10-Q

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, 2012

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 Incorporation or Organization)	(I.R.S. Employer Identification No.)
One Landmark Square, Suite 1900, Stamford, Connecticut	06901
(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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). 

Yes [X]    No [  ]

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

Large accelerated filer  [  ]	Accelerated filer  [  ]
Non-accelerated filer  [  ] (Do not check if a smaller reporting company)	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 7,193,140 shares of the Registrant’s common stock with a par value of $0.01 per share outstanding as of June 4, 2012.

INDEX

PASSUR Aerospace, Inc. and Subsidiary

		Page
PART I. Financial Information
Item 1.	Financial Statements
	Consolidated Balance Sheets as of April 30, 2012 (unaudited) and October 31, 2011.	3
	Consolidated Statements of Income (unaudited)	4
	Six months ended April 30, 2012 and 2011.
	Consolidated Statements of Income (unaudited)	5
	Three months ended April 30, 2012 and 2011.
	Consolidated Statements of Cash Flows (unaudited)	6
	Six months ended April 30, 2012 and 2011.
	Notes to Consolidated Financial Statements (unaudited) – April 30, 2012.	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	11
Item 3.	Quantitative and Qualitative Disclosures about Market Risk.	15
Item 4.	Controls and Procedures.	15
PART II. Other Information		15
Item 5.	Other Information.	15
Item 6.	Exhibits.	16
Signatures.		17

Page 2

PART I: Financial Information

Item 1. Financial Statements

PASSUR Aerospace, Inc. and Subsidiary

Consolidated Balance Sheets

	April 30,			October 31,
	2012			2011
	(Unaudited)
Assets
Current assets:
Cash	$	308,534		$	299,455
Accounts receivable, net		1,311,768			1,402,521
Deferred tax asset, current		509,440			509,440
Prepaid expenses and other current assets		478,156			321,343
Total current assets		2,607,898			2,532,759
PASSUR® Network, net		6,400,050			6,282,031
Capitalized software development costs, net		5,237,568			4,642,374
Property, plant and equipment, net		504,302			371,330
Deferred tax asset, non-current		1,080,779			1,080,779
Other assets		215,500			208,930
Total assets	$	16,046,097		$	15,118,203
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	627,575		$	828,153
Accrued expenses and other current liabilities		723,602			840,730
Deferred revenue, current portion		1,411,250			1,280,834
Total current liabilities		2,762,427			2,949,717
Deferred revenue, less current portion		246,781			188,739
Notes payable – related party		4,814,880			4,814,880
		7,824,088			7,953,336
Commitment and contingencies
Stockholders’ equity:
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 and outstanding 7,889,640 in fiscal year 2012 and 7,871,640 in fiscal year 2011		78,896			78,716
Additional paid–in capital		14,977,632			14,860,163
Accumulated deficit		(5,211,044	)		(6,150,537	)
		9,845,484			8,788,342
Treasury stock, at cost, 696,500 shares in fiscal years 2012 and 2011		(1,623,475	)		(1,623,475	)
Total stockholders’ equity		8,222,009			7,164,867
Total liabilities and stockholders’ equity	$	16,046,097		$	15,118,203

See accompanying notes to consolidated financial statements.

Page 3

PASSUR Aerospace, Inc. and Subsidiary

Consolidated Statements of Income

(Unaudited)

	Six months ended April 30,
	2012		2011
Revenues	$	6,995,788	$	6,875,087
Cost and expenses:
Cost of revenues		3,179,401		2,974,282
Research and development		213,332		151,475
Selling, general, and administrative expenses		2,512,511		2,617,537
		5,905,244		5,743,294
Income from operations		1,090,544		1,131,793
Interest expense – related party		146,051		690,564
Income before income taxes		944,493		441,229
Provision for income taxes		5,000		9,563
Net income	$	939,493	$	431,666
Net income per common share – basic	$	.13	$	.09
Net income per common share – diluted	$	.12	$	.08
Weighted average number of common shares outstanding – basic		7,176,624		4,700,509
Weighted average number of common shares outstanding – diluted		8,003,504		5,500,496

See accompanying notes to consolidated financial statements.

Page 4

PASSUR Aerospace, Inc. and Subsidiary

Consolidated Statements of Income

(Unaudited)

	Three months ended April 30,
	2012		2011
Revenues	$	3,532,004	$	3,364,691
Cost and expenses:
Cost of revenues		1,503,623		1,474,695
Research and development		117,594		76,315
Selling, general, and administrative expenses		1,274,161		1,343,009
		2,895,378		2,894,019
Income from operations		636,626		470,672
Interest expense – related party		72,223		339,559
Income before income taxes		564,403		131,113
Provision for income taxes		5,000		9,563
Net income	$	559,403	$	121,550
Net income per common share – basic	$	.08	$	.03
Net income per common share – diluted	$	.07	$	.02
Weighted average number of common shares outstanding – basic		7,178,140		4,709,875
Weighted average number of common shares outstanding – diluted		8,006,908		5,526,169

See accompanying notes to consolidated financial statements.

Page 5

PASSUR Aerospace, In. and Subsidiary

Consolidated Statements of Cash Flows

(Unaudited)

	Six months ended April 30,
	2012			2011
Cash flows from operating activities
Net income	$	939,493		$	431,666
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,201,083			987,303
Provision for doubtful accounts receivable		11,527			51,376
Stock-based compensation expense		107,749			141,169
Changes in operating assets and liabilities:
Accounts receivable		79,226			443,970
Prepaid expenses and other current assets		(156,813	)		(157,015	)
Other assets		(6,570	)		101,634
Accounts payable		(200,578	)		(543,427	)
Accrued expenses and other current liabilities		(117,128	)		1,497
Deferred revenue		188,458			(142,248	)
Accrued interest – related party		-			143,648
Total adjustments		1,106,954			1,027,907
Net cash provided by operating activities		2,046,447			1,459,573
Cash flows from investing activities
PASSUR® Network		(810,887	)		(130,737	)
Software development costs		(1,056,795	)		(1,090,714	)
Property, plant and equipment		(179,586	)		(46,390	)
Net cash used in investing activities		(2,047,268	)		(1,267,841	)
Cash flows from financing activities
Private placement expenditures		-			(145,718	)
Proceeds from exercise of stock options		9,900			25,000
Net cash provided by (used in) financing activities		9,900			(120,718	)
Increase in cash		9,079			71,014
Cash – beginning of period		299,455			107,069
Cash – end of period	$	308,534		$	178,083
Supplemental cash flow information
Cash paid during the period for:
Interest – related party	$	149,051		$	546,916
Income taxes	$	-		$	8,884

See accompanying notes to consolidated financial statements.

