Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Jan. 31, 2015 | Mar. 03, 2015 | |
Document and Entity Information | ||
Entity Registrant Name | PASSUR Aerospace, Inc. | |
Document Type | 10-Q | |
Document Period End Date | 31-Jan-15 | |
Amendment Flag | FALSE | |
Entity Central Index Key | 225628 | |
Current Fiscal Year End Date | -21 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Current Reporting Status | Yes | |
Entity Voluntary Filers | No | |
Entity Well-known Seasoned Issuer | No | |
Document Fiscal Year Focus | 2015 | |
Document Fiscal Period Focus | Q1 | |
Entity Common Stock, Shares Outstanding | 7,672,026 |
Consolidated_Balance_Sheets
Consolidated Balance Sheets (USD $) | Jan. 31, 2015 | Oct. 31, 2014 |
Current assets: | ||
Cash | $216,290 | $648,727 |
Accounts receivable, net | 1,662,554 | 1,368,758 |
Deferred tax asset, current | 452,283 | 537,283 |
Prepaid expenses and other current assets | 228,531 | 164,179 |
Total current assets | 2,559,658 | 2,718,947 |
PASSUR Network, net | 5,708,501 | 5,428,490 |
Capitalized software development costs, net | 7,020,042 | 6,844,509 |
Property and equipment, net | 1,319,020 | 1,323,349 |
Deferred tax asset, non-current | 2,035,088 | 2,035,088 |
Other assets | 135,772 | 142,482 |
Total assets | 18,778,081 | 18,492,865 |
Current liabilities: | ||
Accounts payable | 802,059 | 650,653 |
Accrued expenses and other current liabilities | 703,432 | 833,292 |
Deferred revenue, current portion | 2,014,238 | 1,979,873 |
Accrued interest - related party | 39,937 | |
Total current liabilities | 3,559,666 | 3,463,818 |
Deferred revenue, less current portion | 75,863 | 90,679 |
Notes payable - related party | 3,864,880 | 3,864,880 |
Total liabilities | 7,500,409 | 7,419,377 |
Commitment and contingencies | ||
Stockholders' equity: | ||
Preferred shares - authorized 5,000,000 shares, par value $0.01 per share; none issued or outstanding | ||
Common shares - authorized 10,000,000 shares, par value $0.01 per share; issued 8,368,526 and 8,225,526 at January 31, 2015 and October 31, 2014 | 83,685 | 82,255 |
Additional paid-in capital | 15,335,109 | 15,273,524 |
Accumulated deficit | -2,517,647 | -2,658,816 |
Stockholders' deficit before treasury stock | 12,901,147 | 12,696,963 |
Treasury stock, at cost, 696,500 shares at January 31, 2015 and October 31, 2014 | -1,623,475 | -1,623,475 |
Total stockholders' equity | 11,277,672 | 11,073,488 |
Total liabilities and stockholders' equity | $18,778,081 | $18,492,865 |
Consolidated_Balance_Sheets_Pa
Consolidated Balance Sheets Parenthetical (USD $) | Jan. 31, 2015 | Oct. 31, 2014 |
Consolidated Balance Sheets Parenthetical | ||
Preferred stock par value | $0.01 | $0.01 |
Preferred stock shares authorized | 5,000,000 | 5,000,000 |
Preferred stock shares issued | ||
Preferred stock shares outstanding | ||
Common stock par value | $0.01 | $0.01 |
Common stock shares authorized | 10,000,000 | 10,000,000 |
Common stock shares issued | 8,368,526 | 8,225,526 |
Common stock shares outstanding | 8,368,526 | 8,225,526 |
Treasury stock shares | 696,500 | 696,500 |
Consolidated_Statements_of_Inc
Consolidated Statements of Income (USD $) | 3 Months Ended | |
Jan. 31, 2015 | Jan. 31, 2014 | |
Revenues | ||
Revenues | $2,764,012 | $2,895,602 |
Cost and expenses: | ||
Cost of revenues | 1,114,452 | 1,475,173 |
Research and development expenses | 182,275 | 164,863 |
Selling, general, and administrative expenses | 1,181,854 | 1,087,748 |
Total costs and expenses | 2,478,581 | 2,727,784 |
Income from operations | 285,431 | 167,818 |
Interest expense - related party | 59,262 | 64,353 |
Income before income taxes | 226,169 | 103,465 |
Provision for Income taxes | 85,000 | 39,825 |
Net income | $141,169 | $63,640 |
Net income per common share - basic | $0.02 | $0.01 |
Net income per common share - diluted | $0.02 | $0.01 |
Weighted average number of common shares outstanding - basic | 7,654,928 | 7,344,501 |
Weighted average number of common shares outstanding - diluted | 7,825,820 | 7,824,700 |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (USD $) | 3 Months Ended | |
Jan. 31, 2015 | Jan. 31, 2014 | |
Cash flows from operating activities | ||
Net income | $141,169 | $63,640 |
Depreciation and amortization | 710,085 | 695,156 |
Provision for deferred taxes | 85,000 | 34,184 |
Provision for doubtful accounts | 66,245 | |
Stock-based compensation | 28,695 | 71,149 |
Change in accounts receivable | -293,796 | 269,520 |
Change in prepaid expenses and other current assets | -64,352 | -31,232 |
Change in other assets | 6,710 | 11,778 |
Change in accounts payable | 151,406 | -61,535 |
Change in accrued expenses and other current liabilities | -129,860 | -129,616 |
Change in deferred revenue | 19,549 | -192,242 |
