Edgar Filing: PASSUR Aerospace, Inc.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K
| X | Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR THE FISCAL YEAR ENDED OCTOBER 31, 2009
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 0-7642

PASSUR AEROSPACE, INC.
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(Exact Name of Registrant as Specified in Its Charter)

NEW YORK 11-2208938
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)

ONE LANDMARK SQUARE, SUITE 1900, STAMFORD, CONNECTICUT 06901
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(Address of Principal Executive Office) (Zip Code)

Registrant's telephone number, including area code: 203-622-4086
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Securities registered pursuant to
Section 12(b) of the Act: NONE

Securities registered pursuant to
Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $0.01 PER SHARE

Indicate by check mark if the Registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. YES [ ] NO [X]

Indicate by check mark if the Registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Exchange Act. YES [ ] NO [X]

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 (ss.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 [ ] NO [X] (The Registrant is not yet required to submit Interactive Data)

Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of the Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this form 10-K or any amendment to this
Form 10-K. [ ]

Indicate by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See the definitions of
"accelerated filer and large accelerated filer" 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]

The aggregate market value of the voting shares of the Registrant
held by non-affiliates as of April 30, 2009 was $3,272,000

The number of shares of common stock, $0.01 par value,
outstanding as of January 11, 2010 was 4,538,948

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Definitive Proxy Statement for the 2010 Annual
Meeting of Stockholders, to be filed with the Securities and Exchange Commission
within 120 days of October 31, 2009, are incorporated by reference into Part III
of this Form 10-K.

FORWARD LOOKING STATEMENTS

The information provided in this Annual Report on Form 10-K (including, without
limitation, "Management's Discussion and Analysis of Financial Condition and
Results of Operations", "Liquidity and Capital Resources", and "Risk Factors",
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, among others, the uncertainties related to the ability of the
Company to sell data subscriptions from its PASSUR(R) Network and to make new
sales of its PASSUR(R) and other product lines (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 war on terror,
increased fuel costs, and airline bankruptcies and consolidations. Other
uncertainties which could impact the Company are 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 are
related to: a) the Company's ability to find and maintain the personnel
necessary to sell, manufacture, and service its products; b) its ability to
adequately protect its intellectual property; c) its ability to secure future
financing; and d) 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.

PART I

ITEM 1. BUSINESS

COMPANY BACKGROUND

PASSUR Aerospace, Inc. (the "Company", "PASSUR(R)", "we", or "our") is a New
York corporation founded in 1967. The Company conducts its business in the
United States, Canada, Europe, and Japan. The Company's offices are located at
One Landmark Square, Stamford, Connecticut, 06901 and 35 Orville Drive, Bohemia,
New York, 11716.

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 believes
it is positioned to provide the industry standard in business intelligence
dashboards and predictive analytics for aviation organizations.

The Company's principal business is to provide business intelligence and
predictive analytics solutions which save money and make available mission
critical information for aviation organizations. These analytics are derived
from its proprietary PASSUR(R) Network of live flight information, updated every
4.6 seconds, which also incorporates decision support software, predictive
analytics, and web-delivered collaborative decision solutions enhanced by
professional services, provided by industry experts.

PASSUR(R) serves dozens of airlines (including six of the top seven North
American airlines), over fifty airport customers (including ten of the top
fifteen North American airports), and more than two hundred corporate aviation
customers.

The Company believes its predictive analytics allow its customers to save
substantial costs by providing "Predict and Proactively Act" solutions. The
PASSUR(R) system simultaneously scans, correlates, and mines information from
its proprietary private passive radar system together with multiple additional
government and private databases-enabling problems, trends, and patterns of
behavior in flight operations to be identified before they happen.

-2-

The PASSUR Network includes one hundred and twenty-two Company-owned passive
radars located primarily in North America, with one located at each of the top
thirty-five U.S. airports. Other PASSUR(R)s are located in Europe and Asia.
Flight tracks are updated every 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
decisions and information useful in predicting future situations. Almost all of
the PASSUR(R) 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(R) products are protected by multiple
patents and patent pending applications.

PRODUCTS AND SERVICES

The Company offers a number of products and services, including:

1. Collaborative Web "portal" tools:
These portals provide instant access to critical information within
organizations, and the ability to receive information and share it
with those organizations. These organizations form the foundation of
our PASSUR(R) Customer Network.
a. PASSUR(R) OPSnet(TM), patent pending, is an internet-based
application designed to improve airport/airline/Federal Aviation
Administration ("FAA") coordination through instant
communication, information sharing, and collaborative decision
making among all parties during all weather conditions and
especially during costly disruptions caused by weather, security
events, and emergencies.
b. PASSUR(R) Field Condition Reporting ("FCR"), patent pending,
provides accurate airport field conditions to operators, helping
to improve operational efficiency and safety of flight. FCR
eNotams integration module creates a seamless link to the FAA's
Flight Services NOTAM's office, allowing airport customers to
file their NOTAM's electronically directly from the FCR page,
creating a single point of entry and distribution - in the form
of onscreen updates and e-mail alerts - for all NOTAM and
non-NOTAM information.
c. PASSUR(R) OPSnet(TM) Delayed Aircraft Assistance module, patent
pending, provides alerts tools to manage aircraft experiencing
extended delays on the ground ("Stranded Aircraft").
d. PASSUR(R) Portal(TM), patent pending, provides a dashboard of
real-time vital information on the status of the airport
operation, and instant two-way communications.
e. FlightNewsLive(TM), patented in 2004, is the first passenger
information display system with live graphics of terminal and
en-route airspace traffic, national weather, and automated
explanations for delays.

2. Application software services:
a. ATC Portal(TM), patent pending, is an outcomes-based airspace
efficiency program that enables airlines to determine, in real
time, the most effective airport arrival and departure rates
based on a variety of current and historical operational factors,
using onscreen alerts, trend analysis, and decision support
tools.
b. ATC Portal Predictive(TM), patent pending and a new product, is a
module of ATC Portal(TM), which provides an 8-hour look ahead at
the demand and capacity within an airspace operational
environment, providing advance alerts and decision support to
enable proactive prevention of diversions and changes in airspace
management to increase arrival rates.

-3-

c. PASSUR(R) Pulse(TM) Revenue, patent pending, provides a web-based
live and archived detailed, accurate landing report for airlines,
airports, and Fixed Based Operators ("FBOs"), creating maximum
revenue efficiency, as well as transparency and equity in the
distribution of landing fees among airport users.

i. PASSUR(R) Pulse Audit(TM), patent pending, module gives
airports access to the most complete, accurate, and timely
activity reports of arrivals and departures, based on the
PASSUR(R) radar record and integrated database of flight
information, including detailed owner/operator information,
maximum certified weights by tail number, seat
configurations, runway utilization, dwell times, and other
details in aggregate and by individual flight.
ii. PASSUR(R) Pulse Proactive Billing(TM) module, patent
pending, allows airlines to log onto a secure website to
view and download their landing fee reports, automatically
generated by the PASSUR(R) database of flight information.
The program is hosted by the Company and managed through
online tools by the airport, including detailed reporting
and invoicing tools, automatic aircraft weight calculations,
and detailed owner/operator and aircraft information by
flight.
d. RapidResponse(TM), patent pending, provides the ability to
immediately replay flight events with a high level of precision,
specificity, and detail, thereby enabling airlines and airports
to improve the safety of operations. Real-time situational
awareness and immediate replay enable customers to be fully
informed and proactive in responding to emergencies. The Company
believes RapidResponse(TM) has Homeland Security, Defense, and
other government applications.
e. PASSUR(R) Pulse(TM) Operations, patent pending, provides
web-based access to the PASSUR(R) database of operational
information for activity reporting and analysis.
f. PASSUR(R) inSight(TM), patent pending, is a takeoff-to-landing,
web-based tool that provides PASSUR(R) terminal area information
on a national flight tracking platform. PASSUR(R) inSight(TM) is
packaged with other PASSUR(R) web-based applications to provide a
premium flight tracking "airspace visualization" capability.
g. AirportMonitor(TM), patented in 2006, is a web-based application
that provides the communities surrounding an airport with live
flight tracking and information as part of the airport's public
relations, community outreach, and noise mitigation programs.
h. FlightPerform(TM) is a live flight tracking and airspace analysis
and awareness system used by airports and airlines for real-time
dispatch, arrivals, and facilities management.
i. Fuel Portal(TM), patent pending, provides improved methods to
price and sell more fuel through data and analytics of aircraft
fuel requirements.

3. Flight data products:
These data feeds, which segment different portions of the PASSUR(R)
Network depending on customer needs, feed directly to customer
systems, or to customers through third-party data integration systems.
These feeds are segmented into:
a. RightETA(TM), patent pending, provides ETA and flight status
feeds for real-time airline schedule management, airport Flight
Information Display Systems (FIDS), Gate and Baggage Information
Display Systems (GIDS and BIDS), and activity reports for
operational analysis.
b. FlightSure(TM), patent pending, provides information and software
for integrated aircraft Noise Operations Monitoring Systems
(NOMS).
c. Pulse Revenue(TM) Data Feed, patent pending, provides the data
source for calculating landing fee reports and invoices in
airport statistical and/or revenue management systems.
d. Data feeds for Airport Operational Databases (AODB's). Airports
will incorporate the PASSUR(R) AODB data feed to power a host of
revenue, operational, and customer service applications within an
airport.

-4-

The Company believes financial performance and operational efficiencies in the
aviation industry can be enhanced by more accurate and timely flight information
and analytics, collaboration, and professional services. The Company believes
its business opportunities come from addressing the following specific problem
areas in the aviation industry:

1. THE AVIATION INDUSTRY'S LACK OF A STANDARDIZED INFORMATION TECHNOLOGY
PLATFORM FOR ACCESSING INFORMATION. The business community has come to
expect a sophisticated delivery of rich information in other
pace-setting industries such as banking, news, and health care. In
aviation, valuable information exists, but is compartmentalized among
its various constituencies, including government air traffic
regulators, airlines, airports, fixed based operators, corporate
aviation departments, and passengers. As such, any aviation-related
organization must contend with multiple conflicting sources of
information (often within the same organization), or a lack of access
to the information at all. The Company's business opportunities arise
from its ability to market otherwise hard-to-access or
compartmentalized information through the unique PASSUR(R) integrated
database of flight and airspace data. The Company believes the
information provided by this database is unique, and makes available a
standardized, comprehensive data set, accessible to all aviation
constituencies. The PASSUR(R) passive radar network is integral to
this database.

2. THE LACK OF STANDARDIZED PROTOCOLS AND INDUSTRY BEST-PRACTICES, AND
THE LACK OF AN INFORMATION PLATFORM TO SHARE THOSE PROTOCOLS
COLLABORATIVELY AMONG ALL PLAYERS TO MANAGE THE MORE COMPLEX AND
EXPENSIVE PROBLEMS IN THE AVIATION INDUSTRY. There are a number of
known aviation conditions that are best addressed through tested,
proven operational protocols. PASSUR(R) provides a platform not
otherwise available for the collaborative implementation of those
protocols by key partners in aviation operations. These conditions
include winter deicing operations, summer thunderstorms, air traffic
delays, security alerts, and aviation incidents and accidents. The
Company's web-based protocols, which codify practices developed by
many leading experts in the industry, are communicated to, and shared
with, multiple parties through PASSUR(R)'s collaborative solutions,
resulting in significant cost reductions and improved customer
service.

3. THE LACK OF AN OUTCOMES-BASED SOLUTIONS DATABASE WHICH OFTEN KEEPS
AVIATION ORGANIZATIONS FROM TAKING THE MOST APPROPRIATE AND EFFECTIVE
ACTIONS. Aviation suffers from a lack of an outcomes-based, historical
database which, when accessed, would allow users to take effective
actions that are appropriate for the exact conditions being
experienced. The PASSUR(R) outcomes database allows users to
immediately determine the right actions at the right time, based on
actual historical performance and outcomes, to help to ensure that the
most effective solution is implemented. The outcomes database helps to
standardize and institutionalize aviation organizations' response to
air traffic control (ATC) conditions, scenarios, and problems which
recur constantly in the operating environment, thereby eliminating the
improvisatory and anecdotal character of today's airline-ATC
interaction which causes significant unnecessary costs. For example,
if an airport has a weather system moving through, the PASSUR(R)
outcomes database will provide information to the user about the
optimal configuration of the airport to maximize arrivals and
departures - based on how the airport has performed under the SAME
CONDITIONS over the previous weeks, months, or years.

4. THE LACK of SPECIALIZED AVIATION EXPERTISE TO ASSIMILATE, ANALYZE, AND
IMPLEMENT AVIATION INFORMATION SOLUTIONS. Even with the best
information solutions, aviation organizations often require expertise
to help implement these solutions in their everyday operating
environment. The PASSUR(R) Professional Services Program provides
experts who are specialists in their respective fields, often with
decades of experience, who assist aviation organizations in a variety
of fields, including Air Traffic Management at an airline or Landing
Fee Management at an airport.

