What changed in this filing

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Item 9A. Controls and Procedures

2022-10-28 compared with 2021-10-27 · 640 added, 1161 removed, 391 unchanged (82% of the section changed)

CONTROLS AND PROCEDURES

ITEM 9A – CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and our Chief Financial

Officer, after evaluating our “disclosure controls and procedures” (as defined in Securities Exchange Act of 1934 (the “Exchange

Act”) Rules 13a-15(e) and 15d-15(e) as of the end of the period covered by this Annual Report on Form 10-K (the “Evaluation

Date”), have concluded that as of the Evaluation Date, our disclosure controls and procedures are effective to ensure that information

we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported

within the time periods specified in Securities and Exchange Commission rules and forms, and to ensure that information required to be

disclosed by us in such reports is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial

Officer, where appropriate, to allow timely decisions regarding required disclosure.

Management Report on Internal Control over

Financial Reporting

Our management is responsible for establishing

and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)

to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of consolidated financial statements

for external purposes in accordance with U.S.

Management assessed our internal control over financial reporting as of August 31,

2021, the end of our fiscal year.

Management based its assessment on criteria established in Internal Control—Integrated Framework

issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).

Management’s assessment included

evaluation of elements such as the design and operating effectiveness of key financial reporting controls, process documentation, accounting

policies, and our overall control environment.

Based on this assessment, management has concluded

that our internal control over financial reporting was effective as of the end of the fiscal year to provide reasonable assurance regarding

the reliability of financial reporting and the preparation of consolidated financial statements for external reporting purposes in accordance

Our Chief Executive Officer and our Chief Financial Officer, after evaluating our “disclosure controls and procedures” (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e) as of the end of the period covered by this Report (the “Evaluation Date”), have concluded that as of the Evaluation Date, our disclosure controls and procedures are effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and to ensure that information required to be disclosed by us in such reports is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, where appropriate, to allow timely decisions regarding required disclosure.

Management Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of consolidated financial statements for external purposes in accordance with U.S.

Management assessed our internal control over financial reporting as of August 31, 2022, the end of our fiscal year.

Management based its assessment on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).

Management’s assessment included evaluation of elements such as the design and operating effectiveness of key financial reporting controls, process documentation, accounting policies, and our overall control environment.

Based on this assessment, management has concluded that our internal control over financial reporting was effective as of the end of the fiscal year to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external reporting purposes in accordance with U.S.

We reviewed the results of management’s assessment with the Audit Committee of our Board of Directors.

Inherent Limitations on Effectiveness of Controls

Our management, including the CEO and CFO, does

not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors

and all fraud.

A control system, no matter how well-designed and operated, can provide only reasonable, not absolute, assurance that the

control system’s objectives will be met.

The design of a control system must reflect the fact that there are resource constraints,

and the benefits of controls must be considered relative to their costs.

Further, because of the inherent limitations in all control systems,

no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues

and instances of fraud, if any, have been detected.

The design of any system of controls is based in part on certain assumptions about

the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential

future conditions.

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud.

A control system, no matter how well-designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met.

The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.

Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.

The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Projections of any evaluation of the effectiveness of controls to future periods are subject to risks.

Over time, controls

may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

Changes in Internal Control over Financial

No change in the Company’s internal controls

over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) occurred during the Company’s most recent

fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

Changes in Internal Control over Financial Reporting

No change in the Company’s internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B – OTHER INFORMATION

ITEM 9C – DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

ITEM 10 – DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

Information required by Item 10 is incorporated

by reference from the Company’s definitive proxy statement, to be filed with the Securities and Exchange Commission within 120 days

after the end of the fiscal year covered by this Annual Report on Form 10-K.

Information required by Item 10 is incorporated herein by reference from the Company’s definitive proxy statement, to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Report.

We have adopted the Corporate Code of Business Conduct and Ethics (the "code of ethics") that applies to each of our directors and employees, including our principal executive officer, principal financial officer, controller, and all other employees performing similar functions.

The code of ethics is publicly available on our website at https://www.simulations-plus.com/wp-content/uploads/Code-of-Ethics-11-12-2020.pdf.

If we make any substantive amendments to the code of ethics or grant any waiver, including any implicit waiver, from a provision of the code of ethics, we will disclose the nature of the amendment or waiver on that website or in a Current Report on Form 8-K.

ITEM 11 – EXECUTIVE COMPENSATION

The information required by Item 11 is incorporated

by reference from the Company’s definitive proxy statement, to be filed with the Securities and Exchange Commission within 120 days

after the end of the fiscal year covered by this Annual Report on Form 10-K.

ITEM 12 – SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

AND RELATED STOCKHOLDER MATTERS

The information required by Item 12 is incorporated

by reference from the Company’s definitive proxy statement, to be filed with the Securities and Exchange Commission within 120 days

after the end of the fiscal year covered by this Annual Report on Form 10-K.

ITEM 13 – CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,

AND DIRECTOR INDEPENDENCE

The information required by Item 13 is incorporated

by reference from the Company’s definitive proxy statement, to be filed with the Securities and Exchange Commission within 120 days

after the end of the fiscal year covered by this Annual Report on Form 10-K.

The information required by Item 11 is incorporated herein by reference from the Company’s definitive proxy statement, to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Annual Report.

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

The information required by this Item pursuant to Item 201(d) of Regulation S-K is set forth under the caption “Market for Registrants Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities” in Part II, Item 5 of this Report, and is incorporated herein by reference.

The information required by this Item 12 pursuant to Item 403 of Regulation S-K is incorporated herein by reference from the Company’s definitive proxy statement, to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Report.

ITEM 13 – CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this Item 13 is incorporated herein by reference from the Company's definitive proxy statement to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Report and is incorporated herein by reference.

ITEM 14 – PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by Item 14 is incorporated

by reference from the Company’s definitive proxy statement, to be filed with the Securities and Exchange Commission within 120 days

after the end of the fiscal year covered by this Annual Report on Form 10-K.

ITEM 15 – EXHIBITS, FINANCIAL STATEMENT

(1) Financial

Our independent registered public accounting firm is Rose, Snyder & Jacobs LLP, Encino, CA, Auditor Firm ID:

The information required by Item 14 is incorporated by reference from the Company’s definitive proxy statement, to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Report.

ITEM 15 – EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(1) Financial Statements.

The consolidated financial statements are included in this Annual Report on Form 10-K beginning on page F-1.

(2) Financial

Statement Schedules.

All financial statement schedules have been omitted since the information is either not applicable or required or

was included in the financial statements or notes included in this Annual Report on Form 10-K.

of Exhibits required by Item 601 of Regulation S-K.

(2) Financial Statement Schedules.

All financial statement schedules have been omitted since the information is either not applicable or required or was included in the financial statements or notes included in this Annual Report on Form 10-K.

(3) List of Exhibits required by Item 601 of Regulation S-K.

See part (b) below.

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The following exhibits are filed or furnished with this report.

Those exhibits marked with a (†) refer to management contracts

or compensatory plans or arrangements.

EXHIBIT NUMBER

Those exhibits marked with a (†) refer to management contracts or compensatory plans or arrangements.

EXHIBIT NUMBER DESCRIPTION

2.1 (4)^ Agreement and Plan of Merger, dated July 23, 2014, by and among the Company, Cognigen Corporation and the other parties thereto.

9 unchanged sentences

10.2 (10) Second Amendment to Lease by and between the Company and Crest Development LLC, dated as of May 1, 2016.

Employment Agreement by and between the Company and Walter S.

Woltosz, dated as of August 8, 2016.

10.3 (5) Form of Indemnification Agreement.

1 unchanged sentence

10.5 (6) Stock Purchase Agreement by and among Simulation Plus, Inc., DILIsym Services, Inc., The Shareholders’ Representative and The Shareholders of DILIsym Services, Inc., dated as of May 1, 2017.

Employment Agreement by and between the Company and Walter S.

Woltosz, dated as of September 1, 2017.

Employment Agreement by and between the Company and John DiBella, dated as of September 1, 2017.

Employment Agreement by and between the Company and Thaddeus H Grasela Jr., dated as of September 2, 2017.

10.10 (11) (†)

Employment Agreement by and between the Company and Shawn O’Connor dated June 26, 2018

10.12 (14) (†)

10.6 (11)(†) Employment Agreement by and between the Company and Shawn O’Connor dated September 3, 2020 .