Change in accrued interest - related party | 39,937 | |
Total adjustments | 553,374 | 733,407 |
Net cash provided by operating activities | 694,543 | 797,047 |
Cash flows from investing activities | ||
PASSUR Network, net | -546,163 | -139,064 |
Software development costs, net | -520,813 | -284,892 |
Property and equipment, net | -94,324 | -176,400 |
Net cash used in investing activities | -1,161,300 | -600,356 |
Cash flows from financing activities | ||
Proceeds from the exercise of stock options | 34,320 | |
Repayments of note payable - related party | -300,000 | |
Net cash provided by (used) in financing activities | 34,320 | -300,000 |
Decrease in cash | -432,437 | -103,309 |
Cash - beginning of period | 648,727 | 454,650 |
Cash - end of period | 216,290 | 351,341 |
Supplemental cash flow information | ||
Cash paid for Interest - related party | 19,325 | 64,353 |
Cash paid for Income taxes | $9,033 | $5,641 |
1_Nature_of_Business
1. Nature of Business | 3 Months Ended |
Jan. 31, 2015 | |
Notes | |
1. Nature of Business | 1. Nature of Business |
PASSUR Aerospace, Inc. (“PASSUR®” or the “Company”) is a business intelligence, predictive analytics, and big data company. Our mission is to connect the world’s aviation professionals onto a single platform to improve global air traffic efficiencies. | |
PASSUR® has a broad and global customer network. PASSUR®’s products are used by all of the top North American airlines, over 125 airlines worldwide, over 60 airports including 73% of the top 30 airports, approximately 200 business aviation organizations, and the US government. | |
Our core business addresses some of aviation’s most intractable and costly operational and financial challenges, including underutilization of airspace and airport capacity, delays, cancellations, and diversions. Several studies have put the annual direct costs to the system of such inefficiencies at over $30 billion. | |
Solutions offered by PASSUR® cover the entire flight life cycle, from gate to gate, and result in reductions in overall costs, fuel costs, and emissions, while maximizing revenue opportunities, as well as improving operational efficiency, and enhancing the passenger experience. The Company provides data consolidation, information, decision support, predictive analytics, collaborative solutions, and professional services. | |
We provide airlines and airports the ability to get the most out of today’s air traffic management system. As the Federal Aviation Administration (“FAA”) brings new capabilities online, we, with our customers, will have the ability to develop additional efficiency solutions. | |
Essentially all commercial companies using the airspace depend on information from the FAA for flight tracking. PASSUR® augments and integrates FAA information with data from PASSUR®’s independent network (the largest passive commercial radar network in the world), which has over 180 radar locations covering North America from coast to coast. PASSUR® provides faster aircraft position updates (from one to 4.6 seconds), and more complete information on aircraft. PASSUR®’s sensors receive aircraft and drone signals in Mode A, C, S, and Automatic Dependent Surveillance-Broadcast (“ADS-B”), providing position, altitude, beacon code, and tail number, among other information. | |
PASSUR® receives signals from aircraft that, when combined with our historical database of aircraft and airport behavior, including that recorded by our network over the last 10 years, allows us to know more about what has happened historically, and what is happening in real-time. In addition, the historical database, also accessible in real-time, allows us to predict how aircraft, the airspace, and airports are going to perform, and more importantly, how the aircraft, the airspace, and airport should perform. | |
PASSUR® offers companies products that are commercially proven, commercially accepted, and with a demonstrated Return on Investment (“ROI”) for airlines and airports – providing a critical bridge between the commercial and government opportunities of the FAA’s Next Generation Air Transportation System (“NextGen”), the new national airspace system due for implementation across the United States in stages over the next 10 years. NextGen proposes to transform the U.S. air traffic control system from an aging ground-based system to a satellite-based system. | |
Management is addressing the Company’s working capital deficiency by aggressively marketing the Company’s PASSUR® Network Systems information capabilities in its existing product and professional service lines, as well as in new products and professional services, which are continually being developed and deployed. Management believes that expanding its existing suite of software products and professional services, which address the wide array of needs of the aviation industry, through the continued development of new product and service offerings, will continue to lead to increased growth in the Company’s customer-base and subscription-based revenues. | |
