-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BUjEhyRp2Ei/zKRWJSwhRgYO6CJ2RxSL80Ntyj1AhFinvoAUQfbgzYTTcJV7DB9j adZzy2j7x94UGuZkpBbzeA== 0000909012-08-000727.txt : 20080616 0000909012-08-000727.hdr.sgml : 20080616 20080616162143 ACCESSION NUMBER: 0000909012-08-000727 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20080430 FILED AS OF DATE: 20080616 DATE AS OF CHANGE: 20080616 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PASSUR Aerospace, Inc. CENTRAL INDEX KEY: 0000225628 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER COMMUNICATIONS EQUIPMENT [3576] IRS NUMBER: 112208938 STATE OF INCORPORATION: NY FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-07642 FILM NUMBER: 08900740 BUSINESS ADDRESS: STREET 1: 47 ARCH STREET CITY: GREENWICH STATE: CT ZIP: 06830 BUSINESS PHONE: 2036224086 MAIL ADDRESS: STREET 1: 47 ARCH STREET CITY: GREENWICH STATE: CT ZIP: 06830 FORMER COMPANY: FORMER CONFORMED NAME: MEGADATA CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: MEGADATA COMPUTER & COMMUNICATIONS CORP DATE OF NAME CHANGE: 19770201 FORMER COMPANY: FORMER CONFORMED NAME: BELLOK DEVICES INC DATE OF NAME CHANGE: 19740314 10-Q 1 t304379.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended APRIL 30, 2008 -------------- OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to _______________ Commission file number 000-7642 PASSUR AEROSPACE, INC. ----------------------- (Exact Name of Registrant as Specified in Its Charter) New York 11-2208938 -------- ---------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 47 Arch Street, Greenwich, Connecticut 06830 -------------------------------------- ----- (Address of Principal Executive Office) (Zip Code) Registrant's telephone number, including area code: (203) 622-4086 ------------------- Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------- ------- Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [X] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No X ------- ------- ====================================================================== There were 4,146,448 shares of common stock with a par value of $0.01 per share outstanding as of June 2, 2008. INDEX PASSUR Aerospace, Inc. and Subsidiary Page PART I. Financial Information 3 Item1. Financial Statements Consolidated Balance Sheets - April 30, 2008 (unaudited) and October 31, 2007. 3 Consolidated Statements of Operations (unaudited) Six months ended April 30, 2008 and 2007. 4 Consolidated Statements of Operations (unaudited) Three months ended April 30, 2008 and 2007. 5 Consolidated Statements of Cash Flows (unaudited) Six months ended April 30, 2008 and 2007. 6 Notes to Consolidated Financial Statements (unaudited) - April 30, 2008. 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 13 Item 3. Quantitative and Qualitative Disclosures about Market Risk. 22 Item 4T. Controls and Procedures. 22 PART II. Other Information 23 Item 5. Submission of Matters to a Vote of Security Holders. 23 Item 6. Exhibits. 24 Signatures. 25 -2- PART I: FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS
PASSUR Aerospace, Inc. and Subsidiary Consolidated Balance Sheets April 30, October 31, 2008 2007 ------------ ------------ (Unaudited) (Audited) ASSETS Current assets: Cash $ 143,395 $ 286,992 Accounts receivable, net 1,057,643 794,487 Inventory, net 1,316,783 366,751 Prepaid expenses and other current assets 131,322 87,123 ------------ ------------ Total current assets 2,649,143 1,535,353 Property, plant and equipment, net 423,402 327,791 PASSUR(R) Network, net 4,588,658 4,517,736 Software development costs, net 1,693,642 1,499,813 Other assets 121,684 48,611 ------------ ------------ Total assets $ 9,476,529 $ 7,929,304 ============ ============ LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Accounts payable $ 581,165 $ 381,262 Accrued expenses and other current liabilities 738,701 660,495 Deferred income, current portion 981,847 911,394 Accrued expenses--related parties 291,426 -- ------------ ------------ Total current liabilities 2,593,139 1,953,151 Deferred income, less current portion 205,215 128,529 Notes payable--related party 13,114,880 12,614,880 ------------ ------------ 15,913,234 14,696,560 Commitment and contingencies Stockholders' deficit: Preferred shares - authorized 5,000,000 shares, par value $.01 per share; none issued or outstanding -- -- Common shares--authorized 10,000,000 shares, par value $.01 per share; issued 4,842,948 in 2008 and 4,787,948 in 2007 48,429 47,879 Additional paid-in capital 4,313,846 4,263,212 Accumulated deficit (9,175,505) (9,454,872) ------------ ------------ (4,813,230) (5,143,781) Treasury Stock, at cost, 696,500 shares in 2008 and 2007 (1,623,475) (1,623,475) ------------ ------------ Total stockholders' deficit (6,436,705) (6,767,256) ------------ ------------ Total liabilities and stockholders' deficit $ 9,476,529 $ 7,929,304 ============ ============ SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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PASSUR Aerospace, Inc. and Subsidiary Consolidated Statements of Operations (Unaudited) SIX MONTHS ENDED APRIL 30, 2008 2007 ----------- ----------- Revenues: Subscriptions $ 3,367,039 $ 2,456,831 Maintenance 193,212 205,432 Other 49,502 31,592 ----------- ----------- Total revenues 3,609,753 2,693,855 ----------- ----------- Cost and expenses: Cost of revenues 1,211,994 931,014 Research and development 149,289 188,493 Selling, general, and administrative expenses 1,677,421 1,142,125 ----------- ----------- 3,038,704 2,261,632 ----------- ----------- Income from operations 571,049 432,223 Other income (expense): Interest income 3,855 4,612 Interest expense--related party (291,414) (264,809) ----------- ----------- Income before income taxes 283,490 172,026 Provision for income taxes 4,123 3,172 ----------- ----------- Net income $ 279,367 $ 168,854 =========== =========== Net income per common share--basic $ .07 $ .04 =========== =========== Net income per common share--diluted $ .05 $ .03 =========== =========== Weighted average number of common shares outstanding--basic 4,113,893 4,091,448 =========== =========== Weighted average number of common shares outstanding--diluted 5,531,692 5,500,660 =========== =========== SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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PASSUR Aerospace, Inc. and Subsidiary Consolidated Statements of Operations (Unaudited) THREE MONTHS ENDED APRIL 30, 2008 2007 ----------- ----------- Revenues: Subscriptions $ 1,776,953 $ 1,289,459 Maintenance 89,697 102,716 Other 36,619 -- ----------- ----------- Total revenues 1,903,269 1,392,175 ----------- ----------- Cost and expenses: Cost of revenues 605,974 471,632 Research and development 78,149 78,746 Selling, general, and administrative expenses 946,772 595,814 ----------- ----------- 1,630,895 1,146,192 ----------- ----------- Income from operations 272,374 245,983 Other income (expense): Interest income 1,245 1,551 Interest expense--related party (146,342) (132,560) ----------- ----------- Net income $ 127,277 $ 114,974 =========== =========== Net income per common share--basic $ .03 $ .03 =========== =========== Net income per common share--diluted $ .02 $ .02 =========== =========== Weighted average number of common shares outstanding--basic 4,133,948 4,091,448 =========== =========== Weighted average number of common shares outstanding--diluted 5,558,736 5,500,310 =========== =========== SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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PASSUR Aerospace, Inc. and Subsidiary Consolidated Statements of Cash Flows (Unaudited) SIX MONTHS ENDED APRIL 30, 2008 2007 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 279,367 $ 168,854 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 656,541 498,443 Provision for doubtful accounts receivable 18,136 11,090 Non cash stock compensation expense 32,234 39,223 Provision for inventory reserve -- 15,000 Changes in operating assets and liabilities: Accounts receivable (281,292) (150,589) Inventory (950,032) 6,662 Prepaid expenses and other current assets (44,199) (47,162) Other assets (73,073) -- Accounts payable 199,903 74,844 Deferred income 147,140 13,321 Accrued expenses and other current liabilities 369,632 (7,891) ----------- ----------- Total adjustments 74,990 452,941 ----------- ----------- Net cash provided by operating activities 354,357 621,795 CASH FLOWS FROM INVESTING ACTIVITIES PASSUR(R) Network (468,082) (819,185) Software development costs (367,726) (272,514) Capital expenditures (181,096) (130,524) ----------- ----------- Net cash used in investing activities (1,016,904) (1,222,223) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from notes payable--related party 500,000 700,000 Proceeds from exercise of stock options 18,950 -- Payments on note payable -- (2,408) ----------- ----------- Net cash provided by financing activities 518,950 697,592 ----------- ----------- Increase (decrease) in cash (143,597) 97,164 Cash--beginning of period 286,992 215,366 ----------- ----------- Cash--end of period $ 143,395 $ 312,530 =========== =========== SUPPLEMENTAL CASH FLOW INFORMATION Cash paid during the period for: Interest-related party $ -- $ 335,270 Income taxes $ 4,123 $ -- SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
-6- PASSUR Aerospace, Inc. and Subsidiary Notes to Consolidated Financial Statements April 30, 2008 (Unaudited) 1. NATURE OF BUSINESS PASSUR Aerospace, Inc.'s (the "Company", "we", or "our") principal business is the delivery from its proprietary passive radar ("PASSUR(R)") Network of live, unique flight information, decision support software, analytics, and web-delivered collaborative decision solutions to the aviation industry and organizations that serve, or are served by, the aviation industry. The Company owns and operates a unique database of flight information with proprietary decision-making software, primarily powered by a growing international network of PASSUR(R) Systems located at more than 90 airports worldwide, including 33 of the top 35 U.S. airports - from which it provides PASSUR(R) information, analytics, and decision support tools to improve the financial condition and operational efficiency of aviation organizations. The Company offers unique, user-friendly information, as well as decision algorithms, which provide innovative commercial air traffic solutions to more than 50 airports, including 8 of the top 10 U.S. airports; to dozens of airlines, including 7 of the top 10 U.S. airlines; and to more than 190 corporate aviation customers, as well as the U.S. Government. In addition, the Company has created and implemented collaborative web-based software that allows the Company's customers to instantly share information to improve individual and joint decision making, creating additional value for those customers. On April 16, 2008, the Company's shareholders approved an amendment to the Company's Articles of Incorporation to change the Company's name from Megadata Corporation to PASSUR Aerospace, Inc. The Company's new ticker symbol is "PSSR". The amendment to change the Company's name was filed with the Secretary of State of the State of New York on April 22, 2008. 