10.13 (17) (†)

Agreement by and between the Company and Will Frederick, dated December 1, 2020.

10.14 (18)(†)

10.7 (14)(†) Employment Agreement by and between the Company and Will Frederick, dated December 1, 2020.

10.8 (15)(†) Separation Agreement, dated December 1, 2020, by and between the Company and John Kneisel .

10.9 (13) Third Amendment to Lease by and between the Company and Crest Development LLC, dated as of December 28, 2020.

10.16 (19)(†)

10.10 (16)(†) Simulation Plus, Inc.

2021 Equity Incentive Plan.

10.11 (17)(†) First Amendment to Employment Agreement, by and between Simulations Plus, Inc.

and Shawn O’Connor, dated November 19, 2021.

10.12(†)* Employment Agreement by and between the Company and John DiBella, dated January 1, 2022.

10.13(†)* Employment Agreement by and between the Company and Brett Howell, dated January 1, 2022.

10.14(†)* Employment Agreement by and between the Company and Jill Fiedler-Kelly, dated January 1, 2022.

21.1 * List of Subsidiaries.

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32.1 * Section 906 – Certification of the Chief Executive Office and Chief Financial Officer.

Inline XBRL Instance Document

Inline XBRL Taxonomy Extension Schema Document

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Inline XBRL Taxonomy Extension Definition Linkbase Document

Inline XBRL Taxonomy Extension Label Linkbase Document

Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.INS** Inline XBRL Instance Document

101.SCH** Inline XBRL Taxonomy Extension Schema Document

101.CAL** Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF** Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB** Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE** Inline XBRL Taxonomy Extension Presentation Linkbase Document

_____________________________

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(5) Incorporated by reference to an exhibit to the Company’s Form 8-K filed August 10, 2016.

Incorporated by reference to an exhibit to the Company’s Form 8-K filed August 10, 2016.

(6) Incorporated by reference to an exhibit to the Company’s Form 10-Q filed July 10, 2017.

(7) Incorporated by reference to Appendix A to the Company’s Schedule 14A filed December 29.

Incorporated by reference to an exhibit to the Company’s Form 8-K filed September 6, 2017.

(8) Incorporated by reference to an exhibit to the Company’s Form 10-K for the fiscal year ended August 31, 2016.

Incorporated by reference to an exhibit to the Company’s Form 10-Q filed July 10, 2018.

(9) Incorporated by reference to an exhibit to the Company’s Form 8-K filed April 2, 2020.

6 unchanged sentences

(16) Incorporated by reference to an exhibit to the Company’s Form 8-K filed June 8, 2021.

Statement Schedule.

(17) Incorporated by reference to an exhibit to the Company’s Form 8-K filed November 19, 2021.

See Item 15(a)(2) above.

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.

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.

October 28, 2022

1 unchanged sentence

/s/ Will Frederick

Chief Financial 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 dates indicated.

Shawn O’Connor

Chief Executive Officer

(Principal executive officer)

Will Fredrick

Chief Financial Officer (Principal financial 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 dates indicated.

Signature Title

/s/ Shawn O’Connor Chief Executive Officer (Principal executive officer)

Shawn O’Connor

October 28, 2022

Chairman of the Board of

/s/ Walter S.

Woltosz Chairman of the Board of Directors

October 28, 2022

Lisa LaVange Director

October 28, 2022

Daniel Weiner

Daniel Weiner Director

Daniel Weiner

October 28, 2022

/s/ Sharlene Evans Director

Sharlene Evans

October 28, 2022

Paglia Director

October 28, 2022

Will Frederick

Chief Financial Officer

(Principal financial

/s/ Will Frederick Chief Financial Officer (Principal financial

officer and principal accounting officer)

Will Frederick

officer and principal accounting

October 28, 2022

SIMULATIONS PLUS, INC.

& SUBSIDIARIES

August 31, 2022, 2021 and 2020

6 unchanged sentences

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

1 unchanged sentence

Opinion on the Financial Statements

We have audited the accompanying consolidated

balance sheets of Simulations Plus, Inc.

and Subsidiaries (the Company) as of August 31, 2021, and 2020, and the related consolidated

statements of operations and comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year

period ended August 31, 2021, and the related notes (collectively referred to as the financial statements).

In our opinion, the consolidated

financial statements present fairly, in all material respects, the financial position of the Company as of August 31, 2021, and 2020,

and the results of its operations and its cash flows for each of the years in the three-year period ended August 31, 2021, in conformity

with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards

of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting

as of August 31, 2021, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee

of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated October 27, 2021, expressed an unqualified opinion.

We have audited the accompanying consolidated balance sheets of Simulations Plus, Inc.

and Subsidiaries (the Company) as of August 31, 2022, and 2021, and the related consolidated statements of operations and comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended August 31, 2022, and the related notes (collectively referred to as the financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of August 31, 2022, and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended August 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of August 31, 2022, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated October 28, 2022, expressed an unqualified opinion.

Basis for Opinion

These consolidated financial statements are the responsibility

of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements

based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the

Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission

and the PCAOB.

We conducted our audits in accordance with the standards

of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements

are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material

misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures

included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included

evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation

of the financial statements.

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are

matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the

audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially

challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the

financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions

on the critical audit matters or on the accounts or disclosures to which they relate.

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue Recognition – Contract cost estimates

Description of the Matter

As discussed in Note 2 and Note 3 to the Consolidated

Financial Statements, the Company earns a portion of its revenue through consulting service agreements.

For performance obligations related

to services that are required to be recognized over time, the Company generally measures its progress to completion using an input measure

of total labor costs incurred divided by total labor costs expected to be incurred.

Auditing revenue recognition is complex and highly

judgmental due to the variability and uncertainty associated with the Company’s assessment of measure of progress.

Changes in these

estimates would have a significant effect on the amount of revenue recognized.

As discussed in Note 2 to the Consolidated Financial Statements, the Company earns a portion of its revenue through consulting service agreements.

For performance obligations related to services that are required to be recognized over time, the Company generally measures its progress to completion using an input measure of total labor costs incurred divided by total labor costs expected to be incurred.

Auditing revenue recognition is complex and highly judgmental due to the variability and uncertainty associated with the Company’s assessment of measure of progress.

Changes in these estimates would have a significant effect on the amount of revenue recognized.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design,

and tested the operating effectiveness of controls that address the risk of material misstatement of consulting services revenue including

those associated with cost to complete estimates.

We tested controls over management’s process to collect, review, and approve the

data used in assessing revenue recognized over time.

To test the measures of progress used for performance

obligations related to services that are required to be recognized over time, our audit procedures included, among others, evaluating

the appropriateness of the Company’s accounting policy for each type of arrangement, testing the identified measure of performance

by reading contracts with customers, including all amendments, and reviewing the contract analyses prepared by management.

whether the selected measures of progress towards satisfaction of performance obligations were applied consistently.

We also tested the

completeness and accuracy of the underlying data used for the measure of progress by testing the underlying cost data.

We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls that address the risk of material misstatement of consulting services revenue including those associated with cost to complete estimates.

We tested controls over management’s process to collect, review, and approve the data used in assessing revenue recognized over time.

To test the measures of progress used for performance obligations related to services that are required to be recognized over time, our audit procedures included, among others, evaluating the appropriateness of the Company’s accounting policy for each type of arrangement, testing the identified measure of performance by reading contracts with customers, including all amendments, and reviewing the contract analyses prepared by management.

We evaluated whether the selected measures of progress towards satisfaction of performance obligations were applied consistently.

We also tested the completeness and accuracy of the underlying data used for the measure of progress by testing the underlying cost data.

Rose, Snyder & Jacobs LLP

We have served as the Company’s

auditor since 2004.

We have served as the Company’s auditor since 2004.

Encino, California

October 28, 2022

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

2 unchanged sentences

We have audited Simulations Plus, Inc.

and Subsidiaries

(the Company’s) internal control over financial reporting as of August 31, 2021, based on criteria established in Internal Control—Integrated

Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company

maintained, in all material respects, effective internal control over financial reporting as of August 31, 2021, based on criteria established

in Internal Control—Integrated Framework (2013) issued by COSO.