-5-

5. THE LACK OF PREDICTIVE ANALYTICS. A critical growth area for the
industry will come from the ability to predict outcomes. PASSUR(R)
tools provide a "look ahead" capability, which deliver far greater
savings than the industry has typically been able to achieve, by
enabling proactive, rather than reactive, decision making in areas of
major financial impact like diversions, Ground Delay Programs, fuel
planning, departure sequencing, and optimization of national airspace.

Revenues during Fiscal Year (FY) 2009 increased by approximately 18%, or
$1,388,000, to $8,960,000 from $7,572,000 in FY 2008, while total costs and
expenses in FY 2009 increased by approximately 19%, or $1,211,000 to $7,689,000
from $6,478,000 in FY 2008. In FY 2009, income from operations increased by
approximately 16%, or $177,000, to $1,271,000 from $1,094,000 in FY 2008.

The Company currently has the exclusive license rights to use thirteen patents
in the United States and various foreign countries, relating to the Company's
PASSUR(R) System and related technologies. The licensed patents expire in
various years through 2013.

HOW PASSUR AEROSPACE, INC. GENERATES REVENUE

The Company revenues are generated by selling: (1) subscription-based
information and software products, (2) annual maintenance contracts for
PASSUR(R) radar systems and, (3) professional services. Under the subscription
model, the customer signs at least a one-year contract for access to the
information services. The agreement also provides that the information from the
PASSUR(R) Network cannot be resold, used by others, or used for unauthorized
purposes. Consulting services generally accompany the sale of the Company's
collaborative decision tools.

DISTRIBUTION METHOD

The Company's direct sales force sells and markets its products.

COMPETITION

The PASSUR(R) applications are, to the best of the Company's knowledge,
relatively unique; however there are other forms of flight tracking and aviation
business intelligence products. Depending on the end use of the Company's
products, the Company's primary competitors include Sabre, Inc., ARINC, Sensis,
and SITA. The Company also sells certain data solutions through systems
integrators, including Lochard Pty, LTD, and Era Corporation, some of whom may
also sell products that are competitive with those offered by the Company. Most
of these companies are larger than the Company, and have larger sales forces and
greater financial resources than the Company.

SOURCES OF RAW MATERIALS

The Company obtains its raw materials from component distributors and
manufacturers throughout the United States. The Company has multiple sources of
supply for a majority of its components.

DEPENDENCE ON CERTAIN CUSTOMERS

For the fiscal years ended October 31, 2009 and 2008, two customers accounted
for approximately 22% of total revenues, and one customer accounted for
approximately 12% of total revenues, respectively.

-6-

RESEARCH AND DEVELOPMENT

The Company's research and development ("R&D") efforts are primarily focused on
continued software and hardware enhancements, as well as maintenance to the
existing PASSUR(R) Systems and related suite of software applications. R&D is
also focused on developing and maintaining the new software applications and
decision support products designed to expand the Company's software suite of
products. There were no customer sponsored research and development activities.

For the fiscal years ended October 31, 2009 and 2008, research and development
expenses amounted to approximately $278,000 and $290,000, respectively. The
Company's research and development efforts include activities associated with
the enhancement, maintenance, and improvement of the Company's existing
hardware, software, and information products.

ENVIRONMENTAL COSTS

The Company is not aware of any environmental issues which would have a material
adverse effect on future capital expenditures or current and future business
operations.

EMPLOYEES

As of October 31, 2009, the Company employed 26 employees, of which 24 were full
time, including 6 officers.

ITEM 1A. RISK FACTORS

THE COMPANY, IN THE PAST, INCURRED OPERATING LOSSES AND NEGATIVE CASH FLOWS FROM
OPERATIONS.

While the Company had net income during fiscal years 2009, 2008, 2007, and 2006,
it incurred significant net losses during the previous three fiscal years. The
Company had net income of approximately $154,000 and $495,000 for the fiscal
years ended October 31, 2009 and 2008, respectively. As of October 31, 2009, the
Company's accumulated deficit was approximately $8,806,000. The Company's
ability to maintain profitability will depend upon its ability to generate
significant increased revenues through new and existing customer agreements,
additional services, and/or products offered to existing customers and to
control the costs associated with the business operations. There is no guarantee
that the Company will be able to execute on these requirements. The Company is
profitable but may not be able to sustain or increase its profits on a quarterly
or annual basis in the future.

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
consummated, the Company has a commitment to receive the necessary continuing
financial support to meet its obligations from its significant shareholder and
Chairman through January 22, 2011. Such continuing financial support may be in
the form of additional loans or advances to the Company, in addition to the
deferral of principal and/or interest payments due on the outstanding loans, if
deemed necessary.

THE COMPANY'S SUCCESS IS DEPENDENT ON THE AVIATION INDUSTRY. IF THE COMPANY DOES
NOT EXECUTE ITS BUSINESS PLAN, OR IF THE MARKET FOR ITS SERVICES FAILS TO
DEVELOP DUE TO THE DEPRESSED AVIATION INDUSTRY, ITS RESULTS OF OPERATIONS AND
FINANCIAL RESULTS COULD CONTINUE TO BE ADVERSELY AFFECTED.

The Company's revenues are solely derived from the aviation industry. The
Company's future revenues and results of operations are dependent on its
continued execution of its subscription-based revenue strategy and development
of new software solutions and applications for the aviation industry. Due to the
depressed aviation industry, it is not assured that the Company will be able to
continue to report growth in its subscription-based business or sustain its
current subscription business. If the Company is unable to sustain and/or
increase its levels of revenues, and it is not successful in reducing costs, its
cash requirements may increase and the results of operations will continue to be
adversely affected.

-7-

Additionally, the aviation industry has been impacted by budgetary constraints
and airline bankruptcies due to the downturn in the current economy, changes in
fuel costs, the terrorist events of September 11, 2001, and the war on
terrorism. The terrorist attacks of September 11, 2001 caused fundamental and
permanent changes in the airline industry, including substantial revenue
declines and cost increases, which resulted in industry-wide liquidity issues.
Additional terrorist attacks, or fear of such attacks, even if not made directly
on the airline industry, would negatively affect the airline industry (through,
for example, increased security, insurance, and other costs, and lost revenue
from increased ticket refunds and decreased ticket sales), which would in turn
negatively affect the Company.

The aviation industry is extensively regulated by government agencies,
particularly the FAA and the National Transportation Safety Board ("NTSB"). New
air travel regulations have been, and management anticipates will continue to
be, implemented that could have a negative impact on airline and airport
revenues. Since substantially all of the Company's current revenues are derived
from either airports, airlines, or related businesses, continued increased
regulations of the aviation industry or a continued downturn in the economic
situation of the aviation industry could have a material adverse effect on the
Company.

RELIANCE ON THE COMPANY'S QUARTERLY OPERATING RESULTS AS AN INDICATION OF FUTURE
RESULTS IS INAPPROPRIATE DUE TO POTENTIAL SIGNIFICANT FLUCTUATIONS.

The Company's future revenues and results of operations may fluctuate
significantly due to a combination of factors, including:

o Delays and/or decreases in the signing and invoicing of new contracts;
o The length of time needed to initiate and complete customer contracts;
o Revenues recognized from one-time sales events (selling or upgrading
systems) versus subscription-based sales;
o The introduction and market acceptance of new and enhanced products
and services;
o The costs associated with providing existing and new products and
services;
o Economic conditions in the United States and the impact on the
aviation industry of the terrorist events of September 11, 2001 and
continued war on terrorism; and
o The potential of future terrorist acts against the aviation industry
and the adverse effects of any further terrorist attacks or other
international hostilities involving the United States.

Accordingly, quarter-to-quarter comparisons of its results of operations should
not be relied on as an indication of performance. It is possible that in future
periods, results of operations may be below those expected based upon previous
performance.

THE COMPANY MAY BE UNABLE TO RAISE ADDITIONAL FUNDS TO MEET OPERATING CAPITAL
REQUIREMENTS IN THE FUTURE.

While the Company's operations were cash flow positive as of October 31, 2009
and 2008, the Company's debt in fiscal year 2009 increased by $100,000 to fund
additions to the PASSUR(R) Network. The Company had an accumulated deficit of
approximately $8,806,000 as of October 31, 2009. The Company has obtained a
commitment from its significant shareholder and Chairman to provide the
resources necessary to meet working capital and liquidity requirements through
January 22, 2011. However, future liquidity and capital requirements are
difficult to predict, as they depend on numerous factors, including the
maintenance and growth of existing product lines and service offerings, as well
as the ability to develop, provide, and sell new products in an industry for
which liquidity and resources are already adversely affected.

The Company has significant cash requirements, which are expected to continue in
the future. The Company may need to raise additional funds in order to support
discretionary capital expenditures and execute its business plan. These funds in
some cases may be beyond the scope and normal operating requirements for which
the Company has a commitment from its significant shareholder and Chairman and
therefore, may not be approved and/or funded. In such case, the Company may be
required to seek alternate sources of financing (which may not be available on
favorable terms or at all) or abandon such activities by either: (i) terminating
or eliminating certain operating activities; (ii) terminating personnel; (iii)
eliminating marketing activities; and/or (iv) eliminating research and
development programs. If any of the aforementioned occurs, the Company's ability
to expand could become adversely affected.

-8-

A LIMITED NUMBER OF CUSTOMER CONTRACTS ACCOUNTS FOR A HIGH PERCENTAGE OF THE
COMPANY'S REVENUES, AND THE INABILITY TO REPLACE A KEY CUSTOMER CONTRACT COULD
ADVERSELY AFFECT ITS RESULTS OF OPERATIONS, BUSINESS, AND FINANCIAL CONDITION.

The Company relies on a small number of customer contracts for a large
percentage of its revenues and expects that a significant percentage of its
revenues will continue to be derived from a limited number of customer
contracts. The Company's business plan is to obtain additional customers, but
anticipates that near term revenues and operating results will continue to
depend on large contracts from a small number of customers. Additionally, the
aviation industry, particularly the airline sector, has experienced several
Chapter 11 bankruptcy filings recently. Any Chapter 11 filings by our existing
customers may adversely affect our ability to continue such services and collect
payments due to the Company by such customers. As a result of this concentration
of our customer base, an inability to replace one or more of these large
customer contracts could materially adversely affect our business, financial
condition, operating results and cash flow.

THE SOFTWARE BUSINESS FOR THE AVIATION INDUSTRY IS HIGHLY COMPETITIVE, AND
FAILURE TO ADAPT TO THE CHANGING INDUSTRY NEEDS COULD ADVERSELY AFFECT OUR
RESULTS OF OPERATIONS, BUSINESS, AND FINANCIAL CONDITION.

The industry in which we compete is marked by rapid and substantial technology
change, the steady emergence of new companies and products, as well as evolving
industry standards and changing customer needs. We compete with many established
companies in the industry we serve, and some of these companies may have
substantially greater financial, marketing, and technology resources, larger
distribution capabilities, earlier access to potential customers, and greater
opportunities to address customers' various information technology requirements.
As the aviation industry seeks to be more cost effective due to the continued
economic downturn, product pricing becomes increasingly important for our
customers. As a result, we may experience increased competition from certain
low-priced competitors. To remain competitive, we continue to develop new
products and continue to enhance existing products. We may be unsuccessful in
our ability to sell new products and/or product releases that meet the needs of
our industry in light of low-cost, less functional alternatives available in the
market. In addition, the pricing of new products or releases of existing
products may be above that required by the market place. Our inability to bring
such new products or enhancements to existing products to the market in a timely
manner or the failure of these products to achieve industry acceptance could
adversely affect our business, financial condition, operating results, and cash
flow.

THE COMPANY DEPENDS UPON CERTAIN KEY PERSONNEL AND MAY NOT BE ABLE TO RETAIN
THESE EMPLOYEES.

The Company's future performance depends on the continued services of its key
technical and engineering personnel. Significant improvements have been made in
the past year to address such issues, in particular, technical redundancy, but
the Company continues to depend on the efforts of a limited number of key
personnel. The employment of any of the Company's key personnel could cease at
any time, which could have an adverse affect on our business.

THE PASSUR(R) NETWORK COULD EXPERIENCE DISRUPTIONS, WHICH COULD AFFECT THE
DELIVERY OF DATA.

The Company's network infrastructure is maintained and hosted by AT&T through an
existing frame-relay network. If AT&T experiences system failures or fails to
adequately maintain the frame-relay network, the Company may experience
interruption of delivery of data/software services and customers may terminate
or elect not to continue to subscribe to these services in the future. The
Company's network infrastructure may be vulnerable to computer viruses,
break-ins, denial of service, attacks, and similar disruptive problems. Computer
viruses, break-ins, denial of service attacks or other problems caused by third
parties could lead to interruptions, delays, or cessation in service to
customers. There is currently no existing technology that provides absolute
security. Such incidents could deter potential customers and adversely affect
existing customer relationships.

