Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Jul. 31, 2022 | Sep. 01, 2022 | |
Details | ||
Registrant CIK | 0000225628 | |
Fiscal Year End | --10-31 | |
Registrant Name | PASSUR AEROSPACE, INC. | |
SEC Form | 10-Q | |
Period End date | Jul. 31, 2022 | |
Tax Identification Number (TIN) | 11-2208938 | |
Number of common stock shares outstanding | 7,712,091 | |
Filer Category | Non-accelerated Filer | |
Current with reporting | Yes | |
Interactive Data Current | Yes | |
Shell Company | false | |
Small Business | true | |
Emerging Growth Company | false | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Securities Act File Number | 000-7642 | |
Entity Incorporation, State or Country Code | NY | |
Entity Address, Address Line One | 3452 Lake Lynda Dr | |
Entity Address, Address Line Two | Suite 190 | |
Entity Address, City or Town | Orlando | |
Entity Address, State or Province | FL | |
Entity Address, Postal Zip Code | 32817 | |
City Area Code | 203 | |
Local Phone Number | 622-4086 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2022 | |
Document Fiscal Period Focus | Q3 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Jul. 31, 2022 | Oct. 31, 2021 |
Current assets | ||
Cash | $ 216,570 | $ 1,569,587 |
Accounts receivable, net | 911,195 | 808,611 |
Prepaid expenses and other current assets | 299,530 | 247,940 |
Total current assets | 1,427,295 | 2,626,138 |
Capitalized software development costs, net | 373,250 | 737,600 |
Property and equipment, net | 15,115 | 92,905 |
Operating lease right-of-use assets | 273,533 | 334,866 |
Other assets | 45,719 | 45,719 |
Total assets | 2,134,912 | 3,837,228 |
Current liabilities | ||
Accounts payable | 725,630 | 731,767 |
Accrued liabilities - Stimulus funding | 0 | 866,560 |
Accrued expenses and other current liabilities | 1,552,377 | 678,063 |
Operating lease liabilities, current portion | 89,701 | 86,195 |
Deferred revenue, current portion | 951,572 | 1,319,859 |
Total current liabilities | 3,319,280 | 3,682,444 |
Deferred revenue, long term portion | 136,131 | 173,939 |
Note payable - related party | 12,491,625 | 10,691,625 |
Operating lease liabilities, non-current | 271,353 | 331,168 |
Total liabilities | 16,218,389 | 14,879,176 |
Stockholders' deficit | ||
Preferred shares - authorized 5,000,000 shares, par value $0.01 per share; none issued or outstanding | 0 | 0 |
Common shares - authorized 20,000,000 shares, respectively, par value $0.01 per share; issued 8,496,526 at July 31, 2022 and October 31, 2021 | 84,964 | 84,964 |
Additional paid-in capital | 18,923,283 | 18,670,969 |
Accumulated deficit | (31,158,046) | (27,864,203) |
Stockholders' Equity before Treasury Stock | (12,149,799) | (9,108,270) |
Treasury stock, at cost | (1,933,678) | (1,933,678) |
Stockholders' Equity Attributable to Parent | (14,083,477) | (11,041,948) |
Total liabilities and stockholders' deficit | $ 2,134,912 | $ 3,837,228 |
Consolidated Balance Sheets - P
Consolidated Balance Sheets - Parenthetical - $ / shares | Jul. 31, 2022 | Oct. 31, 2021 |
Details | ||
Preferred Stock, Shares Authorized | 5,000,000 | 5,000,000 |
Preferred Stock, Par or Stated Value Per Share | $ 0.01 | $ 0.01 |
Preferred Stock, Shares Issued | 0 | 0 |
Preferred Stock, Shares Outstanding | 0 | 0 |
Common Stock, Shares Authorized | 20,000,000 | 20,000,000 |
Common Stock, Par or Stated Value Per Share | $ 0.01 | $ 0.01 |
Common Stock, Shares, Issued | 8,496,526 | 8,496,526 |
Common Stock, Shares, Outstanding | 8,496,526 | 8,496,526 |
Treasury Stock, Shares | 784,435 | 784,435 |
Consolidated Statement of Opera
Consolidated Statement of Operations - USD ($) | 3 Months Ended | 9 Months Ended | ||
Jul. 31, 2022 | Jul. 31, 2021 | Jul. 31, 2022 | Jul. 31, 2021 | |
Details | ||||
Revenues | $ 1,483,960 | $ 1,509,808 | $ 4,340,577 | $ 4,669,573 |
Operating expenses | ||||
Cost of revenues | 1,227,394 | 579,491 | 3,111,778 | 1,714,615 |
Research and development expenses | 91,050 | 55,802 | 247,977 | 156,685 |
Selling, general, and administrative expenses | 1,353,213 | 672,399 | 3,441,903 | 1,987,183 |
Operating Expenses | 2,671,657 | 1,307,692 | 6,801,658 | 3,858,483 |
Income/(Loss) from operations | (1,187,697) | 202,116 | (2,461,081) | 811,090 |
Interest expense - related party | 301,608 | 266,400 | 832,762 | 790,513 |
Income/(Loss) before income taxes | (1,489,305) | (64,284) | (3,293,843) | 20,577 |
Provision for income taxes | 0 | 0 | 0 | 0 |
Net Income/(Loss) | $ (1,489,305) | $ (64,284) | $ (3,293,843) | $ 20,577 |
Net income/(loss) per common share - basic | $ (0.19) | $ (0.01) | $ (0.43) | $ 0 |
Net income/(loss) per common share - diluted | $ (0.19) | $ (0.01) | $ (0.43) | $ 0 |
Weighted average number of common shares outstanding - basic | 7,712,091 | 7,712,091 | 7,712,091 | 7,712,091 |
Weighted average number of common shares outstanding - diluted | 7,712,091 | 7,712,091 | 7,712,091 | 7,748,451 |
Consolidated Statements of Shar
Consolidated Statements of Shareholders' Deficit - USD ($) | Common Stock | Additional Paid-in Capital | Retained Earnings | Treasury Stock | Total |
Stockholders' Equity Attributable to Parent, Beginning Balance at Oct. 31, 2020 | $ 84,964 | $ 18,448,202 | $ (27,957,401) | $ (1,933,678) | $ (11,357,913) |
Shares, Outstanding, Ending Balance at Jan. 31, 2021 | 8,496,526 | ||||
Stock-based compensation | $ 0 | 47,026 | 0 | 0 | 47,026 |
Net Income/(Loss) | $ 0 | 0 | 135,397 | 0 | 135,397 |
Shares, Outstanding, Beginning Balance at Oct. 31, 2020 | 8,496,526 | ||||
Stockholders' Equity Attributable to Parent, Ending Balance at Jan. 31, 2021 | $ 84,964 | 18,495,228 | (27,822,004) | (1,933,678) | (11,175,490) |
Stockholders' Equity Attributable to Parent, Beginning Balance at Oct. 31, 2020 | $ 84,964 | 18,448,202 | (27,957,401) | (1,933,678) | (11,357,913) |
Shares, Outstanding, Ending Balance at Jul. 31, 2021 | 8,496,526 | ||||
Stock-based compensation | 178,148 | ||||
Net Income/(Loss) | 20,577 | ||||
Shares, Outstanding, Beginning Balance at Oct. 31, 2020 | 8,496,526 | ||||
Stockholders' Equity Attributable to Parent, Ending Balance at Jul. 31, 2021 | $ 84,964 | 18,626,350 | (27,936,824) | (1,933,678) | (11,159,188) |
Stockholders' Equity Attributable to Parent, Beginning Balance at Jan. 31, 2021 | $ 84,964 | 18,495,228 | (27,822,004) | (1,933,678) | (11,175,490) |
Shares, Outstanding, Ending Balance at Apr. 30, 2021 | 8,496,526 | ||||
Stock-based compensation | $ 0 | 66,621 | 0 | 0 | 66,621 |
Net Income/(Loss) | $ 0 | 0 | (50,536) | 0 | (50,536) |
Shares, Outstanding, Beginning Balance at Jan. 31, 2021 | 8,496,526 | ||||
Stockholders' Equity Attributable to Parent, Ending Balance at Apr. 30, 2021 | $ 84,964 | 18,561,849 | (27,872,540) | (1,933,678) | (11,159,405) |
Shares, Outstanding, Ending Balance at Jul. 31, 2021 | 8,496,526 | ||||
Stock-based compensation | $ 0 | 64,501 | 0 | 0 | 64,501 |
Net Income/(Loss) | $ 0 | 0 | (64,284) | 0 | (64,284) |
Shares, Outstanding, Beginning Balance at Apr. 30, 2021 | 8,496,526 | ||||
Stockholders' Equity Attributable to Parent, Ending Balance at Jul. 31, 2021 | $ 84,964 | 18,626,350 | (27,936,824) | (1,933,678) | (11,159,188) |
Stockholders' Equity Attributable to Parent, Beginning Balance at Oct. 31, 2021 | $ 84,964 | 18,670,969 | (27,864,203) | (1,933,678) | (11,041,948) |
Shares, Outstanding, Ending Balance at Jan. 31, 2022 | 8,496,526 | ||||
Stock-based compensation | $ 0 | 103,570 | 0 | 0 | 103,570 |
Net Income/(Loss) | $ 0 | 0 | (429,775) | 0 | (429,775) |
Shares, Outstanding, Beginning Balance at Oct. 31, 2021 | 8,496,526 | ||||
Stockholders' Equity Attributable to Parent, Ending Balance at Jan. 31, 2022 | $ 84,964 | 18,774,539 | (28,293,978) | (1,933,678) | (11,368,153) |
Stockholders' Equity Attributable to Parent, Beginning Balance at Oct. 31, 2021 | $ 84,964 | 18,670,969 | (27,864,203) | (1,933,678) | (11,041,948) |
Shares, Outstanding, Ending Balance at Jul. 31, 2022 | 8,496,526 | ||||
Stock-based compensation | 252,314 | ||||
Net Income/(Loss) | (3,293,843) | ||||
Shares, Outstanding, Beginning Balance at Oct. 31, 2021 | 8,496,526 | ||||
Stockholders' Equity Attributable to Parent, Ending Balance at Jul. 31, 2022 | $ 84,964 | 18,923,283 | (31,158,046) | (1,933,678) | (14,083,477) |
Stockholders' Equity Attributable to Parent, Beginning Balance at Jan. 31, 2022 | $ 84,964 | 18,774,539 | (28,293,978) | (1,933,678) | (11,368,153) |
Shares, Outstanding, Ending Balance at Apr. 30, 2022 | 8,496,526 | ||||
Stock-based compensation | $ 0 | 77,052 | 0 | 0 | 77,052 |
Net Income/(Loss) | $ 0 | 0 | (1,374,763) | 0 | (1,374,763) |
Shares, Outstanding, Beginning Balance at Jan. 31, 2022 | 8,496,526 | ||||
Stockholders' Equity Attributable to Parent, Ending Balance at Apr. 30, 2022 | $ 84,964 | 18,851,591 | (29,668,741) | (1,933,678) | (12,665,864) |
Shares, Outstanding, Ending Balance at Jul. 31, 2022 | 8,496,526 | ||||
Stock-based compensation | $ 0 | 71,692 | 0 | 0 | 71,692 |
Net Income/(Loss) | $ 0 | 0 | (1,489,305) | 0 | (1,489,305) |
Shares, Outstanding, Beginning Balance at Apr. 30, 2022 | 8,496,526 | ||||
Stockholders' Equity Attributable to Parent, Ending Balance at Jul. 31, 2022 | $ 84,964 | $ 18,923,283 | $ (31,158,046) | $ (1,933,678) | $ (14,083,477) |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 9 Months Ended | |
Jul. 31, 2022 | Jul. 31, 2021 | |
Cash flows from operating activities | ||
Net Income/(Loss) | $ (3,293,843) | $ 20,577 |
Adjustments to reconcile net (loss)/income to net cash used in operating activities | ||
Depreciation and amortization | 442,681 | 539,066 |
Recovery of doubtful accounts | (86,325) | (43,905) |
Federal Stimulus credits utilized | (789,108) | (3,377,105) |
Stock-based compensation | 252,314 | 178,148 |
Operating lease assets and liabilities, net | 5,024 | (92,536) |
Changes in operating assets and liabilities | ||
Accounts receivable | (16,259) | 200,278 |
Prepaid expenses and other current assets | (52,131) | (61,955) |
Other assets | 0 | 550 |
Accounts payable | (6,137) | (712,419) |
Accrued expenses and other current liabilities | 796,862 | 95,499 |
Deferred revenue | (406,095) | 88,419 |
Total adjustments | 140,826 | (3,185,960) |
Net cash used in operating activities | (3,153,017) | (3,165,383) |
Cash flows used in investing activities | ||
Property and equipment | 0 | (61,014) |
Net cash used in investing activities | 0 | (61,014) |
Cash flows from financing activities | ||
Proceeds under Federal Stimulus grant program | 0 | 3,494,392 |
Proceeds from notes payable - related party | 1,800,000 | 0 |
Net cash provided by financing activities | 1,800,000 | 3,494,392 |
(Decrease)/Increase in cash | (1,353,017) | 267,995 |
Cash - beginning of period | 1,569,587 | 2,748,066 |
Cash - end of period | 216,570 | 3,016,061 |
Supplemental cash flow information | ||
Interest - related party | 0 | 790,512 |
Income taxes | $ 0 | $ 0 |
1. Nature of Business
1. Nature of Business | 9 Months Ended |
Jul. 31, 2022 | |
Notes | |
1. Nature of Business | 1. Nature of Business PASSUR ® PASSUR delivers digital solutions to global aviation operations, meeting the needs of global air travel as well as supporting the recovery of the aviation industry from the COVID-19 crisis. The structure and execution of operations within the aviation industry have fundamentally changed as a result of this crisis due to the significant change in the economics required to support current conditions, return to normal operations and profitability, and assist in mitigating health risks. PASSUR continues to apply artificial intelligence powered by machine learning to aviation data, addressing the industry’s most costly challenges, including the management and optimization of airspace, airport assets, aircraft, and day of flight operations. The Company provides its solutions to airlines and airports in the United States, as well as an airline in Latin America. The global market presents an opportunity to network more customers in a broader market. Solutions offered by PASSUR help to ensure flight completion. They cover the entire flight life cycle, from gate to gate, and result in reductions in overall costs and carbon emissions, while maximizing revenue opportunities, improving operational efficiency, and enhancing the passenger experience. The Company is a supplier and partner to the air transportation industry. While many of the Company’s customers are experiencing increases in air travel volume, spending to invest in programs to promote operational efficiencies and productivity usually lag such increases. As a result, the Company experienced downturns in its revenues year-to-date in fiscal 2022 and for the fiscal year 2021. The Company continues to believe that its products and professional service engagements are critical to the efficient operation of the air transportation market. See Part II, Item 1A, “Risk Factors”, in this Quarterly Report on Form 10-Q. |
2. Basis of Presentation and Si
2. Basis of Presentation and Significant Accounting Policies | 9 Months Ended |
Jul. 31, 2022 | |