If the Company’s business plan does not generate sufficient cash flows from operations to meet the Company’s operating cash requirements, the Company will attempt to obtain external financing. |
2_Basis_of_Presentation_and_Si
2. Basis of Presentation and Significant Accounting Policies | 3 Months Ended | ||
Jan. 31, 2015 | |||
Notes | |||
2. Basis of Presentation and Significant Accounting Policies | |||
2. Basis of Presentation and Significant Accounting Policies | |||
The consolidated financial information contained in this Form 10-Q represents 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. Such footnote information was included in the Company's annual report on Form 10-K for the year ended October 31, 2014, filed with the Securities and Exchange Commission (“SEC”); 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 (which include only normal recurring adjustments) necessary to present fairly the Company’s consolidated financial position as of January 31, 2015, and its consolidated results of operations and cash flows for the three months ended January 31, 2015 and 2014. | |||
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, 2015. | |||
Certain financial information in the footnotes has been rounded to the nearest thousand for presentation purposes. | |||
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. | |||
Revenue Recognition Policy | |||
The Company recognizes revenue in accordance with FASB ASC 605-15 (“Revenue Recognition in Financial Statements”), which requires that four basic criteria must be met before revenues can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the fee is fixed and determinable; and (4) collectability is reasonably assured. | |||
The Company’s revenues are generated by selling: (1) subscription-based, real-time decision and solution information; (2) professional services; and (3) annual maintenance contracts for PASSUR® Radar Systems. | |||
Revenues generated from subscription and maintenance agreements are recognized over the term of such executed agreements and/or customer’s receipt of such data or services. In accordance with ASC 605-15, we recognize revenue when persuasive evidence of an arrangement exists which is evidenced by a signed agreement, the service has been deployed, as applicable, to its hosted servers, the fee is fixed and determinable, and collection of the resulting receivable is reasonably assured. The Company records revenues pursuant to individual contracts on a month-by-month basis, as outlined by the applicable agreement. In many cases, the Company may invoice respective customers in advance of the specified period, either quarterly or annually, which coincides with the terms of the agreement. In such cases, the Company will defer at the close of each month and/or reporting period, any subscription or maintenance revenues invoiced for which services have yet to be rendered, in accordance with ASC 605-15. Revenues generated by professional services are recognized over the term of such executed agreements. | |||
The individual offerings that are included in arrangements with our customers are identified and priced separately to the customer based upon the stand alone price for each individual element sold in the arrangement irrespective of the combination of products and services which are included in a particular arrangement. As such, the units of accounting are based on each individual element sold, and revenue is allocated to each element based on selling price. Selling price is determined using vendor-specific objective evidence ("VSOE") if available, third-party evidence ("TPE") if VSOE is not available, or best estimate of selling price ("BESP") if neither VSOE or TPE is available. BESP must be determined in a manner that is consistent with that used to determine the price to sell the specific elements on a standalone basis. Our best estimate of selling price is established considering multiple factors including, but not limited to, pricing practices with different classes of customers, geographies and other factors contemplated in negotiating the arrangement with the customer. | |||
From time to time, the Company will enter into an agreement with a customer to receive a one-time fee for rights including, but not limited to, the rights to use certain data at an agreed upon location(s) for a specific use and/or for an unlimited number of users. These fees are recognized as revenue ratably over the term of the agreement or expected useful life of such arrangement, whichever is longer, but typically five years. | |||