THE COMPANY MAY BE SUBJECT TO NEW GOVERNMENT REGULATIONS RELATING TO THE
DISTRIBUTION OF FLIGHT-TRACKING DATA.

The Company currently maintains strict safety regulations for its data in order
to comply with current government regulations. Due to the continued growing
safety needs and concerns of the aviation industry, new government regulations
may be implemented. Such new regulations may, in some cases, hinder the
Company's ability to provide current and/or additional services.

-9-

UNAUTHORIZED USE OF THE COMPANY'S INTELLECTUAL PROPERTIES BY THIRD PARTIES MAY
DAMAGE AND/OR ADVERSELY AFFECT OUR BUSINESS.

The Company regards its trademarks, trade secrets, and all other intellectual
property as critical to its future success. Unauthorized use of our intellectual
property by third parties may damage and/or impair our business. Our
intellectual property includes exclusive licenses to use patents held by third
parties, as well as Company-owned patents. We rely on trademarks, trade secrets,
patent protection, and contracts, including confidentiality and non-exclusive
license agreements with our customers, employees, consultants, strategic
partners, and others, to protect our intellectual property rights. Despite our
precautions, it may be possible for third parties to obtain and use our
intellectual property without our prior knowledge and/or authorization.
Prosecuting infringers could be time consuming and costly, and, irrespective of
whether or not the Company is successful, could disrupt its business.

The Company currently owns five issued patents, and nineteen additional patents
are pending with the United States Patent Office, some of which relate to newly
developed internet-based software applications, derived in large part from the
data generated from the Company's PASSUR(R) Systems. The issued and allowed
patents expire in various years through 2025. We also intend to seek additional
patents on our products and technological advances and/or software applications,
when appropriate. There can be no assurance that patents will be issued for any
of our pending or future patent applications, or that any claims allowed from
such applications will be of sufficient scope, or provide adequate protection or
any commercial advantage to the Company. Additionally, our competitors may be
able to design around our patents and possibly affect our commercial interests.

The Company also owns a federal trademark registration in the mark PASSUR(R) for
use with both the PASSUR(R) hardware system installation and the software
products which use the data derived from the PASSUR(R) Network and other
sources. The PASSUR(R) federal registration will allow the Company to enforce
its rights in the mark in the federal court system. The registration does not
assure that others will be prevented from using similar trademarks in connection
with related products and/or services.

DEFENDING AGAINST INTELLECTUAL PROPERTY CLAIMS COULD POSE SIGNIFICANT LEGAL AND
PROFESSIONAL COSTS, AND IF UNSUCCESSFUL, COULD ADVERSELY AFFECT THE COMPANY.

The Company cannot guarantee that our future products, technologies, and
software applications will not inadvertently infringe valid patents or other
intellectual property rights held by third parties. We may be subject to legal
proceedings and claims from time to time relating to the intellectual property
of others. Investigation of any claims from third parties alleging infringement
of their intellectual property, whether with or without merit, can be expensive
and could affect development, marketing, selling, or delivery of our products.
Defending against intellectual property infringement claims could be time
consuming and costly, and, irrespective of whether or not the Company is
successful, could disrupt our business. We may incur substantial expenses in
defending against these third party claims, regardless of their merit.
Successful infringement claims against the Company may result in significant
monetary liability and could adversely affect our business, financial condition,
operating results and cash flow.

-10-

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

The Company's executive offices are currently located at One Landmark Square,
Suite 1900, Stamford, Connecticut, in part of a six building, 800,000 square
foot office park. Effective June 26, 2009, the Company entered into a five year
lease for approximately 4,000 square feet of office space at an average rental
rate of approximately $157,000 per year. Prior to October 31, 2009, the
Company's leased 1,900 square feet for its executive offices, located in a
three-story office building at 47 Arch Street, Greenwich, Connecticut, at a
rental rate of $90,000 per year.

The Company's research and manufacturing facility is located in a one-story,
36,000 square foot building at 35 Orville Drive, Bohemia, New York. The building
previously was owned by the Company and was sold in October 1999 to an
unaffiliated buyer. The Company, which renewed the lease through October 31,
2012, leases 12,000 square feet at an annual average rental cost of
approximately $109,000.

The Company believes these rates are competitive and are at or below market
rates.

The Company's research and manufacturing facility and its executive offices are
suitable for its requirements.

ITEM 3. LEGAL PROCEEDINGS

The Company is not aware of any material pending legal proceedings to which the
Company or its subsidiary is a party or to which any of its properties are
subject.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company did not submit any matter to a vote of its security holders during
the fourth quarter of fiscal 2009.

-11-

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS

(A) MARKET INFORMATION

The Company's Common Stock, par value $0.01 per share (the "Common Stock"), is
traded on the over-the-counter bulletin board.

The following table sets forth the reported high and low sales prices for the
Company's common stock for each quarterly period during the Company's last two
fiscal years, as reported by the National Quotation Bureau, Inc.:

PRICES*
-------

PERIOD HIGH LOW
------ ---- ---

FISCAL YEAR ENDED OCTOBER 31, 2009

FIRST QUARTER $ 4.00 $ 1.25
SECOND QUARTER 3.35 1.10
THIRD QUARTER 3.20 2.00
FOURTH QUARTER 2.90 1.30

Fiscal year ended October 31, 2008

First quarter $ 4.15 $ 3.50
Second quarter 4.50 3.00
Third quarter 4.00 2.50
Fourth quarter 3.25 1.55

--------------------------------------------------------------------------------

* The quotations represent prices on the over-the-counter bulletin board between
dealers in securities, do not include retail markup, markdown or commission, and
do not necessarily represent actual transactions.

(B) HOLDERS

The number of registered equity security holders of record at January 11, 2010
was 254, as shown in the records of the Company's transfer agent.

The Company has never paid cash dividends on its shares. The Company does not
anticipate paying cash dividends in the foreseeable future.

-12-

(D) SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY
COMPENSATION PLANS

The following table provides information as of October 31, 2009 with respect to
the securities authorized for issuance under the Company's equity compensation
plans.

--------------------------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES REMAINING
NUMBER OF SECURITIES TO BE WEIGHTED-AVERAGE AVAILABLE FOR FUTURE ISSUANCE
ISSUED UPON EXERCISE OF EXERCISE PRICE OF UNDER EQUITY COMPENSATION
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, PLANS (EXCLUDING SECURITIES
PLAN CATEGORY WARRANTS, AND RIGHTS WARRANTS, AND RIGHTS REFLECTED IN COLUMN (A))
--------------------------------------------------------------------------------------------------------------------------------
(A) (B) (C)
--------------------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------------------
Equity compensation plan approved
by security holders 1,627,000 $.70 430,000
--------------------------------------------------------------------------------------------------------------------------------
Equity compensation plans not approved
by security holders -- -- --
--------------------------------------------------------------------------------------------------------------------------------
Total 1,627,000 $.70 430,000
========= ==== =======
--------------------------------------------------------------------------------------------------------------------------------

-13-

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

RESULTS OF OPERATIONS

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. The Company has identified the policies and estimates below as
critical to its 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, where such
policies affect its reported financial results. The actual impact of these
factors may differ under different assumptions or conditions.

OVERVIEW

The Company's revenues are generated by selling: (1) subscription-based
information and software products; (2) annual maintenance contracts for
PASSUR(R) radar systems; and (3) professional services.

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 designed to address the needs of the aviation industry.
The Company's strategy is to help solve problems faced by its customers, and is
built on the following basic objectives: (1) continue to extend the reach of the
PASSUR(R) radar network, which provides the proprietary backbone for many of its
solutions; (2) continue to integrate multiple additional industry data sets into
its integrated aviation database, including data from a variety of additional
aircraft, airspace, and ground surveillance technologies, in order to ensure
that PASSUR(R) is the primary choice for data integration and management for
large aviation organizations; (3) continue to develop decision support solutions
built on business intelligence, predictive analytics, and web dashboard
technology; and (4) continue to develop the Company's professional service
capabilities in order to ensure that its solutions can be fully implemented in
the customer's work environment with minimal demand on the customer's internal
resources.

The Company shipped twenty-one and installed twenty-three Company-owned
PASSUR(R) Systems during fiscal 2009 (installations include systems shipped in
the current and the previous fiscal year). Several units shipped in fiscal 2009
should be installed during fiscal year 2010. The shipped and installed PASSUR(R)
Systems were capitalized as part of the Company owned "PASSUR(R) Network." The
Company will continue to expand the PASSUR(R) Network by shipping and installing
additional PASSUR(R) Systems throughout fiscal 2010. The Company manufactured
thirty-one PASSUR(R) units in fiscal year 2009. Management anticipates that
future PASSUR(R) sites will provide increased coverage for the PASSUR(R) Network
by increasing the Company's ability to contract with new customers at such
locations and by providing existing customers with additional data solutions.
The Company will continue to market the business intelligence, predictive
analytics, as well as decision support applications and solutions derived from
the PASSUR(R) Network, directly to the aviation industry and organizations that
serve, or are served by, the aviation industry. There were one hundred and
twenty-two Company-owned PASSUR(R) Systems located at various airports worldwide
at the end of fiscal 2009.

-14-

REVENUES

Revenues during fiscal 2009 increased by approximately $1,388,000, or 18%, to
$8,960,000 from $7,572,000 in fiscal 2008. This increase was primarily due to
the continued development and deployment of new software applications and
solutions, as well as the wide selection of products which address customers'
needs, easily delivered through web-based applications. These efforts resulted
in new customers subscribing to the Company's suite of software applications, as
well as higher subscriptions from some of its existing customers.

Management concentrates its efforts on the sale of business intelligence,
predictive analytics, and decision support product applications, utilizing data
primarily derived from the PASSUR(R) Network. Such efforts include the continued
development of new product applications, as well as enhancements and maintenance
of existing applications. As a result, subscription-based revenues of
approximately $8,371,000 in fiscal 2009 increased $1,293,000, or 18%, compared
to approximately $7,078,000 in fiscal 2008.

COST OF REVENUES

Costs associated with subscription and maintenance revenues consist primarily of
direct labor, depreciation of PASSUR(R) Network assets, amortization of software
development costs, communication costs, data feeds, and allocated overhead
costs. Also included in cost of revenues are costs associated with the upgrades
of PASSUR(R) Systems necessary to make older systems compatible with new
software applications, as well as the ordinary repair and maintenance of
existing network systems. Additionally, cost of revenues in each reporting
period is impacted by: (1) the number of PASSUR(R) units produced, upgraded,
shipped, and installed during the year which are added to the PASSUR(R) 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.

During fiscal 2009, cost of revenues increased by approximately $984,000 or 41%,
compared to fiscal 2008, primarily because fewer PASSUR(R) Systems were shipped
and installed compared to the prior fiscal year. Other factors are lower
capitalization of manufacturing costs, increases in headcount related costs,
data feeds, communication costs, depreciation, as well as amortization of
capitalized software assets. This increase was partially offset by reductions in
license fees, travel and entertainment expenses, as well as an increase in the
capitalization of software development costs.

RESEARCH AND DEVELOPMENT

During fiscal 2009, research and development expenses remained consistent
compared to fiscal 2008. The Company's research and development efforts include
activities associated with the enhancement, maintenance, 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, maintain, and support the existing and newly developed
applications for its PASSUR(R) customers. There were no customer sponsored
research and development activities during fiscal 2009 or 2008. Research and
development expenses are funded by current operations.

SELLING, GENERAL, AND ADMINISTRATIVE

During fiscal 2009, selling, general, and administrative expenses increased by
approximately $239,000, or 6%, compared to fiscal 2008. This increase was
primarily due to an increase in sales and marketing payroll, as well as higher
legal fees.

-15-

INCOME FROM OPERATIONS

During fiscal 2009, revenues of approximately $8,960,000 exceeded costs and
expenses of approximately $7,689,000, and resulted in income from operations of
approximately $1,271,000. During fiscal 2009, total revenues increased by
approximately $1,388,000, or 18%, total costs and expenses increased by
approximately $1,211,000, or 19%, and income from operations increased by
approximately $177,000, or 16%, compared to fiscal 2008.

OTHER INCOME (EXPENSE)

Interest income was not significant in fiscal 2009 and 2008.

Refinancing and extending the maturity of the Company's debt at a higher
interest rate resulted in an increase in interest expense-related party of
approximately $513,000, or 86%, in fiscal 2009, compared to fiscal 2008.The
interest rate charged by the related party increased from 4.5% to 9%, as of
February 1, 2009. The principal balance of the note at the end of fiscal 2009
was $100,000 higher as compared to the same period of the prior fiscal year.

INCOME TAXES

The Company's provision for income taxes in each year consists of current state
and local minimum taxes.

As of October 31, 2009, the Company had available a federal net operating loss
carry-forward of approximately $11,455,000 for income tax purposes, which will
expire in various tax years from 2010 through 2028. The Company has provided a
full valuation allowance on the net deferred tax asset of approximately
$4,497,000 which primarily consists of the net operating loss carry-forwards
which are considered more likely than not to be realizable.