We also have audited, in accordance with the standards

of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet as of August 31, 2021, and the

related consolidated statements of operations and comprehensive income, stockholders’ equity, and cash flows for each of the three

years in the period ended August 31, 2021, and related notes, and our report dated October 27, 2021, expressed an unqualified opinion

and Subsidiaries (the Company’s) internal control over financial reporting as of August 31, 2022, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of August 31, 2022, based on criteria established in Internal Control—Integrated Framework (2013) issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet as of August 31, 2022, and the related consolidated statements of operations and comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended August 31, 2022, and related notes, and our report dated October 28, 2022, expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for

maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over

financial reporting, included in the accompanying Management Report on Internal Control over Financial Reporting.

Our responsibility is

to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting

firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities

laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards

of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal

control over financial reporting was maintained in all material respects.

Our audit of internal control over financial reporting included

obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing

and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing

such other procedures as we considered necessary in the circumstances.

The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control

over Financial Reporting

A company’s internal control over financial

reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of

financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control

over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,

accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions

are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and

that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition

of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control

over financial reporting may not prevent or detect misstatements.

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.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

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.

Rose, Snyder & Jacobs LLP

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CONSOLIDATED BALANCE SHEETS

(in thousands,

except share and per share amounts)

(in thousands, except share and per share amounts) 2022 2021

Current assets

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Accounts receivable, net of allowance for doubtful accounts of $ 12 and $ 78

Revenues in excess of billings

Prepaid income taxes 1,391 1,012

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Property and equipment, net 632 1,838

Operating lease right of use asset

Operating lease right-of-use assets 1,420 1,276

Intellectual property, net of accumulated amortization of $ 7,928 and $ 6,516

Other intangible assets, net of accumulated amortization of $ 2,662 and $ 2,186

Goodwill 12,921 12,921

Other assets 439 51

Total assets $ 188,382 $ 179,978

LIABILITIES AND SHAREHOLDERS' EQUITY

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Accounts payable $ 225 $ 387

Accrued payroll and other expenses

Contracts payable - current portion

Billings in excess of revenues

Accrued compensation 3,254 3,185

Accrued expenses 931 2,419

Contracts payable — 4,550

Operating lease liability - current portion 461 382

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Operating lease liability 943 896

Contracts payable – net of current portion

Total liabilities 10,134 14,196

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Preferred stock, $ 0.001 par value 10,000,000 shares authorized, no shares issued and outstanding

Common stock, $ 0.001 par value and additional paid-in capital — 50,000,000 shares authorized, 20,141,521 and 19,923,277 shares issued and outstanding

Common stock, $ 0.001 par value and additional paid-in capital — 50,000,000 shares authorized;

20,260,070 and 20,141,521 shares issued and outstanding

138,512 133,418

Retained earnings 40,044 32,407

Accumulated other comprehensive income (loss)

Accumulated other comprehensive loss ( 308 ) ( 43 )

Total shareholders' equity 178,248 165,782

Total liabilities and shareholders' equity $ 188,382 $ 179,978

The accompanying notes are an integral part of

these consolidated financial statements.

The accompanying notes are an integral part of these consolidated financial statements.

SIMULATIONS PLUS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

Years Ended August 31,

(in thousands,

except per common share amounts)

(in thousands, except per common share amounts) 2022 2021 2020

Software $ 32,642 $ 27,670 $ 21,587

Services 21,264 18,796 20,002

Total revenues 53,906 46,466 41,589

Cost of revenues

Software 3,060 3,235 2,883

Services 7,762 7,365 7,766

Total cost of revenues 10,822 10,600 10,649

Gross profit 43,084 35,866 30,940

Operating expenses

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Income from operations 14,911 11,253 11,605

Other income (expense)

Interest income

Interest expense

Change in value of contingent consideration

Gain (loss) on currency exchange

Total other income (expense), net

Other income (expense), net 204 ( 168 ) ( 218 )

Income before income taxes 15,115 11,085 11,387

Provision for income taxes ( 2,632 ) ( 1,303 ) ( 2,055 )

Net Income $ 12,483 $ 9,782 $ 9,332

Earnings per share

Basic $ 0.62 $ 0.49 $ 0.52

Diluted $ 0.60 $ 0.47 $ 0.50

Weighted-average common shares outstanding

Other comprehensive income (loss), net of tax

Basic 20,196 20,045 17,819

Diluted 20,749 20,743 18,538

Other comprehensive (loss) income, net of tax

Foreign currency translation adjustments ( 265 ) ( 101 ) 58

Comprehensive income $ 12,218 $ 9,681 $ 9,390

The accompanying notes are an integral part of

these consolidated financial statements.

The accompanying notes are an integral part of these consolidated financial statements.

SIMULATIONS PLUS, INC.

STATEMENTS OF SHAREHOLDERS' EQUITY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Year ended August 31,

(in thousands,

except per common share amounts)

(in thousands, except per common share amounts) 2022 2021 2020

Common stock and additional paid in capital

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Balance, beginning of period 32,407 27,436 22,354

Cumulative effect of changes related to adoption of ASC 606

Declaration of dividends ( 4,846 ) ( 4,811 ) ( 4,250 )

Net income 12,483 9,782 9,332

Balance, end of period 40,044 32,407 27,436

Accumulated other comprehensive income

Accumulated other comprehensive (loss) income

Balance, beginning of period ( 43 ) 58 —

Other comprehensive

income (loss)

Other comprehensive (loss) income ( 265 ) ( 101 ) 58

Balance, end of period ( 308 ) ( 43 ) 58

Total shareholders’ equity $ 178,248 $ 165,782 $ 156,035

Other comprehensive income (loss)

Total shareholders’ equity

Cash dividends declared per common share $ 0.24 $ 0.24 $ 0.24

The accompanying notes are an integral part of

these consolidated financial statements.

The accompanying notes are an integral part of these consolidated financial statements.

SIMULATIONS PLUS, INC.

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Cash flows from operating activities

Net income $ 12,483 $ 9,782 $ 9,332

Adjustments to reconcile net income to net cash provided by operating activities

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Accounts receivable ( 3,936 ) ( 2,429 ) ( 2,018 )

Revenues in excess of billings

Prepaid income taxes ( 379 ) ( 42 ) ( 12 )

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Accounts payable ( 162 ) 39 221

Accrued payroll and other expenses

Billings in excess of revenues

Other liabilities ( 1,437 ) 3,353 23

Deferred revenue 2,213 210 ( 739 )

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Purchases of property and equipment ( 819 ) ( 1,627 ) ( 231 )

Purchases of intellectual property

Purchase of short-term investments ( 100,846 ) ( 122,395 ) ( 67,249 )

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Capitalized computer software development costs ( 3,151 ) ( 2,949 ) ( 2,353 )

Net cash used in investing activities

Net cash provided by (used in) investing activities 4,305 ( 26,742 ) ( 75,505 )

Cash flows from financing activities

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Proceeds from follow-on public offering, net — — 107,747

Net cash provided by (used in) financing activities

Net cash (used in) provided by financing activities ( 7,622 ) ( 4,684 ) 102,366

Net increase (decrease) in cash and cash equivalents 14,583 ( 12,223 ) 37,773

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Right of use assets capitalized $ 624 $ 905 $ 1,499

The accompanying notes are an integral part of

these consolidated financial statements.

The accompanying notes are an integral part of these consolidated financial statements.

Simulations Plus, Inc.

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Simulations Plus, Inc.

(“The Company”)

was incorporated on July 17, 1996.

In September 2014, Simulations Plus acquired all of the outstanding equity interests of Cognigen Corporation

(“Cognigen”) and Cognigen became a wholly-owned subsidiary of Simulations Plus, Inc.

In June 2017, Simulations Plus acquired

DILIsym Services, Inc.

(the "Company") was incorporated on July 17, 1996.

In September 2014, Simulations Plus acquired all of the outstanding equity interests of Cognigen Corporation ("Cognigen") and Cognigen became a wholly-owned subsidiary of Simulations Plus, Inc.

In June 2017, Simulations Plus acquired DILIsym Services, Inc.

("DILIsym") as a wholly-owned subsidiary.

In April 2020, Simulations Plus, Inc.

acquired Lixoft, a

French société par actions simplifiée (“Lixoft) as a wholly-owned subsidiary pursuant to a stock purchase and

contribution agreement.

acquired Lixoft, a French société par actions simplifiée ("Lixoft") as a wholly-owned subsidiary pursuant to a stock purchase and contribution agreement.