Page 6

PASSUR Aerospace, Inc. and Subsidiary

Notes to Consolidated Financial Statements

April 30, 2012

(Unaudited)

1. Nature of Business

PASSUR Aerospace, Inc. (the “Company”, “PASSUR®”, “we”, or “our”) is a business intelligence company which develops predictive analytics built on proprietary algorithms and on concurrent integration and simultaneous mining of multiple databases. The Company offers vertical expertise in the aviation market – providing data consolidation, information, decision support, predictive analytics, collaborative solutions, and professional services for aviation operations worldwide.

The Company’s principal business is to provide its customers business intelligence and predictive analytics solutions which improve financial performance, enhance operational efficiency, increase safety and security, and improve the passenger experience. These analytics are derived from the Company’s PASSUR® Proprietary Surveillance Network (the “PASSUR® Network”) of live flight information, updated from 1 to 4.6 seconds and include decision support software, predictive analytics, and web-delivered collaborative decision solutions, enhanced by professional services provided by industry experts.

The Company serves most major airlines (including six of the top eight North American airlines, as well as the top five hub and spoke airlines), approximately sixty airport customers (including twenty three of the top thirty North American airports), and more than two hundred corporate aviation customers, as well as the U.S. government, including the Federal Aviation Administration and Transportation Security Administration.

The Company believes its predictive analytics save its customers substantial costs annually by enabling preemptive decision making and more effective operational planning. The PASSUR® System simultaneously scans, correlates, and pulls information from the Company’s PASSUR® Network together with multiple additional government and private databases.

The PASSUR® Network has one hundred and fifty-five Company-owned PASSUR® Radar Systems, covering ninety-eight of the top one hundred North American airports. Other PASSUR®s are located in Europe and Asia. Flight tracks are updated between 1 and 4.6 seconds, thereby providing a system which is user-friendly and useful for decision-making.

The Company delivers these tools primarily on “web-dashboards” – a single page or screen which aggregates many different sets of information into a simplified presentation of performance indicators and exception alerts to support quick, informed, and proactive decisions with reduced need for human processing and calculation. Almost all of the PASSUR® solutions have a live or real-time component, and most also include alerts, decision support, collaborative components, immediate playback or review, as well as analysis. The PASSUR® products are protected by multiple patents and patent pending applications.

Management is addressing the Company’s working capital deficiency by aggressively marketing the Company’s PASSUR® Network Systems information capabilities in its existing product and professional service lines, as well as in new products and professional services, which are continually being developed and deployed. Management believes that expanding its existing suite of software products and professional services, which address the wide array of needs of the aviation industry, through the continued development of new product and service offerings, will continue to lead to increased growth in the Company’s customer-base and subscription-based revenues. 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 obtained, the Company has received an unconditional and irrevocable commitment from its significant shareholder and Chairman to receive the necessary continuing financial support to meet such obligations through June 4, 2013.

Page 7

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, 2011, filed with the Securities and Exchange Commission (“SEC”); the consolidated financial data included herein should be read in conjunction with that report. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (which include only normal recurring adjustments) necessary to present fairly the Company’s consolidated financial position at April 30, 2012, and its consolidated results of operations and cash flows for the six months ended April 30, 2012 and 2011.

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, 2012.

Certain financial information in the footnotes has been rounded to the nearest thousand for presentation purposes.

Principles of Consolidation

The consolidated financial statements include the accounts of PASSUR 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 FASB ASC 985-605 (“Software Revenue Recognition”), as amended. ASC 985-605 delineates the accounting practices for software products, maintenance, support services, and professional services revenue. Under ASC 985-605, 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. 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 performs certain professional services for customers on a subscription basis that have stand-alone value. Such subscription-based professional services are recognized over the subscription period.

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.

Cost of Revenues

Costs associated with subscription and maintenance revenues consist primarily of direct labor, depreciation of PASSUR® Network Systems, amortization of capitalized software development costs, communication costs, data feeds, allocated overhead costs, travel and entertainment, and consulting fees. Also included in cost of revenues are costs associated with upgrades to PASSUR® Network Systems necessary to make such systems compatible with new software applications, as well as the ordinary repair and maintenance of existing PASSUR® Network Systems. Additionally, cost of revenues in each reporting period is impacted by: (1) the number of PASSUR® Network units added to the Network, which include the cost of production, shipment, and installation of these assets, which are capitalized to the PASSUR® Network; and (2) capitalized costs associated with software development projects. Both of these are referred to as “Capitalized Assets”, and are depreciated and/or amortized over their respective useful lives and charged to cost of revenues.

Page 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 all amounts due under the original payment terms without making concessions. Net accounts receivable is comprised of the monthly, quarterly, or annual committed amounts due from customers pursuant to the terms of each respective customer’s agreement. These account receivable balances include unearned revenue attributable to deferred subscription revenues, deferred maintenance revenues, and unamortized license fee revenues.

American Airlines’ parent corporation, AMR Corporation, filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code on November 29, 2011. In December 2011, the Company was notified by American Airlines that it will continue operating under the original contract between the Company and American Airlines, with an immaterial revision.