NET INCOME

The Company earned net income of approximately $154,000, or $.03 per diluted
share, during fiscal 2009, as compared to net income of approximately $495,000,
or $.09 per diluted share, in fiscal 2008. During fiscal year 2009, the
Company's income from operations was higher compared to fiscal year 2008, but
this increase was more than offset by higher interest costs to a related party,
resulting in lower net income compared to the prior fiscal year.

IMPACT OF INFLATION

In the opinion of management, inflation has not had a material effect on the
operations of the Company including selling prices, capital expenditures, and
operating expenses.

LIQUIDITY AND CAPITAL RESOURCES

At October 31, 2009, the Company's current liabilities exceeded current assets
by approximately $2,072,000. The notes payable to a related party of $13,914,880
are due November 1, 2011. At October 31, 2009, the Company's stockholders'
deficit was approximately $5,943,000. For fiscal 2009, the Company had net
income of approximately $154,000.

-16-

Management is addressing the Company's working capital and stockholders'
deficiencies by aggressively marketing the Company's PASSUR(R) information
capabilities in its existing product lines, as well as in new products, which
are continually being developed and deployed. The Company intends to increase
the size and related airspace coverage of its owned "PASSUR(R) Network," by
continuing to install PASSUR(R) Systems throughout the United States and certain
foreign countries. In addition, management believes that expanding its existing
software suite of products, which address the wide array of needs of the
aviation industry, through the continued development of new product 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 consummated, the Company has a
commitment to receive the necessary continuing financial support to meet its
obligations from its significant shareholder and Chairman through January 22,
2011. Such continuing financial support may be in the form of additional loans
to the Company, in addition to the deferral of principal and/or interest
payments due on the outstanding loans, if deemed necessary.

Effective November 1, 2008, the Company entered into a new agreement, renewing
and extending the term of the $13,814,880 note due to G.S. Beckwith Gilbert, the
Company's significant shareholder and Chairman, from one year to three years,
resulting in an increase in the interest rate from 4.5% to 9% as of February 1,
2009. During fiscal 2009, Mr. Gilbert loaned the Company an additional $100,000,
bringing the principal amount of notes due to Mr. Gilbert to $13,914,880 on
October 31, 2009 with a maturity of November 1, 2011. Interest remained at the
annual rate of 4.5% from November 1, 2008 to January 31, 2009, payable in cash.
Effective February 1, 2009 through October 31, 2011, the interest rate was
increased to 9% and is payable as follows: interest at the annual rate of 6%
will be payable in cash with the remaining interest, at the annual rate of 3%,
payable at the option of the Company in cash or "paid in kind" and added to the
principal of the note. Annual interest payments are due at October 31 of each
fiscal year. During October 2009, the Company entered into an agreement to
extend the interest payment due to Mr. Gilbert on October 31, 2009 to December
31, 2009. This interest payment was paid in full by the Company prior to the
extended payment date. Mr. Gilbert loaned the Company an additional $900,000 to
fund part of this interest payment, bringing the loan balance to $14,814,880 as
of December 31, 2009. During fiscal 2008, Mr. Gilbert loaned the Company an
additional $1,200,000, which brought the principal amount of the note due to Mr.
Gilbert to $13,814,880 as of October 31, 2008. The Company has a commitment from
Mr. Gilbert that if the Company, at any time, is unable to meet its obligations
through January 22, 2011, 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 interest payments due on the existing loans, if deemed necessary.
The notes are secured by the Company's assets.

Net cash provided by operating activities for fiscal 2009 was approximately
$2,380,000 and consisted of approximately $154,000 of net income, $1,701,000 of
non-cash items, primarily depreciation and amortization, and approximately
$1,108,000 of accrued interest-related party, offset by a decrease in accrued
expenses of approximately $293,000 which was due primarily to a reduction in
license fees, an increase in accounts receivable of approximately $227,000, and
a net decrease of all other operating cash-flows of approximately $63,000. Cash
flow used in investing activities for fiscal 2009 was approximately $2,469,000
and consisted of investments in the Company's PASSUR(R) Network, capitalized
software development costs, and capital expenditures. Cash flow provided by
financing activities for fiscal 2009 was approximately $122,000 and consisted of
$100,000 from notes payable-related party, and approximately $22,000 of proceeds
from the exercise of stock options. No principal payments on notes payable-
related party were made during fiscal 2009.

The Company was profitable in fiscal year 2009. To date, the Company's revenue
has increased as a result of its subscription-based revenue model. 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 terrorist events of September 11, 2001, the
continued war on terrorism, and increased fuel costs. The aviation market is
extensively regulated by government agencies, particularly the FAA and the NTSB,
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.

-17-

Interest by potential customers in the information and decision support software
products obtained from the PASSUR(R) Network remains strong, and 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.

OFF-BALANCE SHEET ARRANGEMENTS

None.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

GENERAL

REVENUE RECOGNITION

The Company recognizes revenue in accordance with SEC Staff Accounting Bulletin
No. 104, "REVENUE RECOGNITION IN FINANCIAL STATEMENTS" ("SAB 104"), as codified.
SAB 104 requires that four basic criteria must be met before revenues can be
recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has
occurred or services have been rendered; (3) the fee is fixed and determinable;
and (4) collectibility is reasonably assured. The Company also recognizes
revenue in accordance with FASB ASC 985-605 (SOP 97-2, "SOFTWARE REVENUE
RECOGNITION") as amended, when applicable.

The Company's revenues are generated by selling: (1) subscription-based
information and software products; (2) annual maintenance contracts for
PASSUR(R) radar systems; and (3) professional services.

Revenues generated from subscription and maintenance agreements are recognized
over the term of such executed agreements and/or customer's receipt of such data
or services. In accordance with ASC 985-605, we recognize revenue from the
licensing of our software products or performance of maintenance when all of the
following criteria are met: (1) we have evidence of an agreement with a
customer; (2) we deliver the products/services; (3) license or maintenance
agreement terms are deemed fixed or determinable and free of contingencies or
uncertainties that may alter the agreement, such that the sale may not be
complete and/or final; and (4) collection is probable. The Company records
revenues pursuant to individual contracts on a month-by-month basis, as outlined
by the applicable agreement(s). In many cases, the Company may invoice
respective customers in advance of specified period(s), either quarterly or
annually, which coincides with the terms of the agreement. In such cases, the
Company will defer at the close of each month and/or reporting period, any
subscription or maintenance revenues invoiced for which services have yet to be
rendered, in accordance with ASC 985-605.

Our software licenses generally do not include acceptance provisions. An
acceptance provision generally allows a customer to test the software for a
defined period of time before committing to a binding agreement to license the
software. If a subscription agreement includes an acceptance provision, the
Company will not recognize revenue until the earlier of the receipt of a written
customer acceptance or, if not notified by the customer to cancel the
subscription agreement, the expiration of the acceptance period.

-18-

From time to time, the Company will receive one-time payments from customers for
rights, including but not limited to, the rights to use certain data at an
agreed upon location(s) for a specific use and/or for an unlimited number of
users. Such one-time payments are in the form of license fees. These fees are
recognized as revenue ratably over the term of the license agreement or expected
useful life of such license arrangement, whichever is longer, but typically five
years.

Any deferred revenue is classified on the Company's balance sheet as a liability
in the deferred income account until such time as revenue from services is
properly recognized as revenue in accordance with SAB 104 and/or ASC 985-605 and
the corresponding agreement.

CAPITALIZED SOFTWARE 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"). Costs
incurred to develop computer software products as well as significant
enhancements to software features of the existing products to be sold or
otherwise marketed, are capitalized after technological feasibility is
established and ending when the product is available for general release to
customers. Once the software products become available for general release to
the public, the Company begins to amortize such costs to cost of revenues.

The Company's policy on capitalized software costs determines whether the costs
incurred are classified as capitalized costs (in accordance with ASC 985-20) or
as research and development expenses. In cases where the Company capitalizes
costs incurred with development of new hardware/software products, a product
specification is designed and/or a working model of the respective project is
developed as the guideline for the capitalization of costs associated with such
project in accordance with ASC 985-20.

Once a product has been made available for sale and/or released for sale to the
general public, the development costs of that product are no longer capitalized
and amortization commences over a five-year period. Any additional costs
incurred to maintain or support such product are expensed as incurred. In some
cases, the Company may capitalize costs incurred in the development of enhanced
versions of already existing products, but will immediately expense any
additional costs incurred to maintain products which were completed and released
to the general public, in accordance with ASC 985-20. Management uses judgment
in determining and evaluating whether development costs meet the criteria for
immediate expense or capitalization.

The Company's net capitalized software costs at October 31, 2009 totaled
approximately $2,516,000. The carrying value of the capitalized software costs
is evaluated for impairment based on the forecasted and actual future cash flows
expected to be generated from such assets, as determined and evaluated by
management.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company follows the provisions of FASB ASC 360-10 (SFAS 144, "ACCOUNTING FOR
THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS"). At each reporting period, the
Company reviews long-lived assets for impairment to determine if the carrying
amount of an asset may not be recoverable. Impairment is recognized when the sum
of the undiscounted estimated future cash flows expected to result from the use
of the asset is less than the carrying value. The Company evaluates the periods
of amortization continually in determining whether any events or circumstances
warrant revised estimates of useful lives.

The Company's long-lived assets include property, plant and equipment and the
PASSUR(R) Network, that, at October 31, 2009, approximated $7,551,000, which
accounted for 64% of the Company's total assets.

At each reporting period, management evaluates the carrying values of the
Company's assets. The evaluation considers the undiscounted cash flows generated
from current contractual revenue sources and the anticipated forecast revenue
derived from each asset. The Company then evaluates these revenues on an overall
basis to determine if any impairment issues exist. As of October 31, 2009, based
upon management's evaluation of the above asset groups, no impairments of these
asset groups exist. If these forecasts are not met, the Company may have to
record impairment charges not previously recorded.

-19-

DEPRECIATION AND AMORTIZATION

As of October 31, 2009, the total net property, plant and equipment approximated
$259,000, the total net PASSUR(R) Network approximated $7,291,000, and the total
net software development costs approximated $2,516,000. The total depreciation
and amortization expense for fiscal 2009 related to capitalized assets
approximated $1,677,000. In management's judgment the estimated depreciable
lives used to calculate the annual depreciation and amortization expense are
appropriate.

Depreciation and amortization is provided on the straight-line basis over the
estimated useful lives of the assets, as follows:

Property, plant and equipment 3 to 10 Years
PASSUR(R) Network 7 Years
Software development costs 5 Years

All of the Company's capitalized assets are recorded at cost (which may also
include salaries and related overhead costs incurred during production and/or
development) and depreciated and/or amortized over the asset's estimated useful
life for financial statement purposes. The estimated useful life represents the
projected period of time that the asset will be productively employed by the
Company and is determined by management based on many factors, including
historical experience with similar assets, technological life cycles and
industry standards for similar assets. Circumstances and events relating to
these assets are monitored to ensure that changes in asset lives or impairments
(see "Impairment of Long-Lived Assets" above) are identified and prospective
depreciation expense or impairment expense is adjusted accordingly.

For the year ended October 31, 2009, total depreciation and/or amortization of
$1,677,000 consisted of $227,000 for property, plant and equipment, $1,079,000
for the PASSUR(R) Network, and $371,000 for software development costs.

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 compensation over the service period
for awards expected to vest. The fair value of stock options was determined
using the Black-Scholes valuation model, which is consistent with our valuation
techniques previously utilized for stock options in footnote disclosures
required under ASC 718. Such fair value is recognized as expense over the
service period, net of estimated forfeitures. For the years ended October 31,
2009 and 2008, stock compensation expense of approximately $35,000 and $100,000,
respectively, was incurred by the Company and primarily charged to selling,
general, and administrative expenses. For the year ended October 31, 2009, stock
compensation expense was reduced by approximately $31,000 due to reversals of
prior fiscal year's costs for the forfeiture of options with a service
condition, previously issued to employees terminated in the current fiscal year.

-20-

RECENT ACCOUNTING PRONOUNCEMENTS

We adopted FASB ASC 820-10 (SFAS No. 157, "Fair Value Measurements"). ASC 820-10
defines fair value, establishes a methodology for measuring fair value, and
expands the required disclosure for fair value measurements. On February 12,
2008, the Financial Accounting Standards Board ("FASB") issued FASB Staff
Position No. SFAS 157-2, "Effective Date of FASB Statement No. 157," which
amends ASC 820-10 by delaying its effective date by one year for non-financial
assets and non-financial liabilities, except for items that are recognized or
disclosed at fair value in the financial statements on a recurring basis. The
adoption of ASC 820-10 for our financial assets and financial liabilities did
not have a material impact on our consolidated financial statements. Effective
November 1, 2009, ASC 820-10 will also apply to all other fair value
measurements for us. We are evaluating the effect the implementation of ASC
820-10 will have on our non-financial assets and non-financial liabilities on
our consolidated financial statements.