Cost of Revenues | |||
Costs associated with subscription and maintenance revenues consist primarily of direct labor, depreciation of PASSUR® Network Systems, amortization of capitalized software development costs, communication costs, data feeds, allocated overhead costs, travel and entertainment, and consulting fees. Also included in cost of revenues are costs associated with upgrades to PASSUR® Systems necessary to make such systems compatible with new software applications, as well as the ordinary repair and maintenance of existing PASSUR® Systems. Additionally, cost of revenues in each reporting period is impacted by: (1) the number of PASSUR® Systems added to the Network, which includes the cost of production, shipment, and installation of these assets, which are capitalized to the PASSUR® Network; and (2) capitalized costs associated with software development projects. Both of these are referred to as “Capitalized Assets”, and are depreciated and/or amortized over their respective useful lives and charged to cost of revenues. | |||
Accounts Receivable | |||
The Company has a history of successfully collecting all amounts due from its customers under the original terms of its subscription agreements without making concessions. The Company records accounts receivables for agreements where amounts due from customers are contractually required and are non-refundable. The carrying amount of accounts receivables is reduced by a valuation allowance that reflects our best estimate of the amounts that will not be collected. Net accounts receivable is comprised of the monthly, quarterly, or annually committed amounts due from customers pursuant to the terms of each respective customer’s agreement. Account receivable balances include amounts attributable to deferred revenues. | |||
The provision for doubtful accounts was $30,000 as of January 31, 2015 and October 31, 2014. In addition to reviewing delinquent accounts receivable, the Company considers many factors in estimating our 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 reasonable. | |||
PASSUR® Network | |||
The PASSUR® Network is comprised of PASSUR® Systems, which include the direct and indirect production, shipping, and installation costs incurred for each PASSUR® System, which are recorded at cost, net of accumulated depreciation. Depreciation is charged to cost of revenues and is calculated using the straight-line method over the estimated useful life of the asset, which is estimated at seven years. PASSUR® Systems which are not installed, raw materials, work-in-process, and finished goods components are carried at cost and no depreciation is recorded. | |||
Capitalized Software Development Costs | |||
The Company follows the provisions of ASC 350-40, “Internal Use Software.” ASC 350-40 provides guidance for determining whether computer software is internal-use software, and on accounting for the proceeds of computer software originally developed or obtained for internal use and then subsequently sold to the public. It also provides guidance on capitalization of the costs incurred for computer software developed or obtained for internal use. The Company expenses all costs incurred during the preliminary project stage of its development, and capitalizes the costs incurred during the application development stage. Costs incurred relating to upgrades and enhancements to the software are capitalized if it is determined that these upgrades or enhancements add additional functionality to the software. Costs incurred to improve and support products after they become available are charged to expense as incurred. The Company records amortization of the software on a straight-line basis over the shorter of the estimated useful life of the software or revenues, typically five years. The Company had $1,944,000 of software development projects in development as of January 31, 2015. There are several new software developments projects scheduled to begin in fiscal year 2015. | |||
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 revised useful life. | |||
Deferred Tax Asset | |||
The Company had available a federal net operating loss carry-forward of $8,943,000 for income tax purposes as of January 31, 2015, which will expire in various tax years from fiscal year 2021 through fiscal year 2034. The Company evaluates whether a valuation allowance related to deferred tax assets is required each reporting period. A valuation allowance would be established if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred income tax asset will not be realized. As of January 31, 2015, the Company’s deferred tax asset was $2,487,000, and it was determined it is more likely than not that the net operating loss carry-forward would be used. At October 31, 2014, the Company had available a federal net operating loss carry-forward of $9,149,000 for income tax purposes, which will expire in various tax years from fiscal year 2021 through fiscal year 2034. | |||