Accounts receivable balances also include initial set-up fees billed when the service is performed. Revenues are recognized on a straight-line basis over the estimated life of the customer relationship period, typically five years.

The provision for doubtful accounts was $105,000 and $94,000 as of April 30, 2012 and October 31, 2011, respectively. The Company monitors its outstanding accounts receivable balances and believes the provision is reasonable. The pre-petition receivable from American Airlines is less that the provision for doubtful accounts as of April 30, 2012 and October 31, 2011.

PASSUR® Network

The PASSUR® Network includes PASSUR® Systems and the related software workstations used for the data derived from PASSUR® Systems, as well as costs pertaining to raw material, work-in-process, and finished goods components. PASSUR® Network installations include the direct and indirect production and installation costs incurred for each of the Company-owned PASSUR® Systems. PASSUR® Network assets which are not installed in the PASSUR® Network are carried at cost and no depreciation is recorded.

Capitalized Software Development Costs

The Company follows the provisions of FASB ASC 985-20 (SFAS 86, “Accounting for the Costs of Software to be Sold, Leased, or Otherwise Marketed.”) Capitalized software development costs are comprised of costs incurred to develop and significantly enhance software products to be sold or otherwise marketed. When technological feasibility is established, the Company begins to capitalize development costs, and once the software product is 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, 2012 are recoverable through anticipated future sales of such applicable products.

Long-Lived Assets

The Company reviews long-lived assets for impairment when circumstances indicate the carrying amount of an asset may not be recoverable. Impairment is recognized to the extent the sum of undiscounted estimated future cash flows expected to result from the use of the asset is less than the carrying value. Assets to be disposed of are carried at the lower of their carrying value or fair value, less costs to sell. The Company evaluates the periods of amortization continually in determining whether later events and circumstances warrant revised estimates of useful lives. If estimates are changed, the unamortized costs will be allocated to the increased or decreased number of remaining periods in the revised life.

Page 9

Deferred Revenue

Deferred revenue includes advances received on subscription services and/or maintenance agreements, which are derived from the Company’s PASSUR® Network and which may be prepaid either annually or quarterly, as well as the unamortized portion of 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.

Fair Value of Financial Instruments

The recorded amounts of the Company’s receivables and payables approximate their fair values, principally because of the short-term nature of these items. The fair value of related party debt is not practicable to determine due primarily to the fact that the Company’s related party debt is held by its Chairman and significant shareholder, and the Company does not have any third-party debt with which to compare.

Additionally, on a recurring basis, the Company uses fair value measures when analyzing asset impairments. Long-lived assets and certain identifiable intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If it is determined such indicators are present, and the review indicates that the assets will not be fully recoverable based on the undiscounted estimated future cash flows expected to result from the use of the asset, their carrying values are reduced to estimated fair value.

Net Income per Share Information

Basic net income per share is computed based on the weighted average number of shares outstanding. Diluted net income per share 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 three months ended		For the six months ended
	April 30,		April 30,
	2012	2011	2012	2011
Basic weighted average shares outstanding	7,178,140	4,709,875	7,176,624	4,700,509
Effect of dilutive stock options	828,768	816,294	826,880	799,987
Diluted weighted average shares outstanding	8,006,908	5,526,169	8,003,504	5,500,496
Weighted average shares which are not included in the calculation of diluted net income per share because their impact is anti-dilutive
Stock options	512,732	699,206	514,620	715,513

Stock-Based Compensation

The Company follows FASB ASC 718 (SFAS 123R, “Share-Based Payments”) which requires measurement of compensation cost for all stock-based awards at fair value on date of grant, and recognition of stock-based compensation expense over the service period for awards expected to vest. The fair value of stock options was determined using the Black-Scholes valuation model. Such fair value is recognized as an expense over the service period, net of forfeitures. Stock-based compensation expense was $35,000 and $108,000, and $71,000 and $141,000, for the three and six months ended April 30, 2012 and 2011, respectively, and was primarily included in selling, general, and administrative expenses.

Page 10

3. Notes Payable – Related Party

The Company had a note payable to G.S. Beckwith Gilbert, the Company’s significant shareholder and Chairman, of $4,815,000 as of April 30, 2012 and October 31, 2011. The note payable bears a maturity date of November 1, 2014, with an annual interest rate of 6%. Interest payments are due by October 31 of each fiscal year. During fiscal year 2011, the Company paid fiscal year 2011 interest to Mr. Gilbert of $912,000, representing the entire fiscal year 2011 interest due, thereby meeting the payment requirements of the loan agreement. Total payments for interest made to Mr. Gilbert in fiscal year 2011 were $1,358,000, including the remaining fiscal year 2010 interest payment. The Company has paid all interest incurred on the note payable through April 30, 2012.

The Company has received a commitment from Mr. Gilbert, dated June 4, 2012, that if the Company, at any time, is unable to meet its obligations through June 4, 2013, 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/or interest payments due on the existing loans, if deemed necessary. The note payable is secured by the Company’s assets.

The Company believes that its liquidity is adequate to meet operating and investment requirements through October 31, 2012. During such period the Company does not anticipate borrowing additional funds from Mr. Gilbert, although it has received a commitment from Mr. Gilbert to do so if the Company requires additional funds.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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", below) contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 regarding the Company's future plans, objectives, and expected performance. The words “believe,” “may,” “will,” “could,” “should,” “would,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “objective,” “seek,” “strive,” “might,” “likely result,” “build,” “grow,” “plan,” “goal,” “expand,” “position,” or similar words, or the negatives of these words, or similar terminology, identify forward-looking statements. These statements are based on assumptions that the Company believes are reasonable, but are subject to a wide range of risks and uncertainties, and a number of factors could cause the Company's actual results to differ materially from those expressed in the forward-looking statements referred to above. These factors include, without limitation, the risks and uncertainties related to the ability of the Company to sell PASSUR® Network Systems information capabilities in its existing product and professional service lines, as well as in new products and professional services (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 continued war on terrorism, changes in fuel costs, airline bankruptcies and consolidations, economic conditions, and other risks detailed in the Company's periodic report filings with the SEC. Other uncertainties which could impact the Company include, without limitation, uncertainties with respect to future changes in governmental regulation and the impact that such changes in regulation will have on the Company’s business. Additional uncertainties include, without limitation, uncertainties relating to: (1) the Company's ability to find and maintain the personnel necessary to sell, manufacture, and service its products; (2) its ability to adequately protect its intellectual property; (3) its ability to secure future financing; and (4) 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.