In December 2007, the FASB issued ASC 805 (SFAS No. 141R, "Business
Combinations") that will significantly change the accounting for business
combinations in a number of areas including the treatment of contingent
consideration, contingencies, acquisition costs, IPR&D, and restructuring costs.
The changes in deferred tax asset valuation allowances and acquired income tax
uncertainties in a business combination after the measurement period will impact
income tax expense. This guidance is effective for fiscal years beginning after
December 15, 2008. This pronouncement will affect future acquisitions, if any.

In December 2007, the FASB issued ASC 810 (SFAS No. 160, "Noncontrolling
Interests in Consolidated Financial Statements"). This will change the
accounting and reporting for minority interests, which will be recharacterized
as noncontrolling interests (NCI) and classified as a component of equity. This
new consolidation method will significantly change the accounting for
transactions with minority interest holders. This pronouncement will affect the
accounting for future acquisitions, if any. The Company wholly owns its
subsidiary and thus does not expect this pronouncement to impact the Company.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Part IV, Item 15(a)(1) of this Annual Report on Form 10-K for the Company's
annual financial statements.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

ITEM 9A (T). CONTROLS AND PROCEDURES

DISCLOSURE CONTROLS AND PROCEDURES

As of the end of the period covered by this annual report on Form 10-K,
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, cannot
provide absolute assurance that the objectives of the control system are met,
and no evaluation of controls can provide absolute assurance that all control
issues and instances of fraud, if any, within a Company have been detected.
Based on their evaluation as of the end of the period covered by this annual
report on Form 10-K, 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 October 31, 2009.

-21-

INTERNAL CONTROL OVER FINANCIAL REPORTING

The Company's management is responsible for establishing and maintaining
adequate internal control over financial reporting (as such term is defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act). The Company's internal
control over financial reporting is a process designed under the supervision of
its Chief Executive Officer and Chief Financial Officer to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of the Company's financial statements for external reporting in accordance with
accounting principles generally accepted in the United States of America.
Management evaluates the effectiveness of the Company's internal control over
financial reporting using the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control--Integrated
Framework. Due to its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Therefore, even those systems
determined to be effective can provide only reasonable assurance of achieving
their control objectives. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

Management, under the supervision and with the participation of the Company's
Chief Executive Officer and Chief Financial Officer, conducted an evaluation of
the effectiveness of the Company's internal control over financial reporting as
of October 31, 2009. Based on this evaluation, management concluded that the
Company's internal control over financial reporting was effective at a
reasonable assurance level as of October 31, 2009.

This annual report does not include an attestation report of our registered
public accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the Securities and Exchange
Commission that permit the Company to provide only management's report in this
annual report.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There has been no change in our internal control over financial reporting during
our fourth fiscal quarter ended October 31, 2009 that has materially affected,
or is reasonably likely to materially affect, our internal control over
financial reporting.

ITEM 9B. OTHER INFORMATION

None.

-22-

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

(A) IDENTIFICATION OF DIRECTORS

The following table sets forth the names and ages of the Company's directors, as
well as the year each individual became a director, and the position(s) with the
Company, if any, held by each individual.

DIRECTOR
NAME AGE SINCE DIRECTOR POSITION AND OFFICERS WITH COMPANY
------------------------------------------------------------------------------------------------

G.S. Beckwith Gilbert 67 1997 Chairman of the Board and a Director

Richard R. Schilling, Jr. 84 1974 Director

John R. Keller 69 1997 Executive Vice President and a Director

Bruce N. Whitman 76 1997 Chairman of the Executive Committee and a Director

Paul L. Graziani 52 1997 Director

James T. Barry 48 2000 President, Chief Executive Officer, and a Director

James J. Morgan 67 2005 Director

Kurt J. Ekert 39 2009 Director

Peter L. Bloom 52 2009 Director

Each director is elected to serve until the succeeding annual meeting of
shareholders and until his successor is duly elected and qualified.

-23-

(B) IDENTIFICATION OF EXECUTIVE OFFICERS

The following table sets forth the names and ages of the Company's executive
officers, as well as the office(s) held by each individual, and the year in
which each executive officer began to serve in such capacity.

OFFICER
NAME AGE SINCE OFFICER POSITION AND OFFICERS WITH COMPANY
------------------------------------------------------------------------------------------------

James T. Barry 48 1998 President, Chief Executive Officer, and a Director

Jeffrey P. Devaney 50 2004 Chief Financial Officer, Treasurer, and a Secretary

John R. Keller 69 1967 Executive Vice President and a Director

Dr. James A. Cole 69 1988 Senior Vice President of Research and Development

Matthew H. Marcella 52 2003 Vice President of Software Development

Ron A. Dunsky 47 2003 Vice President of Marketing

Each officer is elected to serve at the discretion of the Board of Directors.

None.

(D) FAMILY RELATIONSHIP

None.

-24-

(E) BUSINESS EXPERIENCE

The following sets forth the business experience during the past five years of
each director and executive officer:

G.S. Beckwith Gilbert Mr. Gilbert has continued to serve as the Company's
Chairman of the Board since his election in 1997.
Mr. Gilbert was appointed Chief Executive Officer in
October of 1998 and served as such until his
retirement from that post on February 1, 2003. Mr.
Gilbert is also President and Chief Executive
Officer of Field Point Capital Management Company, a
merchant-banking firm, a position he has held since
1988. He is a Director of Davidson Hubeny Brands.
Mr. Gilbert is also the Chairman of the Board of
Fellows of Harvard Medical School, a Director of the
Yale Cancer Center, a trustee of the Williston
Northampton School, and a member of the Council on
Foreign Relations.

Richard R. Schilling, Jr. Mr. Schilling has been a Director of the Company
since 1974. Mr. Schilling is a member of the law
firm of Burns, Kennedy, Schilling & O'Shea, New
York, New York, where he has been practicing since
October 1964.

Bruce N. Whitman Mr. Whitman has been a Director of the Company since
1997. He is currently the president, CEO, and a
Director of FlightSafety International, where he has
been employed in various positions (such as
Executive Vice President) since 1961. He is
currently a Director and Chairman of the Executive
Committee of PASSUR Aerospace, Inc., Co-Chairman of
the Board and Chairman of the Nominating Committee
of the Congressional Medal of Honor Foundation, a
Director of the General Aviation Manufacturers
Association, an Executive Committee member of NATA's
Air Charter Safety Foundation Board of Governors; a
Director of ORBIS International, a Director of the
Wings Club, and a Director Emeritus of the
Smithsonian National Air and Space Museum. He is a
member of the Board of Governors of the Aerospace
Industries Association, The Wings Club, the Civil
Air Patrol and a member of its Executive and Audit
Committees, a trustee of the Falcon Foundation, the
Kent School, and the National World War II Museum.

-25-

Paul L. Graziani Mr. Graziani has been a Director of the Company
since 1997. He currently serves as Chief Executive
Officer of Analytical Graphics, Inc. (AGI), a
leading producer of commercially available analysis
and visualization software for the aerospace,
defense, and intelligence communities, a position he
has held since January 1989. Until March 2009, he
also served as AGI's president. In recent times, Mr.
Graziani has been recognized as "CEO of the Year" by
the Philadelphia region's Eastern Technology Council
and the Chester County Chamber of Business and
Industry; "Entrepreneur of the Year" regional winner
by Ernst & Young; and "Businessman of the Year" by
the local Great Valley Regional Chamber of Commerce.
He sits on the Boards of Directors of the United
States Geospatial Intelligence Foundation (USGIF)
and Federation of Galaxy Explorers (FOGE), and is a
member of the boards of governors of the Civil Air
Patrol (CAP) and the Aerospace Industries
Association (AIA). He serves on the advisory board
for Penn State Great Valley and is an associate
fellow of the American Institute of Aeronautics and
Astronautics (AIAA). After fulfilling his board
tenure, he was recently elected to the honorary
position of life director of The Space Foundation.
In 2009 AGI was named a "Top Small Workplace" by the
Wall Street Journal and the non-profit organization
Winning Workplaces.

James J. Morgan Mr. Morgan has been a Director of the Company since
September 12, 2005. Mr. Morgan is also a partner in
the New York City based private equity firm Jacobson
Partners, a position he has held since September
2001. In his role at Jacobson Partners, Mr. Morgan
serves as a board member of Bertucci's Inc. Mr.
Morgan retired in 1997 as President and Chief
Executive Officer of Philip Morris Incorporated.

Kurt J. Ekert Mr. Ekert has been a Director of the Company since
September 10, 2009. Mr. Ekert is currently the Chief
Operating Officer of GTA by TRAVELPORT, INC., a
Blackstone company, a position he has held since
October 2006. In his role as Chief Operating
Officer, Mr. Ekert leads GTA's operating and
commercial functions, as well as all elements of its
online consumer business, OctopusTravel.com. In
December 2005, he was named Senior Vice President,
Travelport Supplier Services, where he oversaw
supplier services and content for the Travelport
consumer and business groups including Orbitz.com
and Galileo. At Travelport, prior to December 2005,
Mr. Ekert held the positions of Group Vice
President, Strategy and Business Development, and
Chief Operating Officer, Orbitz for Business. His
experience in the travel industry includes a number
of senior finance roles at Continental Airlines. He
also spent four years as an active duty Army
officer. Mr. Ekert holds a B.S. from the Wharton
School of the University of Pennsylvania and a MBA
from the University of South Carolina.

-26-

Peter L. Bloom Mr. Bloom has been a Director of the Company since
December 10, 2009. Mr. Bloom is currently an
Advisory Director at General Atlantic, where he has
worked since 1996. As a Managing Director at General
Atlantic, he was responsible for technology due
diligence on prospective investments and assistance
to the CEO and senior management teams of portfolio
companies on technology strategy and guidance on
emerging technology trends. Prior to joining General
Atlantic, Mr. Bloom spent thirteen years at Salomon
Brothers in a variety of roles in both technology
and fixed income sales and trading. He received the
Carnegie Mellon/AMS Achievement Award in Managing
Information Technology for his work managing the
technology implementation of a new distributed
computing architecture that supported the company's
global business operations. He graduated from
Northwestern University in 1978 with a B.A. in
Computer Studies and Economics. He is a member of
Business Executives for National Security, an
Associate Founder of Singularity University. He is
currently the Chairman of DonorsChoose, which was
named the most innovative charity in America by
Stanford Business School and Amazon. Mr. Bloom is
also the co-founder and Chairman of Peak Rescue
Institute. He is a member of the board of The Food
Bank for New York City and the Cancer Research
Institute.

Dr. James A. Cole Dr. Cole currently serves as Senior Vice President
and the Director of Research and Development of the
Company, a position he has held since July 1988. Dr.
Cole earned a Ph.D. in physics from Johns Hopkins
University in 1966. He is a current member of the
American Association for the Advancement of Science,
American Physics Society, Association for Computing
Machinery, Institute of Electrical and Electronic
Engineers and IEEE Computer Society. Dr. Cole has
been with the Company since 1974.

John R. Keller Mr. Keller serves as Executive Vice President of the
Company, a position he has held since the Company's
inception in 1967 as one of the co-founders. Mr.
Keller received his bachelor's and master degrees in
engineering from New York University in 1960 and
1962, respectively.

James T. Barry Mr. Barry was named President of the Company on
April 14, 2003 and Chief Executive Officer on
February 1, 2003. Since Mr. Barry joined the Company
in 1998, he has held the positions of Chief
Operating Officer, Chief Financial Officer,
Secretary, and Executive Vice President. From 1989
to 1998, he was with Dianon Systems, Inc., most
recently as Vice President of Marketing. Prior to
Dianon, Mr. Barry was an officer in the United
States Marine Corps.

-27-

Jeffrey P. Devaney Mr. Devaney joined the Company as Chief Financial
Officer, Treasurer, and Secretary on June 14, 2004.
Prior to joining the Company, Mr. Devaney was the
Chief Financial Officer at Cierant Corporation from
2002 to 2004. From 2000 to 2001, he was a Controller
at SageMaker, Inc. From 1995 to 2000 he was the
Controller at Information Management Associates,
Inc.

Matthew H. Marcella Mr. Marcella was named Vice President - Software
Development on January 15, 2003. Mr. Marcella joined
the Company in 2001 from Cityspree Inc., where he
served as lead software architect from 2000 to 2001.
From 1999 to 2000, he was a Vice President at
Deutsche Bank and Nomura Securities. From 1996 to
1999, he was a technical officer at UBS Securities.

Ron A. Dunsky Mr. Dunsky was named Vice President of Marketing
on May 21, 2003. Mr. Dunsky joined the Company in
2001, and initially served as Director of Marketing
and New Product Development. Prior to joining the
Company, Mr. Dunsky was a senior aviation producer
with the New York bureau of ABCNews.com from 2000 to
2001. Prior to ABCNews.com, he was a senior aviation
producer with the New York bureau of CNN from 1995
to 2000.