Deferred Revenue | |||
Deferred revenue includes amounts attributable to advances received on customer agreements, which may be billed either annually or quarterly. Revenues from such customer agreements are recognized as income ratably as services are provided. | |||
The Company recognizes initial set-up fee revenues and associated costs on a straight-line basis over the estimated life of the customer relationship period, typically five years. | |||
Fair Value of Financial Instruments | |||
The recorded amounts of the Company’s receivables, accrued expenses, and 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 Chairman and significant shareholder, 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. | |||
Net Income per Share Information | |||
Basic net income per share is computed based on the weighted average number of shares outstanding. Diluted net income per share gives effect to all diluted potential common shares outstanding and common stock equivalents during the period using the treasury stock method. The Company’s 2009 Stock Incentive Plan allows for a cashless exercise. Shares used to calculate net income per share are as follows: | |||
For the three months ended | |||
January 31, | |||
2015 | 2014 | ||
Basic weighted average shares outstanding | 7,654,928 | 7,344,501 | |
Effect of dilutive stock options | 170,892 | 480,199 | |
Diluted weighted average shares outstanding | 7,825,820 | 7,824,700 | |
Weighted average shares which are not included in the calculation of diluted net income per share because their impact is anti-dilutive | 632,608 | 620,801 | |
Stock-Based Compensation | |||
The Company follows FASB ASC 718 “Compensation-Stock Compensation”, which requires the measurement of compensation cost for all stock-based awards at fair value on date of grant, and recognition of stock-based compensation expense over the service period for awards expected to vest. The fair value of stock options was determined using the Black-Scholes valuation model. Such fair value is recognized as an expense over the service period, net of forfeitures. Stock-based compensation expense was $29,000 and $71,000 for the three months ended January 31, 2015 and 2014, respectively, and was primarily included in selling, general, and administrative expenses. |
3_Notes_Payable_Related_Party
3. Notes Payable - Related Party | 3 Months Ended |
Jan. 31, 2015 | |
Notes | |
3. Notes Payable - Related Party | 3. Notes Payable – Related Party |
The Company had a note payable to G.S. Beckwith Gilbert, the Company’s significant shareholder and Chairman, of $3,865,000 (the “Gilbert Note”) as of January 31, 2015. The Gilbert Note bears a maturity date of November 1, 2016, with an annual interest rate of 6%. Interest payments are due by October 31 of each fiscal year. The Company paid $19,00019,325 of the total amount due of $59,00059,262 in interest incurred on the Gilbert Note through January 31, 2015. | |
The Company believes that its liquidity is adequate to meet operating and investment requirements through January 31, 2016. |
2_Basis_of_Presentation_and_Si1
2. Basis of Presentation and Significant Accounting Policies: Principles of Consolidation (Policies) | 3 Months Ended |
Jan. 31, 2015 | |
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_Si2
2. Basis of Presentation and Significant Accounting Policies: Revenue Recognition Policy (Policies) | 3 Months Ended |
Jan. 31, 2015 | |
Policies | |
Revenue Recognition Policy | Revenue Recognition Policy |
The Company recognizes revenue in accordance with FASB ASC 605-15 (“Revenue Recognition in Financial Statements”), which requires that four basic criteria must be met before revenues can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the fee is fixed and determinable; and (4) collectability is reasonably assured. | |
The Company’s revenues are generated by selling: (1) subscription-based, real-time decision and solution information; (2) professional services; and (3) annual maintenance contracts for PASSUR® Radar Systems. | |