Notes | |
2. Basis of Presentation and Significant Accounting Policies | 2. Basis of Presentation and Significant Accounting Policies The consolidated financial information contained in this quarterly report on Form 10-Q represents interim condensed financial data and, therefore, does not include all footnote disclosures required to be included in financial statements prepared in conformity with accounting principles generally accepted in the United States (“GAAP”). Such footnote information was included in the Company's Annual Report on Form 10-K for the year ended October 31, 2021, filed with the Securities and Exchange Commission (“SEC”) on January 26, 2022; the consolidated financial data included herein should be read in conjunction with that report. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the Company’s consolidated financial position as of July 31, 2022, and its consolidated results of operations for the three and nine months ended July 31, 2022 and July 31, 2021, respectively. 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 ending October 31, 2022. Certain financial information in the footnotes has been rounded to the nearest thousand for presentation purposes. Liquidity The Company’s current liabilities exceeded its current assets (excluding deferred revenue) by $940,000 as of July 31, 2022. The note payable to a related party, G.S. Beckwith Gilbert, the Company’s significant shareholder and Non-Executive Chairman of the Board, with a maturity of November 1, 2023, was $12,492,000 at July 31, 2022. The Company has accrued and unpaid interest under these borrowings for the first nine months of fiscal 2022 in the amount of $833,000, which amount is included in accrued expenses and other current liabilities at July 31, 2022. During fiscal year 2021, the Company paid Mr. Gilbert all accrued interest incurred for fiscal 2021 in the amount of $1,057,000. The Company’s stockholders’ equity had a deficit of $14,083,000 at July 31, 2022. The Company reported a net loss of $3,294,000 for the nine months ended July 31, 2022. If the Company’s business does not generate sufficient cash flows from operations to meet its operating cash requirements, the Company will attempt to obtain external financing on commercially reasonable terms. However, the Company has received a commitment from G.S. Beckwith Gilbert, dated September 12, 2022, that if the Company, at any time, is unable to meet its obligations through September 13, 2023, G.S. Beckwith Gilbert will provide the Company with the necessary continuing financial support 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. The Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), enacted in March 2020, as well as subsequently enacted legislation, including the American Rescue Plan Act of 2021 (the “Rescue Act”), have provided economic support for, among others, businesses in the aviation industry. The Company has received grants under both the CARES Act and the Rescue Act (collectively referred to herein as the “CARES Act grants”), totaling approximately $6,498,000, as described in more detail below. 1. 2. 3. 4. The Company expended the remaining balance of funds received under the various Payroll Support Programs during the three months ended January 31, 2022. The amount of unused stimulus funding as of July 31, 2022 and October 31, 2021 was $0 and $856,000, respectively, and is shown in the balance sheet under current liabilities as Accrued Liabilities - Stimulus Funding. The Company believes that it has operated in compliance with all the provisions and requirements under the CARES Act, the Rescue Act and the Payroll Support Program Agreements up through and including the period ended July 31, 2022, and fully intends to continue to comply with all such provisions and requirements. Consequently, the Company has accounted for the advanced funds as grants not requiring repayment and recognized such amounts in income as qualifying salaries, wages and benefits were incurred. The Company reduced its compensation expense by $0 and $1,189,000 during the three months ended July 31, 2022 and July 31, 2021, respectively, and by $789,000 and $3,377,000 during the nine months ended July 31, 2022 and July 31, 2021, respectively, as the CARES Act grant proceeds received by the Company were used to fund eligible payroll costs. If the Company does not comply with the provisions of the CARES Act, the Rescue Act and the Payroll Support Program Agreements, the Company may be required to repay the government funds and also be subject to other remedies. Principles of Consolidation The consolidated financial statements include the accounts of PASSUR and its wholly-owned subsidiary. All significant inter-company transactions and balances have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s significant estimates include those related to revenue recognition, stock-based compensation, software development costs, the PASSUR Network and income taxes. Actual results could differ from those estimates. Revenue Recognition Policy The Company recognizes revenue in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers ("Topic 606") The Company derives revenue primarily from subscription-based, real-time decision and solution information and professional services. Revenues are recognized when control of these services is transferred to the customer, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. The Company determines revenue recognition through the following steps: · · · · · A. Nature of Performance Obligations Subscription services revenue Subscription services revenue is comprised of cloud-based subscription fees that provide the customer the right to access the Company’s software and receive support and updates, if any, for a period of time. The Company has determined such access represents a stand-ready service provided continually throughout the contract term. As such, control and satisfaction of this stand-ready performance obligation is deemed to occur over time. The Company’s subscription contracts include a fixed amount of consideration that is recognized ratably over the non-cancellable contract term, beginning on the date that access is made available to the customer. The passage of time is deemed to be the most faithful depiction of the transfer of control of the services as the customer simultaneously receives and consumes the benefit provided by the Company’s performance. Subscription contracts are generally one to three years in length, billed either monthly, quarterly or annually, typically in advance, which coincides with the terms of the agreement. The Company’s subscription contracts do not have a significant financing component and customer invoices are typically due within 30 days. There is no significant variable consideration related to these arrangements. Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue, depending on whether transfer of control to customers has occurred. Professional services revenue Professional services primarily consist of value assessments and customer training services. Payment for professional services is generally a fixed fee or a fee based on time and materials. The obligation to provide professional services is generally satisfied over time, with the customer simultaneously receiving and consuming the benefits as the Company satisfies its performance obligations. For professional services, revenue is recognized by measuring progress toward the complete satisfaction of the Company’s obligation. Progress for services that are contracted for a fixed price is generally measured based on hours incurred as a portion of total estimated hours, and as a practical expedient, progress for services that are contracted for time and materials is generally based on the amount the Company has the right to invoice. Professional services contracts are generally one year or less in length, billed either in advance, upon pre-defined milestones or as services are rendered, in accordance with the terms of the agreement. The Company’s professional service contracts do not have a significant financing component and customer invoices are typically due within 30 days. Material rights Contracts with customers may include material rights which are also performance obligations. Material rights primarily arise when the contract gives the customer the right to renew subscription services at a discounted price in the future. This may occur from time to time when the Company’s contracts provide an implicit discount as the customer pays a nonrefundable up-front fee in connection with the initial services contract that it does not have to pay again in order to renew the service. These non-refundable up-front fees are not related to any promised service that the customer benefits from other than providing access to the subscription service. Revenue allocated to material rights is recognized when the customer exercises the right over the estimated renewal period of five years or when the right expires. If exercised by the customer, the amount previously deferred for the material right is included in the transaction price of the renewal contract and allocated to the services included in that contract. If expired, revenue is recognized as subscription services revenue in the period the right expired. If the up-front fees do not provide the customer with a material right, then the amount is included in the transaction price of the initial services contract and allocated to the performance obligations in that contract. Contracts with multiple performance obligations Some of the Company’s contracts with customers contain multiple distinct performance obligations. For these contracts, the transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. The standalone selling price reflects the price the Company would charge for a specific service if it was sold separately in similar circumstances and to similar customers. The Company maximizes the use of directly observable transactions to determine the standalone selling prices for its performance obligations. For subscription services, the Company separately determines the standalone selling prices by type of solution and customer demographics. For professional services, the Company separately determines standalone selling price by type of services. Other policies and judgments The commissions that the Company pays for obtaining a contract with a customer are conditional on future service provided by the employee. Therefore, since these costs are not incremental solely based on obtaining a contract, the Company does not defer any commission costs. Some of the Company’s contracts with its customers contain multiple performance obligations subject to allocation of transaction prices. Some contracts contain material rights, in the form of non-refundable up-front fees. Such fees are amortized to income over an estimated average customer life. Differences in actual average customer life compared with estimates may result in changes to amounts amortized to income. In the case of professional services, revenue recognition may be dependent on estimating the amount of time needed to complete various tasks within a contract and estimating the actual amount of completion at any point in time. Revisions to such estimates at any time may result in adjustments to the amounts of revenue recognized. B. Disaggregation The disaggregation of revenue by customer and type of performance obligation is as follows: Revenue by type of customer: Three Months Ended July 31, 2022 Three Months Ended July 31, 2021 Nine Months Ended July 31, 2022 Nine Months Ended July 31, 2021 Airlines $220,000 $149,000 $732,000 $660,000 Airports 896,000 1,215,000 2,811,000 3,695,000 Other 368,000 146,000 798,000 315,000 Total Revenue $1,484,000 $1,510,000 $4,341,000 $4,670,000 Revenue by type of performance obligation: Three Months Ended July 31, 2022 Three Months Ended July 31, 2021 Nine Months Ended July 31, 2022 Nine Months Ended July 31, 2021 Subscription services $1,313,000 $1,340,000 $4,045,000 $4,279,000 Professional services 171,000 170,000 296,000 391,000 Total Revenue $1,484,000 $1,510,000 $4,341,000 $4,670,000 C. Contract Balances The opening and closing balances of the Company's accounts receivable, unbilled receivables, and deferred revenues are as follows: Accounts Receivable Unbilled Receivable Deferred Revenue Balance at November 1, 2021 $ 720,000 $ 89,000 $ 1,494,000 Balance at July 31, 2022 $ 745,000 $ 166,000 $ 1,088,000 The differences in the opening and closing balances of the Company’s unbilled receivable and deferred revenue primarily result from the timing difference between the Company’s performance and the customer’s payment. Deferred revenue includes amounts billed to customers for which the revenue recognition criteria has not yet been met. Deferred revenue primarily consists of billings or payments received in advance of revenue recognition from the Company’s subscription services and, to a lesser extent, professional services. Deferred revenue is recognized as the Company satisfies its performance obligations. The Company generally invoices its customers in monthly, quarterly or annual installments for subscription services. Accordingly, the deferred revenue balance does not generally represent the total contract value of annual or multi-year, non-cancellable subscription arrangements. Deferred revenue that will be recognized during the succeeding 12-month period is recorded as current deferred revenue and the remaining portion is recorded as noncurrent. The amount of revenue recognized during the nine months ended July 31, 2022 that was included in the deferred revenue balance at November 1, 2021 was approximately $1,244,000. Unbilled accounts receivable relates to the delivery of subscription and/or professional services for which the related billings will occur in a future period. D. Transaction Price Allocated to the Remaining Performance Obligation The following table discloses the aggregate amount of the transaction price allocated to the remaining performance obligations as of the end of the reporting period, and when the Company expects to recognize the revenue. 