(F) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS

The Company knows of no event which occurred during the past five years and
which is described in Item 401(f) of Regulation S-K relating to any director or
executive officer of the Company.

(G) IDENTIFICATION OF AUDIT COMMITTEE

Our Board of Directors has appointed an Audit Committee, consisting of three
directors. All of the members of the Audit Committee are independent of our
Company and management, as independence is defined under applicable National
Association of Securities Dealers ("NASD") rules. The Audit Committee consists
of Mr. Graziani, Mr. Schilling and Mr. Whitman.

(H) AUDIT COMMITTEE FINANCIAL EXPERT

Our Board of Directors has determined that Paul L. Graziani, Chairman of the
Company's Audit Committee, meets the Securities and Exchange Commission's
criteria of an "audit committee financial expert" as set forth in item
407(d)(5)(ii) of Regulation S-K. Mr. Graziani acquired the attributes necessary
to meet such criteria by holding positions that provided relevant experience.
Mr. Graziani is independent, as defined under applicable NASD rules.

-28-

(I) SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires the Company's directors, executive
officers, and 10% stockholders to file reports of ownership and reports of
change in ownership of the Company's Common Stock and other equity securities
with the Securities and Exchange Commission. Directors, executive officers, and
10% stockholders are required to furnish the Company with copies of all Section
16(a) forms they file. As previously reported in March 2009, it came to the
Company's attention that a number of reports required by Section 16(a) of the
Exchange Act had inadvertently not been filed with the SEC - specifically Forms
3 (Initial Statement of Beneficial Ownership of Securities) and Forms 4
(Statement of Changes in Beneficial Ownership). In addition, the failure to file
these reports was not properly documented in several of the Company's Annual
Reports on Forms 10-K and Definitive Proxy Statements, as filed with the SEC. As
a result of this error, the Company implemented a new procedure to track such
filings and the Company has notified the delinquent filers and all of the
required filings have been made. In March 2009, the Company implemented a
procedure whereby Section 16 filings are tracked under the supervision of the
Company's Chief Financial Officer, who is also charged with reviewing the
disclosures required by Item 405 of Regulation S-K in the Company's Annual
Reports on Form 10-K and Definitive Proxy Statements.

The following table sets forth the total number of late Section 16(a) reports,
the number of transactions that were not reported on a timely basis, and any
known failure to file a required Form for each person who was a director or
officer required to file reports under Section 16(a) or beneficial owner of more
than 10% of the Company's common stock during the past fiscal year:

NUMBER OF FORMS FILED LATE:
---------------------------
---------------------------------------------------------------------------------------------------------------------
NUMBER OF
TRANSACTIONS
REPORTED NUMBER OF FORMS
FORM 3 FORM 4 UNTIMELY NOT FILED (1)
------------------------------- -------------------- -------------------- ------------------- -----------------------

Richard R. Schilling, Jr. 0 1 1 1
------------------------------- -------------------- -------------------- ------------------- -----------------------
Bruce N. Whitman 0 5 5 4
------------------------------- -------------------- -------------------- ------------------- -----------------------
Paul L. Graziani 0 4 4 3
------------------------------- -------------------- -------------------- ------------------- -----------------------
James J. Morgan 1 2 2 2
------------------------------- -------------------- -------------------- ------------------- -----------------------
Kurt J. Ekert 0 1 1 0
------------------------------- -------------------- -------------------- ------------------- -----------------------
Dr. James A. Cole 0 6 7 5
------------------------------- -------------------- -------------------- ------------------- -----------------------
John R. Keller 0 4 5 3
------------------------------- -------------------- -------------------- ------------------- -----------------------
James T. Barry 0 5 5 3
------------------------------- -------------------- -------------------- ------------------- -----------------------
Jeffrey P. Devaney 1 1 1 1
------------------------------- -------------------- -------------------- ------------------- -----------------------
Matthew H. Marcella 1 7 8 5
------------------------------- -------------------- -------------------- ------------------- -----------------------
Richard C. Scott 1 1 1 1
------------------------------- -------------------- -------------------- ------------------- -----------------------
Ron A. Dunsky 1 7 7 4
------------------------------- -------------------- -------------------- ------------------- -----------------------

1) In each case, the Form involved was a Form 5 - Annual Statement of Beneficial
Ownership of Securities. The information required to be included on the Forms 5
was included on the late Forms 4 for each of the above individuals.

(J) BOARD NOMINATIONS BY SHAREHOLDERS

There have not been any material changes to the procedures by which the
Company's shareholders may recommend nominees to the Company's board of
directors as disclosed in the definitive proxy statement on Schedule 14A filed
on February 28, 2009 by the Company with the Securities and Exchange Commission
in connection with the Company's 2009 annual shareholder meeting.

(K) CODE OF ETHICS

The Company hereby incorporates by reference into this Item the information
contained under the heading "Code of Ethics" in the Company's definitive proxy
statement that will be filed with the Securities and Exchange Commission within
120 days of October 31, 2009 (the "2010 Proxy Statement").

-29-

ITEM 11. EXECUTIVE COMPENSATION

The Company hereby incorporates by reference into this Item the information
contained under the heading "Executive Compensation" in the 2010 Proxy
Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

The Company hereby incorporates by reference into this Item the information
contained under the heading "Security Ownership of Certain Beneficial Owners and
Management" in the 2010 Proxy Statement.

For information regarding securities authorized for issuance under the Company's
equity compensation plans, see Item 5(d) above.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

(A) TRANSACTIONS WITH RELATED PERSONS

(B) DIRECTOR INDEPENDENCE

The Board of Directors had determined, after considering all the relevant facts
and circumstances, that all named directors, except for Mr. Gilbert, Mr. Barry,
and Mr. Keller, are independent directors, as "independence" is defined in
accordance with the NASD standards.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The Company hereby incorporates by reference into this Item the information
contained under the heading "Principal Accounting Fees and Services" in the 2010
Proxy Statement.

-30-

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(A) LIST OF DOCUMENTS FILED AS A PART OF THIS PAGE
ANNUAL REPORT ON FORM 10-K:

(1) Index to Consolidated Financial Statements Included
in Part II of this Report:

Report of Independent Registered Public F-1
Accounting Firm - BDO Seidman, LLP

Consolidated Balance Sheets as of F-2
October 31, 2009 and 2008

Consolidated Statements of F-3
Income for the years ended
October 31, 2009 and 2008

Consolidated Statements of F-4
Stockholders' Deficit for the years ended
October 31, 2009 and 2008

Consolidated Statements of F-5
Cash Flows for the years ended
October 31, 2009 and 2008

Notes to Consolidated Financial F-6
Statements

(2) Index to Financial Statement Schedule: N/A

Schedules for which provision is made in the applicable accounting regulation of
the Securities and Exchange Commission are not required under the related
instructions or are inapplicable, and therefore have been omitted.

The following exhibits are required to be filed with this Annual Report
on Form 10-K by Item 15(a) (3).

EXHIBITS

3.1 The Company's composite Certificate of Incorporation, dated as of
January 24, 1990, is incorporated by reference from our Annual Report on
Form 10-K for the fiscal year ended October 31, 1989.

3.2 The Company's By-laws, dated as of May 16, 1988, are incorporated by
reference to Exhibit 3-14 to our Annual Report on Form 10-K for the
fiscal year ended October 31, 1998.

10.1 The Company's 1988 Bonus Pool Plan is incorporated by reference to
Exhibit 10-1 to our Annual Report on Form 10-K for the fiscal year ended
October 31, 1998.

10.2 The Company's 1988 Stock Option Plan is incorporated by reference to
Exhibit 10-3 to our Annual Report on Form 10-K for the fiscal year ended
October 31, 1998.

10.3 The Company's Amended 1999 Stock Incentive Plan is incorporated by
reference to Exhibit 10.3 of our Report on Form 8-K filed on April 17,
2006.

10.4 Severance Agreement with Yitzhak N. Bachana effective October 2, 1998 is
incorporated by reference from our Form 8-K, dated October 13, 1998.

10.5 Letter of Agreement for employment services, dated December 28, 1999,
between the Company and Ken J. McNamara is incorporated by reference to
Exhibit 10.5 to our Annual Report on Form 10-K for the fiscal year ended
October 31, 1999.

10.6 Letter of Agreement for employment services, dated September 5, 2002,
between the Company and Delon Dotson is incorporated by reference to
Exhibit 99.1 to our Form 8-K, dated September 12, 2002.

10.7 Debt Agreement, dated November 1, 2003, between the Company and G.S.
Beckwith Gilbert is incorporated by reference to Exhibit 10-1 to our
Form 8-K, dated January 23, 2004.

10.8 Debt Extension Agreement, dated as of November 1, 2004, between the
Company and G.S. Beckwith Gilbert is incorporated by reference to
Exhibit 10.1 to our Current Report on Form 8-K on February 1, 2005.

10.9 Debt Extension Agreement, made as of November 1, 2005, between the
Company and G.S. Beckwith Gilbert, is incorporated by reference to
Exhibit 10.2 to our Current Report on Form 8-K filed on February 6,
2006.

-31-

10.10 Debt Extension Agreement, made as of November 1, 2006, between the
Company and G.S. Beckwith Gilbert, is incorporated by reference to
Exhibit 10.2 to our Current Report on Form 8-K filed on January 5, 2007.

10.11 Debt Extension Agreement, made as of November 1, 2007, between the
Company and G.S. Beckwith Gilbert is incorporated by reference to
Exhibit 10.3 to our Current Report on Form 8-K filed on January 17,
2008.

10.12 Debt Extension Agreement, made as of November 1, 2008, between the
Company and G.S. Beckwith Gilbert is incorporated by reference to
Exhibit 10.2 to our Current Report on Form 8-K filed on January 28,
2009.

16 Change in Certifying Accountant is incorporated by reference to
our Form 8-K/A, dated October 28, 1998.

21 List of Subsidiaries is incorporated by reference to our Annual Report
on Form 10-K report for the fiscal year ended October 31, 1981.

23.1 Consent of Independent Registered Public Accounting Firm.

31.1 Certification of Chief Executive Officer 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.

31.2 Certification of Chief Financial Officer 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.

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.

-32-

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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: JANUARY 29, 2010 By: /s/ James T. Barry
--------------------------------------
James T. Barry
President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated:

DATED: JANUARY 29, 2010 /s/ James T. Barry
--------------------------------------
James T. Barry
President, Chief Executive Officer
and Director
(Principal Executive Officer)

DATED: JANUARY 29, 2010 /s/ Jeffrey P. Devaney
--------------------------------------
Jeffrey P. Devaney
Chief Financial Officer, Treasurer
and Secretary
(Principal Financial and Accounting
Officer)

-33-

SIGNATURES (CONTINUED)

DATED: JANUARY 29, 2010 /s/ G.S. Beckwith Gilbert
--------------------------------------
G.S. Beckwith Gilbert
Chairman and Director

DATED: JANUARY 29, 2010 /s/ John R. Keller
--------------------------------------
John R. Keller
Executive Vice President and Director

DATED: JANUARY 29, 2010 /s/ Richard R. Schilling, Jr.
--------------------------------------
Richard R. Schilling, Jr.
Director

DATED: JANUARY 29, 2010 /s/ Bruce N. Whitman
--------------------------------------
Bruce N. Whitman
Chairman of the Executive Committee
and Director

DATED: JANUARY 29, 2010 /s/ Paul L. Graziani
--------------------------------------
Paul L. Graziani
Director

DATED: JANUARY 29, 2010 /s/ James J. Morgan
--------------------------------------
James J. Morgan
Director

DATED: JANUARY 29, 2010 /s/ Kurt J. Ekert
--------------------------------------
Kurt J. Ekert
Director

DATED: JANUARY 29, 2010 /s/ Peter L. Bloom
--------------------------------------
Peter L. Bloom
Director

-34-

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders
PASSUR Aerospace, Inc. and Subsidiary

We have audited the accompanying consolidated balance sheets of PASSUR
Aerospace, Inc. and Subsidiary as of October 31, 2009 and 2008 and the related
consolidated statements of income, stockholders' deficit, and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of PASSUR Aerospace,
Inc. and Subsidiary at October 31, 2009 and 2008, and the results of their
operations and their cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States of America.