(Collectively, "Company", "we", "us", "our").

Effective September 1,

2021, the Company merged both Cognigen Corporation and DILIsym, Services, Inc.

with and into Simulations Plus, Inc.

through short-form

mergers (the “Mergers”).

To effectuate the Mergers, the Company filed Certificates of Ownership with the Secretaries of State

of the states of Delaware (Cognigen’s and DILIsym’s state of incorporation) and California (the Company’s state of incorporation).

Consummation of the Mergers was not subject to approval of the Company’s stockholders and did not impact the rights of the Company’s

stockholders.

Effective September 1, 2021, the Company merged both Cognigen Corporation and DILIsym with and into Simulations Plus, Inc.

through short-form mergers (the “Mergers”).

To effectuate the Mergers, the Company filed Certificates of Ownership with the Secretaries of State of the states of Delaware (Cognigen’s and DILIsym’s state of incorporation) and California (the Company’s state of incorporation).

Consummation of the Mergers was not subject to approval of the Company’s stockholders and did not impact the rights of the Company’s stockholders.

Lines of Business

We are a premier developer of drug discovery and

development software for modeling and simulation, and for the prediction of molecular properties utilizing both artificial intelligence

(“AI”) as well as machine learning based technology.

We also provide consulting services ranging from early drug discovery

through preclinical and clinical trial data analysis and for submissions to regulatory agencies.

Our software and consulting services

are provided to major pharmaceutical, biotechnology, agrochemical, cosmetics and food industry companies, and to regulatory agencies worldwide

for use in the conduct of industry-based research.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING

We are a premier developer of drug discovery and development software for modeling and simulation, and for the prediction of molecular properties utilizing both artificial intelligence (“AI”) as well as machine-learning-based technology.

We also provide consulting services ranging from early drug discovery through preclinical and clinical trial data analysis and for submissions to regulatory agencies.

Our software and consulting services are provided to major pharmaceutical, biotechnology, agrochemical, cosmetics, and food industry companies, and to regulatory agencies worldwide for use in the conduct of industry-based research.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include

the accounts of Simulations Plus and, as of September 2, 2014, its wholly-owned subsidiary, Cognigen, as of June 1, 2017, the accounts

of DILIsym, and as of April 1, 2020, Lixoft.

The consolidated financial statements include the accounts of Simulations Plus and, as of April 1, 2020, Lixoft.

All significant intercompany accounts and transactions are eliminated in consolidation.

Use of Estimates

Our financial statements and accompanying notes

are prepared in accordance with accounting principles generally accepted in the United States of America.

Preparing financial statements

requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses.

Our financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America.

Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses.

These estimates and assumptions are affected by management’s application of accounting policies.

Actual results could differ from

those estimates.

Significant accounting policies for us include revenue recognition, accounting for capitalized computer software development

costs, valuation of stock options, and accounting for income taxes.

Actual results could differ from those estimates.

Reclassifications

Certain numbers in the prior year have been reclassified

to conform to the current year's presentation.

Certain numbers in the prior year have been reclassified to conform to the current year's presentation.

Revenue Recognition

We generate revenue primarily from the sale of

software licenses and providing consulting services to the pharmaceutical industry for drug development.

The Company determines revenue recognition through

the following steps:

We generate revenue primarily from the sale of software licenses and by providing consulting services to the pharmaceutical industry for drug development.

In accordance with ASC 606, we determine revenue recognition through the following steps:

Identification of the contract, or contracts, with a customer

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Allocation of the transaction price to the performance obligations in the contract

Recognition of revenue when, or as, the Company satisfies a performance obligation

Recognition of revenue when, or as, we satisfy a performance obligation

Components of Revenue

The following is a description of principal activities from which the Company generates revenue.

As part of the accounting for these arrangements, the Company must develop assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the contract.

Stand-alone selling prices are determined based on the prices at which the Company separately sells its services or goods.

Revenue Components Typical Payment Terms

Software Revenues:

Software revenues are generated primarily from sales of software licenses at the time the software is unlocked, and the term commences.

The license period typically is one year or less.

Along with the license a di minimis amount of customer support is provided to assist the customer with the software.

Should the customer need more than a di minimis amount of support, they can choose to enter into a separate contract for additional training.

Most software is installed on our customers’ servers and the Company has no control of the software once the sale is made.

Payments are generally due upon invoicing on a net 30 basis unless other payment terms are negotiated with the customer based on customer history.

Typical industry standards apply.

For certain software arrangements the Company hosts the licenses on servers maintained by the Company, Revenue for those arrangements is accounted as Software as a Service over the life of the contract.

These arrangements are a small portion of software revenues of the Company.

Consulting Contracts:

Consulting services provided to our customers are generally recognized over time as the contracts are performed and the services are rendered.

The company measures its consulting revenue based on time expended compared to total estimated hours to complete a project.

The Company believes the method chosen for its contract revenue best depicts the transfer of benefits to the customer under the contracts.

Payment terms vary, depending on the size of the contract, credit history and history with the client and deliverables within the contract.

Consortium Member Based Services:

The performance obligation is recognized on a time elapsed basis, by month, for which the services are provided, as the Company transfers control evenly over the contractual period.

Payment is due at the beginning of the period, generally on a net 30 or 60 basis.

Remaining Performance Obligations

Transaction price allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes deferred revenue and unbilled amounts that will be recognized as revenue in future periods.

As of August 31, 2022, remaining performance obligations were $ 13.5 million.

86 % of the remaining performance obligations are expected to be recognized over the next 12 months, with the remainder recognized thereafter.

Remaining performance obligations estimates are subject to change and are affected by several factors, including contract terminations and changes in the scope of contracts.

Disaggregation of Revenues

The components of disaggregation of revenue for the years ended August 31, 2022, 2021, and 2020 were as follows:

Year ended August 31,

(in thousands) 2022 2021 2020

Software licenses

Point in time $ 31,587 $ 26,725 $ 20,668

Over time 1,055 945 919

Over time 21,264 18,796 20,002

Total revenue $ 53,906 $ 46,466 $ 41,589

In addition, the Company allocates revenues to geographic areas based on the locations of its customers.

Geographical revenues for the years ended August 31, 2022, 2021, and 2020 were as follows:

(in thousands) Year ended August 31,

2022 2021 2020

$ % of total $ % of total $ % of total

Americas $ 37,681 70 % $ 32,549 70 % $ 29,674 71 %

EMEA 10,388 19 % 7,906 17 % 5,827 14 %

Asia Pacific 5,837 11 % 6,011 13 % 6,088 15 %

Total $ 53,906 100 % $ 46,466 100 % $ 41,589 100 %

Contract Balances

We receive payments from customers based upon contractual billing schedules, while we recognize revenue when, or as, we satisfy our performance obligations.

This timing difference results in accounts receivable, contract assets, and contract liabilities.

We record accounts receivable when the right to consideration becomes unconditional.

We record a contract asset if the right to consideration is conditioned on something other than the passage of time, such as our future performance.

Contract assets are included in prepaid expenses and other current assets on our consolidated balance sheets.

We record a contract liability when we have an obligation to transfer goods or services to a customer for which we have either received consideration or a payment is due from a customer.

We refer to contract liabilities as deferred revenue on our consolidated balance sheets.

Contract asset balances as of August 31, 2022, and August 31, 2021, were $ 1.7 million and $ 3.2 million, respectively.

During the year ended August 31, 2022, the Company recognized $ 0.6 million of revenue that was included in contract liabilities as of August 31, 2021, and during the year ended August 31, 2021, the Company recognized $ 0.4 million of revenue that was included in contract liabilities as of August 31, 2020.

Deferred Commissions

Sales commissions earned by our sales force and

our commissioned sales representatives are considered incremental and recoverable costs of obtaining a contract with a customer.

commissions for new contracts are deferred and then amortized on a straight-line basis over a period of benefit.

We determined the period

of benefit by taking into consideration our customer contracts, our technology and other factors.

Sales commissions for renewal contracts

are deferred and then amortized on a straight-line basis over the related contractual renewal period.

Amortization expense is included

in sales and marketing expenses on the consolidated statements of operations and comprehensive income as Selling, general, and administrative expense.

Practical Expedients and Exemptions

The Company has elected the following additional

practical expedients in applying Topic 606:

Commission Expense :

We apply the practical expedient in ASC Topic 606 to expense costs

as incurred for sales commissions when the period of benefit is one year or less.

