18. 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/
2019	Government		Commercial		Total		Reconciling Items			Total
Net sales	$	9,239,379	$	2,876,671	$	12,116,050	$	-		$	12,116,050
Cost of Sales		4,902,016		1,796,814		6,698,830		-			6,698,830

Gross Margin		4,337,363		1,079,857		5,417,220		-			5,417,220

Engineering, research, and development						2,312,043		-			2,312,043
Selling, general, and administrative						880,641		1,334,880			2,215,521
Litigation expenses						-		234,720			234,720
Change in fair value of common stock warrant						-		43,500			43,500
Interest income						-		(4,005	)		(4,005	)
Interest expense - judgment								310,663			310,663
Interest expense, net						-		101,740			101,740
						3,192,684		2,021,498			5,214,182
Income (loss) before income taxes					$	2,224,536	$	(2,021,498	)	$	203,038

Segment Assets	$	4,763,198	$	365,533	$	5,128,731	$	3,200,936		$	8,329,667

	Avionics		Avionics		Avionics			Corporate/
2018	Government		Commercial		Total			Reconciling Items			Total
Net sales	$	7,395,724	$	2,628,864	$	10,024,588		$	-		$	10,024,588
Cost of Sales		4,537,216		2,357,563		6,894,779			-			6,894,779

Gross Margin		2,858,508		271,301		3,129,809			-			3,129,809

Engineering, research, and development						2,275,508			-			2,275,508
Selling, general, and administrative						1,112,191			1,379,625			2,491,816
Litigation expenses						-			610,125			610,125
Legal damages						-			2,159,000			2,159,000
Amortization of deferred financing costs						-			3,363			3,363
Change in fair value of common stock warrant						-			(95,000	)		(95,000	)
Proceeds from life insurance						-			(92,678	)		(92,678	)
Interest income						-			(866	)		(866	)
Interest expense, net						-			164,352			164,352
						3,387,699			4,127,921			7,515,620
Income (loss) before income taxes					$	(257,890	)	$	(4,127,921	)	$	(4,385,811	)

Segment Assets	$	4,873,736	$	491,247	$	5,364,983		$	2,735,796		$	8,100,779