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, 2007, 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 the Company, 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 at April 30, 2008, and its consolidated results of operations and cash flows for the six months ended April 30, 2008 and 2007. -7- Management is addressing the stockholders' deficiency, which, as of April 30, 2008, was approximately $6,437,000, by aggressively marketing the Company's PASSUR(R) information capabilities in its existing product lines, as well as in new products, which are continually being developed and deployed. The Company intends to increase the size and related airspace coverage of its owned "PASSUR(R) Network," by continuing to install PASSUR(R) Systems throughout the United States and certain foreign countries. In addition, management believes that expanding its existing software suite of products, which address the wide array of needs of the aviation industry, through the continued development of new product offerings, will continue to lead to increased growth in the Company's customer base and subscription-based revenues. Additionally, 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, and if such external financing is not consummated, the Company has a commitment to receive additional financial support from its significant shareholder and Chairman through May 29, 2009. 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 interest payments due on the existing loans, if deemed necessary. 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, 2008. Footnotes have been rounded to the nearest thousand for presentation purposes. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of PASSUR Aerospace, Inc. and its wholly-owned subsidiary. All significant inter-company transactions and balances have been eliminated in consolidation. REVENUE RECOGNITION POLICY The Company follows the provisions of the American Institute of Certified Public Accountants Statement of Position 97-2, or SOP 97-2, "Software Revenue Recognition," as amended. SOP 97-2 delineates the accounting practices for software products, maintenance and support services, and consulting revenue. Under SOP 97-2, the Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the fee is determinable, and collection of the resulting receivable is probable. For arrangements involving multiple elements (e.g., maintenance, support, and other services), the Company allocates revenue to each element of the arrangement based on vendor-specific objective evidence of its fair value, or for products not being sold separately, the objective and verifiable fair value established by management. The Company recognizes service and maintenance revenues on a straight-line basis over the service contract period. Revenues for data subscription services are recognized on a monthly basis upon the execution of an agreement and the customer's receipt of the data. The Company recognizes license fee revenues on a straight-line basis over the term of the license agreement, which typically does not exceed five years. 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. -8- ACCOUNTS RECEIVABLE The Company uses installment license and/or maintenance agreements as part of its standard business practice. The Company has a history of successfully collecting amounts due under the original payment terms, without making concessions on payments, software products, maintenance, or other services. Net accounts receivable are composed of either the monthly, quarterly, or annual committed amounts due from customers, pursuant to the terms of each respective customer's agreement. These account receivable balances include unearned revenue attributable to deferred subscription revenues, deferred maintenance revenues, and unamortized license fee revenues. Deferred revenue amounts represent fees billed prior to actual performance of services, which will be recognized as revenue over the respective license agreement term, which typically does not exceed five years. Accounts receivable balances also include initial set up fees billed when the service is performed and revenues are recognized on a straight-line basis over the estimated life of the customer relationship period, typically five years. For the period ended April 30, 2008, the provision for doubtful accounts was approximately $25,000, compared to $7,000, recorded as of the fiscal year ended October 31, 2007. The Company monitors the outstanding accounts receivable balance and believes the $25,000 provision is reasonable. COST OF REVENUES The Company has not segregated its cost of revenues between cost of system revenues and cost of subscription and maintenance revenues, as it is not practicable to segregate such costs. Costs associated with system revenues consist primarily of purchased materials, direct labor, and overhead costs. Costs associated with subscription and maintenance revenues consist primarily of direct labor, communication costs, depreciation of PASSUR(R) Network assets, amortization of software development costs, and overhead costs allocations. Also included in costs of revenues are costs associated with the upgrades of PASSUR(R) systems necessary to make such systems compatible with new software applications, as well as the ordinary repair and maintenance of existing PASSUR(R) Network systems. Additionally, cost of revenues in each reporting period is impacted by: (1) the number of PASSUR(R) Network units added, which include the production, shipment, and installation of these assets which are capitalized to the PASSUR(R) Network; and (2) capitalized costs associated with software development programs which are expensed in cost of revenues. INVENTORY Inventory is valued at the lower of cost or market with cost being determined using the first-in, first-out (FIFO) method. Costs included in inventory consist of materials, labor, and manufacturing overhead that are related to the purchase and production of inventory. -9- PASSUR(R) NETWORK The PASSUR(R) Network installations, which include the direct and indirect production and installation costs incurred for each of the Company-owned PASSUR(R) Systems (the "PASSUR(R) Network"), 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. Units that are not placed into service are not depreciated until they are placed into service. CAPITALIZED SOFTWARE COSTS The Company follows the provisions of Statement of Financial Accounting Standards ("SFAS") No. 86, "Accounting for the Costs of Software to be Sold, Leased, or Otherwise Marketed." Costs incurred to develop computer software products, as well as significant enhancements to software features of the existing products to be sold or otherwise marketed, are capitalized after technological feasibility is established and ending when the product is available for release to customers. Once the software products become available for general release to the public, the Company begins to amortize such costs to cost of revenues. Amortization of capitalized software costs is provided on a product-by-product basis based on the greater of the ratio of current gross revenues to the total of current and anticipated future gross revenues or the straight-line method over the estimated economic life of the product beginning at the point the product becomes available for general release, typically over five years. Costs incurred to improve and support products after they become available for general release are charged to expense as incurred. The assessment of recoverability of capitalized software development costs requires the exercise of judgment by management. In the opinion of management, all such costs capitalized as of April 30, 2008 are recoverable through anticipated future sales of such applicable products. DEFERRED INCOME Deferred income includes advances received on subscription services and/or maintenance agreements, which are derived from the Company's PASSUR(R) Network and which may be prepaid either annually or quarterly, as well as advanced one-time payments received for license fees relating to Company software applications. Revenues from subscription and maintenance services are recognized as income ratably over the subscription and/or maintenance period that coincides with the respective agreement. The Company recognizes license fee revenues on a straight-line basis over the term of the license agreement, which typically does not exceed five years. 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. -10- 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 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 life. 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 is based on the sum of the weighted average number of common shares outstanding and common stock equivalents. Shares used to calculate net income per share are as follows: FOR THE FOR THE THREE MONTHS ENDED SIX MONTHS ENDED APRIL 30, APRIL 30, --------------------------------------------- 2008 2007 2008 2007 --------- --------- --------- --------- Basic weighted average shares outstanding 4,133,948 4,091,448 4,113,893 4,091,448 Effect of dilutive stock options 1,424,788 1,408,862 1,417,799 1,409,212 --------- --------- --------- --------- Diluted weighted average shares outstanding 5,558,736 5,500,310 5,531,692 5,500,660 ========= ========= ========= ========= Weighted average shares which are not included in the calculation of diluted net income per share because their impact is anti-dilutive Stock options 277,712 301,638 284,701 301,288 STOCK BASED COMPENSATION The Company follows FASB No.123R "Share-Based Compensation" which requires measurement of compensation cost for all stock-based awards at fair value on date of grant and recognition of compensation over the service period for awards expected to vest. The fair value of stock options was determined using the Black-Scholes valuation model, which is consistent with our valuation techniques previously utilized for stock options in footnote disclosures required under SFAS No. 123. Such fair value is recognized as expense over the service period, net of estimated forfeitures. The adoption of SFAS No. 123R resulted in no cumulative change in accounting as of the date of adoption. For the three and six months ended April 30, 2008 and 2007, stock compensation expense of approximately $18,000 and $19,000, and $32,000 and $39,000, respectively, was primarily charged to selling, general and administrative expense. -11- RECENT ACCOUNTING PRONOUNCEMENTS On July 13, 2006, FASB Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes - An Interpretation of FASB Statement No. 109, was issued. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 also prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The new FASB standard also provides guidance on de-recognition, classification, interest, and penalties, accounting in interim periods, disclosure, and transition. FASB Interpretation (FIN) No. 48 takes effect for years beginning after December 15, 2006. The Company adopted FIN No. 48 on November 1, 2007 and determined that the adoption of FIN No. 48 did not have a material impact on its consolidated financial statements. In addition, there are no unrecognized tax benefits included in the consolidated balance sheet that would, if recognized, have a material effect on the Company's effective tax rate. When applicable the Company is continuing the practice of recognizing interest and penalties to income tax matters in income tax expense. The Company did not recognize interest or penalties related to income taxes during the six months ended April 30, 2008. The Company files U.S. federal and U.S. state tax returns. The statute of limitations for major jurisdictions are closed for fiscal years prior to October 31, 2004. 3. RELATED PARTY TRANSACTIONS During the six months ended April 30, 2008, G.S. Beckwith Gilbert, the Company's significant shareholder and Chairman, loaned the Company an additional $500,000 in exchange for promissory notes bearing interest payable in cash at 4.5% per annum and maturing on November 1, 2008, bringing the principal amount of notes due to Mr. Gilbert to $13,114,880, adding accrued interest of $291,426, resulting in a total of $13,406,306 owed to Mr. Gilbert on April 30, 2008. During fiscal 2007, Mr. Gilbert loaned the Company $1,400,000 bringing the principal amount of notes due to Mr. Gilbert to $12,614,880 on October 31, 2007. The notes payable-related party are classified as long-term liabilities as of April 30, 2008 and October 31, 2007. The notes payable-related party are classified as long-term liabilities because the Company has a commitment from Mr. Gilbert that if the Company, at any time, is unable to meet its obligations through May 29, 2009, Mr. Gilbert will provide the necessary continuing financial support to the Company in order for the Company to meet such obligations. Such commitment for financial support may be in the form of additional advances or loans to the Company, in addition to the deferral of principal and interest payments due on the existing loans, if deemed necessary. The notes are secured by the Company's assets. -12- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS DESCRIPTION OF BUSINESS The Company's principal business is the delivery from its proprietary PASSUR(R) Network of live, unique flight information, decision support software, analytics, and web-delivered collaborative decision solutions to the aviation industry and organizations that serve, or are served by, the aviation industry. Over the past several years, the Company has been developing and selling information and software from its unique flight database, powered by the PASSUR(R) radar network, to airlines and airports, while simultaneously investing in growing the radar network and integrating additional information sets into the database. The Company has created, and continues to create, collaborative web-based software that allows all of its customers, both industrial and non-industrial, to instantly share information to improve individual and joint decision making, creating additional value for both its traditional and new customers. Information services include timely, accurate, user-friendly information important to the efficient operation of airlines, airports, and other customers. The information services leverage the PASSUR(R) Network, and are designed to address specific customer requirements, many of which can only be satisfied by information generated from the PASSUR(R) Network. The services provide airline and airport customers with specific and timely information needed to efficiently manage their airport, airside, and ground operations. The estimated time of arrivals ("ETAs") generated from the PASSUR(R) System are an example of information services currently being used throughout the customer network. The Company sells subscription-based information and software products, annual maintenance contracts for PASSUR(R) radar systems, as well as consulting and professional services. Under the subscription model, the customer signs, at a minimum, a one-year contract for access to the information services. The agreement also provides that the information from the PASSUR(R) Information Network cannot be resold, used by others, or used for unauthorized purposes. Consulting services generally accompany the sale of our collaborative decision tools. The Company has incorporated strict levels of security in both the information generated by the PASSUR(R) Network, and the availability of that information to the end users. -13- RESULTS OF OPERATIONS REVENUES The Company's principal business is the delivery from its proprietary PASSUR(R) Network of live, unique flight information, decision support software, analytics, and web-delivered collaborative decision solutions to the aviation industry and organizations that serve, or are served by, the aviation industry. The Company offers unique, user-friendly information, as well as decision algorithms, which provide innovative commercial air traffic solutions to more than 50 airports, including 8 of the top 10 U.S. airports; to dozens of airlines, including 7 of the top 10 U.S. airlines; and to more than 190 corporate aviation customers, as well as the U.S. Government. In addition, the Company has created and implemented collaborative web-based software that allows the Company's customers to instantly share information to improve individual and joint decision making, creating additional value for those customers. Revenues during the three and six months ended April 30, 2008 increased by approximately $511,000, or 37%, and $916,000, or 34%, respectively, to $1,903,000 and $3,610,000 , respectively, when compared to the same periods in fiscal 2007. This increase was primarily due to the continued development and deployment of new software applications, increased effectiveness of the Company's marketing efforts, industry acceptance of the Company's applications, as well as the wide selection of products which address customers' needs, and ease of delivery through web-based applications. These efforts resulted in an increased number of new customers subscribing to the Company's suite of software applications and the increased subscriptions from its suite of applications by existing customers. This increase was primarily due to the increased focus on the subscription-based revenue business model. Management continues to concentrate its efforts on the sale of information and decision support product applications utilizing data primarily derived from the PASSUR(R) Information Network. Such efforts include the continued development of new product applications, as well as enhancements and maintenance of existing applications. As a result, during the three and six months ended April 30, 2008, subscription-based revenues increased approximately $487,000, or 38%, and $910,000 or 37%, respectively, compared to the same periods in fiscal 2007. The Company's business plan is to continue to focus on increasing subscription-based revenues from the suite of software applications, and to develop new applications designed to address the needs of the aviation industry. The Company shipped nine and installed eight Company-owned PASSUR(R) Systems during the six months ended April 30, 2008 (installations include systems shipped in current and previous fiscal years). The shipped and installed PASSUR(R) Systems were capitalized as part of the Company-owned "PASSUR(R) Information Network." The Company will continue to expand the PASSUR(R) Information Network by shipping and installing additional PASSUR(R) Systems throughout fiscal 2008. The Company is continuing its manufacturing program in fiscal 2008, and there were a number of subassemblies in work-in-process inventory at April 30, 2008. Management anticipates that future PASSUR(R) sites will provide increased coverage for the PASSUR(R) Information Network by increasing the Company's ability to contract with new customers at such locations and by providing existing customers with additional data solutions. -14- The Company will continue to market the data generated from the PASSUR(R) Information Network directly to the aviation industry and organizations that serve, or are served by, the aviation industry. There were eighty Company-owned PASSUR(R) Systems located at various airports worldwide as of April 30, 2008. COST OF REVENUES Costs associated with subscription and maintenance revenues consist primarily of direct labor, depreciation of PASSUR(R) Network assets, amortization of software development costs, communication costs, and allocated overhead costs. Also included in cost of revenues are costs associated with the upgrades of PASSUR(R) Systems necessary to make older systems compatible with new software applications, as well as, the ordinary repair and maintenance of existing network systems. Additionally, cost of revenues in each reporting period is impacted by: (1) the number of PASSUR(R) units produced, upgraded, shipped, and installed during the year which are added to the PASSUR(R) network and (2) capitalized costs associated with software development projects, collectively referred to as "Capitalized Assets", which are depreciated and/or amortized over their respective useful lives and charged to cost of revenues. For the three and six months ended April 30, 2008, cost of revenues increased by approximately $134,000, or 28%, and $281,000 or 30%, respectively, compared to the same periods in fiscal 2007. This increase was primarily due to an increase in headcount related costs, data feeds, communication costs, travel and entertainment expenses, depreciation, as well as amortization of capitalized software assets. This increase was partially offset by an increase in the number of PASSUR(R) Systems added to the PASSUR(R) Network, as well as an increase in the capitalization of software development costs. RESEARCH AND DEVELOPMENT For the three months ended April 30, 2008, research and development expenses were consistent compared to the same period in fiscal 2007. For the six months ended April 30, 2008, research and development expenses decreased $39,000, or 21%, compared to the same period in fiscal 2007. This decrease is primarily due to an increase in the capitalization of costs associated with software development programs. The Company's research and development efforts include activities associated with the enhancement, maintenance, and improvement of the Company's existing hardware, software, and information products. The Company anticipates that it will continue to invest in research and development to develop, maintain, and support the existing and newly developed applications for its PASSUR(R) customers. There were no customer sponsored research and development activities during the three and six months ended April 30, 2008 and 2007. Research and development expenses are funded by current operations. SELLING, GENERAL AND ADMINISTRATIVE For the three and six months ended April 30, 2008, selling, general and administrative expenses increased by approximately $351,000, or 59%, and $535,000 or 47%, respectively, compared to the same periods in fiscal 2007. These increases reflect planned expenditures based on anticipated future demand for our products. These increases include increased sales and marketing costs due to the hiring of five