Revenues generated from subscription and maintenance agreements are recognized over the term of such executed agreements and/or customer’s receipt of such data or services. In accordance with ASC 605-15, we recognize revenue when persuasive evidence of an arrangement exists which is evidenced by a signed agreement, the service has been deployed, as applicable, to its hosted servers, the fee is fixed and determinable, and collection of the resulting receivable is reasonably assured. The Company records revenues pursuant to individual contracts on a month-by-month basis, as outlined by the applicable agreement. In many cases, the Company may invoice respective customers in advance of the specified period, either quarterly or annually, which coincides with the terms of the agreement. In such cases, the Company will defer at the close of each month and/or reporting period, any subscription or maintenance revenues invoiced for which services have yet to be rendered, in accordance with ASC 605-15. Revenues generated by professional services are recognized over the term of such executed agreements. | |
The individual offerings that are included in arrangements with our customers are identified and priced separately to the customer based upon the stand alone price for each individual element sold in the arrangement irrespective of the combination of products and services which are included in a particular arrangement. As such, the units of accounting are based on each individual element sold, and revenue is allocated to each element based on selling price. Selling price is determined using vendor-specific objective evidence ("VSOE") if available, third-party evidence ("TPE") if VSOE is not available, or best estimate of selling price ("BESP") if neither VSOE or TPE is available. BESP must be determined in a manner that is consistent with that used to determine the price to sell the specific elements on a standalone basis. Our best estimate of selling price is established considering multiple factors including, but not limited to, pricing practices with different classes of customers, geographies and other factors contemplated in negotiating the arrangement with the customer. | |
From time to time, the Company will enter into an agreement with a customer to receive a one-time fee for rights including, but not limited to, the rights to use certain data at an agreed upon location(s) for a specific use and/or for an unlimited number of users. These fees are recognized as revenue ratably over the term of the agreement or expected useful life of such arrangement, whichever is longer, but typically five years. |
2_Basis_of_Presentation_and_Si3
2. Basis of Presentation and Significant Accounting Policies: Cost of Revenues (Policies) | 3 Months Ended |
Jan. 31, 2015 | |
Policies | |
Cost of Revenues | Cost of Revenues |
Costs associated with subscription and maintenance revenues consist primarily of direct labor, depreciation of PASSUR® Network Systems, amortization of capitalized software development costs, communication costs, data feeds, allocated overhead costs, travel and entertainment, and consulting fees. Also included in cost of revenues are costs associated with upgrades to PASSUR® Systems necessary to make such systems compatible with new software applications, as well as the ordinary repair and maintenance of existing PASSUR® Systems. Additionally, cost of revenues in each reporting period is impacted by: (1) the number of PASSUR® Systems added to the Network, which includes the cost of production, shipment, and installation of these assets, which are capitalized to the PASSUR® Network; and (2) capitalized costs associated with software development projects. Both of these are referred to as “Capitalized Assets”, and are depreciated and/or amortized over their respective useful lives and charged to cost of revenues. |
2_Basis_of_Presentation_and_Si4
2. Basis of Presentation and Significant Accounting Policies: Accounts Receivable (Policies) | 3 Months Ended |
Jan. 31, 2015 | |
Policies | |
Accounts Receivable | Accounts Receivable |
The Company has a history of successfully collecting all amounts due from its customers under the original terms of its subscription agreements without making concessions. The Company records accounts receivables for agreements where amounts due from customers are contractually required and are non-refundable. The carrying amount of accounts receivables is reduced by a valuation allowance that reflects our best estimate of the amounts that will not be collected. Net accounts receivable is comprised of the monthly, quarterly, or annually committed amounts due from customers pursuant to the terms of each respective customer’s agreement. Account receivable balances include amounts attributable to deferred revenues. | |
The provision for doubtful accounts was $30,000 as of January 31, 2015 and October 31, 2014. In addition to reviewing delinquent accounts receivable, the Company considers many factors in estimating our 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 reasonable. |