12 months or less Greater than 12 months * Subscription services $ 3,239,000 $ 1,026,000 Professional services $ 62,000 $ - Material rights $ 81,000 $ 136,000 *Approximately 100% of subscription services and 90% of material rights amounts are expected to be recognized between 12 and 36 months. The table above includes amounts billed and not yet recognized as revenue, as well as unrecognized future committed billings in customer contracts and excludes future billing amounts for which the customer has a termination for convenience right in their agreement. Cost of Revenues Costs associated with subscription and maintenance revenues consist primarily of communication costs, data feeds costs, compensation and benefit costs and amortization of previously capitalized software development costs (referred to as “Capitalized Assets”). Cost of revenues in each reporting period was impacted by previously capitalized costs associated with software development and data center projects. In prior periods, the labor and fringe benefit costs of the Company employees involved in creating Capitalized Assets were capitalized, rather than expensed, and amortized over three years, as determined by their projected useful life. The Company did not capitalize any software development costs, as well as network and data center costs, subsequent to January 31, 2020. Given business conditions in the aviation industry surrounding the unprecedented COVID-19 pandemic, the Company’s software efforts were concentrated in the areas of maintenance of existing products. PASSUR’s services are powered by a combination of FAA data plus commercial ADS-B aggregator feeds and other data feeds available to the Company, which provide a more cost-effective solution and allow us to focus more on value-added analytics, and less on sensor technology. Additionally, due to the financial and economic hardships that have been experienced by the Company’s customers and air transportation support vendors in the ongoing COVID-19 environment (described in “3. Impact of the COVID-19 Pandemic”, below), there has been a significant amount of uncertainty surrounding the ability of our customers to either renew and/or maintain their current levels of committed contracts with the Company. As a result of the industry changes in response to the COVID-19 pandemic, the Company anticipates that its level of Capitalized Assets, including related amortization of such costs, will decrease in the future, as the Company’s technological efforts are focused more on maintenance of existing products. Income Taxes On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act") was enacted to provide economic relief to those impacted by the COVID-19 pandemic. The CARES Act made various tax law changes, including, among other things: (i) modified the federal net operating loss rules, including permitting federal net operating losses incurred in 2018, 2019, and 2020 to be carried back to the five preceding taxable years in order to generate a refund of previously paid income taxes; (ii) enhanced recoverability of AMT tax credit carryforwards; (iii) delayed payment of employer payroll taxes; (iv) increased the limitation on business interest expenses under IRC Section 163(j) for the 2019 and 2020 tax years to permit additional expensing of interest; and (v) enacted a technical correction so that qualified improvement property can be immediately expensed under IRC Section 168(k). As of October 31, 2021, the Company had approximately $26,239,000 of net operating losses, which cannot be carried back to prior years to generate tax refunds since no tax had been paid in those years by the Company. The Company’s provision for income taxes consists of federal, state and foreign taxes, as applicable, in amounts necessary to align the Company’s year-to-date tax provision with the effective rate that it expects to achieve for the full year. Each quarter the Company updates its estimate of the annual effective tax rate and records cumulative adjustments as necessary. The estimated annual effective tax rate for the fiscal year ending October 31, 2022 is 0%. This calculation reflects estimated income tax expense based on our current year annual pretax income forecast which is offset by a reduction in the valuation allowance. The Company maintains a full valuation allowance against its deferred tax assets. For the three and nine months ended July 31, 2022, the Company recorded an income tax provision of $0. The effective tax rate for the three and nine months ended July 31, 2022 was 0% on a pretax loss of $1,489,000 and $3,294,000, respectively. The effective rate differs from the U.S. federal corporate tax rate of 21% due to the valuation allowance. For the three and nine months ended July 31, 2021, the Company recorded an income tax provision of $0. The effective tax rate for the three and nine months ended July 31, 2021 was 0% on a pretax (loss)/income of ($64,000) and $21,000, respectively. The effective rate differed from the U.S. federal statutory rate of 21% due to the valuation allowance and the use of net operating losses offset by a reduction in the valuation allowance. Accounts Receivable The Company records accounts receivable for agreements where amounts due from customers are contractually required and are non-refundable. The carrying amount of accounts receivable is reduced by a valuation allowance that reflects the Company’s best estimate of the amounts that will not be collected. Net accounts receivable is comprised of the monthly, quarterly, or annual committed amounts due from customers pursuant to the terms of each respective customer’s agreement. Accounts receivable balances include amounts attributable to deferred revenues. The Company’s accounts receivable balances included $166,000 of unbilled receivables associated with contractually committed services provided to existing customers during the nine months ended July 31, 2022, which will be invoiced subsequent to July 31, 2022. At October 31, 2021, the Company’s accounts receivable balance included $89,000 of unbilled receivables associated with contractually committed services provided to existing customers during the twelve months ended October 31, 2021. The Company has a history of successfully collecting all amounts due from its customers under the original terms of its subscription agreements and believes that its products and professional service engagements are critical to the efficient operation of the air transportation market. The provision for doubtful accounts was $52,000 and $183,000 as of July 31, 2022 and October 31, 2021, respectively. In addition to reviewing delinquent accounts receivable, the Company considers many factors in estimating its reserve, including historical data, experience, customer types, credit worthiness, and economic trends. The Company monitors its outstanding accounts receivable balances and believes the provision is adequate. Capitalized Software Development Costs The Company capitalizes costs related to the development of internal use software in accordance with authoritative guidance issued by the FASB on internal-use software, ASC 350-40, “Internal-Use Software.” The Company expenses all costs incurred during the preliminary project stage of its development, and capitalizes the costs incurred during the application development stage. For periods through January 31, 2020, costs incurred relating to upgrades and enhancements to the software were capitalized if it had been determined that these upgrades or enhancements add additional functionality to the software. Costs incurred to maintain and support products after they became available were charged to expense as incurred. The Company did not capitalize any software development costs subsequent to January 31, 2020. Due to the financial and economic hardships that have been experienced by airlines, airports and air transportation support vendors in the ongoing COVID-19 environment (described in “3. Impact of the COVID-19 Pandemic” below), there has been a significant amount of uncertainty surrounding the ability of our customers to continue to perform their contracts with the Company. Given these business conditions, the Company’s software efforts were concentrated in the areas of maintenance of existing products. As a result, the Company did not capitalize any software development costs during the three and nine months ended July 31, 2022 and July 31, 2021, respectively. The Company amortized $121,500 and $364,000 of capitalized software development costs during both the three and nine months ended July 31, 2022 and the three and nine months ended July 31, 2021, respectively. The Company recorded amortization of the software on a straight-line basis over the estimated useful life of the software, typically over three years, within “Cost of Revenues”. As a result of the industry changes in response to the COVID-19 pandemic, the Company anticipates that its level of capitalized software development costs, including related amortization of such costs, will decrease in the future, as the Company’s technological efforts are focused more on maintenance of existing products. Long-Lived Assets The Company reviews long-lived assets for impairment when circumstances indicate the carrying amount of an asset may not be recoverable. Impairment is recognized to the extent the sum of undiscounted estimated future cash flows expected to result from the use of the asset is less than the carrying value. Assets to be disposed of are carried at the lower of their carrying value or fair value, less costs to sell. The Company evaluates the periods of amortization continually in determining whether later events and circumstances warrant revised estimates of useful lives. If estimates are changed, the unamortized costs will be allocated to the increased or decreased number of remaining periods in the asset’s revised life. Deferred Tax Assets 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 assets 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 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 its net deferred tax assets are not realizable on a more-likely-than-not basis and that a valuation allowance is required against its net deferred tax assets. At October 31, 2021, the Company had available federal net operating loss carryforwards of $26,812,000, of which $14,032,000 are indefinite lived, but only available to offset 80% of future taxable income, and $12,780,000 will expire in various tax years from fiscal year 2022 through fiscal year 2038. Net (Loss)/Income per Share Information Basic net (loss)/income per share is computed based on the weighted average number of shares outstanding. Diluted (loss)/earnings per share is computed similarly to basic (loss)/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, which expired on February 24, 2019, and 2019 Stock Incentive Plan (the “Plan”), allow for a cashless exercise. Shares used to calculate net (loss)/income per share are as follows: For the three months ended For the nine months ended July 31, July 31, 2022 2021 2022 2021 Basic Weighted average shares outstanding 7,712,091 7,712,091 7,712,091 7,712,091 Effect of dilutive stock options - - - 36,360 Diluted weighted average shares outstanding 7,712,091 7,712,091 7,712,091 7,748,451 Weighted average shares which are not included in the 1,452,500 1,472,500 1,452,500 1,277,500 Stock-Based Compensation The Company follows FASB ASC 718, Compensation-Stock Compensation On August 16, 2021, the Company’s Board of Directors adopted the Second Amendment to the Plan, to authorize the granting of restricted stock unit (RSU) awards under the Plan. Each RSU represents the right to receive, following vesting, one share of the Company’s Common