additional employees and two consultants, executive recruiting fees, sales commissions, as well as expenditures relating to the introduction of new marketing initiatives. Approximately, half of these increases had occurred in the fourth quarter of the previous fiscal year. -15- The Company anticipates continued increases in its sales and marketing efforts in order to market new and existing products from the PASSUR(R) suite of software applications. The Company anticipates that its sales and marketing expenses will increase in fiscal 2008 resulting from these efforts, while efforts to maintain and expand cost reduction initiatives are identified and implemented. OTHER INCOME (EXPENSE) Interest income and interest expense to unrelated parties was not significant for the three and six months ended April 30, 2008. Interest expense-related party increased by approximately $14,000, or 10% and $27,000 or 10%, respectively, for the three and six months ended April 30, 2008, compared to the same periods in fiscal 2007. The increase is due to $1,200,000 in higher related-party debt. NET INCOME The Company earned net income of approximately $127,000, or $.02 and $279,000 or $.05 per diluted share, during the three and six months ended April 30, 2008, as compared to net income of $115,000, or $.02 per diluted share and $169,000 or $.03 per diluted share, during the same periods of fiscal 2007. During the three and six months ended April 30, 2008, revenues of approximately $1,903,000 and $3,610,000 exceeded costs and expenses of approximately $1,631,000 and $3,039,000, respectively, and resulted in income from operations of approximately $272,000 and $571,000, respectively. Revenues increased by 37% and 34%, respectively, during the three and six months ended April 30, 2008, and total costs and expenses increased by approximately $485,000, or 42%, and $777,000 or 34%, respectively, compared to the same periods in fiscal 2007. LIQUIDITY AND CAPITAL RESOURCES At April 30, 2008, the Company's current assets exceeded current liabilities by approximately $56,000. At April 30, 2008, the Company's stockholders' deficit was approximately $6,437,000. For the six months ended April 30, 2008, the Company had net income of approximately $279,000. Management is addressing the stockholders' deficiency by aggressively marketing the Company's PASSUR(R) information capabilities in its existing product lines, as well as in new products, which are continually being developed and deployed. The Company intends to increase the size and related airspace coverage of its owned "PASSUR(R) Network," by continuing to install PASSUR(R) Systems throughout the United States and certain foreign countries. In addition, management believes that expanding its existing software suite of products, which address the wide array of needs of the aviation industry, through the continued development of new product offerings, will continue to lead to increased growth in the Company's customer base and subscription-based revenues. -16- Additionally, 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, and if such external financing is not consummated, the Company has a commitment to receive the necessary continuing financial support to meet its obligations from its significant shareholder and Chairman through May 29, 2009. Such continuing financial support may be in the form of additional loans or advances to the Company, in addition to the deferral of principal and/or interest payments due on the outstanding loans, if deemed necessary. Net cash provided by operating activities for the six months ended April 30, 2008 was approximately $354,000. Cash flows used in investing activities for the six months ended April 30, 2008 was approximately $1,017,000, and consisted of investments in the Company's PASSUR(R) Network, capitalized software development costs, and capital expenditures. Cash flows provided by financing activities for the six months ended April 30, 2008, was approximately $519,000 and consisted of $500,000 from notes payable-related party, and approximately $19,000 of proceeds from the exercise of stock options. No principal payments on notes payable - related party were made during the six months ended April 30, 2008. The Company was profitable during the six months ended April 30, 2008. To date, the Company has experienced increased revenues as a result of its subscription-based revenue model. The Company is actively addressing the increasing costs associated with supporting the business, and plans to identify and reduce any unnecessary costs as part of its cost reduction initiatives. Additionally, the aviation market has been impacted by budgetary constraints, airline bankruptcies and consolidations due to the downturn in the current economy, the terrorist events of September 11, 2001, the continued war on terrorism, and increased fuel costs. The aviation market is extensively regulated by government agencies, particularly the Federal Aviation Administration and The National Transportation Safety Board, and management anticipates that new regulations relating to air travel may continue to be issued. Substantially all of the Company's revenues are derived from airports, airlines, and organizations that serve, or are served by, the aviation industry. It is premature to evaluate the impact, if any, that any new regulations or changes in the economic situation of the aviation industry could have on the future operations of the Company, either positively or negatively. Interest by potential customers in the information and decision support software products obtained from the PASSUR(R) Network remains strong, and the Company anticipates an increase in future revenues. However, the Company cannot predict if such revenues will materialize. If sales do not increase, losses may occur. The extent of such profits or losses will be dependent on sales volume achieved and Company cost reduction initiatives. -17- CONTRACTUAL OBLIGATIONS As of April 30, 2008, the Company had contractual obligations as follows:
CONTRACTUAL OBLIGATIONS PAYMENTS DUE BY PERIOD LESS THAN 1 MORE THAN TOTAL YEAR 1 - 3 YEARS 3 YEARS ----------- ----------- ----------- ----------- Operating Leases $ 262,293 $ 196,991 $ 65,302 $ -- Promissory Notes-Related Party 13,114,880 -- 13,114,880 -- Other Long-Term Obligations 536,000 161,000 225,000 150,000 ----------- ----------- ----------- ----------- Total Contractual Obligations $13,913,173 $ 357,991 $13,405,182 $ 150,000 =========== =========== =========== ===========
o Obligations under "Operating Leases" relate to the research and manufacturing facility located in Bohemia, New York ($96,735 - fiscal 2008), the Company's headquarters located in Greenwich, CT ($90,000 - fiscal 2008), and the Company's Washington, D.C. sales office ($8,322 - fiscal 2008). All other operating leases are under a month-to-month arrangement, therefore, such obligations have been excluded from the above calculation. o Obligations under "Other Long-Term Obligations" relate to the minimum royalty payments due to a third party for exclusive licensing rights of certain patents relating to the PASSUR(R) System. The annual minimum royalty payments total $75,000 and are effective until the last licensed patent expires in 2013. The Company's annual royalty payment may exceed the minimum royalty amount of $75,000 based upon certain sales thresholds exceeded in any given year; however, the minimum annual royalty obligation will never be less than $75,000. As of April 30, 2008, the Company had $123,500 accrued in accrued expenses and other accrued liabilities for royalty payments. CRITICAL ACCOUNTING POLICIES AND ESTIMATES GENERAL The Company's discussion and analysis of its financial condition and results of operations are based upon its consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities based upon accounting policies management has implemented. The Company has identified the policies and estimates below as critical to its business operations and the understanding of its results of operations. The impact and any associated risks related to these policies on the Company's business operations are discussed throughout Management's Discussion and Analysis of Financial Condition and Results of Operations, where such policies affect its reported financial results. The actual impact of these factors may differ under different assumptions or conditions. The Company's accounting policies that require management to apply significant judgment and estimates include: -18- REVENUE RECOGNITION The Company recognizes revenue in accordance with SEC Staff Accounting Bulletin No. 104, "REVENUE RECOGNITION IN FINANCIAL STATEMENTS" ("SAB 104"), as codified. SAB 104 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) collectibility is reasonably assured. The Company also recognizes revenue in accordance with Statement of Position 97-2, "SOFTWARE REVENUE RECOGNITION" ("SOP 97-2"), as amended, when applicable. The Company's revenues are generated from the following: (1) subscription and maintenance agreements and (2) one-time license fees. 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 SOP 97-2, we recognize revenue from the licensing of our software products or performance of maintenance when all of the following criteria are met: (1) we have evidence of an agreement with a customer; (2) we deliver the products/services; (3) license or maintenance agreement terms are deemed fixed or determinable and free of contingencies or uncertainties that may alter the agreement, such that the sale may not be complete and/or final; and (4) collection is probable. The Company records revenues pursuant to individual contracts on a month-by-month basis, as outlined by the applicable agreement(s). In many cases, the Company may invoice respective customers in advance of specified period(s), 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 SOP 97-2. Our software licenses generally do not include acceptance provisions. An acceptance provision generally allows a customer to test the software for a defined period of time before committing to a binding agreement to license the software. If a subscription agreement includes an acceptance provision, the Company will not recognize revenue until the earlier of the receipt of a written customer acceptance or, if not notified by the customer to cancel the subscription agreement, the expiration of the acceptance period. From time to time, the Company will receive one-time payments from customers 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. Such one-time payments are in the form of license fees. These fees are recognized as revenue ratably over the term of the license agreement or expected useful life of such license arrangement, whichever is longer, but typically five years. Any deferred revenue is classified on the Company's balance sheet as a liability in the deferred income account until such time as revenue from services is properly recognized as revenue in accordance with SAB 104 and/or SOP 97-2 and the corresponding agreement. -19- CAPITALIZED SOFTWARE COSTS The Company follows the provisions of Statement of Financial Accounting Standards No. 86, "ACCOUNTING FOR THE