Page 11

Description of Business

PASSUR Aerospace, Inc. is a business intelligence company which develops predictive analytics built on proprietary algorithms and on concurrent integration and simultaneous mining of multiple databases. The Company offers vertical expertise in the aviation market – providing data consolidation, information, decision support, predictive analytics, collaborative solutions, and professional services for aviation operations worldwide.

The Company’s principal business is to provide its customers business intelligence and predictive analytics solutions which improve financial performance, enhance operational efficiency, increase safety and security, and improve the passenger experience. These analytics are derived from the Company’s PASSUR® Proprietary Surveillance Network (the “PASSUR® Network”) of live flight information, updated from 1 to 4.6 seconds and include decision support software, predictive analytics, and web-delivered collaborative decision solutions, enhanced by professional services provided by industry experts.

The Company serves most major airlines (including six of the top eight North American airlines, as well as the top five hub and spoke airlines), approximately sixty airport customers (including twenty three of the top thirty North American airports), and more than two hundred corporate aviation customers, as well as the U.S. government, including the Federal Aviation Administration and Transportation Security Administration.

The Company believes its predictive analytics save its customers substantial costs annually by enabling preemptive decision making and more effective operational planning. The PASSUR® System simultaneously scans, correlates, and pulls information from the Company’s PASSUR® Network together with multiple additional government and private databases.

The PASSUR® Network has one hundred and fifty-five Company-owned PASSUR® Radar Systems, covering ninety-eight of the top one hundred North American airports. Other PASSUR®s are located in Europe and Asia. Flight tracks are updated between 1 and 4.6 seconds, thereby providing a system which is user-friendly and useful for decision-making.

The Company delivers these tools primarily on “web-dashboards” – a single page or screen which aggregates many different sets of information into a simplified presentation of performance indicators and exception alerts to support quick, informed, and proactive decisions with reduced need for human processing and calculation. Almost all of the PASSUR® solutions have a live or real-time component, and most also include alerts, decision support, collaborative components, immediate playback or review, as well as analysis. The PASSUR® products are protected by multiple patents and patent pending applications.

Results of Operations

Revenues

The Company’s business plan is to continue to focus on increasing subscription-based revenues from its suite of software applications, and to develop new applications and professional services designed to address the needs of the aviation industry and the U.S. government. Management concentrates its efforts on the sale of business intelligence, predictive analytics, and decision support product applications, utilizing data primarily derived from the PASSUR® Network. Such efforts include the continued development of new products, professional services, and existing product enhancements.

Revenues increased by $167,000, or 5%, and $121,000, or 2%, to $3,532,000 and $6,996,000, for the three and six months ended April 30, 2012, respectively, as compared to the same periods in fiscal year 2011. New customer subscriptions and existing customer upgrades to the Company’s suite of software applications increased by $180,000 and $251,000, offset by a reduction of $13,000 and $130,000 in professional services income as a result of the completion of a consulting assignment, respectively. The Company continues to develop and deploy new software applications and solutions, as well as a wide selection of products which address customers’ needs, easily delivered through web-based applications, as well as other new products which include stand-alone professional services.

Page 12

Cost of Revenues

Costs associated with subscription and maintenance revenues consist primarily of direct labor, depreciation of PASSUR® Network Systems, amortization of capitalized software development costs, communication costs, data feeds, allocated overhead costs, travel and entertainment, and consulting fees. Also included in cost of revenues are costs associated with upgrades to PASSUR® Network Systems necessary to make such systems compatible with new software applications, as well as the ordinary repair and maintenance of existing PASSUR® Network Systems. Additionally, cost of revenues in each reporting period is impacted by: (1) the number of PASSUR® Network units added to the Network, which include the production, shipment, and installation of these assets, which are capitalized to the PASSUR® Network; and (2) capitalized costs associated with software development projects. Both of these are referred to as “Capitalized Assets”, and are depreciated and/or amortized over their respective useful lives and charged to cost of revenues.

Cost of revenues increased by $29,000, or 2%, and $205,000, or 7%, for the three and six months ended April 30, 2012, respectively, as compared to the same periods in fiscal year 2011, primarily due to increases in communication costs of $101,000 and $257,000 and depreciation and amortization of $102,000 and $219,000, offset by a decrease in consulting fees. In addition, when the Company manufactures its PASSUR® Network Systems, there is a reduction in cost of revenues due to the fact that the labor-related costs for these systems are capitalized, rather than expensed, as a component of costs of revenue. For the three and six months ended April 30, 2012, manufacturing activity occurred, as compared to no such activity during the same periods in fiscal year 2011, which resulted in a decrease in cost of revenues of $125,000 and $171,000, respectively.

Research and Development

Research and development expenses increased by $41,000, or 54%, and $62,000, or 41%, for the three and six months ended April 30, 2012, respectively, as compared to the same periods in fiscal year 2011, primarily due to an increase in payroll and related costs. The Company’s research and development efforts include activities associated with new product development, as well as the enhancement and improvement of the Company's existing hardware, software, and information products.

The Company anticipates that it will continue to invest in research and development to develop new applications for its customers. There were no customer-sponsored research and development activities during the six months ended April 30, 2012 or 2011. Research and development expenses are funded by current operations.

Selling, General, and Administrative

Selling, general, and administrative expenses decreased by $69,000, or 5%, and $105,000, or 4%, for the three and six months ended April 30, 2012, respectively, as compared to the same periods in fiscal year 2011, primarily due to decreases in consulting fees, legal fees, and payroll and related costs.