Stock. In connection with the Second Amendment to the Plan, the Board of Directors has authorized an aggregate of 800,000 RSU awards to be granted under the Plan. As of January 31, 2022, 797,500 RSU awards were granted under the Plan at a grant date fair market value of $0.63 per share, which RSU awards vest ratably over a three-year period. All 797,500 RSU awards were granted on October 22, 2021. Compensation expense related to RSU awards was $35,000 and $0 for the three months ended July 31, 2022 and July 31, 2021, respectively. Compensation expense related to RSU awards was $118,000 and $0 for the nine months ended July 31, 2022 and July 31, 2021, respectively. Fair Value of Financial Instruments The recorded amounts of the Company’s cash, receivables, and accounts payables approximate their fair values principally because of the short-term nature of these items. The fair value of related party debt is not practicable to determine due primarily to the fact that the Company’s related party debt is held by its significant shareholder and Non-Executive Chairman of the Board, and the Company does not have any third-party debt with which to compare. Additionally, on a recurring basis, the Company uses fair value measures when analyzing asset impairments. Long-lived assets and certain identifiable intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If it is determined such indicators are present, and the review indicates that the assets will not be fully recoverable based on the undiscounted estimated future cash flows expected to result from the use of the asset, their carrying values are reduced to estimated fair value. Recent Accounting Pronouncements Adopted In February 2016, the FASB issued ASU 2016-02, which amends the ASC and creates Topic 842, Leases . In December 2019, the FASB issued ASU 2019-12, “Income Taxes Topic 740-Simplifying the Accounting for Income Taxes” (“ASU 2019-12”), which intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application of Topic 740. This guidance was effective for fiscal years beginning after December 15, 2020, including interim periods therein. Topic 740 did not have a material effect on the Company’s consolidated financial statements or any disclosures within these consolidated financial statements. Accounting Pronouncements Issued but not yet Adopted In June 2016, the FASB issued ASU 2016-13, “Current Expected Credit Losses” (ASU 2016-13), which introduces an impairment model based on expected, rather than incurred, losses. Additionally, it requires expanded disclosures regarding (a) credit risk inherent in a portfolio and how management monitors the portfolio’s credit quality; (b) management’s estimate of expected credit losses; and (c) changes in estimates of expected credit losses that have taken place during the period. ASU 2016-13 is effective for fiscal years beginning after December 15, 2022. The Company has not yet quantified the impact of ASU 2016-13 on its consolidated financial statements. However, it is not expected to have a material effect on the Company’s consolidated financial statements. |
3. Impact of the COVID-19 Pande
3. Impact of the COVID-19 Pandemic | 9 Months Ended |
Jul. 31, 2022 | |
Notes | |
3. Impact of the COVID-19 Pandemic | 3. Impact of the COVID-19 Pandemic The aviation and travel industries, which are served by the Company and its products, have been severely affected by the ongoing COVID-19 outbreak. Travel restrictions and other measures imposed by most jurisdictions, coupled with the public’s reluctance to travel during the pandemic, resulted in a precipitous decline in demand for air travel, and our customers in the aviation and travel industries drastically reduced their capacity and operations from 2020 into 2021 as compared to 2019, which in turn has resulted in a significant reduction of demand for our products and services. As a result, the Company has faced increased economic pressures and continued to experience a significant loss of revenue during the nine- month periods ended July 31, 2022 and July 31, 2021. While the Company anticipates a return to an improved economic environment in fiscal 2023 given the state of vaccinations, treatments available, and changes in public behaviors, the recovery depends on many factors, the outcomes of which are uncertain or unknown at this time, such as, among other things, the scope, severity and duration of any variants to the COVID-19 virus, the continuing actions taken to contain the pandemic or to mitigate its impact, the acceptance and public distribution of treatments and vaccines for the disease (including its variants), and the length of time before the public feels safe to travel. All of these variables may have an impact on how quickly the industry can recover, which in turn may affect the revenue and earnings levels of the Company going forward. See Part II, Item 1A, “Risk Factors”, in this Quarterly Report on Form 10-Q. The Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), enacted in March 2020, as well as subsequently enacted legislation, including the American Rescue Plan Act of 2021 (the “Rescue Act”), have provided economic support for, among others, businesses in the airline industry. The Company has received grants under both the CARES Act and the Rescue Act (collectively referred to herein as the “CARES Act grants”), totaling approximately $6,498,000, as described in more detail below. 1. 2. 3. 4. The Company expended the remaining balance of funds received under the various Payroll Support Programs during the three months ended January 31, 2022. The amount of unused stimulus funding as of July 31, 2022 and October 31, 2021 was $0 and $856,000, respectively, and is shown in the balance sheet under current liabilities as Accrued Liabilities - Stimulus Funding. The Company believes that it has operated in compliance with all the provisions and requirements under the CARES Act, the Rescue Act and the Payroll Support Program Agreements up through and including the period ended July 31, 2022, and fully intends to continue to comply with all such provisions and requirements. Consequently, the Company has accounted for the advanced funds as grants not requiring repayment and recognized such amounts in income as qualifying salaries, wages and benefits were incurred. The Company reduced its compensation expenses by $0 and $1,189,000 during the three months ended July 31, 2022 and July 31, 2021, respectively, and by $789,000 and $3,377,000 during the nine months ended July 31, 2022 and July 31,2021, respectively. If the Company does not comply with the provisions of the CARES Act, the Rescue Act and the Payroll Support Program Agreements, the Company may be required to repay the government funds and also be subject to other remedies. Additionally, provisions under the CARES Act allowed the Company to defer payment of the employer’s share of social security taxes incurred from March of 2020 through December 31, 2020. The amount of payroll taxes subject to deferred payment was approximately $139,000. Under the terms of the legislation, 50% of the deferred payroll taxes, or approximately $70,000, was due and payable by December 31, 2021 (which amount has been paid by the Company), and the remaining 50%, or approximately $69,000, will become due and payable by December 31, 2022. As previously disclosed, the Company took several actions beginning in April 2020 and prior to receiving the CARES Act funds, to mitigate the effects of the COVID-19 pandemic on its business and align its operating costs with its outlook for the foreseeable future. The effects of such actions are reflected in the costs of revenues, research and development and administrative costs for the three and nine months ended July 31, 2022 and July 31, 2021, and the Company anticipates that such cost savings will continue to benefit the Company for the remainder of fiscal 2022. However, if the recovery of the air transportation industry accelerates and revenue levels quickly return to pre-COVID-19 levels, these levels of cost savings may not be practicable or sustainable to support the operations necessary for the increased level of revenue. During the nine months ended July 31, 2022, the Company made investments in, among other areas, infrastructure and marketing, to benefit the longer-term growth of the Company. See Part II, Item 1A, “Risk Factors”, in this Quarterly Report on Form 10-Q. |
4. Leases
4. Leases | 9 Months Ended |
Jul. 31, 2022 | |
Notes | |
4. Leases | 4. Leases The Company accounts for leases under the guidance of Topic 842, requiring the recognition of ROU assets and associated lease liabilities related to operating leases. The accounting for finance leases under Topic 842 is consistent with the prior accounting for capital leases. The Company elected not to apply the measurement and recognition requirements of Topic 842 to short-term leases (i.e., leases with a term of 12 months or less). Accordingly, short-term leases will not be recorded as ROU assets or lease liabilities on the Company’s consolidated balance sheets, and the related lease payments will be recognized in net earnings on a straight-line basis over the lease term. The Company recognizes a lease liability and a related ROU asset at the commencement date for leases on its consolidated balance sheet, excluding short-term leases as noted above. The lease liability is equal to the present value of unpaid lease payments over the remaining lease term. The Company’s lease term at the commencement date may reflect options to extend or terminate the lease when it is reasonably certain that such options will be exercised. To determine the present value of the lease liability, the Company uses an incremental borrowing rate, which is defined as the rate of interest that the Company would have to pay to borrow (on a collateralized basis over a similar term) an amount equal to the lease payments in similar economic environments. The ROU asset is based on the corresponding lease liability adjusted for certain costs such as initial direct costs, prepaid lease payments and lease incentives received. Both operating and finance lease ROU assets are reviewed for impairment, consistent with other long-lived assets, whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. After a ROU asset is impaired, any remaining balance of the ROU asset is amortized on a straight-line basis over the shorter of the remaining lease term or the estimated useful life. After the lease commencement date, the Company evaluates lease modifications, if any, that could result in a change in the accounting for leases. For a lease modification, an evaluation is performed to determine if it should be treated as either a separate lease or a change in the accounting of an existing lease. In addition, significant changes in events or circumstances within the Company’s control are assessed to determine whether a change in the accounting for leases is required. Certain of the Company’s leases provide for variable lease payments for the right to use an underlying asset that vary due to changes in facts and circumstances occurring after the commencement date, other than the passage of time. Variable lease payments that are dependent on an index or rate (e.g., Consumer Price Index) are included in the initial measurement of the lease liability, the initial measurement of the ROU asset, and the lease classification test based on the index or rate as of the commencement date. Any changes from the commencement date estimation of the index- and rate-based variable payments are expensed as incurred in the period of the change. Variable lease payments that are not known at the commencement date and are determinable based on the performance or use of the underlying asset, are not included in the initial measurement of the lease liability or the ROU asset, but instead are expensed as incurred. The Company’s variable lease payments primarily include common area maintenance and real estate taxes. As of July 31, 2022, the Company had operating leases primarily for offices and its now-decommissioned PASSUR and Surface Multilateration (“SMLAT”) systems, with remaining terms of approximately two months to 4.5 years. The Company’s office lease contracts include options to extend the leases for up to five years. The Company’s office located in Stamford, Connecticut, was previously located in a 5,300 square foot office at an average annual cost of $220,000, under a lease expiring on June 30, 2023. On October 6, 2020, the Company modified this agreement, reducing the amount of square footage under rental and extending the term to June 30, 2025, at the reduced average annual rental rate of $61,000. The Company’s office located in Orlando, Florida, was subject to a lease through August 31, 2021, at an average annual rental rate of $74,000. Effective as of September 1, 2021, the Company entered into a new lease for its Orlando office, for approximately 1,800 square feet for a term of 64 months at an average annual rental of $51,400. A summary of total lease costs and other information for the period relating to the Company’s operating leases is as follows: Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended Total lease cost July 31, 2022 July 31, 2021 July 31, 2022 July 31, 2021 Operating lease cost $ 31,441 $ 46,969 $ 85,806 $ 144,104 Short-term lease cost $ 3,398 $ 17,848 $ 10,335 $ 56,555 Variable lease cost $ 2,093 $ 1,414 $ 6,338 $ 8,867 Total $ 36,932 $ 66,231 $ 102,479 $ 209,526 Other information Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 106,392 Right-of-use assets obtained in exchange for new operating lease liabilities $ - Weighted-average remaining lease term - operating leases 3.77 years Weighted-average discount rate - operating leases 9.75% The total future minimum lease payments, over the remaining lease term, relating to the Company’s operating leases for the remainder of fiscal year 2022 and for each of the next four fiscal years and thereafter is as follows: Fiscal Year Ended October 31: Operating Leases 2022 $ 29,713 2023 117,944 2024 116,657 2025 96,523 2026 57,806 Thereafter 9,873 Total future minimum lease payments $ 428,516 Less imputed interest (67,462) Total $ 361,054 The following table summarizes scheduled maturities of the Company’s contractual obligations relating to operating leases for which cash flows are fixed and determinable as of July 31, 2022: Fiscal Year Ended October 31: Payments Due in Fiscal Year (1) 2022 $ 28,180 2023 113,495 2024 115,082 2025 96,523 2026 57,806 Thereafter 9,873 Total contractual obligations $ 420,959 (1) As of July 31, 2022, the Company did not have any finance leases or leases that had not yet commenced as of such date. As described above, effective as of September 1, 2021, the Company entered into a new lease for its primary software development facility, located in Orlando, Florida. |