/s/ BDO Seidman, LLP
--------------------

Melville, New York
January 29, 2010

F-1

PASSUR Aerospace, Inc. and Subsidiary

Consolidated Balance Sheets

OCTOBER 31,
2009 2008
------------ ------------
ASSETS
Current assets:

Cash $ 250,626 $ 217,316
Accounts receivable, net 867,043 629,888
Prepaid expenses and other current assets 243,918 146,473
------------ ------------
Total current assets 1,361,587 993,677

Property, plant and equipment, net 259,231 380,181
PASSUR(R) Network, net 7,291,429 6,904,158
Software development costs, net 2,516,278 1,990,547
Other assets 282,569 101,183
------------ ------------
TOTAL ASSETS $ 11,711,094 $ 10,369,746
============ ============

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 407,647 $ 615,639
Accrued expenses and other current liabilities 540,793 834,132
Deferred income, current portion 1,377,106 1,070,693
Accrued interest - related party 1,108,112 --
------------ ------------
Total current liabilities 3,433,658 2,520,464

Deferred income, less current portion 305,193 187,970
Notes payable - related party 13,914,880 13,814,880
------------ ------------
17,653,731 16,523,314
Commitment and contingencies

Stockholders' deficit:
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
4,990,448 in 2009 and 4,842,948 in 2008 49,904 48,429
Additional paid-in capital 4,436,770 4,381,528
Accumulated deficit (8,805,836) (8,960,050)
------------ ------------
(4,319,162) (4,530,093)
Treasury stock, at cost, 696,500 shares in 2009 and 2008 (1,623,475) (1,623,475)
------------ ------------
Total stockholders' deficit (5,942,637) (6,153,568)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 11,711,094 $ 10,369,746
============ ============

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-2

PASSUR Aerospace, Inc. and Subsidiary

Consolidated Statements of Income

YEARS ENDED OCTOBER 31,
2009 2008
---------------- ----------------
REVENUES:

Subscriptions $ 8,371,085 $ 7,078,042
Maintenance 372,585 395,438
Other 216,640 98,901
---------------- ----------------
Total revenues 8,960,310 7,572,381
---------------- ----------------

COST AND EXPENSES:
Cost of revenues 3,373,842 2,390,200
Research and development 278,058 289,609
Selling, general, and administrative expenses 4,037,381 3,798,806
---------------- ----------------
7,689,281 6,478,615
---------------- ----------------

INCOME FROM OPERATIONS 1,271,029 1,093,766

Other income (expense):
Interest income 109 4,970
Interest expense - related party (1,108,112) (595,068)
---------------- ----------------
Income before income taxes 163,026 503,668
Provision for income taxes 8,812 8,846
---------------- ----------------
NET INCOME $ 154,214 $ 494,822
================ ================

Net income per common share - basic $ .04 $ .12
================ ================

Net income per common share - diluted $ .03 $ .09
================ ================

Weighted-average number of common shares
outstanding - basic 4,190,900 4,130,259
================ ================
Weighted-average number of common shares
outstanding - diluted 5,265,889 5,425,687
================ ================

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-3

PASSUR Aerospace, Inc. and Subsidiary

Consolidated Statements of Stockholders' Deficit

Years Ended October 31, 2009 and 2008

COMMON
SHARES AFTER
DEDUCTING COMMON ADDITIONAL TOTAL
TREASURY SHARES PAID-IN ACCUMULATED TREASURY STOCKHOLDERS'
STOCK AMOUNT CAPITAL DEFICIT STOCK DEFICIT
----------- ----------- ----------- ----------- ----------- -----------

Balance at October 31, 2007 4,091,448 $ 47,879 $ 4,263,212 $(9,454,872) $(1,623,475) $(6,767,256)
Exercise of common
stock options 55,000 550 18,400 18,950
Stock-based compensation 99,916 99,916
Net income 494,822 494,822
----------- ----------- ----------- ----------- ----------- -----------
Balance at October 31, 2008 4,146,448 48,429 4,381,528 (8,960,050) (1,623,475) (6,153,568)
Exercise of common
stock options 147,500 1,475 20,650 22,125
Stock-based compensation 34,592 34,592
Net income 154,214 154,214
----------- ----------- ----------- ----------- ----------- -----------
Balance at October 31, 2009 4,293,948 $ 49,904 $ 4,436,770 $(8,805,836) $(1,623,475) $(5,942,637)
=========== =========== =========== =========== =========== ===========

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-4

PASSUR Aerospace, Inc. and Subsidiary

Consolidated Statements of Cash Flows

YEARS ENDED OCTOBER 31,
2009 2008
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES

Net income $ 154,214 $ 494,822
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,676,606 1,381,744
(Recovery of) provision for doubtful accounts receivable (10,350) 47,056
Stock compensation expense 34,592 99,916
Changes in operating assets and liabilities:
Accounts receivable (226,805) 117,543
Prepaid expenses and other current assets (97,445) (59,350)
Other assets (181,386) (52,572)
Accounts payable (207,992) 234,377
Deferred income 423,636 218,740
Accrued expenses and other current liabilities (293,339) 173,637
Accrued interest - related party 1,108,112 --
----------- -----------
Total adjustments 2,225,629 2,161,091
----------- -----------
Net cash provided by operating activities 2,379,843 2,655,913
----------- -----------

CASH FLOWS FROM INVESTING ACTIVITIES
PASSUR(R) Network (1,466,421) (2,874,687)
Software development costs (896,545) (831,039)
Capital expenditures (105,692) (238,813)
----------- -----------
Net cash used in investing activities (2,468,658) (3,944,539)
----------- -----------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable - related party 100,000 1,200,000
Proceeds from exercise of stock options 22,125 18,950
----------- -----------
Net cash provided by financing activities 122,125 1,218,950
----------- -----------

Increase (decrease) in cash 33,310 (69,676)
Cash - beginning of year 217,316 286,992
----------- -----------
Cash - end of year $ 250,626 $ 217,316
=========== ===========

SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the year for:
Interest - related party $ -- $ 595,081
Income taxes $ 8,812 $ 8,847

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-5

PASSUR Aerospace, Inc. and Subsidiary

Notes to Consolidated Financial Statements

October 31, 2009

1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS

The Company is a business intelligence company which simultaneously integrates
data from its private radar network with data from multiple databases and uses
proprietary predictive analytics to generate collaborative solutions.

BASIS OF PRESENTATION

At October 31, 2009, the Company's current liabilities exceeded current assets
by approximately $2,072,000 and had a stockholder's deficit of approximately
$5,943,000. For fiscal 2009, the Company had net income of approximately
$154,000.

Management is addressing the Company's working capital and stockholders'
deficiency by aggressively marketing the Company's PASSUR(R) information
capabilities in its existing product lines, as well as in new products, which
are continually being developed and deployed. The Company intends to increase
the size and related airspace coverage of its owned "PASSUR(R) Network," by
continuing to install PASSUR(R) Systems throughout the United States and certain
foreign countries. In addition, management believes that expanding its existing
software suite of products, which address the wide array of needs of the
aviation industry, through the continued development of new product 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 consummated, the Company has a
commitment to receive additional financial support from its significant
shareholder and Chairman through January 22, 2011. 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 interest payments due on the existing
loans, if deemed necessary.

Certain financial information in the footnotes have 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.

F-6

PASSUR Aerospace, Inc. and Subsidiary

Notes to Consolidated Financial Statements (continued)

1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

REVENUE RECOGNITION POLICY

The Company follows the provisions of FASB ASC 985-605 (SOP 97-2, "SOFTWARE
REVENUE RECOGNITION"), as amended. ASC 985-605 delineates the accounting
practices for software products, maintenance, and support services and
consulting 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. For
arrangements involving multiple elements (e.g. maintenance, support, and other
services), the Company allocates revenue to each element of the arrangement
based on vendor-specific objective evidence of its fair value, or for products
not being sold separately, the objective and verifiable fair value established
by management.

The Company recognizes services 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 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.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those estimates.

SUBSEQUENT EVENTS

Management has evaluated subsequent events after the balance sheet date, through
the issuance of the financial statements, for appropriate accounting and
disclosure through January 29, 2010.

F-7

PASSUR Aerospace, Inc. and Subsidiary

Notes to Consolidated Financial Statements (continued)

1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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 on payments, software products, maintenance, or other services. Net
accounts receivable are composed of either 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. Deferred revenue amounts represent fees
billed prior to actual performance of services, which will be recognized as
revenue over the respective license agreement term, which typically does not
exceed five years.

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

For the fiscal year ended October 31, 2009, the provision for doubtful accounts
was approximately $43,000 compared to approximately $54,000, recorded as of the
fiscal year ended October 31, 2008. The Company monitors its outstanding
accounts receivable balances and believes the $43,000 provision is reasonable.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are recorded at cost and are depreciated on a
straight-line basis over the estimated useful lives of the related assets.
Amortization of leasehold improvements is calculated on a straight-line basis
over the estimated useful life of the improvements or the term of the lease,
including renewal options expected to be exercised, whichever is shorter.
Routine repairs and maintenance are expensed when incurred.

PASSUR(R) NETWORK

CAPITALIZED SOFTWARE 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.") Costs
incurred to develop computer software products as well as significant
enhancements to software features of the existing products to be sold or
otherwise marketed, are capitalized, after technological feasibility is
established and ending when the product is available for release to customers.
Once the software products become available for general release to the public,
the Company begins to amortize such costs to cost of revenues.

F-8

PASSUR Aerospace, Inc. and Subsidiary

Notes to Consolidated Financial Statements (continued)

1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

CAPITALIZED SOFTWARE COSTS (CONTINUED)

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. Costs incurred to enhance products
are capitalized. 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 October 31, 2009 are
recoverable through anticipated future sales of such applicable products. During
fiscal years 2009 and 2008, the Company capitalized approximately $897,000 and
$831,000 of such costs, respectively. During fiscal years 2009 and 2008, the
Company recorded approximately $371,000 and $340,000 of amortization related to
software development projects, respectively. The Company had certain projects
completed, and which were released for sale, and certain projects were still in
development as of each fiscal year end.

In fiscal 2009 and 2008 the Company did not write off any capitalized software
projects.

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.

COST OF REVENUES

The Company has not segregated its cost of revenues between cost of system
revenues and cost of subscription and maintenance revenues, as it is not
practicable to segregate such costs. Costs associated with system revenues
consist primarily of purchased materials, direct labor, and overhead costs.
Costs associated with subscription and maintenance revenues consist primarily of
direct labor, depreciation of PASSUR(R) Network assets, amortization of software
development costs, communication costs, data feeds, and allocated overhead
costs. Also included in costs of revenues are costs associated with the upgrades
of PASSUR(R) Systems necessary to make such systems compatible with new software
applications, as well as the ordinary repair and maintenance of existing
PASSUR(R) Network Systems. Additionally, cost of revenues in each reporting
period is impacted by: (1) the number of PASSUR(R) Network units added, which
include the production, shipment, and installation of these assets, which are
capitalized to the PASSUR(R) Network; and (2) capitalized costs associated with
software development programs which are expensed in cost of revenues.

F-9

PASSUR Aerospace, Inc. and Subsidiary

Notes to Consolidated Financial Statements (continued)

1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INCOME TAXES

The Company follows the liability method of accounting for income taxes.
Deferred income taxes are recorded to reflect the temporary differences in the
tax bases of the assets or liabilities and their reported amounts in the
financial statements. The Company recognizes deferred tax assets and liabilities
for the expected future tax consequences of events that have been included in
the Company's financial statements or tax returns. Under this method, deferred
tax assets and liabilities are determined based on the difference between the
financial statement and tax basis of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to reverse.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount currently estimated to be realized. The Company adopted ASC
740-10 (Financial Accounting Standards Board ("FASB") Interpretation No. 48),
"Accounting for Uncertainty in Income Taxes - An Interpretation of FASB
Statement No. 109" ("FIN 48") effective November 1, 2007. Under ASC 740-10 (FIN
48), tax benefits are recognized only for tax positions that are more likely
than not to be sustained upon examination by tax authorities. The amount
recognized is measured as the largest amount of benefit that is greater than 50%
likely to be realized upon ultimate settlement. Unrecognized tax benefits are
tax benefits claimed in tax returns that do not meet these recognition and
measurement standards. At October 31, 2009, the Company did not have any
uncertain tax positions, and the Company does not expect ASC 740-10 (FIN 48) to
have a significant impact on its results of operations or financial position
during the next 12 months. As permitted by ASC-740-10 (FIN 48), the Company also
adopted an accounting policy to prospectively classify accrued interest and
penalties related to any unrecognized tax benefits in its income tax provision.
Previously, the Company's policy was to classify interest and penalties as an
interest expense in arriving at pre-tax income.

RESEARCH AND DEVELOPMENT COSTS

Research and development costs are expensed as incurred.

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:

2009 2008
--------- ---------

Basic weighted-average shares outstanding 4,190,900 4,130,259
Effect of dilutive stock options 1,074,989 1,295,428
--------- ---------
Diluted weighted-average shares outstanding 5,265,889 5,425,687
========= =========

Weighted-average shares which are not
included in the calculation of diluted
net income per share because their
impact is anti-dilutive

Stock options 552,011 490,073
========= =========

F-10

PASSUR Aerospace, Inc. and Subsidiary

Notes to Consolidated Financial Statements (continued)

1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

DEFERRED INCOME

Deferred income includes advances received on subscription services and/or
maintenance agreements, which are derived from the Company's PASSUR(R) 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 fees 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 cash, receivables, accounts payable, and
accrued liabilities 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 (see footnote 6) is held by its Chairman and significant shareholder,
and the Company does not have any third party debt with which to compare.