Income from Operations

Revenues increased by $167,000, or 5%, and $121,000, or 2%, to $3,532,000 and $6,996,000, costs and expenses increased by $1,000, or 0%, and $162,000, or 3%, to $2,895,000 and $5,905,000, and income from operations increased by $166,000, or 35%, to $637,000 for the three months ended April 30, 2012, and decreased by $41,000 or 4%, to $1,091,000 for the six months ended April 30, 2012, as compared to the same periods in fiscal year 2011.

Interest Expense – Related Party

Interest expense – related party decreased by $267,000, or 79%, and $545,000, or 79%, for the three and six months ended April 30, 2012, respectively, as compared to the same periods in fiscal year 2011, due to the transactions in fiscal year 2011 that reduced the Company’s outstanding notes payable to G.S. Beckwith Gilbert, the Company’s significant shareholder and Chairman, by $10,000,000, as well as the amendment to the note payable which reduced the annual interest rate from 9% to 6%.

Page 13

Net Income

The Company had net income of $559,000, or $0.07 per diluted share, and $939,000 or $0.12 per diluted share, for the three and six months ended April 30, 2012, respectively, as compared to net income of $122,000, or $0.02 per diluted share, and $432,000 or $0.08 per diluted share, for the same periods in fiscal year 2011.

Liquidity and Capital Resources

The Company’s current liabilities exceeded current assets by $155,000 at April 30, 2012. The note payable to a related party, G.S. Beckwith Gilbert, the Company’s significant shareholder and Chairman, was $4,815,000 at April 30, 2012, with a maturity of November 1, 2014. The Company’s stockholders’ equity was $8,222,000 at April 30, 2012. The Company had net income of $939,000 for the six months ended April 30, 2012.

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

If the Company’s business plan does not generate sufficient cash flows from operations to meet the Company’s operating cash requirements, the Company will attempt to obtain external financing. However, the Company has received a commitment from Mr. Gilbert, dated June 4, 2012, that if the Company, at any time, is unable to meet its obligations through June 4, 2013, 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/or interest payments due on the existing loans, if deemed necessary. The note payable is secured by the Company’s assets.

Net cash provided by operating activities was $2,046,000 for the six months ended April 30, 2012, and consisted of $1,320,000 non-cash items, primarily depreciation and amortization of $1,201,000, as well as $939,000 of net income, offset by a decrease in accounts payable, primarily due to the timing of vendor invoice payments. Net cash used in investing activities was $2,047,000 for the six months ended April 30, 2012, expended primarily for capitalized software development costs and additions to the PASSUR® Network. Net cash provided by financing activities was $10,000 for the six months ended April 30, 2012.

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 continued war on terrorism, and increases in fuel costs. The aviation market is extensively regulated by government agencies, particularly the FAA 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. Any new regulations or changes in the economic situation of the aviation industry could have an impact on the future operations of the Company, either positively or negatively.

Interest by potential customers in the information and decision support software products obtained from PASSUR® Network Systems and its professional services remains strong. As a result, the Company 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.

The Company believes that its liquidity is adequate to meet operating and investment requirements through October 31, 2012. During such period, the Company does not anticipate borrowing additional funds from Mr. Gilbert, although it has received a commitment from Mr. Gilbert to do so if the Company requires additional funds.

Off-Balance Sheet Arrangements

None.

Page 14

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. These significant accounting policies are disclosed in Note 1 to the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2011 and there have been no material changes to such policies since the filing of such Annual Report. These policies and estimates are critical to the Company’s business operations and the understanding of its results of operations. The impact and any associated risks related to these policies on the Company’s business operations are discussed throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report on Form 10-K for the fiscal year ended October 31, 2011, where such policies affect its reported financial results. The actual impact of these factors may differ under different assumptions or conditions.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Not applicable.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

As of the end of the period covered by this report, management carried out an evaluation, under the supervision, and with the participation of, the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”). The Company's disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Commission’s rules. The Company believes that a control system, no matter how well designed and operated, can provide only reasonable assurance, not absolute assurance, that the objectives of the control system are met. Based on their evaluation as of the end of the period covered by this report, the Company's Chief Executive Officer and Chief Financial Officer have concluded that such controls and procedures were effective at a reasonable assurance level as of April 30, 2012.

Changes in Internal Control over Financial Reporting

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.

PART II. Other Information

Item 5. Other Information.

On June 4, 2012, the Company’s significant shareholder and Chairman confirmed his commitment to provide the necessary continuing financial support to the Company in order for the Company to meet its obligations through June 4, 2013. A copy of the commitment is attached as Exhibit 10.1 to this Form 10-Q and incorporated by reference into this Item 5.

Page 15

Item 6. Exhibits.

10.1	Commitment of G.S. Beckwith Gilbert, dated June 4, 2012.
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) under 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) under 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.
101.ins**	XBRL Instance
101.xsd**	XBRL Schema
101.cal**	XBRL Calculation
101.def**	XBRL Definition
101.lab**	XBRL Label
101.pre**	XBRL Presentation

___________________

* Filed herewith.

** Furnished herewith.

Page 16

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, 2012     By:	/s/ James T. Barry
	James T. Barry,
	President and Chief Executive Officer
	(Principal Executive Officer)
Dated: June 13, 2012     By:	/s/ Jeffrey P. Devaney
	Jeffrey P. Devaney,
	Chief Financial Officer, Treasurer, and Secretary
	(Principal Financial and Accounting Officer)

Page 17

EX-10.1

Exhibit 10.1

Field Point Capital Management Company

One Landmark Square, Suite 1900

Stamford, CT 06901

June 4, 2012

PASSUR Aerospace, Inc.

One Landmark Square, Suite 1900

Stamford, CT 06901

As Chairman of the Board as well as the principal shareholder of PASSUR Aerospace, Inc. (“PASSUR Aerospace” or the “Company”), I make the following commitment to the Company with respect to the period from the date of this commitment through June 4, 2013.