Most of our contracts are of a duration of one year

or less, few, if any of the longer-term contracts have commissions associated with them .

This expense is included in the consolidated

statements of operations and comprehensive income as Selling, general, and administrative expense.

Transaction Price Allocated to Future Performance

ASC 606 requires that the Company disclose the

aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied as of August 31, 2021.

ASC 606 provides certain practical expedients that limit the requirement to disclose the aggregate amount of transaction price allocated

to unsatisfied performance obligations.

The Company applied the practical expedient to

not disclose the amount of transaction price allocated to unsatisfied performance obligations when the performance obligation is part

of a contract that has an original expected duration of one year or less.

Sales commissions earned by our sales force and our commissioned sales representatives are considered incremental and recoverable costs of obtaining a contract with a customer.

We apply the practical expedient as described in ASC 340-40-25-4 to expense costs as incurred for sales commissions, since the amortization period of the asset that we otherwise would have recognized is one year or less.

This expense is included in the consolidated statements of operations and comprehensive income as selling, general, and administrative expense.

Cash and Cash Equivalents

For purposes of the statements of cash flows,

the Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.

Accounts Receivable

We analyze the age of customer balances, historical

bad-debt experience, customer creditworthiness, and changes in customer payment terms when making estimates of the collectability of the

Company’s trade accounts receivable balances.

If we determine that the financial conditions of any of our customers have deteriorated,

whether due to customer-specific or general economic issues, an increase in the allowance may be made.

Accounts receivable are written

off when reasonable collection attempts have failed.

We may invest excess cash balances in short-term

and long-term marketable debt securities.

Investments may consist of certificates of deposit, money market accounts, government-sponsored

enterprise securities, corporate bonds and/or commercial paper.

The Company accounts for its investment in marketable securities in accordance

with FASB ASC 320, Investments – Debt and Equity Securities.

This statement requires debt securities to be classified into three

Held-to-maturity—Debt securities that the

entity has the positive intent and ability to hold to maturity are reported at amortized cost.

Discounts and premiums to par value of

the debt securities are amortized to interest income/expense over the term of the security.

No gains or losses on investment securities

are realized until they are sold or a decline in fair value is determined to be other-than-temporary.

Trading Securities—Debt securities that

are bought and held primarily for the purpose of selling in the near term are reported at fair value, with unrealized gains and losses

included in earnings.

Available-for-Sale—Debt securities not classified

as either securities held-to-maturity or trading securities are reported at fair value with unrealized gains or losses excluded from earnings

and reported as a separate component of shareholders’ equity.

We classify our investments in marketable debt

securities based on the facts and circumstances present at the time of purchase of the securities.

During the year ended August 31, 2021,

all of our investments were classified as held-to-maturity.

Held-to-maturity investments are measured and

recorded at amortized cost on the Company’s Consolidated Balance Sheets.

Discounts and premiums to par value of the debt securities

are amortized to interest income/expense over the term of the security.

No gains or losses on investment securities are realized until

they are sold or a decline in fair value is determined to be other-than-temporary.

For purposes of the statements of cash flows, we consider all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.

Accounts Receivable and Allowance for Credit Losses

The Company extends credit to its customers in the normal course of business.

The Company evaluates its allowance for credit losses based on its estimate of the collectability of its trade accounts receivable.

As part of this assessment, the Company considers various factors including the financial condition of the individual companies with which it does business, the aging of receivable balances, historical experience, changes in customer payment terms, current market conditions, and reasonable and supportable forecasts of future economic conditions.

In times of economic turmoil, the Company’s estimates and judgments with respect to the collectability of its receivables is subject to greater uncertainty than in more stable periods.

Accounts receivable balances will be charged off against the allowance for credit losses after all means of collection have been exhausted and the potential for recovery is considered remote.

The Company may invest excess cash balances in short-term and long-term marketable debt securities.

Investments may consist of certificates of deposit, money market accounts, government-sponsored enterprise securities, corporate bonds, and/or commercial paper within the parameters of our Investment Policy and Guidelines.

The Company accounts for its investments in marketable securities in accordance with ASC 320, Investments – Debt and Equity Securities.

This statement requires debt securities to be classified into three categories:

Held-to-maturity—Debt securities that the entity has the positive intent and ability to hold to maturity are measured at amortized cost and are presented at the net amount expected to be collected.

Any change in the allowance for credit losses during the period is reflected in earnings.

Discounts and premiums to par value of the debt securities are amortized to interest income/expense over the term of the security.

Trading Securities—Debt securities that are bought and held primarily for the purpose of selling in the near term are reported at fair value, with unrealized gains and losses included in earnings.

Available-for-Sale—Debt securities not classified as either securities held-to-maturity or trading securities are reported at fair value.

For available-for-sale debt securities in an unrealized loss position, we evaluate as of the balance sheet date whether the unrealized losses are attributable to a credit loss or other factors.

The portion of unrealized losses related to a credit loss is recognized in earnings, and the portion of unrealized loss not related to a credit loss is recognized in other comprehensive income.

We classify our investments in marketable debt securities based on the facts and circumstances present at the time of purchase of the securities.

We subsequently reassess the appropriateness of that classification at each reporting date.

During the year ended August 31, 2022, all of our investments were classified as held-to-maturity.

Capitalized Computer Software Development Costs

Software development costs are capitalized in

accordance with ASC 985-20, “Costs of Software to Be Sold, Leased, or Marketed” .

Capitalization of software development

costs begins upon the establishment of technological feasibility and is discontinued when the product is available for sale.

The establishment of technological feasibility

and the ongoing assessment for recoverability of capitalized software development costs require considerable judgment by management with

respect to certain external factors including, but not limited to, technological feasibility, anticipated future gross revenues, estimated

economic life, and changes in software and hardware technologies.

Capitalized computer software development costs are comprised primarily

of salaries and direct payroll-related costs and the purchase of existing software to be used in the Company's software products.

Amortization of capitalized computer software

development costs is provided on a product-by-product basis on the straight-line method over the estimated economic life of the products

(not to exceed five years).

Amortization of software development costs amounted to $ 1.4 million, $ 1.2 million, and $ 1.3 million for the

years ended August 31, 2021, 2020, and 2019, respectively.

We expect future amortization expense to vary due to increases in capitalized

computer software development costs.

We test capitalized computer software development

costs for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

Software development costs are capitalized in accordance with ASC 985-20.

Capitalization of software development costs begins upon the establishment of technological feasibility and is discontinued when the product is available for sale.

The establishment of technological feasibility and the ongoing assessment for recoverability of capitalized software development costs require considerable judgment by management with respect to certain external factors including, but not limited to, technological feasibility, anticipated future gross revenue, estimated economic life, and changes in software and hardware technologies.

Capitalized software development costs are comprised primarily of salaries and direct payroll-related costs and the purchase of existing software to be used in our software products.

Amortization of capitalized software development costs is calculated on a product-by-product basis on the straight-line method over the estimated economic life of the products (not to exceed five years).

Amortization of software development costs amounted to $ 1.2 million, $ 1.4 million, and $ 1.2 million for the years ended August 31, 2022, 2021, and 2020, respectively.

We expect future amortization expense to vary due to increases in capitalized computer software development costs.

We test capitalized computer software development costs for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

Property and Equipment

Property and equipment are recorded at cost,

or fair market value for property and equipment acquired in business combinations, less accumulated depreciation and amortization.

and amortization are provided using the straight-line method over the estimated useful lives as follows:

Property and Equipment estimated useful lives

Computer equipment

Furniture and fixtures

Leasehold improvements

Shorter of life of asset or lease

Maintenance and minor replacements are charged

to expense as incurred.

Property and equipment are recorded at cost, or fair market value for property and equipment acquired in business combinations, less accumulated depreciation and amortization.

Depreciation and amortization are calculated using the straight-line method over the estimated useful lives as follows:

Equipment 5 years

Computer equipment 3 to 7 years

Furniture and fixtures 5 to 7 years

Leasehold improvements Shorter of life of asset or lease

Maintenance and minor replacements are charged to expense as incurred.

Gains and losses on disposals are included in the results of operations.

Internal-use Software

We have a service contract related to the implementation

of internally used software.

In accordance with ASC 350-40 “Customer’s Accounting for Implementation Costs Incurred in

a Cloud Computing Arrangement That Is a Service Contract” , we have capitalized certain internal-use software which are included

in long-term assets.

