Registrant's telephone number, including area code: (203) 622-4086

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes [X]    No [   ]      

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).Yes [X]    No [   ]

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

 

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes [   ]    No [X]

PASSUR Aerospace, Inc. ("PASSUR" or the "Company"), a New York corporation founded in 1967, is a leading business intelligence company, providing predictive analytics and decision support technology for the aviation industryindustry's primarily to improve the operational performance and cash flow of airlines and the airports where they operate. The Company is recognized as a leader in airline and airport operational efficiency and business aviation marketing and operational solutions. PASSUR is a pioneer in the successful use ofuses big data, with anwithin the aviation intelligence platform and suite of web-based solutions that address the aviation industry's most intractable and costly challenges, including, but not limited to, the underutilization of airspace and airport capacity, delays, cancellations, and diversions. The Company's technology platform is supported by its Aviation Intelligence Center of Excellence, a team of subject matter experts with extensive experience in airline, airport, and business aviation operations, finance, air traffic management, systems automation, and data visualization, with specific expertise in the operational and business needs, requirements, objectives, and constraints of the aviation industry.

PASSUR's mission is to improve global air traffic efficiencies by connecting the world's aviation professionals onto a single aviation intelligence platform, making PASSUR an essential element in addressing the aviation industriesindustry's system-wide inefficiencies. We are an aviation intelligence company that makes air travel more predictable, gate-to-gate, by using predictive analytics generated from our own big data – to mitigate constraints for airlines and their customers.

PASSUR's information solutions are used by the largest five North American airlines, more than 60 airport customers, including 2221 of the top 30 North American airports (with PASSUR solutions also used at the remaining eightnine airports by one or more airline customers), hundreds of corporate aviation customers, and the U.S. government.

PASSUR provides data aggregation and consolidation, information, decision support, predictive analytics, collaborative solutions, and professional services. To enable this unique offering, PASSUR owns and operates the largest commercial passive radar network in the world that updates flight tracks every 1 to 4.6 seconds, powering a proprietary database that is accessible in real-time and delivers timely, accurate information and solutions via PASSUR's industry-leading algorithms and business logic included in its products.

Solutions offered by PASSUR help to ensure flight completion, covering the entire flight life cycle, from gate to gate, and result in reductions in overall costs and carbon emissions, while maximizinghelping to maximize revenue opportunities, as well as improving operational efficiency and enhancing the passenger experience.

PASSUR's commercial solutions give aviation operators the ability to optimize performance in today's air traffic management system, while also achieving Next Generation Air Transportation System ("NextGen") and Single European Sky ATM Research objectives.

PASSUR integrates data from multiple sources, including its independent network of over 180 surveillance sensors installed throughout North America creating coast to coast coverage, as well as locations in Europe and Asia; government data; customer data; and data from third party partners. PASSUR's sensors receive aircraft and drone signals in Mode A, C, S, and Automatic Dependent Surveillance-Broadcast ("ADS-B"), providing position, altitude, beacon code, and tail number, among other information. PASSUR receives signals from aircraft that, when combined with its historical database of aircraft and airport behavior, including information recorded by its network over the last 10 years, allowsallow the Company to know more about what has happened historically and what is happening in real-time. In addition, the historical database allows the Company to predict how aircraft, the airspace, and airports are going to perform, and more importantly, how the aircraft, the airspace, and airports should perform.

The results of operations for the interim period stated above are not necessarily indicative of the results of operations to be recorded for the full fiscal year ended October 31, 2017.2018.

As of July 31, 2017, the Company has determined that its net deferred tax assets of approximately $1,691,000 are realizable on a more-likely-than-not basis.  Each reporting period, the Company assesses the realizability of its deferred tax assets to determine if it is more-likely-than-not that some portion, or all, of the deferred tax asset will be realized.  The Company considered all available positive and negative evidence including the reversal of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operating results. The ultimate realization of a deferred tax asset is ultimately dependent on sufficient taxable income within the available carryback and/or carryforward periods to utilize the deductible temporary differences.  Based on the weight of available evidence including recent financial operating results, the Company determined that its net deferred tax assets are not realizable on a more-likely-than-not basis and has recorded a full valuation allowance is not required.against its net deferred tax assets and liabilities

As ofAt October 31, 2016,2017, the Company had aavailable federal net operating loss carry-forwardcarryforwards of $6,180,000 available for income tax purposes$7,474,000, which will expire in various tax years from fiscal year 20222023 through fiscal year 2030.  Included in the federal net operating loss of $6,180,000 is approximately $1,498,000 in connection with tax deductions for equity compensation that are greater than the compensation recognized for financial reporting purposes.  Such amount is not included in the Company's net deferred tax assets.2037.

