3. Passur Network

12 Months Ended

Oct. 31, 2019

Notes

3. Passur Network

3. PASSUR Network, net

PASSUR Network consists of the following as of October 31, 2019 and 2018:

	2019	2018
PASSUR Network, beginning balance	$      19,242,000	$      19,788,000
Additions	15,000	322,000
Disposals	(355,000)	(128,000)
Write-off	-	(510,000)
Inventory reserve	-	(230,000)
Total capitalized PASSUR Network costs	18,902,000	19,242,000
Less accumulated depreciation	14,953,000	14,441,000
PASSUR Network, ending balance, net	$        3,949,000	$       4,801,000

The Company capitalized $61,000 and $242,000, of PASSUR Network costs, for the year ended October 31, 2019 and 2018, respectively.  Depreciation expense related to the Company-owned PASSUR Network was $868,000 and $785,000 for the years ended October 31, 2019 and 2018, 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 $3,000 and $152,000, during the year ended October 31, 2019 and 2018, respectively. The Company used $49,000 and $73,000 of PASSUR Network parts for repairs during the year ended October 31, 2019 and 2018, respectively.

The net carrying balance of the PASSUR Network as of October 31, 2019 and 2018 was $3,949,000 and $4,801,000, respectively. Included in the net carrying balance as of October 31, 2019, were parts and finished goods for PASSUR and SMLAT Systems totaling $1,298,000 and $533,000, respectively, which have not yet been installed. As of October 31, 2018, $1,316,000 and $576,000 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, 2019, depreciation expense for the PASSUR Network assets, where depreciation has commenced, is estimated to approximate $854,000, $610,000, $442,000, $136,000, and $47,000, for the fiscal years ended October 31, 2020, 2021, 2022, 2023 and 2024, respectively.

During fiscal year 2018, the Company increased its reserve for PASSUR Network parts and supplies by $230,000, bringing the reserve to approximately $270,000. Additionally, during fiscal year 2018, 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”. During the year ended October 31, 2019, the Company disposed of four PASSUR Network assets, with a net book value of zero. During the year ended October 31, 2018, the Company disposed of one PASSUR Network asset, with a net book value of zero and deinstalled and returned to inventory, one PASSUR Network asset with a net book value of $23,000. The Company did not record any impairments related to any of the PASSUR Network assets in fiscal year 2019.