The amortization will be classified as Selling,

general, and administrative expenses on the consolidated statement of operations and comprehensive income and maintenance and minor upgrades

are charged to expense as incurred.

Gains and losses on disposals are included in the results of operations.

No amortization has been

expensed for the project as it is still in progress.

We have capitalized certain internal-use software costs in accordance with ASC 350-40, which are included in intangible assets.

The amortization of such costs is classified as selling, general, and administrative expenses on the consolidated statements of operations.

Maintenance of and minor upgrades to internal-use software are also classified as selling, general, and administrative expenses as incurred.

We determine if an arrangement is a lease at inception.

leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities (current and long-term)

in our consolidated balance sheets.

ROU assets represent our right to use an underlying

asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

Operating lease

ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

of our leases do not provide an implicit rate, we generally use our incremental borrowing rate based on the estimated rate of interest

for collateralized borrowing over a similar term of the lease payments at commencement date.

The operating lease ROU asset also includes

any lease payments made and excludes lease incentives.

Our lease terms may include options to extend or terminate the lease when it is

reasonably certain that we will exercise that option.

Lease expense for lease payments is recognized on a straight-line basis over the

Supplemental balance sheet information related

to operating leases was as follows as of August 31, 2021:

Schedule of lease cost

Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities (current and long-term) in our consolidated balance sheets.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term.

As most of our leases do not provide an implicit rate, we generally use our incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at the commencement date.

The operating lease ROU asset also includes any lease payments made at or before the commencement date and excludes lease incentives.

Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Lease expense is recognized on a straight-line basis over the lease term.

Supplemental balance sheet information related to operating leases was as follows as of August 31, 2022:

(in thousands)

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Operating lease costs $ 520

Weighted Average remaining lease term

Weighted-average remaining lease term 3.05 years

Weighted-average discount rate 3.41 %

Intangible Assets and Goodwill

The Company performs valuations of assets acquired

and liabilities assumed on each acquisition accounted for as a business combination and recognizes the assets acquired and liabilities

assumed at their acquisition-date fair value.

Acquired intangible assets include customer relationships, software, trade names, and noncompete

We determine the appropriate useful life by performing an analysis of expected cash flows based on historical experience of

the acquired businesses.

Intangible assets are amortized over their estimated useful lives using the straight-line method, which approximates

the pattern in which the majority of the economic benefits are expected to be consumed.

Goodwill represents the excess of the cost of

an acquired entity over the fair value of the acquired net assets.

Goodwill is not amortized, instead it is tested for impairment annually

or when events or circumstances change that would indicate that goodwill might be impaired.

Events or circumstances that could trigger

an impairment review include, but are not limited to, a significant adverse change in legal factors or in the business climate, an adverse

action or assessment by a regulator, unanticipated competition, a loss of key personnel, significant changes in the manner of our use

of the acquired assets or the strategy for our overall business, significant negative industry or economic trends, or significant underperformance

relative to expected historical or projected future results of operations.

Goodwill is tested for impairment at the reporting

unit level, which is one level below or the same as an operating segment.

As of August 31, 2021, the Company determined that it has four

reporting units, Simulations Plus, Cognigen Corporation, DILIsym Services, Inc.

When testing goodwill for impairment, the

Company first performs a qualitative assessment to determine whether it is necessary to perform step one of a two-step annual goodwill

impairment test for each reporting unit.

The Company is required to perform step one only if it concludes that it is more likely than

not that a reporting unit's fair value is less than its carrying value.

Should this be the case, the first step of the two-step process

is to identify whether a potential impairment exists by comparing the estimated fair values of the Company's reporting units with their

respective book values, including goodwill.

If the estimated fair value of the reporting unit exceeds book value, goodwill is considered

not to be impaired, and no additional steps are necessary.

If, however, the fair value of the reporting unit is less than book value,

then the second step is performed to determine if goodwill is impaired and to measure the amount of impairment loss, if any.

of the impairment loss is the excess of the carrying amount of the goodwill over its implied fair value.

The estimate of implied fair

value of goodwill is primarily based on an estimate of the discounted cash flows expected to result from that reporting unit, but may

require valuations of certain internally generated and unrecognized intangible assets such as the Company's software, technology, patents

and trademarks.

If the carrying amount of goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in

an amount equal to the excess.

As of August 31, 2021, the entire balance of goodwill

was attributed to three of the Company's reporting units, Cognigen Corporation, DILIsym Services, Inc.

Intangible assets subject

to amortization are reviewed for impairment whenever events or circumstances indicate that the carrying amount of these assets may not

be recoverable.

The Company has no t recognized any impairment charges during the periods ended August 31, 2021, 2020 and 2019.

Reconciliation of Goodwill as of August 31, 2021,

Schedule of reconciliation of goodwill

(in thousands)

We perform valuations of assets acquired and liabilities assumed on each acquisition accounted for as a business combination and recognize the assets acquired and liabilities assumed at their acquisition-date fair value.

Acquired intangible assets include customer relationships, software, trade names, and noncompete agreements.

We determine the appropriate useful life by performing an analysis of expected cash flows based on historical experience of the acquired businesses.

Finite-lived intangible assets are amortized over their estimated useful lives using the straight-line method, which approximates the pattern in which the majority of the economic benefits are expected to be consumed.

Finite-lived intangible assets subject to amortization are reviewed for impairment whenever events or circumstances indicate that the carrying amount of these assets may not be recoverable.

Goodwill represents the excess of the cost of an acquired entity over the fair value of the acquired net assets.

Goodwill and indefinite-lived intangible assets are tested for impairment annually or when events or circumstances change that would indicate that they might be impaired.

Events or circumstances that could trigger an impairment review include, but are not limited to, a significant adverse change in legal factors or in the business climate, an adverse action or assessment by a regulator, unanticipated competition, a loss of key personnel, significant changes in the manner of our use of the acquired assets or the strategy for our overall business, significant negative industry or economic trends, or significant underperformance relative to expected historical or projected future results of operations.

Goodwill and intangible assets are tested for impairment at the reporting unit level, which is one level below or the same as an operating segment.

As of August 31, 2022, we determined that we have four reporting units:

Simulations Plus, Cognigen, DILIsym, and Lixoft.

We did not recognize any impairment charges during the periods ended August 31, 2022, 2021, and 2020.

Reconciliation of Goodwill as of August 31, 2022, and 2021:

(in thousands) Cognigen DILIsym Lixoft Total

Balance, August 31, 2020 $ 4,789 $ 5,598 $ 2,534 $ 12,921

Addition — — — —

Impairments — — — —

Balance, August 31, 2021 4,789 5,598 2,534 12,921

Addition — — — —

Impairments — — — —

Balance, August 31, 2022 $ 4,789 $ 5,598 $ 2,534 $ 12,921

Other Intangible Assets

The following table summarizes other intangible

assets as of August 31, 2021:

Schedule of other intangible assets

Customer relationships

Straight line 8 years

Covenants not to compete

Straight line 5 years

Customer relationships

Straight line 10 years

Covenants not to compete

Straight line 4 years

Customer relationships

Straight line 14 years

Covenants not to compete

Straight line 3 years

The following table summarizes other intangible

assets as of August 31, 2020:

Customer relationships

Straight line 8 years

Covenants not to compete

Straight line 5 years

Customer relationships

Straight line 10 years

Covenants not to compete

Straight line 4 years

Customer relationships

Straight line 14 years

Covenants not to compete

Straight line 3 years

Total amortization expense for the years ended

August 31, 2021, 2020 and 2019 was $ 544 thousand, $ 432 thousand, and $ 358 thousand, respectively.