COSTS OF SOFTWARE TO BE SOLD, LEASED, OR OTHERWISE MARKETED" ("SFAS 86"). Costs incurred to develop computer hardware and software products, as well as enhancements to software features of the existing products to be sold or otherwise marketed, are capitalized after technological feasibility is established. Once the software products become available for general release to the public, the Company will begin to amortize such costs to cost of revenues. The Company's policy on capitalized software costs determines whether the costs incurred are classified as capitalized costs (in accordance with SFAS 86) or as research and development expenses. In cases where the Company capitalizes costs incurred with development of new hardware/software products, a product specification is designed and/or a working model of the respective project is developed as the guideline for the capitalization of costs associated with such project in accordance with SFAS 86. Once a product has been made available for sale and/or released for sale to the general public, the development costs of that product are no longer capitalized and amortization commences over a five-year period. Any additional costs incurred to maintain or support such product are expensed as incurred. In some cases, the Company may capitalize costs incurred in the development of enhanced versions of already existing products, but will immediately expense any additional costs incurred to maintain products which were completed and released to the general public, in accordance with SFAS 86. Management uses judgment in determining and evaluating whether development costs meet the criteria for immediate expense or capitalization. The Company's net capitalized software costs at April 30, 2008 totaled approximately $1,694,000. The carrying value of the capitalized software costs is dependent on the forecasted and actual future cash flows generated from such assets as determined and evaluated by management. IMPAIRMENT OF LONG-LIVED ASSETS The Company follows the provisions of Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). At each reporting period, the Company reviews long-lived assets for impairment to determine if the carrying amount of an asset may not be recoverable. Impairment is recognized when the sum of the undiscounted estimated future cash flows expected to result from the use of the asset is less than the carrying value. The Company evaluates the periods of amortization continually in determining whether any events or circumstances warrant revised estimates of useful lives. The Company's long-lived assets include property, plant, and equipment, the PASSUR(R) Network, and software development costs that, at April 30, 2008, approximated $423,000, $4,589,000 and $1,694,000, respectively, which accounted for approximately 71% of the Company's total assets. The carrying value of long-lived assets is dependent on the forecasted and actual financial performance, as well as future cash flows of such assets, as determined by management. -20- At each reporting period, management evaluates the carrying values of the Company's assets. The evaluation considers the undiscounted cash flows generated from current contractual revenue sources and the anticipated forecast revenue derived from each asset. The Company then evaluates these revenues on an overall basis to determine if any impairment issues exist. As of April 30, 2008, based upon management's evaluation of the above asset groups, no impairments of these asset groups exist. If these forecasts are not met, the Company may have to record impairment charges not previously recorded. -21- FORWARD LOOKING STATEMENTS The information provided in this Quarterly Report on Form 10-Q (including, without limitation, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Liquidity and Capital Resources") contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 regarding the Company's future plans, objectives, and expected performance. The words "believe," "may," "will," "could," "should," "would," "anticipate," "estimate," "expect," "project," "intend," "objective," "seek," "strive," "might," "likely result," "build," "grow," "plan," "goal," "expand," "position," or similar words, or the negatives of these words, or similar terminology, identify forward-looking statements. These statements are based on assumptions that the Company believes are reasonable, but are subject to a wide range of risks and uncertainties, and a number of factors could cause the Company's actual results to differ materially from those expressed in the forward-looking statements referred to above. These factors include, among others, the uncertainties related to the ability of the Company to sell data subscriptions from its PASSUR(R) Network and to make new sales of its PASSUR(R) and other product lines (due to potential competitive pressure from other companies or other products), as well as the current uncertainty in the aviation industry due to terrorist events, the war on terror, increased fuel costs, and airline bankruptcies and consolidations. Other uncertainties which could impact the Company are uncertainties with respect to future changes in governmental regulation and the impact that such changes in regulation will have on the Company's business. Additional uncertainties are related to a) the Company's ability to find and maintain the personnel necessary to sell, manufacture, and service its products, b) its ability to adequately protect its intellectual property, c) its ability to secure future financing and d) its ability to maintain the continued support of its significant shareholder. Readers are cautioned not to place undue reliance on these forward-looking statements, which relate only to events as of the date on which the statements are made and which reflect management's analysis, judgments, belief, or expectation only as of such date. The Company undertakes no obligation to publicly update any forward-looking statements for any reason, even if new information becomes available or other events occur in the future. -22- ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The Company is exposed to market risk from potential changes in interest rates. The Company regularly evaluates these risks. The Company believes the amount of risk relating to interest rates is not material to the Company's financial condition or results of operations. The Company has not and does not anticipate entering into derivative financial instruments. ITEM 4T. CONTROLS AND PROCEDURES. For purposes of Rules 13a-15 and 15d-15 of the Exchange Act 1934 ("Exchange Act"), the term "disclosure controls and procedures" refers to the controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized, and reported within required time periods. The Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of its disclosure controls and procedures, as of the end of period covered by this report. Based on that evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures are effective at ensuring that required information will be disclosed on a timely basis in the Company's reports filed under the Exchange Act. There have not been any changes in the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) within the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. -23- PART II. OTHER INFORMATION ITEM 5. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Shareholders at the Company's Annual Meeting on April 16, 2008 voted to: (1) Elect the following to the Board of Directors: FOR WITHHOLD --- -------- G.S. Beckwith Gilbert 3,856,330 850 James T. Barry 3,855,330 1,850 John R. Keller 3,856,330 850 Paul L. Graziani 3,856,330 850 Richard R. Schilling 3,856,330 850 Bruce N. Whitman 3,856,330 850 James J. Morgan 3,855,330 1,850 (2) Ratify the appointment of BDO Seidman, LLP as the Company's independent public accountants for the fiscal year ending October 31, 2008. FOR AGAINST ABSTAIN --- ------- ------- 3,849,564 2,200 5,416 (3) Amend the Company's Certificate of Incorporation to change the Company's name to PASSUR Aerospace, Inc. FOR AGAINST ABSTAIN --- ------- ------- 3,819,681 35,747 1,750 -24- ITEM 6. EXHIBITS 3.1 The Company's composite Certificate of Incorporation, dated as of April 22, 2008. 31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. -25- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PASSUR AEROSPACE, INC. DATED: JUNE 13, 2008 By: /s/ James T. Barry ---------------------- James T. Barry, President and Chief Executive Officer DATED: JUNE 13, 2008 By: /s/ Jeffrey P. Devaney --------------------------- Jeffrey P. Devaney, Chief Financial Officer, Treasurer, and Secretary (Principal Financial and Accounting Officer) -26-
EXHIBIT INDEX - ----------------------- -------------------------------------------------------------------------- ------------------ PAPER (P) OR EXHIBIT NO. DESCRIPTION ELECTRONIC (E) - ----------------------- -------------------------------------------------------------------------- ------------------ - ----------------------- -------------------------------------------------------------------------- ------------------ 3.1 The Company's composite Certificate of Incorporation, dated as of April 22, 2008. E - ----------------------- -------------------------------------------------------------------------- ------------------ 31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act E of 1934, as E adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. - ----------------------- -------------------------------------------------------------------------- ------------------ 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as E adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. - ----------------------- -------------------------------------------------------------------------- ------------------ 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the E Sarbanes-Oxley Act of 2002. - ----------------------- -------------------------------------------------------------------------- ------------------ 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the E Sarbanes-Oxley Act of 2002. - ----------------------- -------------------------------------------------------------------------- ------------------