Basic net income per share is computed based on the weighted average number of shares outstanding. Diluted earnings per share is computed similarly to basic earnings per share, except that it reflects the effect of common shares issuable upon exercise of stock options, using the treasury stock method in periods in which they have a dilutive effect. The Company's 2009 Stock Incentive Plan allows for a cashless exercise. Shares used to calculate net income per share are as follows:

The Company follows FASB ASC 718, "Compensation-Stock Compensation," which requires the measurement of compensation cost for all stock-based awards at fair value on the date of grant, and recognition of stock-based compensation expense over the service period for awards expected to vest. The fair value of stock options was determined using the Black-Scholes valuation model. Such fair value is recognized as an expense over the service period, net of forfeitures. Stock-based compensation expense was $153,000$171,000 and $408,000$142,000 for the three and nine months ended JulyJanuary 31, 2017, respectively. For the three2018 and nine months ended July 31, 2016, stock-based compensation was $113,000 and $275,000,2017, respectively. Stock-based compensation is primarily included in selling, general, and administrative expenses.

The Company has a note payable to G.S. Beckwith Gilbert, the Company's Chairman and significant stockholder, of $2,700,000$4,725,000 (the "Third Replacement"Existing Gilbert Note") as of JulyJanuary 31, 2017.2018. The Third ReplacementExisting Gilbert Note bears a maturity date of November 1, 2018, with an annual interest rate of 6%. Interest payments are due by October 31 of each fiscal year. During the three months ended January 31, 2018, Mr. Gilbert loaned the Company an additional $925,000. The Company has paid all interest incurred on the Third ReplacementExisting Gilbert Note through JulyJanuary 31, 2017,2018, totaling $122,850.$66,000.

The information provided in this Quarterly Report on Form 10-Q (including, without limitation, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Liquidity and Capital Resources" below) contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 regarding the Company's future plans, objectives, and expected performance. The words "believe," "may," "will," "could," "should," "would," "anticipate," "estimate," "expect," "project," "intend," "objective," "seek," "strive," "might," "likely result," "build," "grow," "plan," "goal," "expand," "position," or similar words, or the negatives of these words, or similar terminology, identify forward-looking statements. These statements are based on assumptions that the Company believes are reasonable, but are subject to a wide range of risks and uncertainties, and a number of factors could cause the Company's actual results to differ materially from those expressed in the forward-looking statements referred to above. These factors include, without limitation, the risks and uncertainties discussed under "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," the uncertainties related to the ability of the Company to sell its existing product and professional service lines, as well as its new products and professional services (due to potential competitive pressure from other companies or other products), as well as the potential for terrorist attacks, changes in fuel costs, airline bankruptcies and consolidations, economic conditions, and other risks detailed in the Company's periodic report filings with the SEC. Other uncertainties which could impact the Company include, without limitation, uncertainties with respect to future changes in governmental regulation and the impact that such changes in regulation will have on the Company's business. Additional uncertainties include, without limitation, uncertainties relating to: (1) the Company's ability to find and maintain the personnel necessary to sell, manufacture, and service its products; (2) its ability to adequately protect its intellectual property; and (3) its ability to secure future financing. Readers are cautioned not to place undue reliance on these forward-looking statements, which relate only to events as of the date on which the statements are made and which reflect management's analysis, judgments, belief, or expectation only as of such date. The Company undertakes no obligation to publicly update any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

The Company's business plan is to continue to focus on increasing subscription-based revenues from its suite of software applications, and to develop new applications and professional services designed to address the needs of the aviation industry and the U.S. government. The Company's goal is to help solve problems faced by its customers and is builtbased on the following product development objectives: (1) continue developing decision support solutions built on business intelligence, predictive analytics, and web-dashboard technology; (2) continue integrating multiple additional industry data sets into its integrated aviation database, including data from a variety of additional aircraft, airspace, and ground surveillance technologies, in order to ensure that PASSUR is the primary choice for data integration and management for large aviation organizations; (3) continue extending the reach of the PASSUR Network, which provides the proprietary backbone for many of the Company's solutions; and (4) continue developing the Company's professional service capabilities, in order to ensure that its solutions can be fully implemented in its customers' work environments, with minimal demand on customers' internal resources.

