3. Impact of the COVID-19 Pandemic	9 Months Ended
Jul. 31, 2020
Notes
3. Impact of the COVID-19 Pandemic	3. Impact of the COVID-19 Pandemic In December 2019, a novel strain of coronavirus (“COVID-19”) was reported in Wuhan, China. The World Health Organization (“WHO”) declared COVID-19 a “pandemic” on March 11, 2020, and the U.S. government declared a national state of emergency on March 13, 2020. The U.S. government has implemented enhanced screenings, quarantine requirements and other travel restrictions in connection with the COVID-19 outbreak. U.S. state governments have instituted similar measures, such as “shelter-in-place” requirements and declared states of emergency. In addition, U.S. federal and state governments have strongly recommended “social distancing” measures, including avoiding social gatherings and discretionary travel. Government restrictions and consumer fears relating to the COVID-19 pandemic have impacted flight schedules and given rise to a general reluctance of consumers to fly at this time, resulted in unprecedented cancellations of flights, and substantially reduced demand for future flights for the foreseeable future. The severe reduction in air travel continues and has had a material negative impact on the Company’s revenues for the three months ended July 31, 2020 and is expected to continue to negatively impact the Company’s revenues for the remainder of fiscal year 2020. The CARES Act was enacted in March 2020 and provides economic support for, among others, businesses in the airline industry. In July 2020, the Company entered into an agreement with the U.S. Department of the Treasury to receive an aggregate of $3,003,000 in emergency relief through the CARES Act Payroll Support Program for Air Carriers and Contractors, which amounts were received in installments through September 2020. Pursuant to the Payroll Support Program Agreement, the relief payments must be used exclusively for the continuation of payment of employee wages, salaries and benefits. The relief payments are conditioned on the Company’s agreement to, among other things, refrain from conducting involuntary employee layoffs or furloughs through September 30, 2020. Other conditions include prohibitions on share repurchases and dividends through September 30, 2021, and certain limitations on executive compensation. The relief payments are comprised of $3,003,000 in direct grants, $1,501,000 of which was received as of July 31, 2020. Subsequent to July 31, 2020, the Company received additional installments of grant payments of $751,000 each on August 3, 2020 and September 1, 2020. As of July 31, 2020, the Company recognized $208,000 of the grant as a contra-expense, with the remaining funds accounted for as a deferred contra-expense in other accrued liabilities at July 31, 2020. We expect to recognize the remainder of the grant proceeds from the CARES Act Payroll Support Program as a contra-expense by the end of April 2021. Additionally, provisions under the CARES Act allow the Company to defer payment of the employer’s share of social security taxes incurred from March of 2020 through December 31, 2020. Under the terms of the legislation, 50% of the deferred payroll taxes would be due and payable by December 31, 2021, and the remaining 50% would be due and payable by December 31, 2022. The amount of payroll taxes subject to deferred payment is approximately $130,000. In addition to entering into the Payroll Support Program Agreement under the CARES Act (as described above), the Company has taken several actions to mitigate the effects of the COVID-19 pandemic on its business, as outlined below: `·`Eliminated or furloughed approximately one-third of existing positions; `·`Instituted a temporary pay reduction plan affecting essentially all of the Company’s remaining employees during the second quarter of fiscal year 2020; `·`Suspended the use of outside consultants; `·`Rationalized the PASSUR Network to reduce data feed and telecom costs; and `·`Reduced and/or eliminated other operating expenses that were not critical to the short-term outlook of the Company. Due to the financial and economic hardships being experienced by airlines, airports and air transportation support vendors since the COVID-19 outbreak, there has been a sufficient amount of uncertainty surrounding the ability of our customers to continue to perform their contracts with the Company. During the second quarter of 2020, the Company conducted a review of its customer contracts and determined that impairments had occurred. As a result of the Company’s analysis, the Company recorded an impairment of $9,874,000 during the three months ended April 30, 2020, related to its capitalized software of $6,134,000, PASSUR Network system assets of $3,565,000 and $175,000 related to the leased assets applicable to the PASSUR locations.