5. Notes Payable - Related Part
5. Notes Payable - Related Party | 9 Months Ended |
Jul. 31, 2022 | |
Notes | |
5. Notes Payable - Related Party | 5. Notes Payable – Related Party On January 29, 2021, the Company and Mr. Gilbert entered into a Seventh Debt Extension Agreement effective January 29, 2021, pursuant to which the Company cancelled an outstanding promissory note in the amount of $9,071,000 issued to Mr. Gilbert on January 27, 2020 (the “Sixth Gilbert Note”) and issued Mr. Gilbert a new promissory note (the “Seventh Gilbert Note”) in the amount of $10,692,000, consisting of a principal of $9,585,000 and unpaid interest of $1,107,000 accrued under the Sixth Gilbert Note through October 31, 2020. Under the terms of the Seventh Gilbert Note, the Company agreed to pay the unpaid interest of $1,107,000 accrued under the Sixth Gilbert Note and included in the Seventh Gilbert Note at the time and on the terms set forth in the Seventh Gilbert Note. Under the terms of the Seventh Gilbert Note, the maturity date of the loan was extended to November 1, 2022, and the annual interest rate remained at 9.75%, with annual interest payments required to be made on October 31st of each year (although any accrued interest can be paid before such time without penalty). The note payable was secured by the Company’s assets. The amendments to the Sixth Gilbert Note were determined to be a modification of the debt instrument and no gain or loss was recorded as a result of the transactions. During the year ended October 31, 2021, the Company paid Mr. Gilbert all accrued interest due for the fiscal 2021 year under the Sixth Gilbert Note and the Seventh Gilbert Note in the amount of $1,057,000. On January 26, 2022, the Company and Mr. Gilbert entered into an Eighth Debt Extension Agreement, effective as of January 26, 2022, pursuant to which the Company cancelled the Seventh Gilbert Note and issued Mr. Gilbert a new promissory note (the “Eighth Gilbert Note”) in the amount of $10,692,000, which represented the total amount due and owing under the Seventh Gilbert Note as of January 26, 2022. Under the terms of the Eighth Gilbert Note, the maturity date of the loan was extended to November 1, 2023, and the annual interest rate remained 9.75%, with annual interest payments required to be made on October 31st of each year (although any accrued interest can be paid before such time without penalty). The note payable was secured by the Company’s assets. On April 30, 2022, the Company and Mr. Gilbert entered into a Ninth Debt Replacement Agreement, effective as of March 15, 2022, pursuant to which the Company cancelled the Eighth Gilbert Note and issued Mr. Gilbert a new promissory note (the “Ninth Gilbert Note”) in the amount of $11,692,000, which represented the total amount due and owing under the Eighth Gilbert Note as of January 26, 2022. Under the terms of the Ninth Gilbert Note, the maturity date of the loan remains November 1, 2023, and the annual interest rate remained 9.75%, with annual interest payments required to be made on October 31st of each year (although any accrued interest can be paid before such time without penalty). The note payable is secured by the Company’s assets. On July 31, 2022, the Company and Mr. Gilbert entered into a Tenth Debt Replacement Agreement, effective as of May 1, 2022, pursuant to which the Company cancelled the Ninth Gilbert Note and issued Mr. Gilbert a new promissory note (the “Tenth Gilbert Note”) in the amount of $12,492,000, which represented the total amount due and owing under the Ninth Gilbert Note plus additional borrowings during the three months ended July 31, 2022. Under the terms of the Tenth Gilbert Note, the maturity date of the loan remains November 1, 2023, and the annual interest rate remained 9.75%, with annual interest payments required to be made on October 31st of each year (although any accrued interest can be paid before such time without penalty). The note payable is secured by the Company’s assets. During the first nine months of fiscal 2022, the Company did not make any payments to Mr. Gilbert for interest accrued under the Seventh Gilbert Note, the Eighth Gilbert Note and the Ninth Gilbert Note through July 31, 2022. The total amount of accrued interest due was $833,000, which amount is included in accrued expenses and other current liabilities at July 31, 2022. During the nine months ended July 31, 2022, Mr. Gilbert loaned the Company an additional $1,800,000, under the Eighth Gilbert Note, the Ninth Gilbert Note and the Tenth Gilbert Note. During the nine months ended July 31, 2021, the Company paid Mr. Gilbert interest accrued on the Sixth Gilbert Note in a total amount of $791,000. During the nine months ended July 31, 2021, Mr. Gilbert did not loan the Company any additional funds. The Company has evaluated its financial position as of July 31, 2022, including an operating loss of $2,461,000 for the nine months ended July 31, 2022 and a working capital deficit of $940,000 (excluding deferred revenues) as of July 31, 2022, and has requested and received a commitment from Mr. Gilbert, dated September 12, 2022, that if the Company, at any time, is unable to meet its obligations through September 13, 2023, Mr. Gilbert will provide the Company with the necessary continuing financial support 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. |
2. Basis of Presentation and _2
2. Basis of Presentation and Significant Accounting Policies: Liquidity (Policies) | 9 Months Ended |
Jul. 31, 2022 | |
Policies | |
Liquidity | Liquidity The Company’s current liabilities exceeded its current assets (excluding deferred revenue) by $940,000 as of July 31, 2022. The note payable to a related party, G.S. Beckwith Gilbert, the Company’s significant shareholder and Non-Executive Chairman of the Board, with a maturity of November 1, 2023, was $12,492,000 at July 31, 2022. The Company has accrued and unpaid interest under these borrowings for the first nine months of fiscal 2022 in the amount of $833,000, which amount is included in accrued expenses and other current liabilities at July 31, 2022. During fiscal year 2021, the Company paid Mr. Gilbert all accrued interest incurred for fiscal 2021 in the amount of $1,057,000. The Company’s stockholders’ equity had a deficit of $14,083,000 at July 31, 2022. The Company reported a net loss of $3,294,000 for the nine months ended July 31, 2022. If the Company’s business does not generate sufficient cash flows from operations to meet its operating cash requirements, the Company will attempt to obtain external financing on commercially reasonable terms. However, the Company has received a commitment from G.S. Beckwith Gilbert, dated September 12, 2022, that if the Company, at any time, is unable to meet its obligations through September 13, 2023, G.S. Beckwith Gilbert will provide the Company with the necessary continuing financial support 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. The Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), enacted in March 2020, as well as subsequently enacted legislation, including the American Rescue Plan Act of 2021 (the “Rescue Act”), have provided economic support for, among others, businesses in the aviation industry. The Company has received grants under both the CARES Act and the Rescue Act (collectively referred to herein as the “CARES Act grants”), totaling approximately $6,498,000, as described in more detail below. 1. 2. 3. 4. The Company expended the remaining balance of funds received under the various Payroll Support Programs during the three months ended January 31, 2022. The amount of unused stimulus funding as of July 31, 2022 and October 31, 2021 was $0 and $856,000, respectively, and is shown in the balance sheet under current liabilities as Accrued Liabilities - Stimulus Funding. The Company believes that it has operated in compliance with all the provisions and requirements under the CARES Act, the Rescue Act and the Payroll Support Program Agreements up through and including the period ended July 31, 2022, and fully intends to continue to comply with all such provisions and requirements. Consequently, the Company has accounted for the advanced funds as grants not requiring repayment and recognized such amounts in income as qualifying salaries, wages and benefits were incurred. The Company reduced its compensation expense by $0 and $1,189,000 during the three months ended July 31, 2022 and July 31, 2021, respectively, and by $789,000 and $3,377,000 during the nine months ended July 31, 2022 and July 31, 2021, respectively, as the CARES Act grant proceeds received by the Company were used to fund eligible payroll costs. If the Company does not comply with the provisions of the CARES Act, the Rescue Act and the Payroll Support Program Agreements, the Company may be required to repay the government funds and also be subject to other remedies. |
2. Basis of Presentation and _3
2. Basis of Presentation and Significant Accounting Policies: Principles of Consolidation (Policies) | 9 Months Ended |
Jul. 31, 2022 | |
Policies | |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of PASSUR and its wholly-owned subsidiary. All significant inter-company transactions and balances have been eliminated in consolidation. |
2. Basis of Presentation and _4
2. Basis of Presentation and Significant Accounting Policies: Use of Estimates (Policies) | 9 Months Ended |
Jul. 31, 2022 | |
Policies | |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s significant estimates include those related to revenue recognition, stock-based compensation, software development costs, the PASSUR Network and income taxes. Actual results could differ from those estimates. |
2. Basis of Presentation and _5
2. Basis of Presentation and Significant Accounting Policies: Revenue Recognition Policy (Policies) | 9 Months Ended |
Jul. 31, 2022 | |
Policies | |