Liquidity

I commit that if the Company at any time is unable to meet its obligations through June 4, 2013, that I will provide the necessary continuing financial support to the Company to ensure the Company’s ability to operate as a going concern through the period ending June 4, 2013. Such continuing support may take the form of additional loans or advances to PASSUR Aerospace in addition to the deferral of principal and/or interest payments due on outstanding loans to PASSUR Aerospace as referred to above.

These commitments are not conditional and are irrevocable through the period ending June 4, 2013.

I, G.S. Beckwith Gilbert, having the financial wherewithal to enter into this irrevocable commitment, make the above commitments to the Company and its shareholders.

/s/ G.S. Beckwith Gilbert

G.S. Beckwith Gilbert

President

EX-31.1

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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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 subsidiary, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b.   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.   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

d.   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, 2012

By:	/s/ James T. Barry
	James T. Barry
	Chief Executive Officer

EX-31.2

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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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 subsidiary, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b.   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.   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

d.   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, 2012

By:	/s/ Jeffrey P. Devaney
	Jeffrey P. Devaney
	Chief Financial Officer

EX-32.1

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, 2012, 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, 2012

EX-32.2

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, 2012, 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, 2012

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Notes Payable - Related Parties

3 Months Ended

Apr. 30, 2012

Related Party Disclosures

Related Party Transactions Disclosure

3. Notes Payable – Related Party

The Company had a note payable to G.S. Beckwith Gilbert, the Company’s significant shareholder and Chairman, of $4,815,000 as of April 30, 2012 and October 31, 2011. The note payable bears a maturity date of November 1, 2014, with an annual interest rate of 6%. Interest payments are due by October 31 of each fiscal year. During fiscal year 2011, the Company paid fiscal year 2011 interest to Mr. Gilbert of $912,000, representing the entire fiscal year 2011 interest due, thereby meeting the payment requirements of the loan agreement. Total payments for interest made to Mr. Gilbert in fiscal year 2011 were $1,358,000, including the remaining fiscal year 2010 interest payment. The Company has paid all interest incurred on the note payable through April 30, 2012.

The Company has received a commitment from Mr. Gilbert, dated June 4, 2012, that if the Company, at any time, is unable to meet its obligations through June 4, 2013, 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/or interest payments due on the existing loans, if deemed necessary. The note payable is secured by the Company’s assets.

The Company believes that its liquidity is adequate to meet operating and investment requirements through October 31, 2012. During such period the Company does not anticipate borrowing additional funds from Mr. Gilbert, although it has received a commitment from Mr. Gilbert to do so if the Company requires additional funds.

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Consolidated Balance Sheets (USD $)	Apr. 30, 2012	Oct. 31, 2011
Cash	$ 308,534	$ 299,455
Accounts receivable, net	1,311,768	1,402,521
Deferred tax asset, current	509,440	509,440
Prepaid expenses and other current assets	478,156	321,343
Total current assets	2,607,898	2,532,759
PASSUR Network, net	6,400,050	6,282,031
Capitalized software development costs, net	5,237,568	4,642,374
Property, plant and equipment, net	504,302	371,330
Deferred tax asset, non-current	1,080,779	1,080,779
Other assets	215,500	208,930
Total assets	16,046,097	15,118,203
Accounts payable	627,575	828,153
Accrued expenses and other current liabilities	723,602	840,730
Deferred revenue, current portion	1,411,250	1,280,834
Total current liabilities	2,762,427	2,949,717
Deferred revenue, less current portion	246,781	188,739
Notes payable - related party	4,814,880	4,814,880
Total liabilities	7,824,088	7,953,336
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 and outstanding 7,889,640 in fiscal year 2012 and 7,871,640 in fiscal year 2011	78,896	78,716
Additional paid-in capital	14,977,632	14,860,163
Accumulated deficit	(5,211,044)	(6,150,537)
Stockholders' deficit before treasury stock	9,845,484	8,788,342
Treasury stock, at cost, 696,500 shares in fiscal years 2012 and 2011	(1,623,475)	(1,623,475)
Total stockholders' equity	8,222,009	7,164,867
Total liabilities and stockholders' equity	$ 16,046,097	$ 15,118,203

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Nature of Business

3 Months Ended

Apr. 30, 2012

Organization, Consolidation and Presentation of Financial Statements

Nature of Operations

1. Nature of Business

PASSUR Aerospace, Inc. (the “Company”, “PASSUR®”, “we”, or “our”) is a business intelligence company which develops predictive analytics built on proprietary algorithms and on concurrent integration and simultaneous mining of multiple databases. The Company offersvertical expertise in the aviation market – providing data consolidation, information, decision support, predictive analytics, collaborative solutions, and professional services for aviation operations worldwide.

The Company’s principal business is to provide its customers business intelligence and predictive analytics solutions which improve financial performance, enhance operational efficiency, increase safety and security, and improve the passenger experience. These analytics are derived from the Company’s PASSUR® Proprietary Surveillance Network (the “PASSUR® Network”) of live flight information, updated from 1 to 4.6 seconds and include decision support software, predictive analytics, and web-delivered collaborative decision solutions, enhanced by professional services provided by industry experts.

The Company serves most major airlines (including six of the top eight North American airlines, as well as the top five hub and spoke airlines), approximately sixty airport customers (including twenty three of the top thirty North American airports), and more than two hundred corporate aviation customers, as well as the U.S. government, including the Federal Aviation Administration and Transportation Security Administration.

The Company believes its predictive analytics save its customers substantial costs annually by enabling preemptive decision making and more effective operational planning. The PASSUR® System simultaneously scans, correlates, and pulls information from the Company’s PASSUR® Network together with multiple additional government and private databases.