-27- EX-3.(I) 2 exh3-1.txt COMPOSITE CERTIFICATE OF INCORPORATION OF PASSUR AEROSPACE, INC. FIRST: The name of the Corporation is PASSUR Aerospace, Inc. SECOND: The purposes for which it is formed are as follows: (a) To engage in the business of manufacturing, creating, compounding, developing, inventing, owning, acquiring, producing, processing, constructing, storing, assembling, preparing for market, exhibiting, distributing, installing, buying, selling, leasing, renting, mortgaging, licensing, exchanging, reconstructing, repairing, importing, exporting, and otherwise dealing with instruments, machinery, raw materials, natural or manufactured products, devices, systems, parts, supplies, apparatus, personal property, goods, wares, equipment, and merchandise of every kind, nature and description, tangible or intangible. (b) To engage in any mercantile distributing or trading business of any kind, character or description whatever within or without the State of New York or the United States of America. To buy and sell as broker, representative or agent or on its own account at wholesale and/or retail. To import, export, acquire, own, exchange, barter, transfer, contract, lease, encumber, prepare for market, package, distribute, ship, service, install, repair, alter, conduct, operate and deal with all goods, wares and merchandise of all types and every description. (c) To develop, apply for, obtain, register, purchase, lease, or otherwise acquire, and to hold, own, exercise, use, operate and introduce, any trade names, trademarks, labels, brands, designs, patents, inventions, improvements and processes, and to sell, lease, license, assign, pledge or dispose of any of the same, or any rights, privileges or interests in any of them, and to carry on any similar business, manufacturing or otherwise, which may be directly or indirectly necessary to effectuate these objects or any of them, provided always that this shall not be deemed to include any business except such as is permitted by the Corporation Laws of the State of New York. (d) To carry on and conduct a general agency business, to act, and to appoint others to act, as general agent, special agent, broker, factor, manufacturers' agent, purchasing agent, sales agent, distributing agent, representative and commission merchant, for individuals, firms, associations, and corporations in the distribution, delivery, purchase, and sale of goods, wares, merchandise, property, commodities, and articles of commerce of every kind and description, and in selling, promoting the sale of, advertising, and introducing, and contracting for the sale, introduction, advertisement, and use of, services of all kinds, relating to any and all kinds of businesses, for any and all purposes. (e) As principal, agent or broker and on commission or otherwise, to acquire, by purchase or otherwise, hold, own, develop, improve, repair, manage, maintain, rent, sell, convey, exchange, trade in and dispose of real property or any estate, interest or right therein; to erect, construct, alter, maintain, improve, demolish, raze, wreck and abandon buildings and structures of every kind and nature on any lands of the Corporation or upon any other lands, and to rebuild, alter and improve existing buildings and structures of every kind and nature to the extent now or hereafter permitted by law; to act as a loan broker; to lend money, whether secured by mortgages, mortgage bonds or other liens on real estate or unsecured. (f) To purchase, acquire, hold and dispose of the stocks, bonds and other securities or evidences of indebtedness of any corporation, domestic or foreign; and to pay cash therefor or to issue in exchange therefor this corporation's stock, bonds, or other obligations, and while owner of any such stock, bonds or other obligations, to possess and exercise in respect thereof all rights, powers and privileges of individual owners or holders thereof and to exercise any and all voting powers thereon. (g) To acquire the good will, rights and property of any other persons, firm, association or corporation engaged in any of the trades or businesses authorized to be carried on under this certificate of incorporation and to pay cash therefor or to issue or exchange therefor this corporation's stocks, bonds or other obligations, and to hold or in any manner dispose of the whole or any part of the property so purchased, or to conduct in any lawful manner the whole or any part of the business so acquired, and to exercise all the powers necessary or convenient in and about the conducting and management of such business. -2- (h) To purchase, hold, sell, transfer, reissue or cancel the shares of its own capital stock or any securities or other obligations of the corporation in the manner and to the extent now or hereafter permitted to corporations organized under the laws of the State of New York. (i) To borrow or raise moneys for any of the purposes of this corporation, without limit as to amount, and in connection therewith to furnish collateral or other security either alone or jointly with any other person, firm or corporation; to make, execute, draw, accept, endorse, pledge, issue, sell or otherwise dispose of promissory notes, warrants, bonds, debentures and other evidence of indebtedness, negotiable or non-negotiable, transferable or non-transferable, secured or unsecured; to confer upon the holders of any of the obligations of this corporation such powers, rights and privileges as from time to time may be deemed advisable by the Board of Directors, to the extent permitted under the laws of the State of New York; to lend and advance money, extend credit, take notes, open accounts and any other evidence of indebtedness in connection therewith, whether secured or unsecured. (j) To make any guarantee respecting dividends, stock, bonds, contracts or other obligations of any other corporations or associations in which this corporation has or may have an interest so far as the same may be permitted by corporations organized under the corporation laws of the State of New York. (k) To have one or more offices, to carry on all or any of its operations and business, and, without restrictions or limit as to amount, to purchase or otherwise acquire, to hold, own, mortgage, sell, convey or otherwise dispose of real and personal property of every class and description in any of the states, districts, territories or colonies of the United States and in any and all foreign countries, subject to the laws of such state, district, territory, colony or country. (l) To carry on any of the above businesses or any business connected therewith wherever the same may be permitted by law, and to the same extent as the laws of this State will permit and as fully and with all the powers that the laws of this State confer upon corporations or organizations under this Act, and to do any and all of the business above mentioned and set forth to the same extent as natural persons might or could do. -3- (m) To undertake, contract for or carry on any business incidental to or in aid of, or advantageous in pursuance of any of the objects or purposes of the corporation. (n) To do any of the things hereinbefore enumerated, for itself or for account of others, and to enter into, make, perform and carry out contracts, agreements or arrangements of every sort and kind for doing any part thereof which may be necessary or convenient for the business of this corporation, or business of a similar nature, with any person, entity, syndicate, partnership, association, trust or governmental or public authority, domestic or foreign, so far as and to the extent that the same may be done and performed by corporations organized under the New York Business Corporation Law. (o) To act generally as principal, agent, factor, representative, dealer, exporter, or importer, and in one or more of said capacities, to do, perform and carry out any and all of the purposes hereinbefore set forth. (p) In general, to carry on any other similar business in connection with the foregoing, and to have and exercise all the powers conferred by the laws of New York upon corporations formed under the Act hereinbefore referred to, and to do any or all of the things hereinbefore set forth to the same extent as natural persons might or could do. The foregoing clauses shall be construed as describing both purposes and objects, and powers, and it is hereby expressly provided that the foregoing enumeration of specific powers shall not be held to limit or restrict in any manner the power of this Corporation. THIRD: The office of the Corporation is to be located in the County of Suffolk, State of New York. FOURTH: The aggregate number of shares which the Corporation shall have authority to issue is ten million (10,000,000) common shares, having a par value of $0.01 per share. -4- FIFTH: The Secretary of State is designated as the agent of the Corporation upon whom process against the Corporation may be served. The post office address to which the Secretary of State shall mail a copy of any process against the Corporation served upon him is 35 Orville Drive, Bohemia, New York 11716. SIXTH: No holders of shares of the Corporation or any class, now or hereafter authorized, shall have any preferential or preemptive right to subscribe for, purchase or receive any shares of the Corporation of any class, now or hereafter authorized, or any options or warrants for such shares, or any rights to subscribe to or purchase such shares, or any securities convertible into or exchangeable for such shares, which may at any time be issued, sold or offered for sale by the Corporation. SEVENTH: No director of the Corporation shall be personally liable to the Corporation or its shareholders for monetary damages for any breach of duty as a director, except for liability of any director if a judgment or other final adjudication adverse to him establishes that his acts or omissions were in bad faith or involved intentional misconduct or a knowing violation of law or that he personally gained in fact a financial profit or other advantage to which he was not legally entitled or that his acts violated section 719 of the New York Business Corporation Law. Any repeal or modification of this Article or adoption or an inconsistent provision shall not adversely affect any right or protection of a director of the Corporation in respect of any matter occurring, or any cause of action, suit, or claim that would accrue or arise prior to such repeal, modification, or adoption of an inconsistent provision. -5- EIGHTH: I. CERTAIN RESTRICTIONS ON THE TRANSFER OF STOCK. In order to preserve the Tax Benefits (as such term is hereinafter defined), the restrictions set forth below shall apply for the period beginning on the ARTICLE EIGHTH Effective Date (as such term is hereinafter defined) and ending on the Expiration Date (as such term is hereinafter defined), unless the Board of Directors shall fix an earlier or later date in accordance with Section VI of this ARTICLE EIGHTH: A. DEFINITIONS. 1. ARTICLE EIGHTH EFFECTIVE DATE. March 2, 2000, which date is the date of the filing of this Amendment to this Corporation's Certificate of Incorporation with the Department of State of the State of New York. 2. CONTROL. The possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person (as such term is hereinafter defined), whether through the ownership of voting securities, by contract, or otherwise. Such definition shall also apply to the terms "controlling," "controlled by" and "under common control with." 3. EXPIRATION DATE. November 30, 2000. 4. INTERNAL REVENUE CODE. The Internal Revenue Code of 1986, as amended. Any reference to a particular Section or provision of the Internal Revenue Code shall be deemed to also refer to any successor Section or provision having similar effect. 5. OWNERSHIP CHANGE. An "ownership change" with respect to the Company, as that term is used in Section 382(g) of the Internal Revenue Code and Treasury Regulations Section 1.382-2T(a)(1). 