Revenue Recognition Policy | Revenue Recognition Policy The Company recognizes revenue in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers ("Topic 606") The Company derives revenue primarily from subscription-based, real-time decision and solution information and professional services. Revenues are recognized when control of these services is transferred to the customer, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. The Company determines revenue recognition through the following steps: · · · · · A. Nature of Performance Obligations Subscription services revenue Subscription services revenue is comprised of cloud-based subscription fees that provide the customer the right to access the Company’s software and receive support and updates, if any, for a period of time. The Company has determined such access represents a stand-ready service provided continually throughout the contract term. As such, control and satisfaction of this stand-ready performance obligation is deemed to occur over time. The Company’s subscription contracts include a fixed amount of consideration that is recognized ratably over the non-cancellable contract term, beginning on the date that access is made available to the customer. The passage of time is deemed to be the most faithful depiction of the transfer of control of the services as the customer simultaneously receives and consumes the benefit provided by the Company’s performance. Subscription contracts are generally one to three years in length, billed either monthly, quarterly or annually, typically in advance, which coincides with the terms of the agreement. The Company’s subscription contracts do not have a significant financing component and customer invoices are typically due within 30 days. There is no significant variable consideration related to these arrangements. Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue, depending on whether transfer of control to customers has occurred. Professional services revenue Professional services primarily consist of value assessments and customer training services. Payment for professional services is generally a fixed fee or a fee based on time and materials. The obligation to provide professional services is generally satisfied over time, with the customer simultaneously receiving and consuming the benefits as the Company satisfies its performance obligations. For professional services, revenue is recognized by measuring progress toward the complete satisfaction of the Company’s obligation. Progress for services that are contracted for a fixed price is generally measured based on hours incurred as a portion of total estimated hours, and as a practical expedient, progress for services that are contracted for time and materials is generally based on the amount the Company has the right to invoice. Professional services contracts are generally one year or less in length, billed either in advance, upon pre-defined milestones or as services are rendered, in accordance with the terms of the agreement. The Company’s professional service contracts do not have a significant financing component and customer invoices are typically due within 30 days. Material rights Contracts with customers may include material rights which are also performance obligations. Material rights primarily arise when the contract gives the customer the right to renew subscription services at a discounted price in the future. This may occur from time to time when the Company’s contracts provide an implicit discount as the customer pays a nonrefundable up-front fee in connection with the initial services contract that it does not have to pay again in order to renew the service. These non-refundable up-front fees are not related to any promised service that the customer benefits from other than providing access to the subscription service. Revenue allocated to material rights is recognized when the customer exercises the right over the estimated renewal period of five years or when the right expires. If exercised by the customer, the amount previously deferred for the material right is included in the transaction price of the renewal contract and allocated to the services included in that contract. If expired, revenue is recognized as subscription services revenue in the period the right expired. If the up-front fees do not provide the customer with a material right, then the amount is included in the transaction price of the initial services contract and allocated to the performance obligations in that contract. Contracts with multiple performance obligations Some of the Company’s contracts with customers contain multiple distinct performance obligations. For these contracts, the transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. The standalone selling price reflects the price the Company would charge for a specific service if it was sold separately in similar circumstances and to similar customers. The Company maximizes the use of directly observable transactions to determine the standalone selling prices for its performance obligations. For subscription services, the Company separately determines the standalone selling prices by type of solution and customer demographics. For professional services, the Company separately determines standalone selling price by type of services. Other policies and judgments The commissions that the Company pays for obtaining a contract with a customer are conditional on future service provided by the employee. Therefore, since these costs are not incremental solely based on obtaining a contract, the Company does not defer any commission costs. Some of the Company’s contracts with its customers contain multiple performance obligations subject to allocation of transaction prices. Some contracts contain material rights, in the form of non-refundable up-front fees. Such fees are amortized to income over an estimated average customer life. Differences in actual average customer life compared with estimates may result in changes to amounts amortized to income. In the case of professional services, revenue recognition may be dependent on estimating the amount of time needed to complete various tasks within a contract and estimating the actual amount of completion at any point in time. Revisions to such estimates at any time may result in adjustments to the amounts of revenue recognized. B. Disaggregation The disaggregation of revenue by customer and type of performance obligation is as follows: Revenue by type of customer: Three Months Ended July 31, 2022 Three Months Ended July 31, 2021 Nine Months Ended July 31, 2022 Nine Months Ended July 31, 2021 Airlines $220,000 $149,000 $732,000 $660,000 Airports 896,000 1,215,000 2,811,000 3,695,000 Other 368,000 146,000 798,000 315,000 Total Revenue $1,484,000 $1,510,000 $4,341,000 $4,670,000 Revenue by type of performance obligation: Three Months Ended July 31, 2022 Three Months Ended July 31, 2021 Nine Months Ended July 31, 2022 Nine Months Ended July 31, 2021 Subscription services $1,313,000 $1,340,000 $4,045,000 $4,279,000 Professional services 171,000 170,000 296,000 391,000 Total Revenue $1,484,000 $1,510,000 $4,341,000 $4,670,000 C. Contract Balances The opening and closing balances of the Company's accounts receivable, unbilled receivables, and deferred revenues are as follows: Accounts Receivable Unbilled Receivable Deferred Revenue Balance at November 1, 2021 $ 720,000 $ 89,000 $ 1,494,000 Balance at July 31, 2022 $ 745,000 $ 166,000 $ 1,088,000 The differences in the opening and closing balances of the Company’s unbilled receivable and deferred revenue primarily result from the timing difference between the Company’s performance and the customer’s payment. Deferred revenue includes amounts billed to customers for which the revenue recognition criteria has not yet been met. Deferred revenue primarily consists of billings or payments received in advance of revenue recognition from the Company’s subscription services and, to a lesser extent, professional services. Deferred revenue is recognized as the Company satisfies its performance obligations. The Company generally invoices its customers in monthly, quarterly or annual installments for subscription services. Accordingly, the deferred revenue balance does not generally represent the total contract value of annual or multi-year, non-cancellable subscription arrangements. Deferred revenue that will be recognized during the succeeding 12-month period is recorded as current deferred revenue and the remaining portion is recorded as noncurrent. The amount of revenue recognized during the nine months ended July 31, 2022 that was included in the deferred revenue balance at November 1, 2021 was approximately $1,244,000. Unbilled accounts receivable relates to the delivery of subscription and/or professional services for which the related billings will occur in a future period. D. Transaction Price Allocated to the Remaining Performance Obligation The following table discloses the aggregate amount of the transaction price allocated to the remaining performance obligations as of the end of the reporting period, and when the Company expects to recognize the revenue. 12 months or less Greater than 12 months * Subscription services $ 3,239,000 $ 1,026,000 Professional services $ 62,000 $ - Material rights $ 81,000 $ 136,000 *Approximately 100% of subscription services and 90% of material rights amounts are expected to be recognized between 12 and 36 months. The table above includes amounts billed and not yet recognized as revenue, as well as unrecognized future committed billings in customer contracts and excludes future billing amounts for which the customer has a termination for convenience right in their agreement. |
2. Basis of Presentation and _6
2. Basis of Presentation and Significant Accounting Policies: Cost of Revenues (Policies) | 9 Months Ended |
Jul. 31, 2022 | |
Policies | |
Cost of Revenues | Cost of Revenues Costs associated with subscription and maintenance revenues consist primarily of communication costs, data feeds costs, compensation and benefit costs and amortization of previously capitalized software development costs (referred to as “Capitalized Assets”). Cost of revenues in each reporting period was impacted by previously capitalized costs associated with software development and data center projects. In prior periods, the labor and fringe benefit costs of the Company employees involved in creating Capitalized Assets were capitalized, rather than expensed, and amortized over three years, as determined by their projected useful life. The Company did not capitalize any software development costs, as well as network and data center costs, subsequent to January 31, 2020. Given business conditions in the aviation industry surrounding the unprecedented COVID-19 pandemic, the Company’s software efforts were concentrated in the areas of maintenance of existing products. PASSUR’s services are powered by a combination of FAA data plus commercial ADS-B aggregator feeds and other data feeds available to the Company, which provide a more cost-effective solution and allow us to focus more on value-added analytics, and less on sensor technology. Additionally, due to the financial and economic hardships that have been experienced by the Company’s customers and air transportation support vendors in the ongoing COVID-19 environment (described in “3. Impact of the COVID-19 Pandemic”, below), there has been a significant amount of uncertainty surrounding the ability of our customers to either renew and/or maintain their current levels of committed contracts with the Company. As a result of the industry changes in response to the COVID-19 pandemic, the Company anticipates that its level of Capitalized Assets, including related amortization of such costs, will decrease in the future, as the Company’s technological efforts are focused more on maintenance of existing products. |
2. Basis of Presentation and _7
2. Basis of Presentation and Significant Accounting Policies: Income Taxes (Policies) | 9 Months Ended |
Jul. 31, 2022 | |
Policies | |
Income Taxes | Income Taxes On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act") was enacted to provide economic relief to those impacted by the COVID-19 pandemic. The CARES Act made various tax law changes, including, among other things: (i) modified the federal net operating loss rules, including permitting federal net operating losses incurred in 2018, 2019, and 2020 to be carried back to the five preceding taxable years in order to generate a refund of previously paid income taxes; (ii) enhanced recoverability of AMT tax credit carryforwards; (iii) delayed payment of employer payroll taxes; (iv) increased the limitation on business interest expenses under IRC Section 163(j) for the 2019 and 2020 tax years to permit additional expensing of interest; and (v) enacted a technical correction so that qualified improvement property can be immediately expensed under IRC Section 168(k). As of October 31, 2021, the Company had approximately $26,239,000 of net operating losses, which cannot be carried back to prior years to generate tax refunds since no tax had been paid in those years by the Company. The Company’s provision for income taxes consists of federal, state and foreign taxes, as applicable, in amounts necessary to align the Company’s year-to-date tax provision with the effective rate that it expects to achieve for the full year. Each quarter the Company updates its estimate of the annual effective tax rate and records cumulative adjustments as necessary. The estimated annual effective tax rate for the fiscal year ending October 31, 2022 is 0%. This calculation reflects estimated income tax expense based on our current year annual pretax income forecast which is offset by a reduction in the valuation allowance. The Company maintains a full valuation allowance against its deferred tax assets. For the three and nine months ended July 31, 2022, the Company recorded an income tax provision of $0. The effective tax rate for the three and nine months ended July 31, 2022 was 0% on a pretax loss of $1,489,000 and $3,294,000, respectively. The effective rate differs from the U.S. federal corporate tax rate of 21% due to the valuation allowance. For the three and nine months ended July 31, 2021, the Company recorded an income tax provision of $0. The effective tax rate for the three and nine months ended July 31, 2021 was 0% on a pretax (loss)/income of ($64,000) and $21,000, respectively. The effective rate differed from the U.S. federal statutory rate of 21% due to the valuation allowance and the use of net operating losses offset by a reduction in the valuation allowance. |
