Note 10 – 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 six month periods ending September 30, 2018 and 2017:

Three Months Ended September 30, 2018	Avionics Government		Avionics Commercial		Avionics Total		Corporate Items			Total
Net sales	$	1,284,099	$	938,842	$	2,222,941	$	-		$	2,222,941
Cost of sales		714,590		509,138		1,223,728		-			1,223,728
Gross margin		569,509		429,704		999,213		-			999,213

Engineering, research, and development						503,380		-			503,380
Selling, general and administrative						194,179		361,232			555,411
Litigation costs								35,848			35,848
Interest income						-		(1,009	)		(1,009	)
Interest expense - judgment								72,003			72,003
Interest expense						-		24,990			24,990
Total expenses						697,559		493,064			1,190,623
Income (loss) before income taxes					$	301,654	$	(493,064	)	$	(191,410	)

Three Months Ended September 30, 2017	Avionics Government		Avionics Commercial		Avionics Total			Corporate Items			Total
Net sales	$	1,028,693	$	758,472	$	1,787,165		$	-		$	1,787,165
Cost of sales		660,589		726,706		1,387,295			-			1,387,295
Gross margin		368,104		31,766		399,870			-			399,870

Engineering, research, and development						529,667			-			529,667
Selling, general and administrative						277,518			348,877			626,395
Litigation costs									43,333			43,333
Legal damages									2,100,000			2,100,000
Amortization of deferred financing costs						-			1,357			1,357
Change in fair value of common stock warrants						-			5,000			5,000
Proceeds from life insurance									-			-
Interest expense, net						-			14,707			14,707
Total expenses						807,185			2,513,274			3,320,459
Loss before income taxes					$	(407,315	)	$	(2,513,274	)	$	(2,920,589	)

Six Months Ended September 30, 2018	Avionics Government		Avionics Commercial		Avionics Total		Corporate Items			Total
Net sales	$	2,376,681	$	1,660,474	$	4,037,155	$	-		$	4,037,155
Cost of sales		1,475,844		1,080,785		2,556,629		-			2,556,629
Gross margin		900,837		579,689		1,480,526		-			1,480,526

Engineering, research, and development						1,020,703		-			1,020,703
Selling, general and administrative						411,307		710,629			1,121,936
Litigation costs								75,119			75,119
Interest income						-		(2,007	)		(2,007	)
Interest expense - judgment								143,223			143,223
Interest expense						-		59,035			59,035
Total expenses						1,432,010		985,999			2,418,009
Income (loss) before income taxes					$	48,516	$	(985,999	)	$	(937,483	)

Six Months Ended September 30, 2017	Avionics Government		Avionics Commercial		Avionics Total			Corporate Items			Total
Net sales	$	4,001,019	$	1,328,223	$	5,329,242		$	-		$	5,329,242
Cost of sales		2,475,742		1,212,340		3,688,082			-			3,688,082
Gross margin		1,525,277		115,883		1,641,160			-			1,641,160

Engineering, research, and development						1,144,940			-			1,144,940
Selling, general and administrative						636,185			696,496			1,332,681
Litigation costs									425,845			425,845
Legal damages									2,100,000			2,100,000
Amortization of deferred financing costs						-			2,714			2,714
Change in fair value of common stock warrants						-			(90,000	)		(90,000	)
Proceeds from life insurance									(92,678	)		(92,678	)
Interest expense, net						-			24,338			24,338
Total expenses						1,781,125			3,066,715			4,847,840
Loss before income taxes					$	(139,965	)	$	(3,066,715	)	$	(3,206,680	)