3. Impact of the COVID-19 Pandemic

9 Months Ended

Jul. 31, 2020

3. Impact of the COVID-19 Pandemic

In December 2019, a novel strain of coronavirus (“COVID-19”) was reported in Wuhan, China. The World Health Organization (“WHO”) declared COVID-19 a “pandemic” on March 11, 2020, and the U.S. government declared a national state of emergency on March 13, 2020. The U.S. government has implemented enhanced screenings, quarantine requirements and other travel restrictions in connection with the COVID-19 outbreak. U.S. state governments have instituted similar measures, such as “shelter-in-place” requirements and declared states of emergency. In addition, U.S. federal and state governments have strongly recommended “social distancing” measures, including avoiding social gatherings and discretionary travel.

Government restrictions and consumer fears relating to the COVID-19 pandemic have impacted flight schedules and given rise to a general reluctance of consumers to fly at this time, resulted in unprecedented cancellations of flights, and substantially reduced demand for future flights for the foreseeable future. The severe reduction in air travel continues and

has had a material negative impact on the Company’s revenues for the three months ended July 31, 2020 and is expected to continue to negatively impact the Company’s revenues for the remainder of fiscal year 2020.

The CARES Act was enacted in March 2020 and provides economic support for, among others, businesses in the airline industry. In July 2020, the Company entered into an agreement with the U.S. Department of the Treasury to receive an aggregate of $3,003,000 in emergency relief through the CARES Act Payroll Support Program for Air Carriers and Contractors, which amounts were received in installments through September 2020. Pursuant to the Payroll Support Program Agreement, the relief payments must be used exclusively for the continuation of payment of employee wages, salaries and benefits. The relief payments are conditioned on the Company’s agreement to, among other things, refrain from conducting involuntary employee layoffs or furloughs through September 30, 2020. Other conditions include prohibitions on share repurchases and dividends through September 30, 2021, and certain limitations on executive compensation. The relief payments are comprised of $3,003,000 in direct grants, $1,501,000 of which was received as of July 31, 2020. Subsequent to July 31, 2020, the Company received additional installments of grant payments of $751,000 each on August 3, 2020 and September 1, 2020. As of July 31, 2020, the Company recognized $208,000 of the grant as a contra-expense, with the remaining funds accounted for as a deferred contra-expense in other accrued liabilities at July 31, 2020. We expect to recognize the remainder of the grant proceeds from the CARES Act Payroll Support Program as a contra-expense by the end of April 2021.

Additionally, provisions under the CARES Act allow the Company to defer payment of the employer’s share of social security taxes incurred from March of 2020 through December 31, 2020. Under the terms of the legislation, 50% of the deferred payroll taxes would be due and payable by December 31, 2021, and the remaining 50% would be due and payable by December 31, 2022. The amount of payroll taxes subject to deferred payment is approximately $130,000.

In addition to entering into the Payroll Support Program Agreement under the CARES Act (as described above), the Company has taken several actions to mitigate the effects of the COVID-19 pandemic on its business, as outlined below:

·Eliminated or furloughed approximately one-third of existing positions;

·Instituted a temporary pay reduction plan affecting essentially all of the Company’s remaining employees during the second quarter of fiscal year 2020;

·Suspended the use of outside consultants;

·Rationalized the PASSUR Network to reduce data feed and telecom costs; and

·Reduced and/or eliminated other operating expenses that were not critical to the short-term outlook of the Company.

Due to the financial and economic hardships being experienced by airlines, airports and air transportation support vendors since the COVID-19 outbreak, there has been a sufficient amount of uncertainty surrounding the ability of our customers to continue to perform their contracts with the Company. During the second quarter of 2020, the Company conducted a review of its customer contracts and determined that impairments had occurred. As a result of the Company’s analysis, the Company recorded an impairment of $9,874,000 during the three months ended April 30, 2020, related to its capitalized software of $6,134,000, PASSUR Network system assets of $3,565,000 and $175,000 related to the leased assets applicable to the PASSUR locations.