Note 9 – 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 tables below present information about reportable segments within the avionics business for the three and six month periods ending September 30, 2019 and 2018:

Three Months Ended September 30, 2019	Avionics Government		Avionics Commercial		Avionics Total		Corporate Items			Total
Net sales	$	3,140,454	$	771,714	$	3,912,168	$	-		$	3,912,168
Cost of sales		1,626,089		412,446		2,038,535		-			2,038,535
Gross margin		1,514,365		359,268		1,873,633		-			1,873,633

Engineering, research, and development						525,739		-			525,739
Selling, general and administrative						278,026		347,137			625,163
Litigation costs								91,553			91,553
Change in fair value of common stock warrants								(5,500	)		(5,500	)
Interest income						-		(1,018	)		(1,018	)
Interest expense - judgment								90,596			90,596
Interest expense						-		10,866			10,866
Total expenses						803,765		533,634			1,337,399
Income (loss) before income taxes					$	1,069,868	$	(533,634	)	$	536,234

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	)

Six Months Ended September 30, 2019	Avionics Government		Avionics Commercial		Avionics Total		Corporate Items			Total
Net sales	$	5,644,594	$	1,574,036	$	7,218,630	$	-		$	7,218,630
Cost of sales		2,868,656		894,737		3,763,393		-			3,763,393
Gross margin		2,775,938		679,299		3,455,237		-			3,455,237

Engineering, research, and development						1,050,842		-			1,050,842
Selling, general and administrative						512,604		725,030			1,237,634
Litigation costs								102,060			102,060
Change in fair value of common stock warrants								73,000			73,000
Interest income						-		(2,018	)		(2,018	)
Interest expense - judgment								171,106			171,106
Interest expense						-		28,603			28,603
Total expenses						1,563,446		1,097,781			2,661,227
Income (loss) before income taxes					$	1,891,791	$	(1,097,781	)	$	794,010

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	)