The PASSUR® Network has one hundred and fifty-five Company-owned PASSUR® Radar Systems, covering ninety-eight of the top one hundred North American airports. Other PASSUR®s are located in Europe and Asia. Flight tracks are updated between 1 and 4.6 seconds, thereby providing a system which is user-friendly and useful for decision-making.

The Company delivers these tools primarily on “web-dashboards” – a single page or screen which aggregates many different sets of information into a simplified presentation of performance indicators and exception alerts to support quick, informed, and proactive decisions with reduced need for human processing and calculation. Almost all of the PASSUR® solutions have a live or real-time component, and most also include alerts, decision support, collaborative components, immediate playback or review, as well as analysis. The PASSUR® products are protected by multiple patents and patent pending applications.

Management is addressing the Company’s working capital deficiency by aggressively marketing the Company’s PASSUR® Network Systems information capabilities in its existing product and professional service lines, as well as in new products and professional services, which are continually being developed and deployed. Management believes that expanding its existing suite of software products and professional services, which address the wide array of needs of the aviation industry, through the continued development of new product and service offerings, will continue to lead to increased growth in the Company’s customer-base and subscription-based revenues. 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 obtained, the Company has received an unconditional and irrevocable commitment from its significant shareholder and Chairman to receive the necessary continuing financial support to meet such obligations through June 4, 2013.

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Basis of Presentation and Significant Accounting Policies

3 Months Ended

Apr. 30, 2012

Accounting Policies

Basis of Presentation and Significant Accounting Policies

2. Basis of Presentation and Significant Accounting Policies

The consolidated financial information contained in this Form 10-Q represents condensed financial data and, therefore, does not include all footnote disclosures required to be included in financial statements prepared in conformity with accounting principles generally accepted in the United States. Such footnote information was included in the Company's annual report on Form 10-K for the year ended October 31, 2011, filed with the Securities and Exchange Commission (“SEC”); the consolidated financial data included herein should be read in conjunction with that report. In the opinion of  management, the accompanying unaudited consolidated financial statements contain all adjustments (which include only normal recurring adjustments) necessary to present fairly the Company’s consolidated financial position at April 30, 2012, and its consolidated results of operations and cash flows for the six months ended April 30, 2012 and 2011.

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, 2012.

Certain financial information in the footnotes has been rounded to the nearest thousand for presentation purposes.

Principles of Consolidation

The consolidated financial statements include the accounts of PASSUR 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 FASB ASC 985-605 (“Software Revenue Recognition”), as amended. ASC 985-605 delineates the accounting practices for software products, maintenance, support services, and professional services revenue. Under ASC 985-605, 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. 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 performs certain professional services for customers on a subscription basis that have stand-alone value. Such subscription-based professional services are recognized over the subscription period.

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.

Cost of Revenues

Costs associated with subscription and maintenance revenues consist primarily of direct labor, depreciation of PASSUR® Network Systems, amortization of capitalized software development costs, communication costs, data feeds, allocated overhead costs, travel and entertainment, and consulting fees. Also included in cost of revenues are costs associated with upgrades to PASSUR® Network Systems necessary to make such systems compatible with new software applications, as well as the ordinary repair and maintenance of existing PASSUR® Network Systems. Additionally, cost of revenues in each reporting period is impacted by: (1) the number of PASSUR® Network units added to the Network, which include the cost of production, shipment, and installation of these assets, which are capitalized to the PASSUR® Network; and (2) capitalized costs associated with software development projects. Both of these are referred to as “Capitalized Assets”, and are depreciated and/or amortized over their respective useful lives and charged to cost of revenues.

 

Accounts Receivable

The Company uses installment license and/or maintenance agreements as part of its standard business practice. The Company has a history of successfully collecting all amounts due under the original payment terms without making concessions. Net accounts receivable is comprised of the monthly, quarterly, or annual committed amounts due from customers pursuant to the terms of each respective customer’s agreement. These account receivable balances include unearned revenue attributable to deferred subscription revenues, deferred maintenance revenues, and unamortized license fee revenues.

American Airlines’ parent corporation, AMR Corporation, filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code on November 29, 2011. In December 2011, the Company was notified by American Airlines that it will continue operating under the original contract between the Company and American Airlines, with an immaterial revision.

Accounts receivable balances also include initial set-up fees billed when the service is performed. Revenues are recognized on a straight-line basis over the estimated life of the customer relationship period, typically five years.

The provision for doubtful accounts was $105,000 and $94,000 as of April 30, 2012 and October 31, 2011, respectively. The Company monitors its outstanding accounts receivable balances and believes the provision is reasonable. The pre-petition receivable from American Airlines is less that the provision for doubtful accounts as of April 30, 2012 and October 31, 2011.

PASSUR® Network

The PASSUR® Network includes PASSUR® Systems and the related software workstations used for the data derived from PASSUR® Systems, as well as costs pertaining to raw material, work-in-process, and finished goods components. PASSUR® Network installations include the direct and indirect production and installation costs incurred for each of the Company-owned PASSUR® Systems. PASSUR® Network assets which are not installed in the PASSUR® Network are carried at cost and no depreciation is recorded.

Capitalized Software Development Costs

The Company follows the provisions of FASB ASC 985-20 (SFAS 86, “Accounting for the Costs of Software to be Sold, Leased, or Otherwise Marketed.”) Capitalized software development costs are comprised of costs incurred to develop and significantly enhance software products to be sold or otherwise marketed. When technological feasibility is established, the Company begins to capitalize development costs, and once the software product is 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, 2012 are recoverable through anticipated future sales of such applicable products.

Long-Lived Assets

The Company reviews long-lived assets for impairment when circumstances indicate the carrying amount of an asset may not be recoverable. Impairment is recognized to the extent the sum of undiscounted estimated future cash flows expected to result from the use of the asset is less than the carrying value. Assets to be disposed of are carried at the lower of their carrying value or fair value, less costs to sell. The Company evaluates the periods of amortization continually in determining whether later events and circumstances warrant revised estimates of useful lives. If estimates are changed, the unamortized costs will be allocated to the increased or decreased number of remaining periods in the revised life.