2. Basis of Presentation and _8
2. Basis of Presentation and Significant Accounting Policies: Accounts Receivable (Policies) | 9 Months Ended |
Jul. 31, 2022 | |
Policies | |
Accounts Receivable | Accounts Receivable The Company records accounts receivable for agreements where amounts due from customers are contractually required and are non-refundable. The carrying amount of accounts receivable is reduced by a valuation allowance that reflects the Company’s best estimate of the amounts that will not be collected. Net accounts receivable is comprised of the monthly, quarterly, or annual committed amounts due from customers pursuant to the terms of each respective customer’s agreement. Accounts receivable balances include amounts attributable to deferred revenues. The Company’s accounts receivable balances included $166,000 of unbilled receivables associated with contractually committed services provided to existing customers during the nine months ended July 31, 2022, which will be invoiced subsequent to July 31, 2022. At October 31, 2021, the Company’s accounts receivable balance included $89,000 of unbilled receivables associated with contractually committed services provided to existing customers during the twelve months ended October 31, 2021. The Company has a history of successfully collecting all amounts due from its customers under the original terms of its subscription agreements and believes that its products and professional service engagements are critical to the efficient operation of the air transportation market. The provision for doubtful accounts was $52,000 and $183,000 as of July 31, 2022 and October 31, 2021, respectively. In addition to reviewing delinquent accounts receivable, the Company considers many factors in estimating its reserve, including historical data, experience, customer types, credit worthiness, and economic trends. The Company monitors its outstanding accounts receivable balances and believes the provision is adequate. |
2. Basis of Presentation and _9
2. Basis of Presentation and Significant Accounting Policies: Capitalized Software Development Costs (Policies) | 9 Months Ended |
Jul. 31, 2022 | |
Policies | |
Capitalized Software Development Costs | Capitalized Software Development Costs The Company capitalizes costs related to the development of internal use software in accordance with authoritative guidance issued by the FASB on internal-use software, ASC 350-40, “Internal-Use Software.” The Company expenses all costs incurred during the preliminary project stage of its development, and capitalizes the costs incurred during the application development stage. For periods through January 31, 2020, costs incurred relating to upgrades and enhancements to the software were capitalized if it had been determined that these upgrades or enhancements add additional functionality to the software. Costs incurred to maintain and support products after they became available were charged to expense as incurred. The Company did not capitalize any software development costs subsequent to January 31, 2020. Due to the financial and economic hardships that have been experienced by airlines, airports and air transportation support vendors in the ongoing COVID-19 environment (described in “3. Impact of the COVID-19 Pandemic” below), there has been a significant amount of uncertainty surrounding the ability of our customers to continue to perform their contracts with the Company. Given these business conditions, the Company’s software efforts were concentrated in the areas of maintenance of existing products. As a result, the Company did not capitalize any software development costs during the three and nine months ended July 31, 2022 and July 31, 2021, respectively. The Company amortized $121,500 and $364,000 of capitalized software development costs during both the three and nine months ended July 31, 2022 and the three and nine months ended July 31, 2021, respectively. The Company recorded amortization of the software on a straight-line basis over the estimated useful life of the software, typically over three years, within “Cost of Revenues”. As a result of the industry changes in response to the COVID-19 pandemic, the Company anticipates that its level of capitalized software development costs, including related amortization of such costs, will decrease in the future, as the Company’s technological efforts are focused more on maintenance of existing products. |
2. Basis of Presentation and_10
2. Basis of Presentation and Significant Accounting Policies: Long-lived Assets (Policies) | 9 Months Ended |
Jul. 31, 2022 | |
Policies | |
Long-lived Assets | Long-Lived Assets The Company reviews long-lived assets for impairment when circumstances indicate the carrying amount of an asset may not be recoverable. Impairment is recognized to the extent the sum of undiscounted estimated future cash flows expected to result from the use of the asset is less than the carrying value. Assets to be disposed of are carried at the lower of their carrying value or fair value, less costs to sell. The Company evaluates the periods of amortization continually in determining whether later events and circumstances warrant revised estimates of useful lives. If estimates are changed, the unamortized costs will be allocated to the increased or decreased number of remaining periods in the asset’s revised life. |
2. Basis of Presentation and_11
2. Basis of Presentation and Significant Accounting Policies: Deferred Tax Asset (Policies) | 9 Months Ended |
Jul. 31, 2022 | |
Policies | |
Deferred Tax Asset | Deferred Tax Assets 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 assets 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 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 its net deferred tax assets are not realizable on a more-likely-than-not basis and that a valuation allowance is required against its net deferred tax assets. At October 31, 2021, the Company had available federal net operating loss carryforwards of $26,812,000, of which $14,032,000 are indefinite lived, but only available to offset 80% of future taxable income, and $12,780,000 will expire in various tax years from fiscal year 2022 through fiscal year 2038. |
2. Basis of Presentation and_12
2. Basis of Presentation and Significant Accounting Policies: Net Loss Per Share Information (Policies) | 9 Months Ended |
Jul. 31, 2022 | |
Policies | |
Net Loss Per Share Information | Net (Loss)/Income per Share Information Basic net (loss)/income per share is computed based on the weighted average number of shares outstanding. Diluted (loss)/earnings per share is computed similarly to basic (loss)/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, which expired on February 24, 2019, and 2019 Stock Incentive Plan (the “Plan”), allow for a cashless exercise. Shares used to calculate net (loss)/income per share are as follows: For the three months ended For the nine months ended July 31, July 31, 2022 2021 2022 2021 Basic Weighted average shares outstanding 7,712,091 7,712,091 7,712,091 7,712,091 Effect of dilutive stock options - - - 36,360 Diluted weighted average shares outstanding 7,712,091 7,712,091 7,712,091 7,748,451 Weighted average shares which are not included in the 1,452,500 1,472,500 1,452,500 1,277,500 |
2. Basis of Presentation and_13
2. Basis of Presentation and Significant Accounting Policies: Stock-based Compensation (Policies) | 9 Months Ended |
Jul. 31, 2022 | |
Policies | |
Stock-based Compensation | Stock-Based Compensation The Company follows FASB ASC 718, Compensation-Stock Compensation On August 16, 2021, the Company’s Board of Directors adopted the Second Amendment to the Plan, to authorize the granting of restricted stock unit (RSU) awards under the Plan. Each RSU represents the right to receive, following vesting, one share of the Company’s Common Stock. In connection with the Second Amendment to the Plan, the Board of Directors has authorized an aggregate of 800,000 RSU awards to be granted under the Plan. As of January 31, 2022, 797,500 RSU awards were granted under the Plan at a grant date fair market value of $0.63 per share, which RSU awards vest ratably over a three-year period. All 797,500 RSU awards were granted on October 22, 2021. Compensation expense related to RSU awards was $35,000 and $0 for the three months ended July 31, 2022 and July 31, 2021, respectively. Compensation expense related to RSU awards was $118,000 and $0 for the nine months ended July 31, 2022 and July 31, 2021, respectively. |
2. Basis of Presentation and_14
2. Basis of Presentation and Significant Accounting Policies: Fair Value of Financial Instruments (Policies) | 9 Months Ended |
Jul. 31, 2022 | |
Policies | |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The recorded amounts of the Company’s cash, receivables, and accounts payables approximate their fair values principally because of the short-term nature of these items. The fair value of related party debt is not practicable to determine due primarily to the fact that the Company’s related party debt is held by its significant shareholder and Non-Executive Chairman of the Board, and the Company does not have any third-party debt with which to compare. Additionally, on a recurring basis, the Company uses fair value measures when analyzing asset impairments. Long-lived assets and certain identifiable intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If it is determined such indicators are present, and the review indicates that the assets will not be fully recoverable based on the undiscounted estimated future cash flows expected to result from the use of the asset, their carrying values are reduced to estimated fair value. |
2. Basis of Presentation and_15
2. Basis of Presentation and Significant Accounting Policies: Recent Accounting Pronouncements (Policies) | 9 Months Ended |
Jul. 31, 2022 | |
Policies | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Adopted In February 2016, the FASB issued ASU 2016-02, which amends the ASC and creates Topic 842, Leases . In December 2019, the FASB issued ASU 2019-12, “Income Taxes Topic 740-Simplifying the Accounting for Income Taxes” (“ASU 2019-12”), which intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application of Topic 740. This guidance was effective for fiscal years beginning after December 15, 2020, including interim periods therein. Topic 740 did not have a material effect on the Company’s consolidated financial statements or any disclosures within these consolidated financial statements. Accounting Pronouncements Issued but not yet Adopted In June 2016, the FASB issued ASU 2016-13, “Current Expected Credit Losses” (ASU 2016-13), which introduces an impairment model based on expected, rather than incurred, losses. Additionally, it requires expanded disclosures regarding (a) credit risk inherent in a portfolio and how management monitors the portfolio’s credit quality; (b) management’s estimate of expected credit losses; and (c) changes in estimates of expected credit losses that have taken place during the period. ASU 2016-13 is effective for fiscal years beginning after December 15, 2022. The Company has not yet quantified the impact of ASU 2016-13 on its consolidated financial statements. However, it is not expected to have a material effect on the Company’s consolidated financial statements. |
2. Basis of Presentation and_16
2. Basis of Presentation and Significant Accounting Policies: Revenue Recognition Policy: Disaggregation of Revenue (Tables) | 9 Months Ended |
Jul. 31, 2022 | |
Customer | |
Disaggregation of Revenue | Revenue by type of customer: Three Months Ended July 31, 2022 Three Months Ended July 31, 2021 Nine Months Ended July 31, 2022 Nine Months Ended July 31, 2021 Airlines $220,000 $149,000 $732,000 $660,000 Airports 896,000 1,215,000 2,811,000 3,695,000 Other 368,000 146,000 798,000 315,000 Total Revenue $1,484,000 $1,510,000 $4,341,000 $4,670,000 |
Performance Obligation | |
Disaggregation of Revenue | Revenue by type of performance obligation: Three Months Ended July 31, 2022 Three Months Ended July 31, 2021 Nine Months Ended July 31, 2022 Nine Months Ended July 31, 2021 Subscription services $1,313,000 $1,340,000 $4,045,000 $4,279,000 Professional services 171,000 170,000 296,000 391,000 Total Revenue $1,484,000 $1,510,000 $4,341,000 $4,670,000 |