6. OTHER PERMITTED HOLDERS. Any Person which has a Prohibited Ownership Percentage permitted under this Section I, whether pursuant to a consent of the Board of Directors or otherwise. -6- 7. PERSON. Any individual, corporation, estate, trust, association, company, partnership, joint venture, or similar organization, or any other entity described in Treasury Regulations Section 1.382-3(a)(1)(i). 8. PROHIBITED OWNERSHIP PERCENTAGE. Any ownership in the Company that would cause a Person or Public Group (as such term is hereinafter defined) to be a "5-percent shareholder" of the Company within the meaning of Treasury Regulations Section 1.382-2T(g)(1)(i) or (ii). For this purpose, whether a Person or Public Group would be a "5-percent shareholder" shall be determined (u) by substituting "4.5 percent" for "5 percent" each place it appears in such provisions, (v) without giving effect to the following provisions: Treasury Regulations Sections 1.382-2T(g)(2), 1.382-2T(g)(3), 1.382-2T(h)(2)(iii) and 1.382-2T(h)(6)(iii), (w) by treating every Person or Public Group which owns Stock, whether directly or by attribution, as directly owning such Stock notwithstanding any further attribution of such Stock to other Persons and notwithstanding Treasury Regulations Section 1.382-2T(h)(2)(i)(A), (x) by substituting the term "Person" in place of "individual" in Treasury Regulations Section 1.382-2T(g)(1)(i), (y) by taking into account ownership of Stock at any time during the "testing period" as defined in Treasury Regulations Section 1.382-2T(d)(1), and (z) by treating each day during the testing period as if it were a "testing date" as defined in Treasury Regulations Section 1.382-2(a)(4). In addition, for the purpose of determining whether any Person or Public Group has a Prohibited Ownership Percentage as of any date, the definition of Stock set forth in Subparagraph A(10) of this Section I shall be applied in lieu of the definition in Treasury Regulations Section 1.382-2T(f)(18), except that any option shall be treated as Stock only to the extent that treating it as Stock would cause an increase in ownership of such Person and such option would be deemed exercised pursuant to Treasury Regulations in effect from time to time (disregarding whether treating such option as exercised would cause an ownership change). 9. PUBLIC GROUP. A "public group" with respect to the Company, as that term is used in Treasury Regulations Section 1.382-2T(f)(13), excluding any "direct public group" with respect to the Company, as that term is used in Treasury Regulations Section 1.382-2T(j)(2)(ii). -7- 10. STOCK. All classes of stock of the Company, all options to acquire stock of the Company and all other interests that would be treated as stock in the Company pursuant to Treasury Regulations Section 1.382-2T(f)(18)(iii), other than (x) stock described in Section 1504(a)(4) of the Internal Revenue Code and (y) stock that would be described in such Section 1504(a)(4) but is not so described solely because it is entitled to vote as a result of dividend averages. As used in this ARTICLE EIGHTH, the term "option" shall have the meaning set forth in Treasury Regulations Section 1.382-2T(h)(4). 11. TAX BENEFITS. The net operating loss carryovers and capital loss carryovers to which the Company is entitled under the Internal Revenue Code, free of restrictions under Section 382 of the Internal Revenue Code. 12. TESTING DATE ACTION. Any Transfer or acquisition of Stock or any other action (including the acquisition or issuance of an option to Transfer or acquire Stock), if the effect of such Transfer, acquisition or other action would be to cause a "testing date" with respect to the Company within the meaning of Treasury Regulations Section 1.382-2(a)(4), determined by treating every Person and Public Group which has a Prohibited Ownership Percentage as a 5-percent shareholder as used in such Section. 13. TRANSFER. Any means of conveyance of legal or beneficial ownership of Stock, whether such ownership is direct or indirect, voluntary or involuntary, including, without limitation, an indirect transfer of ownership through the transfer of any ownership interest of any entity that owns Stock. 14. TRANSFEREE UNDERTAKING. A duly executed undertaking for the benefit of the Company by any transferee pursuant to which the transferee agrees that (i) it will not take any of the following actions without the prior consent of the Board of Directors: (x) acquire any additional Stock, (y) Transfer any Stock in violation of Paragraph B of this Section I, or (z) take or cause to be taken any Testing Date Action, (ii) upon request by the Company, it will furnish or cause to be furnished to the Company all certificates representing Stock held of record or beneficially, directly or indirectly, by it or by any Person, controlling, controlled by or under common control with it for the purpose of placing a legend on such certificates to reflect the undertakings described in clause (i) above, (iii) it acknowledges that "stop transfer" orders may be entered with the transfer agent (or agents) and the registrar (or registrars) of Stock against the transfer of Stock subject to the undertakings described in clause (i) above except in compliance with the requirements of such undertakings, and (iv) it will agree to such other actions and remedies as the Company may reasonably request in order to preserve the Tax Benefits. -8- 15. TREASURY REGULATIONS. The regulations promulgated by the Secretary of the Treasury under the Internal Revenue Code. Any reference to a particular Treasury Regulation or Section or provision thereof shall be deemed to also refer to any successor Regulation or Section or provision having similar effect. B. TRANSFER RESTRICTIONS. The following Transfers and actions shall be prohibited, unless (i) the Board of Directors has consented to such transfer and (ii) the transferee has entered into a Transferee Undertaking: 1. GENERAL. No Person shall Transfer any Stock to any other Person to the extent that such Transfer, if effected, (i) would cause the transferee or any Person or Public Group to have a Prohibited Ownership Percentage, or (ii) would increase the ownership percentage of any transferee or any Person or Public Group having a Prohibited Ownership Percentage within the three-year period ending on and including the date of such Transfer. 2. ADDITIONAL RESTRICTIONS ON TRANSFERS INVOLVING OTHER PERMITTED HOLDERS. In addition to the restrictions under Subparagraph B(1) above, (i) no Other Permitted Holder shall Transfer any Stock, and no other Person shall Transfer any Stock to an Other Permitted Holder, if, in either case, such Transfer would constitute a Testing Date Action, and (ii) no Other Permitted Holder shall take any other action that would constitute a Testing Date Action. 3. ADDITIONAL RESTRICTIONS UNDER TRANSFEREE UNDERTAKINGS. In addition to the restrictions under Subparagraph B(1) above, (i) no Person who has delivered a Transferee Undertaking shall Transfer any Stock, and no Person shall Transfer any Stock to any Person who has delivered a Transferee Undertaking, if, in either case, such Transfer would result in a violation of such Transferee Undertaking, and (ii) no Person who has delivered a Transferee Undertaking shall take or cause to be taken any other action that would constitute a Testing Date Action. C. PERMITTED TRANSFERS. Unless otherwise restricted under Paragraph B of Section I or under a Transferee Undertaking or other agreement, Transfers of Stock may be made without a consent of the Board of Directors. -9- D. WAIVERS. Notwithstanding anything herein to the contrary, the Board of Directors may waive any of the restrictions contained in Paragraph B of this Section I of this ARTICLE EIGHTH: (1) in the event of a tender or exchange offer within the meaning of the Securities Exchange Act of 1934, as amended, to acquire Stock constituting more than fifty percent in value of the outstanding Common Stock of the Company, so long as such waiver shall apply to all Transfers pursuant to such tender or exchange offer; (2) in connection with any Transfers of Stock in connection with underwritten offerings of such Stock; (3) in connection with any investment in or acquisition of a business or any business combination involving the Company or any subsidiary of the Company; and (4) in any other instance in which the Board of Directors reasonably and in good faith determines that a waiver would be in the best interests of the Company. II. ATTEMPTED TRANSFER IN VIOLATION OF TRANSFER RESTRICTIONS. Unless the consent or waiver of the Board of Directors is obtained and except as provided in Paragraph C of Section II below, any attempted Transfer of shares of Stock of the Company in excess of the shares that could be Transferred to the transferee without restriction under Paragraph B of Section I above shall not be effective to transfer ownership of such excess shares (the "Prohibited Shares") to the purported acquiror thereof (the "Purported Acquiror"), and the Purported Acquiror shall not be entitled to any rights as a shareholder of the Company with respect to the Prohibited Shares, including, without limitation, the right to vote or to receive dividends with respect thereto. Nothing contained in this ARTICLE EIGHTH shall preclude the settlement of any transaction involving Stock entered into through the facilities of any national securities exchange. The application of the provisions and remedies described in the first sentence of this Section II and in Paragraphs A, B and C of this Section II this shall be deemed not to so preclude any such settlement. Paragraphs A, B and C below shall apply only in the case of violations of the restrictions contained in Subparagraph B(1) of Section I above. -10- A. TRANSFER OF CERTIFICATES; SALE OF STOCK. Upon demand by the Company, the Purported Acquiror shall transfer any certificate or other evidence of purported ownership of the Prohibited Shares within the Purported Acquiror's possession or control, together with any dividends or other distributions paid by the Company with respect to the Prohibited Shares that were received by the Purported Acquiror (the "Prohibited Distributions"), to an agent to be designated by the Company (the "Agent"). If the Purported Acquiror has sold the Prohibited Shares to an unrelated party in an arm's-length transaction after purportedly acquiring them, the Purported Acquiror shall be deemed to have sold the Prohibited Shares for the Agent, and in lieu of transferring the Prohibited Shares and Prohibited Distributions to the Agent shall transfer to the Agent the Prohibited Distributions and the proceeds of such sale (the "Resale Proceeds") except to the extent that the Agent grants written permission to the Purported Acquiror to retain a portion of the Resale Proceeds not exceeding the amount that would have been payable by the Agent to the Purported Acquiror pursuant to Paragraph B of this Section II if the Prohibited Shares had been sold by the Agent rather than by the Purported Acquiror. Any purported Transfer of the Prohibited Shares by the Purported Acquiror, other than a transfer described in one of the two preceding sentences (unless such transfer itself violates the provisions of this ARTICLE EIGHTH), shall not be effective to transfer any ownership of