3. Passur Network

12 Months Ended

Oct. 31, 2018

Notes

3. Passur Network

3. PASSUR Network, net

PASSUR Network consists of the following as of October 31, 2018 and 2017:

	2018	2017
PASSUR Network, beginning balance	$      19,788,000	$      18,387,000
Additions	322,000	1,401,000
Write-off	(510,000)	-
Inventory reserve	(230,000)	-
Total capitalized PASSUR Network costs	19,370,000	19,788,000
Less accumulated depreciation	14,569,000	13,784,000
PASSUR Network, ending balance, net	$        4,801,000	$       6,004,000

The Company capitalized $242,000 and $1,197,000, of PASSUR Network costs, for the year ended October 31 2018 and 2017, respectively.  Depreciation expense related to the Company-owned PASSUR Network was $785,000 and $595,000 for the period ended October 31, 2018 and 2017, respectively. 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 and five years for PASSUR and SMLAT systems, respectively.

Additionally, the Company purchased parts for the PASSUR Network totaling $80,000 and $204,000, for the year ended October 31, 2018 and 2017, respectively.

The net carrying balance of the PASSUR Network as of October 31, 2018 and October 31, 2017, was $4,801,000 and $6,004,000, respectively. Included in the net carrying balance as of October 31, 2018, were parts and finished goods for PASSUR and SMLAT Systems totaling $1,316,000 and $576,000, respectively, which have not yet been installed. As of October 31, 2017, $1,636,000 and $642,000 of parts and finished goods for PASSUR and SMLAT systems, respectively, were included in the net carrying balance of the PASSUR Network. PASSUR and SMLAT Systems which are not installed are carried at cost and not depreciated until installed.

As of October 31, 2018, depreciation expense for the PASSUR Network assets, where depreciation has commenced, is estimated to approximate $850,000, $823,000, $570,000, $409,000, and $103,000, for the fiscal years ended October 31, 2019, 2020, 2021, 2022 and 2023, respectively.

During fiscal year 2018, the Company increased it’s reserve for PASSUR Network parts and supplies by $230,000, bringing the reserve to approximately $270,000. Additionally, during the fiscal year, the Company determined that certain PASSUR Network assets were no longer likely to generate future revenue as a result of a change in a customer’s requirements at a specific location, which resulted in an impairment charge and write-off of approximately $510,000. These costs were recorded within “Cost of Revenues”. The Company did not dispose of or record any impairments related to any of the PASSUR Network assets in fiscal years 2017.