2_Basis_of_Presentation_and_Si5
2. Basis of Presentation and Significant Accounting Policies: Passur Network (Policies) | 3 Months Ended |
Jan. 31, 2015 | |
Policies | |
Passur Network | PASSUR® Network |
The PASSUR® Network is comprised of PASSUR® Systems, which include the direct and indirect production, shipping, and installation costs incurred for each PASSUR® System, which are recorded at cost, net of accumulated depreciation. Depreciation is charged to cost of revenues and is calculated using the straight-line method over the estimated useful life of the asset, which is estimated at seven years. PASSUR® Systems which are not installed, raw materials, work-in-process, and finished goods components are carried at cost and no depreciation is recorded. |
2_Basis_of_Presentation_and_Si6
2. Basis of Presentation and Significant Accounting Policies: Capitalized Software Development Costs (Policies) | 3 Months Ended |
Jan. 31, 2015 | |
Policies | |
Capitalized Software Development Costs | Capitalized Software Development Costs |
The Company follows the provisions of ASC 350-40, “Internal Use Software.” ASC 350-40 provides guidance for determining whether computer software is internal-use software, and on accounting for the proceeds of computer software originally developed or obtained for internal use and then subsequently sold to the public. It also provides guidance on capitalization of the costs incurred for computer software developed or obtained for internal use. The Company expenses all costs incurred during the preliminary project stage of its development, and capitalizes the costs incurred during the application development stage. Costs incurred relating to upgrades and enhancements to the software are capitalized if it is determined that these upgrades or enhancements add additional functionality to the software. Costs incurred to improve and support products after they become available are charged to expense as incurred. The Company records amortization of the software on a straight-line basis over the shorter of the estimated useful life of the software or revenues, typically five years. The Company had $1,944,000 of software development projects in development as of January 31, 2015. There are several new software developments projects scheduled to begin in fiscal year 2015. |
2_Basis_of_Presentation_and_Si7
2. Basis of Presentation and Significant Accounting Policies: Long-lived Assets (Policies) | 3 Months Ended |
Jan. 31, 2015 | |
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 revised useful life. |
2_Basis_of_Presentation_and_Si8
2. Basis of Presentation and Significant Accounting Policies: Deferred Tax Asset (Policies) | 3 Months Ended |
Jan. 31, 2015 | |
Policies | |
Deferred Tax Asset | Deferred Tax Asset |
The Company had available a federal net operating loss carry-forward of $8,943,000 for income tax purposes as of January 31, 2015, which will expire in various tax years from fiscal year 2021 through fiscal year 2034. The Company evaluates whether a valuation allowance related to deferred tax assets is required each reporting period. A valuation allowance would be established if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred income tax asset will not be realized. As of January 31, 2015, the Company’s deferred tax asset was $2,487,000, and it was determined it is more likely than not that the net operating loss carry-forward would be used. At October 31, 2014, the Company had available a federal net operating loss carry-forward of $9,149,000 for income tax purposes, which will expire in various tax years from fiscal year 2021 through fiscal year 2034. |
2_Basis_of_Presentation_and_Si9
2. Basis of Presentation and Significant Accounting Policies: Deferred Revenue (Policies) | 3 Months Ended |
Jan. 31, 2015 | |
Policies | |
Deferred Revenue | Deferred Revenue |
Deferred revenue includes amounts attributable to advances received on customer agreements, which may be billed either annually or quarterly. Revenues from such customer agreements are recognized as income ratably as services are provided. | |
The Company recognizes initial set-up fee revenues and associated costs on a straight-line basis over the estimated life of the customer relationship period, typically five years. |
Recovered_Sheet1
2. Basis of Presentation and Significant Accounting Policies: Fair Value of Financial Instruments (Policies) | 3 Months Ended |
Jan. 31, 2015 | |
Policies | |
Fair Value of Financial Instruments | Fair Value of Financial Instruments |
The recorded amounts of the Company’s receivables, accrued expenses, and 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 Chairman and significant shareholder, 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. |