the Prohibited Shares. B. ALLOCATION AND DISTRIBUTION OF PROCEEDS. The Agent shall sell to a Person whose ownership of such shares would not exceed the Prohibited Owner Percentage in an arm's-length transaction any Prohibited Shares transferred to the Agent by the Purported Acquiror, and the proceeds of such sale (the "Sale Proceeds"), or the Resale Proceeds, if applicable, shall be allocated to the Purported Acquiror up to the following amount: (1) where applicable, the purported purchase price paid or value of consideration surrendered by the Purported Acquiror for the Prohibited Shares and (2) where the purported Transfer of the Prohibited Shares to the Purported Acquiror was by gift, inheritance, or any similar purported transfer, the fair market value of the Prohibited Shares at the time of such purported Transfer. Any Resale Proceeds or Sales Proceeds in excess of the amount allocable to the Purported Acquiror pursuant to the preceding sentence, together with any Prohibited Distributions (such excess amount and Prohibited Distributions are collectively the "Subject Amounts"), shall be transferred to an entity designated by the Company that is described in Section 501(c)(3) of the Internal Revenue Code (the "Designated Charity"). In no event shall any such Prohibited Shares or Subject Amounts inure to the benefit of the Company or the Agent, but such Subject Amounts may be used to cover expenses incurred by the Agent in performing its duties. -11- C. LIMITATION ON ENFORCEABILITY. Notwithstanding anything herein to the contrary, with respect to any Transfer of Stock which would cause a Person or Public Group (the "Prohibited Party") to violate a restriction provided for in Subparagraph B(1) of Section I above only on account of the attribution to the Prohibited Party of the ownership of Stock by a Person or Public Group which is not controlling, controlled by or under common control with the Prohibited Party, which ownership is nevertheless attributed to the Prohibited Party, Subparagraph B(1) of Section I above shall not apply in a manner that would invalidate such Transfer. In such case, the Prohibited Party and any Persons controlling, controlled by or under common control with the Prohibited Party (collectively the "Prohibited Party Group") shall automatically be deemed to have disposed of, and shall be required to dispose of, sufficient shares of Stock (which shares shall consist only of shares held legally or beneficially, whether directly or indirectly, by any member of the Prohibited Party Group, but not shares held through another Person, other than shares held through a Person acting as agent or fiduciary for any member of the Prohibited Party Group, and which shares shall be disposed of in the inverse order in which they were acquired by members of the Prohibited Party Group) to cause the Prohibited Party, following such disposition, not to be in violation of Subparagraph B(1) of Section I above, provided that in the event no member of the Prohibited Party Group (i) is an Other Permitted Holder and (ii) had any actual knowledge that such Transfer was prohibited under Subparagraph 8(1) of Section I above, such disposition shall only be effected to the extent necessary in order to prevent an Ownership Change. Such disposition shall be deemed to occur simultaneously with the Transfer giving rise to the application of this provision, and such number of shares which are deemed to be disposed of shall be considered Prohibited Shares and shall be disposed of through the Agent as provided in Paragraph B of this Section II, except that the maximum amount payable to the Prohibited Party in connection with such sale shall be the fair market value of the Prohibited Shares at the time of the Prohibited Transfer. D. OTHER REMEDIES. In the event that the Board of Directors determines that a Person proposes to take any action in violation of Paragraph B of Section I above, or in the event that the Board of Directors determines after the fact that an action has been taken in violation of Paragraph B of Section I, the Board of Directors, subject to the second and third sentences of the introductory paragraph of this Section II, may take such action as it deems advisable to prevent or to refuse to give effect to any Transfer or other action which would result, or has resulted, in such violation, including, but not limited to, refusing to give effect to such Transfer or other action on the books of the Company or instituting proceedings to enjoin such Transfer or other action. If any Person shall knowingly violate Paragraph B of Section I, then that Person and all other Persons controlling, controlled by or under common control with such Person shall be jointly and severally liable for, and shall pay to the Company, such amount as will, after taking account of all taxes imposed with respect to the receipt or accrual of such amount and all costs incurred by the Company as a result of such loss, put the Company in the same financial position as it would have been in had such violation not occurred. -12- III. PROMPT ENFORCEMENT AGAINST PURPORTED ACQUIROR. Within 30 business days of learning of a purported Transfer of Prohibited Shares to a Purported Acquiror or a Transfer of Stock to a Prohibited Party, the Company through its Secretary shall demand that the Purported Acquiror or Prohibited Party surrender to the Agent the certificates representing the Prohibited Shares, or any Resale Proceeds, and any Prohibited Distributions, and if such surrender is not made by the Purported Acquiror or Prohibited Party within 30 business days from the date of such demand, the Company shall institute legal proceedings to compel such surrender; provided, however, that nothing in this Section III shall preclude the Company in its discretion from immediately bringing legal proceedings without a prior demand, and also provided that failure of the Company to act within the time periods set out in this Section III shall not constitute a waiver of any right of the Company to compel any transfer required by Section II above. Upon a determination by the Board of Directors that there has been or is threatened a purported Transfer of Prohibited Shares to a Purported Acquiror or a Transfer of Stock to a Prohibited Party or any other violation of Paragraph B of Section I above, the Board of Directors may authorize such additional action as it deems advisable to give effect to the provisions of this ARTICLE EIGHTH, including, without limitation, refusing to give effect on the books of the Company to any such purported Transfer or instituting proceedings to enjoin any such purported Transfer. IV. OBLIGATION TO PROVIDE INFORMATION. The Company may require as a condition to the registration of the Transfer of any Stock that the proposed transferee furnish to the Company all information reasonably requested by the Company with respect to all the direct or indirect ownership of Stock by the proposed transferee and by Persons controlling, controlled by or under common control with the proposed transferee. V. LEGENDS. All certificates evidencing Stock that is subject to the restrictions on transfer set forth in this ARTICLE EIGHTH shall bear a conspicuous legend referencing such restrictions. VI. FURTHER ACTIONS. Subject to the second and third sentences of the introductory paragraph of Section II, nothing contained in this ARTICLE EIGHTH shall limit the authority of the Board of Directors to take such other action to the extent permitted by law as it deems necessary or advisable to protect the Company and the interests of the holders of its securities in preserving the Tax Benefits. Without limiting the generality of the foregoing, in the event of a change in law (including applicable regulations) making one or more of the following actions necessary, in the case of actions described in clauses (B), (C) and (D) below, or desirable, in the case of actions described in clause (A) below, the Board of Directors may (A) accelerate the Expiration Date, (B) extend the Expiration Date, (C) conform any terms or numbers set forth in the transfer restrictions in Section I above to make such terms consistent with the Internal Revenue Code and the Treasury Regulations following any changes therein to the extent necessary to preserve the Tax Benefits, or (D) conform the definitions of any terms set forth in this ARTICLE EIGHTH to -13- the definitions in effect following such change in law; provided that the Board of Directors shall determine in writing that such acceleration, extension, change or modification is reasonably necessary to preserve the Tax Benefits or that the continuation of these restrictions is no longer reasonably necessary for the preservation of the Tax Benefits, which determination shall be based upon an opinion of legal counsel to the Company and which determination shall be filed with the Secretary of the Company and mailed by the Secretary to all stockholders of the Company within ten days after the date of any such determination. VII. SEVERABILITY. If any provision of this ARTICLE EIGHTH or the application of any such provision to any Person or under any circumstance shall be held invalid, illegal, or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision of this ARTICLE EIGHTH. As amended through April 22, 2008 -14- EX-31.1 3 exh31-1.txt EXHIBIT 31.1 CERTIFICATION PURSUANT TO RULE 13a-14(a) or 15d-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, James T. Barry, certify that: 1. I have reviewed this quarterly report on Form 10-Q of PASSUR Aerospace, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and c. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: June 13, 2008 By: /s/ James T. Barry ------------------- James T. Barry Chief Executive Officer (Principal Executive Officer) EX-32.1 4 exh32-1.txt EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the quarterly report of PASSUR Aerospace, Inc. (the "Company") on Form 10-Q for the fiscal quarter ended April 30, 2008, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, James T. Barry, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. By: /s/ James T. Barry ---------------------- James T. Barry Chief Executive Officer June 13, 2008 EX-31.2 5 exh31-2.txt EXHIBIT 31.2 CERTIFICATION PURSUANT TO RULE 13a-14(a) or 15d-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Jeffrey P. Devaney, certify that: 1. I have reviewed this quarterly report on Form 10-Q of PASSUR Aerospace, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and c. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: June 13, 2008 By: /s/ Jeffrey P. Devaney ---------------------- Jeffrey P. Devaney Chief Financial Officer (Principal Financial and Accounting Officer) EX-32.2 6 exh32-2.txt EXHIBIT 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the quarterly report of PASSUR Aerospace, Inc. (the "Company") on Form 10-Q for the fiscal quarter ended April 30, 2008, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jeffrey P. Devaney, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. By: /s/ Jeffrey P. Devaney ------------------------ Jeffrey P. Devaney Chief Financial Officer June 13, 2008 -----END PRIVACY-ENHANCED MESSAGE-----