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 compensation over the service period
for awards expected to vest. The fair value of stock options was determined
using the Black-Scholes valuation model, which is consistent with our valuation
techniques previously utilized for stock options in footnote disclosures
required under SFAS No. 123. Such fair value is recognized as expense over the
service period, net of estimated forfeitures. For the fiscal years ended October
31, 2009 and 2008, stock compensation expense of $35,000 and $100,000,
respectively, was primarily charged to selling, general, and administrative
expenses. For the year ended October 31, 2009, stock compensation expense was
reduced by approximately by $31,000 due to reversals of prior fiscal years costs
for the forfeiture of options with a service condition, previously issued to
employees terminated in the current fiscal year.

The weighted-average fair value of options outstanding during the year ended
October 31, 2009 was $.70. These options vest over a period of three and five
years. The fair value for these options was estimated at the date of grant using
a Black-Scholes option pricing model with the following weighted-average
assumptions for the fiscal years ended October 31, 2009 and 2008; risk-free
interest rate of 4.47%, volatility factor of the expected market price of the
Company's common stock of 128%, no dividend yield, and a weighted-average
expected life of the option of 6.5 years.

COMPREHENSIVE INCOME

For the fiscal years ended October 31, 2009 and 2008, the Company's
comprehensive income is equivalent to that of the Company's total net income.

F-11

PASSUR Aerospace, Inc. and Subsidiary

Notes to Consolidated Financial Statements (continued)

1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

RECENT ACCOUNTING PRONOUNCEMENTS

In December 2007, the FASB issued ASC 805 (SFAS No. 141 and SFAS 141R, "Business
Combinations") that will significantly change the accounting for business
combinations in a number of areas including the treatment of contingent
consideration, contingencies, acquisition costs, IPR&D, and restructuring costs.
The changes in deferred tax asset valuation allowances and acquired income tax
uncertainties in a business combination after the measurement period will impact
income tax expense. This guidance is effective for fiscal years beginning after
December 15, 2008. This pronouncement will affect future acquisitions, if any.

In December 2007, the FASB issued ASC 810 (SFAS No. 160 "Noncontrolling
Statements"). This will change the accounting and reporting for minority
interests, which will be recharacterized as noncontrolling interests (NCI) and
classified as a component of equity. This new consolidation method will
significantly change the accounting for transactions with minority interest
holders. This pronouncement will affect the accounting for future acquisitions,
if any. The Company wholly owns its subsidiary and thus does not expect this
pronouncement to impact the Company.

2. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

ESTIMATED
USEFUL OCTOBER 31,
LIVES 2009 2008
------------------------------------------

Leasehold improvements 3-5 years $ 155,000 $ 155,000
Equipment 5-10 years 2,982,000 2,928,000
Furniture and fixtures 5-10 years 482,000 430,000
---------- ----------
3,619,000 3,513,000
Less accumulated depreciation
and amortization 3,360,000 3,133,000
---------- ----------
Total $ 259,000 $ 380,000
========== ==========

The Company recorded depreciation and amortization expense on the assets
included in property, plant and equipment of $227,000 and $187,000 for the years
ended October 31, 2009 and 2008, respectively.

F-12

PASSUR Aerospace, Inc. and Subsidiary

Notes to Consolidated Financial Statements (continued)

3. PASSUR(R) NETWORK

The PASSUR(R) Network includes PASSUR(R) Systems and the related software
workstations used for the data derived from the PASSUR(R) Systems, as well as
costs pertaining to raw material, work-in-process, and finished goods
components. PASSUR(R) Network installations, which include the direct and
indirect production and installation costs incurred for each of the
Company-owned PASSUR(R) Systems (the "PASSUR(R) Network"), are recorded at cost,
net of accumulated depreciation of approximately $5,090,000 and $4,011,000 as of
October 31, 2009 and 2008, 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 years. Units that are not
placed into service are not depreciated until they are placed in service. At
October 31, 2009 these costs approximated $1,256,000. During fiscal 2009 and
2008, the Company capitalized approximately $1,466,000 and $2,875,000 of costs
related to additions to the PASSUR(R) Network, respectively. Included in the
PASSUR(R) Network are approximately $478,000 and $901,000 of costs pertaining to
raw material, work-in-process, and finished goods components at the end of
fiscal 2009 and 2008, respectively. The Company incurred depreciation expense
related to PASSUR(R) Network installations during fiscal 2009 and 2008 of
approximately $1,079,000 and $855,000, respectively. In fiscal 2009 and 2008 the
Company did not dispose of any PASSUR(R) Network assets.

4. SOFTWARE DEVELOPMENT COSTS

Software development costs are comprised of costs incurred to develop computer
software products as well as enhancements to software features of the existing
products to be sold or otherwise marketed, after technological feasibility is
established and which end when the product is available for release to
customers. As of October 31, 2009 and 2008, the Company had approximately
$4,144,000, and $3,248,000 of such costs capitalized, and $1,628,000 and
$1,257,000 of accumulated amortization, respectively. The average amortization
period of the Company's software development costs as of October 31, 2009 is
approximately 3.1 years. Amortization expense on these assets for the fiscal
years ended October 31, 2009 and 2008 was approximately $371,000 and $340,000,
respectively. Future amortization expense for software development costs
capitalized where amortization has commenced, as of October 31, 2009 for the
years ended October 31, 2010, 2011, 2012, 2013, and 2014 is estimated to
approximate $373,000, $354,000, $269,000, $189,000, and $39,000, respectively.
As of October 31, 2009, the Company had approximately $1,265,000 of capitalized
software development costs relating to projects that were not ready to be
released.

5. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following:

OCTOBER 31,
2009 2008
-------- --------

Payroll, payroll taxes, and benefits $255,000 $267,000
Professional fees 121,000 164,000
License fees 50,000 220,000
Travel expenses 25,000 22,000
Commissions 16,000 72,000
Other liabilities 74,000 89,000
-------- --------
Total $541,000 $834,000
======== ========

F-13

PASSUR Aerospace, Inc. and Subsidiary

Notes to Consolidated Financial Statements (continued)

6. NOTES PAYABLE - RELATED PARTY

7. LEASES

The Company's research and manufacturing facility is located in Bohemia, New
York, and is subject to a lease that was extended for an additional three years
commencing November 1, 2009 through October 31, 2012. Minimum rent under this
agreement for the period ended October 31, 2009 approximated $101,000. The
Company's headquarters, located in Stamford, Connecticut, are rented for the
five year period ending January 21, 2015, at an initial annual base rental rate
of approximately $149,000. Both of these leases provide for additional payments
of real estate taxes and other operating expenses over the minimum rental
amount. All other operating leases are under a month-to-month arrangement.

CONTRACTUAL OBLIGATIONS
Fiscal Year Ended October 31: UNDER OPERATING LEASES
-----------------------

2010 $ 231,000
2011 261,000
2012 269,000
2013 160,000
2014 163,000
2015 37,000
----------
Total minimum contractual obligations $1,121,000
==========

F-14

PASSUR Aerospace, Inc. and Subsidiary

Notes to Consolidated Financial Statements (continued)

8. INCOME TAXES

The Company's provision for income taxes in each year consists of current state
and local minimum taxes.

At October 31, 2009, the Company has available a federal net operating loss
carry-forward of approximately $11,455,000 for income tax purposes which will
expire in various tax years from 2010 through 2028. The Company has provided a
full valuation allowance on the net deferred tax asset of approximately
$4,497,000 which primarily consists of the net operating loss carry-forwards
which are considered more likely than not to be realizable. The most significant
reconciling item between the tax expense per the income statement and the
expected tax using a statutory rate of 34% is the change in the valuation
allowance.

9. STOCK OPTIONS

In fiscal 2009, the Company's Board of Directors approved the Company's 2009
stock option plan, which provides for the granting of stock options for up to
500,000 shares of the Company's common stock. The Company's prior stock option
plan, which provided for the granting of stock options for up to 2,200,000
shares of the Company's common stock, expired during the fiscal year ended 2009.
The option price per share is the fair market value at date of grant. Options
granted may be exercised up to a maximum of ten years from the date of grant;
however, individuals who own more than 10% of the Company's common stock must
exercise their options within five years of the date of the grant and these
options are exercisable at 110% of the fair market value of the common stock at
the date of grant.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options, which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including expected stock price volatility.

The existing models do not necessarily provide a reliable single measure of the
fair value of its employee stock options due to changes in subjective input
assumptions which may materially affect the fair value estimate and because the
Company's employee stock options have characteristics significantly different
from those of traded options.

As of October 31, 2009 there were 2,057,000 shares of common stock reserved for
future issuance under the Company's stock option plans. For the year ended
October 31, 2009 stock compensation expense of approximately $35,000 was
primarily charged to selling, general, and administrative expense, consisting of
$4,000 for options granted during fiscal year 2009, $62,000 for non vested
options granted prior to October 31, 2008, offset by a reduction of $31,000 due
to reversals of prior fiscal year's costs for the forfeiture of options with a
service condition, previously issued to employees terminated in the current
fiscal year. As of October 31, 2009 there was approximately $280,000 of total
unrecognized compensation cost, net of estimated forfeitures, related to
nonvested share-based compensation arrangements, which is expected to be
recognized over a weighted-average period of 4.1 years.

F-15

PASSUR Aerospace, Inc. and Subsidiary

Notes to Consolidated Financial Statements (continued)

9. STOCK OPTIONS (CONTINUED)

Information with respect to stock options during the years ended October 31,
2009 and 2008 is as follows:

----------------------------------------- --------------- -------------- ------------------- ---------------
WEIGHTED-
WEIGHTED- AVERAGE
AVERAGE REMAINING AGGREGATE
NUMBER OF EXERCISE CONTRACTUAL TERM INTRINSIC
OPTIONS PRICE (IN YEARS) VALUE
----------------------------------------- --------------- -------------- ------------------- ---------------

----------------------------------------- --------------- -------------- ------------------- ---------------
Outstanding at November 1, 2007 1,715,500 $ .51
----------------------------------------- --------------- -------------- ------------------- ---------------
Options granted 145,000 3.88
----------------------------------------- --------------- -------------- ------------------- ---------------
Options exercised (55,000) .34
----------------------------------------- --------------- -------------- ------------------- ---------------
Options forfeited and expired (20,000) 3.75
---------- -----
----------------------------------------- --------------- -------------- ------------------- ---------------
Outstanding at October 31, 2008 1,785,500 .75
----------------------------------------- --------------- -------------- ------------------- ---------------
Options granted 70,000 2.05
----------------------------------------- --------------- -------------- ------------------- ---------------
Options exercised (147,500) .15
----------------------------------------- --------------- -------------- ------------------- ---------------
Options forfeited (81,000) 3.95
----------------------------------------- --------------- -------------- ------------------- ---------------
Options outstanding at October 31, 2009 1,627,000 $ .70 4.3 $1,143,000
========= ======
----------------------------------------- --------------- -------------- ------------------- ---------------
Options exercisable at October 31, 2009 1,496,800 $ .53 3.9 $ 799,000
========= ======
----------------------------------------- --------------- -------------- ------------------- ---------------

The weighted-average grant date fair value of options granted during the years
ended October 31, 2009 and 2008 were $1.86 and $3.54, respectively. The total
intrinsic value of options exercised during the years ended October 31, 2009 and
2008 was approximately $22,000 and $19,000, respectively.

10. MAJOR CUSTOMERS

The Company is a supplier of information and decision support software serving
the needs of the aviation industry, primarily airlines, airports, and other
aviation related companies. The Company performs ongoing credit evaluations of
its customers and generally does not require collateral. Credit losses
historically have been immaterial.

The Company had foreign sales of approximately $157,000 and $238,000 in fiscal
2009 and 2008, respectively. All sales, including foreign sales, are denominated
in U.S. dollars.

F-16

PASSUR Aerospace, Inc. and Subsidiary

Notes to Consolidated Financial Statements (continued)

11. ROYALTY AGREEMENT

The Company is a party to a license agreement, as amended in fiscal 2001,
whereby the Company is granted the exclusive right and license worldwide to
manufacture and sell PASSUR(R) Systems for use with airline dispatch systems and
in other aircraft flight tracking systems. The Company is also granted an
exclusive worldwide license to sell PASSUR(R) Systems and/or data subscriptions
for noise applications, dispatch activities, and new applications based on
modifications to existing designs. Under the terms of agreement, the Company
paid a royalty based on the number of PASSUR(R) Systems sold and/or installed
and generating subscription revenues subject to a minimum annual royalty of
$75,000. During fiscal 2009, the Company amended the agreement to a fixed fee
royalty of $50,000 per year. As of October 31, 2009 and 2008, the Company had
$50,000 and $220,000 accrued, respectively, as a component of accrued expenses
and other accrued liabilities. This license agreement is in effect until the
date of expiration of the last licensed patent to expire, which occurs in 2013.

F-17