Recovered_Sheet2
2. Basis of Presentation and Significant Accounting Policies: Net Income Per Share Information (Policies) | 3 Months Ended | ||
Jan. 31, 2015 | |||
Policies | |||
Net Income Per Share Information | Net Income per Share Information | ||
Basic net income per share is computed based on the weighted average number of shares outstanding. Diluted net income per share gives effect to all diluted potential common shares outstanding and common stock equivalents during the period using the treasury stock method. The Company’s 2009 Stock Incentive Plan allows for a cashless exercise. Shares used to calculate net income per share are as follows: | |||
For the three months ended | |||
January 31, | |||
2015 | 2014 | ||
Basic weighted average shares outstanding | 7,654,928 | 7,344,501 | |
Effect of dilutive stock options | 170,892 | 480,199 | |
Diluted weighted average shares outstanding | 7,825,820 | 7,824,700 | |
Weighted average shares which are not included in the calculation of diluted net income per share because their impact is anti-dilutive | 632,608 | 620,801 |
Recovered_Sheet3
2. Basis of Presentation and Significant Accounting Policies: Stock-based Compensation (Policies) | 3 Months Ended |
Jan. 31, 2015 | |
Policies | |
Stock-based Compensation | Stock-Based Compensation |
The Company follows FASB ASC 718 “Compensation-Stock Compensation”, which requires the measurement of compensation cost for all stock-based awards at fair value on date of grant, and recognition of stock-based compensation expense over the service period for awards expected to vest. The fair value of stock options was determined using the Black-Scholes valuation model. Such fair value is recognized as an expense over the service period, net of forfeitures. Stock-based compensation expense was $29,000 and $71,000 for the three months ended January 31, 2015 and 2014, respectively, and was primarily included in selling, general, and administrative expenses. |
Recovered_Sheet4
2. Basis of Presentation and Significant Accounting Policies: Net Income Per Share Information: Schedule of earnings per share basic and diluted (Tables) | 3 Months Ended | ||
Jan. 31, 2015 | |||
Tables/Schedules | |||
Schedule of earnings per share basic and diluted | For the three months ended | ||
January 31, | |||
2015 | 2014 | ||
Basic weighted average shares outstanding | 7,654,928 | 7,344,501 | |
Effect of dilutive stock options | 170,892 | 480,199 | |
Diluted weighted average shares outstanding | 7,825,820 | 7,824,700 | |
Weighted average shares which are not included in the calculation of diluted net income per share because their impact is anti-dilutive | 632,608 | 620,801 |
Recovered_Sheet5
2. Basis of Presentation and Significant Accounting Policies: Accounts Receivable (Details) (USD $) | Jan. 31, 2015 | Oct. 31, 2014 |
Details | ||
Allowance for Doubtful Accounts Receivable, Current | $30,000 | $30,000 |
Recovered_Sheet6
2. Basis of Presentation and Significant Accounting Policies: Capitalized Software Development Costs (Details) (USD $) | Jan. 31, 2015 |
Details | |
Software development projects in development | $1,944,000 |
Recovered_Sheet7
2. Basis of Presentation and Significant Accounting Policies: Deferred Tax Asset (Details) (USD $) | Jan. 31, 2015 |
Details | |
Deferred Tax Assets, Operating Loss Carryforwards | $8,943,000 |
Deferred Tax Assets, Net of Valuation Allowance | 2,487,000 |
Operating Loss Carryforwards | $9,149,000 |
Recovered_Sheet8
2. Basis of Presentation and Significant Accounting Policies: Net Income Per Share Information: Schedule of earnings per share basic and diluted (Details) (USD $) | 3 Months Ended | |
Jan. 31, 2015 | Jan. 31, 2014 | |
Details | ||
Weighted average number of common shares outstanding - basic | 7,654,928 | 7,344,501 |
Dilutive Securities, Effect on Basic Earnings Per Share, Dilutive Convertible Securities | $170,892 | $480,199 |
Weighted average number of common shares outstanding - diluted | 7,825,820 | 7,824,700 |
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 632,608 | 620,801 |
Recovered_Sheet9
2. Basis of Presentation and Significant Accounting Policies: Stock-based Compensation (Details) (USD $) | 3 Months Ended | |
Jan. 31, 2015 | Jan. 31, 2014 | |
Details | ||
Allocated Share-based Compensation Expense | $29,000 | $71,000 |
3_Notes_Payable_Related_Party_
3. Notes Payable - Related Party (Details) (USD $) | 3 Months Ended | |
Jan. 31, 2015 | Jan. 31, 2014 | |
Cash paid for Interest - related party | $19,325 | $64,353 |
Interest expense - related party | 59,262 | 64,353 |
Gilbert Note | ||
Notes Payable, Related Parties | $3,865,000 | |
Interest rate on related party note payable | 6.00% |