Management concentrates its efforts on the sale of business intelligence, predictive analytics, and decision support product applications, utilizing data primarily derived from the PASSUR Network. Such efforts include the continued development of existing products, new product offerings and to a lesser extent, professional services.

Revenues decreased $495,000 or 13% to $3,332,000  forFor the three months ended JulyJanuary 31, 2017,2018, total revenues decreased $102,000, or 3%, to $3,513,000, as compared with $3,616,000 for the same period in fiscal year 2016. For the nine months ended July 31, 2017,2017. The decrease in total revenues decreased $701,000was primarily due (i) a decline in our subscription revenue of $113,000, or 6%3%, to $10,371,000, aswhile our consulting and maintenance revenues collectively increased $10,000, or 14% compared with the same periodprior year.

The decline in fiscal year 2016. The revenue decrease for both the three and nine months ended July 31, 2017, wassubscription revenues of $113,000 is primarily due to lost revenue from expired contracts totaling $455,000, of which one customer's expiring contract contributed approximately $285,000 during the non-renewal of a contract from a customer, as previously disclosed, which was partiallythree months ended January 31, 2017.  These amounts were offset by the net incremental revenue recognized during the three months ended January 31, 2018 related to new contracts closed during fiscal year 2017, totaling approximately $320,000, plus revenue from new contracts closed in fiscal year 2016 and fiscal year 2017. The Company believes the lost revenue from this contract will be offset by the anticipated revenues from new contracts to be closed during fiscal year 2017 on an annualized run-rate basis. Subscriptions to the Company's suite of software applications and services for the three and nine months ended JulyJanuary 31, 2017, decreased by $338,000, or 9% and $244,000 or 2%, compared to the same period in 2016. The Company had consulting and license fee revenue of $38,000 and $119,000 for the three and nine months ended July 31, 2017, as compared to $177,000 and $528,000 for the same period in 2016. 2018, totaling approximately $20,000.

The Company continues to enhance its wide selection of products and develop and deploy new software applications and solutions to better address customers' needs, all of which are easily delivered through web-based applications or as stand-alone professional services.

Costs associated with subscription and maintenance revenues consist primarily of direct labor, depreciation of PASSUR and Surface Multilateration ("SMLAT") Network Systems, amortization of capitalized software development costs, communication costs, data feeds, allocated overhead costs, travel and entertainment, and consulting fees. Also included in Costcost of Revenuesrevenues are costs associated with upgrades to PASSUR and SMLAT Systems necessary to make such systems compatible with new software applications, as well as the ordinary repair and maintenance of existing PASSUR and SMLAT Systems. Additionally, cost of revenues in each reporting period is impacted by: (1) the number of PASSUR and SMLAT System units added to the PASSUR Network, which includes the production, shipment, and installation of these assets, which are capitalized to the PASSUR Network; and (2) capitalized costs associated with software development and data center projects. Both of these are referred to as "Capitalized Assets," and are depreciated and/or amortized over their respective useful lives and charged to cost of revenues. The Company does not break down its costs by product.

Cost of revenues decreased $157,000,increased $558,000, or 10%33%, to $1,490,000$2,239,000 for the three months ended JulyJanuary 31, 2017,2018, as compared with the same period in fiscal year 2016. Cost of revenues decreased $66,000 or 1%, to $4,714,000 for2017. During the ninethree months ended JulyJanuary 31, 2017, as compared with the same period in fiscal year 2016.  The decrease in2018, cost of revenues for the three and nine months ended July 31, 2017, comparedincreases were primarily due to the same periods in 2016, was primarily related to(i) an increase in capitalized cost associated with our PASSUR Network installations and software development projects. The increase in capitalized cost was partially offset by an increase intotal personnel related costs which were not assigned to capitalized projects,and consulting costs of approximately $340,000, as a result of the Company's investmenton-going investments in additional personnel andits software portfolio; (ii) an increase in thedata and license fees of approximately $95,000, to further enhance our software portfolio offerings; and (iii) an increase in amortization expense associated with our capitalized software projects of software development projects.approximately $95,000.

When the Company uses its employees to manufacture PASSUR and SMLAT Systems, build capital assets, and ship and install PASSUR and SMLAT Systems in the field, or for software development, there is a reduction in cost of revenues due to the fact that the labor-related costs for these systems are capitalized, rather than expensed and amortized over 7 years for PASSUR or 5 years for SMLAT systems typically.systems.