Future amortization of intangible assets for the next five years is

Schedule of future amortization

The following table summarizes other intangible assets as of August 31, 2022:

(in thousands) Amortization

Period Acquisition

Value Accumulated

Amortization Net book

Simulations Plus

ERP Straight line 15 years $ 1,702 $ 80 $ 1,622

Customer relationships Straight line 8 years 1,100 1,100 —

Trade Name None 500 — 500

Customer relationships Straight line 10 years 1,900 997 903

Trade Name None 860 — 860

Customer relationships Straight line 14 years 2,550 437 2,113

Trade Name None 1,550 — 1,550

Covenants not to compete Straight line 3 years 60 48 12

$ 10,222 $ 2,662 $ 7,560

The following table summarizes other intangible assets as of August 31, 2021:

(in thousands) Amortization

Period Acquisition

Value Accumulated

Amortization Net book

Customer relationships Straight line 8 years $ 1,100 $ 963 $ 137

Trade Name None 500 — 500

Covenants not to compete Straight line 5 years 50 50 —

Customer relationships Straight line 10 years 1,900 807 1,093

Trade Name None 860 — 860

Covenants not to compete Straight line 4 years 80 80 —

Customer relationships Straight line 14 years 2,550 258 2,292

Trade Name None 1,550 — 1,550

Covenants not to compete Straight line 3 years 60 28 32

$ 8,650 $ 2,186 $ 6,464

Total amortization expense for the years ended August 31, 2022, 2021, and 2020 was $ 0.6 million, $ 0.5 million, and $ 0.4 million, respectively.

Future amortization of finite-lived intangible assets for the next five years is as follows:

(in thousands)

Business Acquisitions

The Company accounted for the acquisition of Cognigen,

DILIsym, and Lixoft using the purchase method of accounting where the assets acquired and liabilities assumed are recognized based on

their respective estimated fair values.

The excess of the purchase price over the estimated fair values of the net assets acquired is

recorded as goodwill.

Determining the fair value of certain acquired assets and liabilities is subjective in nature and often involves

the use of significant estimates and assumptions, including, but not limited to, the selection of appropriate valuation methodology, projected

revenue, expenses and cash flows, weighted average cost of capital, discount rates, estimates of advertiser and publisher turnover rates

and estimates of terminal values.

Business acquisitions are included in the Company's consolidated financial statements as of the date

of the acquisition.

The Company accounted for the acquisition of Lixoft using the acquisition method of accounting where the assets acquired and liabilities assumed are recognized based on their respective estimated fair values.

The excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill.

Determining the fair value of certain acquired assets and liabilities is subjective in nature and often involves the use of significant estimates and assumptions, including, but not limited to, the selection of appropriate valuation methodology, projected revenue, expenses and cash flows, weighted average cost of capital, discount rates, estimates of advertiser and publisher turnover rates, and estimates of terminal values.

Business acquisitions are included in the Company's consolidated financial statements as of the date of the acquisition.

Fair Value of Financial Instruments

Assets and liabilities recorded at fair value

in the Consolidated Balance Sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair

The categories, as defined by the standard are as follows:

Assets and liabilities recorded at fair value in the consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair value.

The categories are as follows:

Input Definition:

Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.

Inputs, other than quoted prices included in Level I, that are observable for the asset or liability through corroboration with market data at the measurement date.

Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.

For certain of our financial instruments, including

accounts receivable, accounts payable, and accrued payroll and other expenses, the carrying amounts approximate fair value due to their

short-term nature.

The following table summarizes fair value measurements

as of August 31, 2021, and August 31, 2020, for assets and liabilities measured at fair value on a recurring basis:

Summarizes fair value measurements

Level I Inputs that are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.

Level II Inputs, other than quoted prices included in Level I, that are observable for the asset or liability through corroboration with market data at the measurement date.

Level III Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.

For certain of our financial instruments, including accounts receivable, accounts payable, and accrued compensation and other accrued expenses, the amounts approximate fair value due to their short maturities.

The following table summarizes fair value measurements as of August 31, 2022, and August 31, 2021, for assets and liabilities measured at fair value on a recurring basis:

August 31, 2022

(in thousands)

(in thousands) Level 1 Level 2 Level 3 Total

Cash and cash equivalents $ 51,567 $ — $ — $ 51,567

Short-term investments $ 76,668 $ — $ — $ 76,668

Acquisition-related contingent consideration obligations

August 31, 2021

(in thousands) Level 1 Level 2 Level 3 Total

Cash and cash equivalents $ 36,984 $ — $ — $ 36,984

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Acquisition-related contingent consideration obligations $ — $ — $ 3,217 $ 3,217

As of August 31, 2021, and 2020, the Company had

a liability for contingent consideration related to its acquisition of Lixoft and DILIsym.

The fair value measurement of the contingent

consideration obligations is determined using Level 3 inputs.

The fair value of contingent consideration obligations is based on a discounted

cash flow model using a probability-weighted income approach.

These fair value measurements represent Level 3 measurements as they are

based on significant inputs not observable in the market.

Significant judgment is employed in determining the appropriateness of these

assumptions as of the acquisition date and for each subsequent period.

Accordingly, changes in assumptions could have a material impact

on the amount of contingent consideration expense the Company records in any given period.

Changes in the value of the contingent consideration

obligations are recorded in the Company’s Consolidated Statement of Operations.

The following is a reconciliation of contingent

consideration value:

Reconciliation of contingent consideration value

As of August 31, 2022, we had no liability for contingent consideration related to our acquisition of Lixoft as the remaining contingent obligation was settled in May 2022.

As of August 31, 2021, we had a liability for contingent consideration related to our acquisition of Lixoft.

The fair value measurement of the contingent consideration obligations was determined using Level 3 inputs and was based on a discounted cash flow model using a probability-weighted income approach.

The liability is recorded as contracts payable on our consolidated balance sheets, and changes in the fair value of the contingent consideration obligations are recorded as other income (expense), net in our consolidated statements of operations and comprehensive income.

The following is a reconciliation of contingent consideration value:

(in thousands)

Value as of August 31, 2021 $ 3,217

Contingent consideration payments

Contingent consideration payments in cash ( 2,334 )

Contingent consideration payments in stock ( 1,166 )

Change in value of contingent consideration 283

Value as of August 31, 2022 $ —

The Company expenses marketing and advertising

costs as incurred.

Marketing costs for the years ended August 31, 2021, 2020 and 2019 were approximately $ 60 thousand, $ 64 thousand and

$ 83 thousand, respectively.

The Company expenses marketing costs as incurred.

Marketing costs for the years ended August 31, 2022, 2021, and 2020 were $ 0.2 million, $ 0.1 million, and $ 0.1 million, respectively.

Research and Development Costs

Research and development costs are charged to

expense as incurred until technological feasibility has been established.

These costs include salaries, laboratory experiment, and purchased

software which was developed by other companies and incorporated into, or used in the development of, our final products.

The Company accounts for income taxes in accordance

with ASC 740-10, “Income Taxes” which requires the recognition of deferred tax assets and liabilities for the expected

future tax consequences of events that have been included in the financial statements or tax returns.

Under this method, deferred income taxes are recognized

for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting

amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected

to affect taxable income.

Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to

The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax

assets and liabilities.

Research and development costs are charged to expense as incurred until technological feasibility has been established.

These costs include salaries, laboratory experiments, and purchased software that was developed by other companies and incorporated into, or used in the development of, our final products.

We account for income taxes in accordance with ASC 740 which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.

Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income.

Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities.

Intellectual property

On February 28, 2012, we bought out the royalty

agreement with Enslein Research.

The cost of $ 75 thousand is being amortized over 10 years under the straight-line method .

On May 15, 2014, we entered into a termination

and non-assertion agreement with TSRL, Inc., pursuant to which the parties agreed to terminate an exclusive software licensing agreement

entered into between the parties in 1997.

As a result, the Company obtained a perpetual right to use certain source code and data, and

TSRL relinquished any rights and claims to any GastroPlus products and to any claims to royalties or other payments under that 1997 agreement.

On February 28, 2012, we bought out the royalty agreement with Enslein Research.

The cost of $ 0.1 million is being amortized over 10 years under the straight-line method .

On May 15, 2014, we entered into a termination and non-assertion agreement with TSRL, Inc., pursuant to which the parties agreed to terminate an exclusive software licensing agreement entered into between the parties in 1997.

As a result, the Company obtained a perpetual right to use certain source code and data, and TSRL relinquished any rights and claims to any GastroPlus products and to any claims, royalties, or other payments under that 1997 agreement.

We agreed to pay TSRL total consideration of $ 6.0 million, which is being amortized over 10 years under the straight-line method .

On June 1, 2017, as part of the acquisition of

DILIsym the Company acquired certain developed technologies associated with the drug induced liver disease (DILI).

These technologies

were valued at approximately $ 2.9 million and are being amortized over 9 years under the straight-line method .

In September 2018, we purchased certain intellectual

property rights of Entelos Holding Company.

The cost of $ 50 thousand is being amortized over 10 years under the straight-line method .