 

Deferred Revenue

Deferred revenue includes advances received on subscription services and/or maintenance agreements, which are derived from the Company’s PASSUR® Network and which may be prepaid either annually or quarterly, as well as the unamortized portion of 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.

Fair Value of Financial Instruments

The recorded amounts of the Company’s receivables and payables approximate their fair values, principally because of the short-term nature of these items. The fair value of related party debt is not practicable to determine due primarily to the fact that the Company’s related party debt is held by its Chairman and significant shareholder, and the Company does not have any third-party debt with which to compare.

Additionally, on a recurring basis, the Company uses fair value measures when analyzing asset impairments. Long-lived assets and certain identifiable intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If it is determined such indicators are present, and the review indicates that the assets will not be fully recoverable based on the undiscounted estimated future cash flows expected to result from the use of the asset, their carrying values are reduced to estimated fair value.

Net Income per Share Information

Basic net income per share is computed based on the weighted average number of shares outstanding. Diluted net income per share 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 three months ended				For the six months ended
	April 30,				April 30,
	2012		2011		2012		2011
Basic weighted average shares outstanding		7,178,140		4,709,875		7,176,624		4,700,509
Effect of dilutive stock options		828,768		816,294		826,880		799,987
Diluted weighted average shares outstanding		8,006,908		5,526,169		8,003,504		5,500,496
Weighted average shares which are not included in the calculation of diluted net income per share because their impact is anti-dilutive
Stock options		512,732		699,206		514,620		715,513

Stock-Based Compensation

The Company follows FASB ASC 718 (SFAS 123R, “Share-Based Payments”) which requires measurement of compensation cost for all stock-based awards at fair value on date of grant, and recognition of stock-based compensation expense over the service period for awards expected to vest. The fair value of stock options was determined using the Black-Scholes valuation model. Such fair value is recognized as an expense over the service period, net of forfeitures. Stock-based compensation expense was $35,000 and $108,000, and $71,000 and $141,000, for the three and six months ended April 30, 2012 and 2011, respectively, and was primarily included in selling, general, and administrative expenses.

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Consolidated Balance Sheets Parenthetical (USD $)	Apr. 30, 2012	Oct. 31, 2011
Preferred stock par value	$ 0.01	$ 0.01
Preferred stock shares authorized	5,000,000	5,000,000
Preferred stock shares issued
Preferred stock shares outstanding
Common stock par value	$ 0.01	$ 0.01
Common stock shares authorized	10,000,000	10,000,000
Common stock shares issued	7,889,640	7,871,640
Common stock shares outstanding	7,889,640	7,871,640
Treasury stock shares	696,500	696,500

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Document and Entity Information	3 Months Ended
	Apr. 30, 2012	Jun. 04, 2012
Document and Entity Information
Entity Registrant Name	PASSUR AEROSPACE, INC.
Document Type	10-Q
Document Period End Date	Apr. 30, 2012
Amendment Flag	false
Entity Central Index Key	0000225628
Current Fiscal Year End Date	--10-31
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q2
Entity Common Stock, Shares Outstanding		7,193,140

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Consolidated Statements of Income (USD $)	3 Months Ended		6 Months Ended
	Apr. 30, 2012	Apr. 30, 2011	Apr. 30, 2012	Apr. 30, 2011
Revenues	$ 3,532,004	$ 3,364,691	$ 6,995,788	$ 6,875,087
Cost of revenues	1,503,623	1,474,695	3,179,401	2,974,282
Research and development	117,594	76,315	213,332	151,475
Selling, general, and administrative expenses	1,274,161	1,343,009	2,512,511	2,617,537
Total costs and expenses	2,895,378	2,894,019	5,905,244	5,743,294
Income from operations	636,626	470,672	1,090,544	1,131,793
Interest expense - related party	72,223	339,559	146,051	690,564
Income before income taxes	564,403	131,113	944,493	441,229
Provision for income taxes	5,000	9,563	5,000	9,563
Net income	$ 559,403	$ 121,550	$ 939,493	$ 431,666
Net income per common share - basic	$ 0.08	$ 0.03	$ 0.13	$ 0.09
Net income per common share - diluted	$ 0.07	$ 0.02	$ 0.12	$ 0.08
Weighted average number of common shares outstanding - basic	7,178,140	4,709,875	7,176,624	4,700,509
Weighted average number of common shares outstanding - diluted	8,006,908	5,526,169	8,003,504	5,500,496

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Consolidated Statements of Cash Flows (USD $)	6 Months Ended
	Apr. 30, 2012	Apr. 30, 2011
Net income	$ 939,493	$ 431,666
Depreciation and amortization	1,201,083	987,303
Provision for doubtful accounts receivable	11,527	51,376
Stock-based compensation expense	107,749	141,169
Change in accounts receivable	79,226	443,970
Change in prepaid expenses and other current assets	(156,813)	(157,015)
Change in other assets	(6,570)	101,634
Change in accounts payable	(200,578)	(543,427)
Change in accrued expenses and other current liabilities	(117,128)	1,497
Change in deferred revenue	188,458	(142,248)
Change in accrued interest - related party		143,648
Total adjustments	1,106,954	1,027,907
Net cash provided by operating activities	2,046,447	1,459,573
PASSUR Network	(810,887)	(130,737)
Software development costs	(1,056,795)	(1,090,714)
Property, plant and equipment	(179,586)	(46,390)
Net cash used in investing activities	(2,047,268)	(1,267,841)
Private placement expenditures		(145,718)
Proceeds from exercise of stock options	9,900	25,000
Net cash provided by (used in) financing activities	9,900	(120,718)
Increase in cash	9,079	71,014
Cash - beginning of period	299,455	107,069
Cash - end of period	308,534	178,083
Cash paid for Interest - related party	149,051	546,916
Cash paid for Income taxes		$ 8,884