Research and development expenses decreased $45,000,$73,000, or 20%32%, to $186,000,$155,000, for the three months ended JulyJanuary 31, 2017,2018, as compared to $232,000$227,000 for the three months ended July 31, 2016.  Research and development expenses decreased $41,000 or 6%, to $600,000 for the nine months ended July 31, 2017, as compared to $641,000, for the nine months ended July 31, 2016.same period in fiscal year 2017. The decrease was primarily attributable to a decreasereduction  in personnel related costs allocated to research and development, from cost of sales and selling general and administrative expenses as compared with the prior year.

The Company's research and development efforts include activities associated with new product development, as well as the enhancement and improvement of the Company's existing software and information products. The Company anticipates that it will continue to invest in research and development to develop, maintain, and support existing and newly developed applications for its customers.

Selling, general, and administrative expenses increased $521,000,$402,000, or 33%22%, to $2,107,000$2,221,000 for the three months ended JulyJanuary 31, 2017,2018, as compared to $1,586,000$1,819,000 for the three months ended July 31, 2016.same period in fiscal year 2017.  The increase is primarily due in part to (i) an increase in personnel related costs associated with sales and marketing of approximately $249,000.  Additionally, the Company recorded an accrual for approximately $159,000 to increase the bad debt reserve related to accounts receivable outstanding for which collections are uncertain. Stock-based compensation expense increased $44,000, due to the increase in stock awards granted during the three months ended July 31, 2017, as compared with the same period in 2016.

Loss from operations increased $989,000 for the ninethree months ended JulyJanuary 31, 2017, income from operations decreased $1,462,000 or 207%,2018, as compared to the same periodsperiod in fiscal year 2016.2017. The decreases for the three and nine months ended July 31, 2017, wereincrease was primarily due to (i) an increase in operating expenses of $319,000,$887,000 or 9% and $761,000 or 7%24%, respectively; and (ii) a decrease in revenues of $495,00$102,000 or 13% and $701,000 or 6%, respectively.3%. Overall, the increase in operating expenses for the three and nine-month periods ended July 31, 2017, was primarily due to our continued investmentsmajor investment in hiring new development, sales and marketing and management professionals needed to achieve our near-termfuture strategic product enhancements and future revenue growth objectives.

Interest expense – related party decreased $3,000,increased $24,000, or 7% and $19,000 or 13%,59% for the three and nine months ended JulyJanuary 31, 2017,2018, as compared to the three and nine months ended JulyJanuary 31, 2016,2017, due to the lowerhigher principal balance on the note.note for the first quarter of 2018, as compared to the same period in fiscal year 2017.

The Company had net loss of $579,000,$1,167,000, or $0.08 per diluted share and $874,000 or $0.11$0.15 per diluted share for the three and nine months ended JulyJanuary 31, 2017,2018, as compared to a net incomeloss of $181,000,$51,000, or $0.02 per diluted share and $328,000 or $0.04$0.01 per diluted share, for the three and nine months ended July 31, 2016. Includedsame period in the net loss for the nine months ended July 31, 2017, is a discrete tax provision of approximately $198,000 related to the Company adjusting its deferred tax asset relating to net operating losses in various state jurisdictions.2017.

The Company's current assets exceeded its current liabilities, excluding deferred revenue, by $735,000$1,663,000 as of JulyJanuary 31, 2017.2018. The Company's stockholders' equity was $7,457,000 as of January 31, 2018.

The outstanding principal amount under the note payable to a related party, G.S. Beckwith Gilbert, the Company's Chairman and significant stockholder, was $2,700,000$4,725,000 as of JulyJanuary 31, 2017,2018 and $3,800,000 as of October 31, 2016,2017, with a maturity of November 1, 2018. On August2019. During the three months ended January 31, 2017,2018, the Company paid all interest incurred on the note payable totaling $66,000. During the three months ended January 31, 2018, Mr. Gilbert loaned the Company an additional $500,000. As of September 11, 2017, the loan balance totaled $3,200,000.