2. Basis of Presentation and_17
2. Basis of Presentation and Significant Accounting Policies: Revenue Recognition Policy: Schedule of Contract Balances (Tables) | 9 Months Ended |
Jul. 31, 2022 | |
Tables/Schedules | |
Schedule of Contract Balances | Accounts Receivable Unbilled Receivable Deferred Revenue Balance at November 1, 2021 $ 720,000 $ 89,000 $ 1,494,000 Balance at July 31, 2022 $ 745,000 $ 166,000 $ 1,088,000 |
2. Basis of Presentation and_18
2. Basis of Presentation and Significant Accounting Policies: Revenue Recognition Policy: Transaction Price Allocated to the Remaining Performance Obligation Schedule (Tables) | 9 Months Ended |
Jul. 31, 2022 | |
Tables/Schedules | |
Transaction Price Allocated to the Remaining Performance Obligation Schedule | 12 months or less Greater than 12 months * Subscription services $ 3,239,000 $ 1,026,000 Professional services $ 62,000 $ - Material rights $ 81,000 $ 136,000 |
2. Basis of Presentation and_19
2. Basis of Presentation and Significant Accounting Policies: Net Loss Per Share Information: Schedule of Earnings per share basic and diluted (Tables) | 9 Months Ended |
Jul. 31, 2022 | |
Tables/Schedules | |
Schedule of Earnings per share basic and diluted | For the three months ended For the nine months ended July 31, July 31, 2022 2021 2022 2021 Basic Weighted average shares outstanding 7,712,091 7,712,091 7,712,091 7,712,091 Effect of dilutive stock options - - - 36,360 Diluted weighted average shares outstanding 7,712,091 7,712,091 7,712,091 7,748,451 Weighted average shares which are not included in the 1,452,500 1,472,500 1,452,500 1,277,500 |
4. Leases_ Schedule of lease co
4. Leases: Schedule of lease costs and other information relating to the Company's operating leases (Tables) | 9 Months Ended |
Jul. 31, 2022 | |
Tables/Schedules | |
Schedule of lease costs and other information relating to the Company's operating leases | Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended Total lease cost July 31, 2022 July 31, 2021 July 31, 2022 July 31, 2021 Operating lease cost $ 31,441 $ 46,969 $ 85,806 $ 144,104 Short-term lease cost $ 3,398 $ 17,848 $ 10,335 $ 56,555 Variable lease cost $ 2,093 $ 1,414 $ 6,338 $ 8,867 Total $ 36,932 $ 66,231 $ 102,479 $ 209,526 Other information Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 106,392 Right-of-use assets obtained in exchange for new operating lease liabilities $ - Weighted-average remaining lease term - operating leases 3.77 years Weighted-average discount rate - operating leases 9.75% |
4. Leases_ Schedule of Future M
4. Leases: Schedule of Future Minimum Rental Payments for Operating Leases (Tables) | 9 Months Ended |
Jul. 31, 2022 | |
Tables/Schedules | |
Schedule of Future Minimum Rental Payments for Operating Leases | Fiscal Year Ended October 31: Operating Leases 2022 $ 29,713 2023 117,944 2024 116,657 2025 96,523 2026 57,806 Thereafter 9,873 Total future minimum lease payments $ 428,516 Less imputed interest (67,462) Total $ 361,054 |
4. Leases_ Schedule of Maturiti
4. Leases: Schedule of Maturities of Contractual Obligations Relating to Operating Leases (Tables) | 9 Months Ended |
Jul. 31, 2022 | |
Tables/Schedules | |
Schedule of Maturities of Contractual Obligations Relating to Operating Leases | Fiscal Year Ended October 31: Payments Due in Fiscal Year (1) 2022 $ 28,180 2023 113,495 2024 115,082 2025 96,523 2026 57,806 Thereafter 9,873 Total contractual obligations $ 420,959 |
2. Basis of Presentation and_20
2. Basis of Presentation and Significant Accounting Policies: Liquidity (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||||||||||
May 27, 2021 | Apr. 29, 2021 | Apr. 26, 2021 | Apr. 16, 2021 | Mar. 08, 2021 | Mar. 05, 2021 | Feb. 12, 2021 | Jul. 31, 2020 | Jul. 31, 2022 | Jul. 31, 2021 | Jul. 31, 2022 | Jul. 31, 2021 | Oct. 31, 2021 | |
Current Assets Exceed Current Liabilities, Excluding Deferred Revenue | $ 940,000 | $ 940,000 | |||||||||||
Proceeds from Grantors | 833,000 | ||||||||||||
Shareholders' Deficit, rounded | 14,083,000 | 14,083,000 | |||||||||||
Net Income/(loss), rounded | (1,489,000) | $ (64,000) | (3,294,000) | $ 21,000 | |||||||||
Accrued Liabilities And Other Liabilities Rounded | $ 0 | 0 | $ 856,000 | ||||||||||
Federal Stimulus Credits Utilized Rounded | $ 0 | 1,189,000 | |||||||||||
Accrued Interest on Existing Gilbert Note | |||||||||||||
Debt Instrument, Increase, Accrued Interest | $ 1,057,000 | ||||||||||||
CARES Act Payroll Support Program | |||||||||||||
Proceeds from Loans | $ 655,000 | $ 655,000 | $ 655,000 | $ 1,310,000 | $ 655,000 | $ 1,310,000 | $ 875,000 | $ 3,003,000 |
2. Basis of Presentation and_21
2. Basis of Presentation and Significant Accounting Policies: Revenue Recognition Policy: Disaggregation of Revenue (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Jul. 31, 2022 | Jul. 31, 2021 | Jul. 31, 2022 | Jul. 31, 2021 | |
Revenue (Rounded) | $ 1,484,000 | $ 1,510,000 | $ 4,341,000 | $ 4,670,000 |
Subscription services | ||||
Revenue (Rounded) | 1,313,000 | 1,340,000 | 4,045,000 | 4,279,000 |
Professional Services | ||||
Revenue (Rounded) | 171,000 | 170,000 | 296,000 | 391,000 |
Airlines | ||||
Revenue (Rounded) | 220,000 | 149,000 | 732,000 | 660,000 |
Airports | ||||
Revenue (Rounded) | 896,000 | 1,215,000 | 2,811,000 | 3,695,000 |
Other | ||||
Revenue (Rounded) | $ 368,000 | $ 146,000 | $ 798,000 | $ 315,000 |
2. Basis of Presentation and_22
2. Basis of Presentation and Significant Accounting Policies: Revenue Recognition Policy: Schedule of Contract Balances (Details) - USD ($) | Jul. 31, 2022 | Oct. 31, 2021 |
Details | ||
Accounts Receivable | $ 745,000 | $ 720,000 |
Unbilled Receivable | 166,000 | 89,000 |
Deferred Revenue | $ 1,088,000 | $ 1,494,000 |
2. Basis of Presentation and_23
2. Basis of Presentation and Significant Accounting Policies: Revenue Recognition Policy: Transaction Price Allocated to the Remaining Performance Obligation Schedule (Details) | 9 Months Ended |
Jul. 31, 2022 USD ($) | |
Subscription services | |
Transaction price allocated to the remaining performance obligation, Revenue recognized in 12 months or less | $ 3,239,000 |
Transaction price allocated to the remaining performance obligation, Revenue recognized in greater than 12 months | 1,026,000 |
Professional Services | |
Transaction price allocated to the remaining performance obligation, Revenue recognized in 12 months or less | 62,000 |
Transaction price allocated to the remaining performance obligation, Revenue recognized in greater than 12 months | 0 |
Material Rights | |
Transaction price allocated to the remaining performance obligation, Revenue recognized in 12 months or less | 81,000 |
Transaction price allocated to the remaining performance obligation, Revenue recognized in greater than 12 months | $ 136,000 |
2. Basis of Presentation and_24
2. Basis of Presentation and Significant Accounting Policies: Income Taxes (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Jul. 31, 2022 | Jul. 31, 2021 | Jul. 31, 2022 | Jul. 31, 2021 | |
Details | ||||
Provision for income taxes | $ 0 | $ 0 | $ 0 | $ 0 |
Income Tax Expense Benefit Percentage | 0% | 0% | 0% | 0% |
Net Income/(loss), rounded | $ (1,489,000) | $ (64,000) | $ (3,294,000) | $ 21,000 |
2. Basis of Presentation and_25
2. Basis of Presentation and Significant Accounting Policies: Accounts Receivable (Details) - USD ($) | Jul. 31, 2022 | Oct. 31, 2021 |
Details | ||
Unbilled Receivable | $ 166,000 | $ 89,000 |
Accounts Receivable, Allowance for Credit Loss | $ 52,000 | $ 183,000 |
2. Basis of Presentation and_26
2. Basis of Presentation and Significant Accounting Policies: Capitalized Software Development Costs (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Jul. 31, 2022 | Jul. 31, 2021 | Jul. 31, 2022 | Jul. 31, 2021 | |
Details | ||||
Capitalized Computer Software, Amortization | $ 121,500 | $ 364,000 | $ 121,500 | $ 364,000 |
2. Basis of Presentation and_27
2. Basis of Presentation and Significant Accounting Policies: Deferred Tax Asset (Details) | Oct. 31, 2021 USD ($) |
Details | |
Operating Loss Carryforwards | $ 26,812,000 |
Operating Loss Carryforwards, indefinite lived | 14,032,000 |
Operating Loss Carryforwards, will expire in various tax years | $ 12,780,000 |
2. Basis of Presentation and_28
2. Basis of Presentation and Significant Accounting Policies: Net Loss Per Share Information: Schedule of Earnings per share basic and diluted (Details) - shares | 3 Months Ended | 9 Months Ended | ||
Jul. 31, 2022 | Jul. 31, 2021 | Jul. 31, 2022 | Jul. 31, 2021 | |
Details | ||||
Weighted average number of common shares outstanding - basic | 7,712,091 | 7,712,091 | 7,712,091 | 7,712,091 |
Effect of dilutive stock options | 0 | 0 | 0 | 36,360 |
Weighted average number of common shares outstanding - diluted | 7,712,091 | 7,712,091 | 7,712,091 | 7,748,451 |
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 1,452,500 | 1,472,500 | 1,452,500 | 1,277,500 |
2. Basis of Presentation and_29
2. Basis of Presentation and Significant Accounting Policies: Stock-based Compensation (Details) - USD ($) | 9 Months Ended | |
Jul. 31, 2022 | Jul. 31, 2021 | |
Details | ||
Share-Based Payment Arrangement, Noncash Expense | $ 37,000 | $ 65,000 |
4. Leases_ Schedule of lease _2
4. Leases: Schedule of lease costs and other information relating to the Company's operating leases (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Jul. 31, 2022 | Jul. 31, 2021 | Jul. 31, 2022 | Jul. 31, 2021 | |
Details | ||||
Operating lease cost | $ 31,441 | $ 46,969 | $ 85,806 | $ 144,104 |
Short-term lease cost | 3,398 | 17,848 | 10,335 | 56,555 |
Variable lease cost | $ 2,093 | $ 1,414 | 6,338 | $ 8,867 |
Operating cash flows from operating leases | 106,392 | |||
Right-of-use assets obtained in exchange for new operating lease liabilities | $ 0 | |||
Operating Lease, Weighted Average Remaining Lease Term | 3 years 9 months 7 days | 3 years 9 months 7 days | ||
Operating Lease, Weighted Average Discount Rate, Percent | 9.75% | 9.75% |
4. Leases_ Schedule of Future_2
4. Leases: Schedule of Future Minimum Rental Payments for Operating Leases (Details) | Jul. 31, 2022 USD ($) |
Details | |
Operating Leases, Future Minimum Payments, Remainder of Fiscal Year | $ 29,713 |
Operating Leases, Future Minimum Payments, Due in Two Years | 117,944 |
Operating Leases, Future Minimum Payments, Due in Three Years | 116,657 |
Operating Leases, Future Minimum Payments, Due in Four Years | 96,523 |
Operating Leases, Future Minimum Payments, Due in Five Years | 57,806 |
Operating Leases, Future Minimum Payments, Due Thereafter | 9,873 |
Operating Lease Liability, Gross | 428,516 |
Operating Leases Future Minimum Payments Interest Included In Payments | (67,462) |
Operating Lease, Liability | $ 361,054 |
4. Leases_ Schedule of Maturi_2
4. Leases: Schedule of Maturities of Contractual Obligations Relating to Operating Leases (Details) | Jul. 31, 2022 USD ($) |
Details | |
Operating Lease Obligations Maturities Repayments Of Principal, Remainder Of Fiscal Year | $ 28,180 |
Operating Lease Obligations Maturities Repayments Of Principal, In Year Two | 113,495 |
Operating Lease Obligations Maturities Repayments Of Principal, In Year Three | 115,082 |
Operating Lease Obligations Maturities Repayments Of Principal, In Year Four | 96,523 |
Operating Lease Obligations Maturities Repayments Of Principal, In Year Five | 57,806 |
Operating Lease Obligations Maturities Repayments Of Principal, Thereafter | 9,873 |
Operating Lease Obligations Maturities Repayments Of Principal | $ 420,959 |
5. Notes Payable - Related Pa_2
5. Notes Payable - Related Party (Details) - USD ($) | 9 Months Ended | ||||||
Jul. 31, 2022 | Apr. 30, 2022 | Jan. 26, 2022 | Jul. 31, 2022 | Jul. 31, 2021 | Oct. 31, 2021 | Jan. 29, 2021 | |
Interest rate on related party note payable | 9.75% | 9.75% | |||||
Accounts payable | $ 725,630 | $ 725,630 | $ 731,767 | ||||
Interest Paid (Rounded) | $ 791,000 | ||||||
Operating Income Loss (Rounded) | 2,461,000 | ||||||
Current Assets Exceed Current Liabilities, Excluding Deferred Revenue | 940,000 | 940,000 | |||||
Accrued Interest on Existing Gilbert Note | |||||||
Accounts payable | 833,000 | 833,000 | |||||
Seventh Gilbert Note | |||||||
Notes Payable, Related Parties, Noncurrent (Rounded) | $ 10,692,000 | ||||||
Eighth Gilbert Note | |||||||
Notes Payable, Related Parties, Noncurrent (Rounded) | $ 10,692,000 | ||||||
Interest rate on related party note payable | 9.75% | ||||||
Debt Instrument, Maturity Date | Nov. 01, 2023 | ||||||
Nine Gilbert Note | |||||||
Notes Payable, Related Parties, Noncurrent (Rounded) | $ 11,692,000 | ||||||
Interest rate on related party note payable | 9.75% | ||||||
Debt Instrument, Maturity Date | Nov. 01, 2023 | ||||||
Ten Gilbert Note | |||||||
Notes Payable, Related Parties, Noncurrent (Rounded) | $ 12,492,000 | $ 12,492,000 | |||||
Interest rate on related party note payable | 9.75% | 9.75% | |||||
Debt Instrument, Maturity Date | Nov. 01, 2023 |