2. Basis of Presentation and Significant Accounting Policies: Cost of Revenues (Policies)	6 Months Ended
Apr. 30, 2020
Policies
Cost of Revenues	Cost of Revenues Costs associated with subscription and maintenance revenues consisted primarily of direct labor, depreciation of PASSUR and Surface Multilateration (“SMLAT”) Network Systems (both collectively, the “PASSUR Network”), amortization of capitalized software development costs, communication costs, data feeds, travel and entertainment, and consulting fees. Also, included in cost of revenues were costs associated with upgrades to PASSUR and SMLAT Systems necessary to make such systems compatible with new software applications, as well as the ordinary repair and maintenance of existing PASSUR and SMLAT Systems. Additionally, cost of revenues in each reporting period has been impacted by: (1) the number of PASSUR and SMLAT Systems added to the PASSUR Network, which included the cost of production, shipment, and installation of these assets, which were capitalized to the PASSUR Network; and (2) new capitalized costs associated with software development projects. Both of these are referred to as “Capitalized Assets” and were depreciated and/or amortized over their respective useful lives and charged to cost of revenues. As a result of the FAA mandate and the corresponding review conducted by the Company, which resulted in the commencement of the decommissioning of the PASSUR Network, as well as industry changes in response to the COVID-19 pandemic (as described in more detail below), the Company anticipates that the costs of maintaining and operating these systems, including depreciation along with related amortization of capitalized software development costs, will decrease during the balance of the fiscal year. Certain of PASSUR’s services have traditionally relied on our proprietary network of sensors for aircraft surveillance. During the three months ended April 30, 2020, in light of the FAA’s mandate for ADS-B equipage on aircrafts operating in most U.S. airspace, effective January 2020, and parallel adoption of ADS-B requirements in much of the world, the Company performed a comprehensive review of its data feeds, specifically those associated with the PASSUR Network units and external ADS-B data feeds to determine if these external data feeds provide sufficient redundant data as to that generated from the existing PASSUR installations. The Company determined that such services can now be powered by a combination of FAA data plus commercial ADS-B aggregator feeds and other data feeds available to the Company. This provides a more cost-effective solution and will allow us to focus more on value-added analytics, and less on sensor technology. In this regard, the Company reviewed and decommissioned approximately half of its PASSUR Network system assets. It is the Company’s intention to decommission all remaining PASSUR Network system assets throughout the remainder of this fiscal year. As a result, the Company wrote off the carrying value applicable to the PASSUR Network systems of approximately $3,565,000, and lease assets applicable to these PASSUR locations of approximately $175,000, which amounts are included as an impairment charge for the three and six months ended April 30, 2020. The write-off amount includes PASSUR System and SMLAT System assets as well as inventory of finished and spare parts. Additionally, due to the financial and economic hardships being experience by the Company’s customers and air transportation support vendors in the current COVID-19 environment, there is a sufficient amount of uncertainty surrounding the ability of our customers to either renew and/or maintain their current levels of committed contracts with the Company. In order to determine whether or not an impairment had occurred, we looked at existing contracted revenue, adjusted for future uncertainties, and compared those amounts with the net carrying value of the related software development asset. Where the contracted revenue amount was less than the net carrying value of the software development asset, we noted an impairment. As a result, the Company wrote off previously capitalized software development costs totaling approximately $6,134,000 due to impairment. The amount of these charges and write-offs are included as an impairment charge for the three and six month periods ended April 30, 2020 totaling $9,874,000.

2. Basis of Presentation and Significant Accounting Policies: Cost of Revenues (Policies)

6 Months Ended

Apr. 30, 2020

Cost of Revenues

Costs associated with subscription and maintenance revenues consisted primarily of direct labor, depreciation of PASSUR and Surface Multilateration (“SMLAT”) Network Systems (both collectively, the “PASSUR Network”), amortization of capitalized software development costs, communication costs, data feeds, travel and entertainment, and consulting fees. Also, included in cost of revenues were costs associated with upgrades to PASSUR and SMLAT Systems necessary to make such systems compatible with new software applications, as well as the ordinary repair and maintenance of existing PASSUR and SMLAT Systems. Additionally, cost of revenues in each reporting period has been impacted by: (1) the number of PASSUR and SMLAT Systems added to the PASSUR Network, which included the cost of production, shipment, and installation of these assets, which were capitalized to the PASSUR Network; and (2) new capitalized costs associated with software development projects. Both of these are referred to as “Capitalized Assets” and were depreciated and/or amortized over their respective useful lives and charged to cost of revenues. As a result of the FAA mandate and the corresponding review conducted by the Company, which resulted in the commencement of the decommissioning of the PASSUR Network, as well as industry changes in response to the COVID-19 pandemic (as described in more detail below), the Company anticipates that the costs of maintaining and operating these systems, including depreciation along with related amortization of capitalized software development costs, will decrease during the balance of the fiscal year.

Certain of PASSUR’s services have traditionally relied on our proprietary network of sensors for aircraft surveillance. During the three months ended April 30, 2020, in light of the FAA’s mandate for ADS-B equipage on aircrafts operating in most U.S. airspace, effective January 2020, and parallel adoption of ADS-B requirements in much of the world, the Company performed a comprehensive review of its data feeds, specifically those associated with the PASSUR Network units and external ADS-B data feeds to determine if these external data feeds provide sufficient redundant data as to that generated from the existing PASSUR installations. The Company determined that such services can now be powered by a combination of FAA data plus commercial ADS-B aggregator feeds and other data feeds available to the Company. This provides a more cost-effective solution and will allow us to focus more on value-added analytics, and less on sensor technology. In this regard, the Company reviewed and decommissioned approximately half of its PASSUR Network system assets. It is the Company’s intention to decommission all remaining PASSUR Network system assets throughout the remainder of this fiscal year. As a result, the Company wrote off the carrying value applicable to the PASSUR Network systems of approximately $3,565,000, and lease assets applicable to these PASSUR locations of approximately $175,000, which amounts are included as an impairment charge for the three and six months ended April 30, 2020. The write-off amount includes PASSUR System and SMLAT System assets as well as inventory of finished and spare parts.

Additionally, due to the financial and economic hardships being experience by the Company’s customers and air transportation support vendors in the current COVID-19 environment, there is a sufficient amount of uncertainty surrounding the ability of our customers to either renew and/or maintain their current levels of committed contracts with the Company. In order to determine whether or not an impairment had occurred, we looked at existing contracted revenue, adjusted for future uncertainties, and compared those amounts with the net carrying value of the related software development asset. Where the contracted revenue amount was less than the net carrying value of the software development asset, we noted an impairment. As a result, the Company wrote off previously capitalized software development costs totaling approximately $6,134,000 due to impairment. The amount of these charges and write-offs are included as an impairment charge for the three and six month periods ended April 30, 2020 totaling $9,874,000.