On January 6, 2017,February 9, 2018, the Company entered into a ThirdFourth Debt Extension Agreement with G.S. BeckwithMr. Gilbert, the Company's Chairman and significant stockholder, effective January 6, 2017,February 9, 2018, pursuant to which the Company and Mr. Gilbert agreed to modify certain terms and conditions of the existing debt agreement with Mr. Gilbert (the "Existing Gilbert Note"). The maturity date of the Existing Gilbert Note was due on November 1, 2017,2018, and the total amount of principal and interest due and owing as of January 6, 2017,February 9, 2018, was $2,730,000.$4,732,000. Pursuant to the ThirdFourth Debt Extension Agreement, the Company issued a new note to Mr. Gilbert in the principal amount of $2,700,000$4,725,000 (the "Third"Fourth Replacement Note") in exchange for the Existing Gilbert Note and the Company agreed to pay the accrued interest under the Existing Gilbert Note as of January 6, 2017,February 9, 2018, in an amount equal to $30,000,$7,000, at the time and on the terms set forth in the Existing Gilbert Note. Under the terms of the ThirdFourth Replacement Note, the maturity date was extended to November 1, 2018,2019, and the annual interest rate remained at 6%. Interest payments under the ThirdFourth Replacement Note shall be made annually on October 31st of each year. The note payable is secured by the Company's assets. The Company has paid all interest incurred on the Third Replacement Note through July 31, 2017, totaling $122,850.  On August 31, 2017, Mr. Gilbert loaned the Company an additional $500,000 to primarily fund the Company's near-term investment strategy to enhance the Company's technology platform, in the form of software development personnel, third-party contractors, and PASSUR Network infrastructure support. As of September 11, 2017, the loan balance totaled $3,200,000. The Company anticipates that Mr. Gilbert may provide additional funding through the remainder of fiscal-year 2017 as part of the Company's near-term investment strategy as discussed above.

Management is addressing the Company's working capital deficiency by aggressively marketing the Company's PASSUR Network Systems information capabilities in its existing product and professional service lines, as well as in new products and professional services, which are continually being developed and deployed. Management believes that the continued development of its existing suite of software products and professional services, which address the wide array of needs of the aviation industry, will continue to lead to increased growth in the Company's customer-base and subscription-based revenues.

If the Company's business plan does not generate sufficient cash flows from operations to meet the Company's operating cash requirements, the Company will attempt to obtain external financing on commercially reasonable terms. TheHowever, the Company believeshas received a commitment from G.S. Beckwith Gilbert, dated March 14, 2018, that its liquidityif the Company, at any time, is adequateunable to meet operating and investment requirementsits obligations through March 14, 2019, Mr. Gilbert will provide the necessary continuing financial support to the Company in order for the next twelve months.Company to meet such obligations. Such commitment for financial support may be in the form of additional advances or loans to the Company, in addition to the deferral of principal and/or interest payments due on the existing loans, if deemed necessary. The note payable is secured by the Company's assets.

Net cash provided by operating activities was $2,711,000$2,557,000 for the ninethree months ended JulyJanuary 31, 2017,2018, and consisted of a net loss of $874,000,$1,167,000, depreciation and amortization of $2,520,000, and$830,000, stock-based compensation expense of $408,000.$171,000 and deferred revenue of $1,967,000, with the balance consisting of an increase in operating liabilities. Net cash used in investing activities was $3,422,000$701,000 for the ninethree months ended JulyJanuary 31, 2017,2018, which was expended for capitalized software development costs, additions to the PASSUR Network, and additional computer equipment for our Bohemia, New York, and Orlando, Florida data centers. Net cash provided by financing activities was zero$925,000 for the ninethree months ended JulyJanuary 31, 2017, which included2018 and consisted of proceeds from note payable – related party.  Net cash provided by operating activities increased by $2,785,000 for the purchase of treasury stock of $38,000 and offset bythree months ended January 31, 2018, as compared to the exercise of stock options of $38,000.same period in 2017.

The Company actively monitors the costs associated with supporting the business, and continually seeks to identify and reduce any unnecessary costs as part of its cost reduction initiatives, while strategically reinvesting back into the business as part of its long-term plans. Additionally, the aviation market has been impacted by budgetary constraints, airline bankruptcies and consolidations, current economic conditions, the continued war on terrorism, and fluctuations in fuel costs. The aviation market is extensively regulated by government agencies, particularly the Federal Aviation AdministrationFAA and the National Transportation Safety Board, and management anticipates that new regulations relating to air travel may continue to be issued. Substantially all of the Company's revenues are derived from airlines, airports, and organizations that serve, or are served by, the aviation industry. Any new regulations or changes in the economic situation of the aviation industry could have an impact on the future operations of the Company, either positively or negatively.

