013,481		675,632		1,689,113		-			1,689,113
Gross margin		812,263		124,417		936,680		-			936,680

Engineering, research, and development						546,691		-			546,691
Selling, general and administrative						225,610		322,781			548,391
Litigation costs								134,765			134,765
Legal damages								30,523			30,523
Amortization of deferred financing costs						-		649			649
Change in fair value of common stock warrants						-		(5,000	)		(5,000	)
Proceeds from life insurance								-			-
Interest expense, net						-		14,097			14,097
Total expenses						772,301		497,815			1,270,116
Income (loss) before income taxes					$	164,379	$	(497,815	)	$	(333,436	)

Three Months Ended December 31, 2016	Avionics Government		Avionics Commercial		Avionics Total		Corporate Items			Total
Net sales	$	3,771,384	$	465,135	$	4,236,519	$	-		$	4,236,519
Cost of sales		2,297,157		305,111		2,602,268		-			2,602,268
Gross margin		1,474,227		160,024		1,634,251		-			1,634,251

Engineering, research, and development						615,007		-			615,007
Selling, general and administrative						256,599		326,281			582,880
Litigation costs								282,490			282,490
Amortization of deferred financing costs						-		1,359			1,359
Change in fair value of common stock warrants						-		(37,000	)		(37,000	)
Interest expense, net						-		11,620			11,620
Total expenses						871,606		584,750			1,456,356
Income (loss) before income taxes					$	762,645	$	(584,750	)	$	177,895

Nine Months Ended December 31, 2017	Avionics Government		Avionics Commercial		Avionics Total		Corporate Items			Total
Net sales	$	5,826,763	$	2,128,272	$	7,955,035	$	-		$	7,955,035
Cost of sales		3,489,223		1,887,972		5,377,195		-			5,377,195
Gross margin		2,337,540		240,300		2,577,840		-			2,577,840

Engineering, research, and development						1,691,631		-			1,691,631
Selling, general and administrative						861,795		1,019,277			1,881,072
Litigation costs								560,610			560,610
Legal damages								2,130,523			2,130,523
Amortization of deferred financing costs						-		3,363			3,363
Change in fair value of common stock warrants						-		(95,000	)		(95,000	)
Proceeds from life insurance								(92,678	)		(92,678	)
Interest expense, net						-		38,435			38,435
Total expenses						2,553,426		3,564,530			6,117,956
Income (loss) before income taxes					$	24,414	$	(3,564,530	)	$	(3,540,116	)

Nine Months Ended December 31, 2016	Avionics Government		Avionics Commercial		Avionics Total		Corporate Items			Total
Net sales	$	12,981,768	$	1,673,149	$	14,654,917	$	-		$	14,654,917
Cost of sales		8,067,636		1,250,789		9,318,425		-			9,318,425
Gross margin		4,914,132		422,360		5,336,492		-			5,336,492

Engineering, research, and development						1,783,655		-			1,783,655
Selling, general and administrative						946,589		1,096,333			2,042,922
Litigation costs								609,330			609,330
Amortization of deferred financing costs						-		4,072			4,072
Change in fair value of common stock warrants						-		(288,203	)		(288,203	)
Interest expense, net						-		46,953			46,953
Total expenses						2,730,244		1,468,485			4,198,729
Income (loss) before income taxes					$	2,606,248	$	(1,468,485	)	$	1,137,763