Interest by potential customers in the information and decision support software products obtained from PASSUR Network Systems and its professional services remains strong. As a result, the Company believes that future revenues will continue to increase on an annualized basis. However, there are no guarantees that such annualized future revenue increases will occur. If revenues do not increase and the Company's cost-structure is not adjusted accordingly, losses may occur. The extent of such profits or losses will be dependent on sales volume achieved and the Company's ability to optimize its cost structures.

None.

The Company's discussion and analysis of its financial condition and results of operations are based upon its consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP").GAAP. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures of contingent assets and liabilities based upon accounting policies management has implemented. These significant accounting policies are disclosed in Note 1 to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2016,2017, and there have been no material changes to such policies since the filing of such Annual Report. These policies and estimates are critical to the Company's business operations and the understanding of its results of operations. The impact and any associated risks related to these policies on the Company's business operations are discussed throughout Management's Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report on Form 10-K for the fiscal year ended October 31, 2016,2017, as such policies affect its reported financial results. The actual impact of these factors may differ under different assumptions or conditions.

Not applicable.

As ofdisclosed in Part II. Item 9A. "Controls and Procedures" in the end of the period covered by this quarterly reportCompany's Annual Report on Form 10-Q, management carried out an evaluation, under10-K for the supervision, andfiscal year ended October 31, 2017, the Company identified a material weakness in internal control over financial reporting related to certain errors associated with the participationcapitalization of certain costs associated with software development and manufacturing and installation of fixed assets.

Based on the Company'sevaluation at January 31, 2018, by our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation ofthey concluded that, our disclosure controls and procedures (as such term is defineddesigned to correct the material weakness in Rules 13a-15(e)internal control over financial reporting described in Part II, Item 9A of our 2017 Form 10-K, were not effective as of January 31, 2018, but subsequent to January 31, 2018, the Company implemented its remediation plans before it prepared its financial statements for the quarter ending January 31, 2018, and 15d-15(e) underbelieves the Securities Exchange Act of 1934 (the "Exchange Act").controls are operated appropriately. However, the Company will continue to monitor the remediation during fiscal year 2018, as required, to ensure the design, implementation and controls are operating effectively.

The Company's disclosureCEO and CFO have instituted plans to remediate the material weakness in internal control over financial reporting related to the capitalization of certain general and administrative costs associated with software development and manufacturing and installations of fixed assets, which costs should have been expensed as incurred. The Company eliminated any general and administrative costs for software development and from the manufacturing and installation of fixed assets, and this change was completed before the Company prepared its financial statements for the quarter ended January 31, 2018. The Company will continue to monitor the remediation during fiscal year 2018, as required, to ensure the design, implementation and controls are operating effectively.

Management believes that the Company's consolidated financial statements included in this Form 10-Q have been prepared in accordance with generally accepted accounting principles.  The Company's CEO and procedures are designedCFO have certified that, based on such officer's knowledge, the financial statements, and other financial information included in this Form 10-Q, fairly present in all material respects the Company's financial condition, results of operations and cash flows as of, and for, the periods presented in this Form 10-Q. 

Management continues to monitor the comprehensive remediation program as disclosed in Part II. Item 9A. "Controls and Procedures" in the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2017 to ensure that information requiredcontrol deficiencies contributing to be disclosed bythe material weaknesses previously identified do not recur and that the new controls recently introduced will operate effectively.

For the quarter ended January 31, 2018, the Company in reports filed or submitted underdeveloped and implemented a comprehensive remediation program to enhance the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Commission's rules. The Company believes that a control system, no matter how well designed and operated, can provide only reasonable assurance, not absolute assurance, that the objectivesCompany's internal controls to prevent any recurrence of the control systemmaterial weaknesses discussed above. Specifically, the Company (i) updated its capitalization policies regarding software development costs and costs associated with manufacturing and installation of Company-owned assets to ensure that such policies are met. Based on theirin compliance with applicable GAAP,  (ii) provided extensive training for all appropriate personnel to improve the identification, evaluation asand monitoring of risks and the effectiveness of associated controls, which has been completed, and (iii) performed additional levels of review around the preparation of the endschedule and data used to compute the costs of the period covered by this quarterly report on Form 10-Q, the Company's Chief Executive Officersoftware development and Chief Financial Officer have concluded that such controlsmanufacturing and procedures were effective at a reasonable assurance level asinstallation of July 31, 2017.Company-owned assets.

The Company is not aware of any material pending legal proceedings to which the Company is a party or to which any of its properties are subject.