On April 1, 2020, as part of the acquisition of

Lixoft, the Company acquired certain developed technologies associated with the Lixoft scientific software.

These technologies were valued

at approximately $ 8.0 million and are being amortized over 16 years under the straight-line method .

The following table summarizes intellectual property

as of August 31, 2021:

Summary of intellectual property

Royalty Agreement buy out-Enslein Research

Straight line 10 years

On June 1, 2017, as part of the acquisition of DILIsym, the Company acquired certain developed technologies associated with the drug-induced liver disease (DILI).

These technologies were valued at $ 2.9 million and are being amortized over 9 years under the straight-line method .

In September 2018, we purchased certain intellectual property rights of Entelos Holding Company.

The cost of $ 0.1 million is being amortized over 10 years under the straight-line method .

On April 1, 2020, as part of the acquisition of Lixoft, the Company acquired certain developed technologies associated with the Lixoft scientific software.

These technologies were valued at $ 8.0 million and are being amortized over 16 years under the straight-line method .

The following table summarizes intellectual property as of August 31, 2022:

(in thousands) Amortization

Period Acquisition

Value Accumulated

Amortization Net Book

Royalty Agreement buy out-Enslein Research Straight line 10 years $ 75 $ 75 $ —

Termination/nonassertion agreement-TSRL Inc.

Straight line 10 years 6,000 4,975 1,025

Developed technologies–DILIsym acquisition

Straight line 9 years

Intellectual rights of Entelos Holding Company

Straight line 10 years

Developed technologies–Lixoft acquisition

Straight line 16 years

The following table summarizes intellectual property

as of August 31, 2020:

Royalty Agreement buy out-Enslein Research

Straight line 10 years

Developed technologies–DILIsym acquisition Straight line 9 years 2,850 1,662 1,188

Intellectual rights of Entelos Holding Company Straight line 10 years 50 20 30

Developed technologies–Lixoft acquisition Straight line 16 years 8,010 1,196 6,814

$ 16,985 $ 7,928 $ 9,057

The following table summarizes intellectual property as of August 31, 2021:

(in thousands) Amortization

Period Acquisition

Value Accumulated

Amortization Net Book

Royalty Agreement buy out-Enslein Research Straight line 10 years $ 75 $ 71 $ 4

Termination/nonassertion agreement-TSRL Inc.

Straight line 10 years 6,000 4,375 1,625

Developed technologies–DILIsym acquisition

Straight line 9 years

Intellectual rights of Entelos Holding Company

Straight line 10 years

Developed technologies–Lixoft acquisition

Straight line 16 years

Total amortization expense for intellectual property

agreements for the years ended August 31, 2021, 2020 and 2019 was $ 1.4 million, $ 1.1 million, and $ 929 thousand, respectively.

Future amortization of intellectual property

for the next five years is as follows:

Schedule of future amortization expenses

Developed technologies–DILIsym acquisition Straight line 9 years 2,850 1,346 1,504

Intellectual rights of Entelos Holding Company Straight line 10 years 50 15 35

Developed technologies–Lixoft acquisition Straight line 16 years 8,010 709 7,301

$ 16,985 $ 6,516 $ 10,469

Total amortization expense for intellectual property agreements for the years ended August 31, 2022, 2021, and 2020 was $ 1.4 million, $ 1.4 million, and $ 1.1 million, respectively.

Future amortization of intellectual property for the next five years is as follows:

(in thousands)

Earnings per Share

The Company reports earnings per share in accordance

with FASB ACS 260-10.

Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average

number of common shares available.

Diluted earnings per share is computed similarly to basic earnings per share except that the denominator

is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been

issued and if the additional common shares were dilutive.

The components of basic and diluted earnings per share for the years ended

August 31, 2021, 2020 and 2019 were as follows:

Schedule of earnings per share

We report earnings per share in accordance with ASC 260.

Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding.

Diluted earnings per share is computed similarly to basic earnings per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.

The components of basic and diluted earnings per share for the years ended August 31, 2022, 2021, and 2020 were as follows:

(in thousands) 2022 2021 2020

4 unchanged sentences

Stock-Based Compensation

Compensation costs related to stock options are

determined in accordance with FASB ASC 718-10, “Compensation-Stock Compensation”, using the modified prospective method.

Under this method, compensation cost is calculated based on the grant-date fair value estimated in accordance with FASB ASC 718-10, amortized

on a straight-line basis over the options’ vesting period.

Stock-based compensation expense related to stock options, not including

shares issued to Directors for services, was $ 2.4 million, $ 1.3 million and $ 866 thousand for the years ended August 31, 2021, 2020 and

2019, respectively.

This expense is included in the consolidated statements of operations and comprehensive income as selling, general,

and administration and research and development expense.

Compensation costs related to stock options are determined in accordance with ASC 718.

Compensation cost is calculated based on the grant-date fair value estimated using the Black-Scholes pricing model and then amortized on a straight-line basis over the requisite service period.

Stock-based compensation expense related to stock options, not including shares issued to directors for services, was $ 2.7 million, $ 2.4 million, and $ 1.3 million for the years ended August 31, 2022, 2021, and 2020, respectively.

Impairment of Long-lived Assets

The Company accounts for the impairment and disposition

of long-lived assets in accordance with ASC 350, “Intangibles – Goodwill and Other ” and ASC 360, “Property

and Equipment” .

Long-lived assets to be held and used are reviewed for events or changes in circumstances that indicate that

their carrying value may not be recoverable.

We measure recoverability by comparing the carrying amount of an asset to the expected future

undiscounted net cash flows generated by the asset.

If we determine that the asset may not be recoverable, or if the carrying amount of

an asset exceeds its estimated future undiscounted cash flows, we recognize an impairment charge to the extent of the difference between

the fair value and the asset's carrying amount.

We account for the impairment and disposition of long-lived assets in accordance with ASC 360.

Long-lived assets to be held and used are reviewed for events or changes in circumstances that indicate that their carrying value may not be recoverable.

We measure recoverability by comparing the carrying amount of an asset to the expected future undiscounted net cash flows generated by the asset.

If we determine that the asset may not be recoverable, or if the carrying amount of an asset exceeds its estimated future undiscounted cash flows, we recognize an impairment charge to the extent of the difference between the fair value and the asset's carrying amount.

No impairment losses were recorded during the years ended August 31, 2022, 2021, and 2020.

Recently Issued Accounting Standards

In February 2016, the FASB issued ASU 2016-02,

Leases (Topic 842), which supersedes existing guidance on accounting for leases in "Leases (Topic 840)" and generally requires

all leases to be recognized in the consolidated balance sheet.

ASU 2016-02 is effective for annual and interim reporting periods beginning

after December 15, 2018.

The Company adopted this ASU on September 1, 2019.

In December 2019, the FASB issued ASU 2019-12 , Income Taxes (Topic

Simplifying the Accounting for Income Taxes , which is intended to simplify various areas related to the accounting for income

taxes and improve consistent application of Topic 740.

The guidance eliminates certain exceptions related to the approach for intra-period

tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for

outside basis differences related to changes in ownership of equity method investments and foreign subsidiaries.

The guidance also simplifies

aspects of accounting for franchise taxes and the accounting for the enacted changes in tax laws or rates, as well as the accounting for

the step-up in the tax basis of goodwill.

ASU 2019-12 is effective for us beginning in fiscal 2022;

The adoption of the new standard is

not expected to have a material impact on the Company’s consolidated financial statements.

In March 2020, the FASB issued Accounting Standards Update (“ASU”)

2020-04 , Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU

The amendments in ASU 2020-04 provide temporary optional expedients and exceptions for applying GAAP to contract modifications,

hedging relationships and other transactions to ease the potential accounting and financial reporting burden associated with transitioning

away from reference rates that are expected to be discontinued, including the London Interbank Offered Rate (“LIBOR”).

ASU is effective as of March 12, 2020, through December 31, 2022.

The adoption of the new standard is not expected to have a material

impact on our financial statements or related disclosures.

NOTE 3 – REVENUE RECOGNITION

We generate revenue primarily from the sale of

software licenses and providing consulting services to the pharmaceutical industry for drug development.

The Company determines revenue recognition through

the following steps:

Identification of the contract, or contracts, with a customer

Identification of the performance obligations in the contract

Determination of the transaction price

Allocation of the transaction price to the performance obligations in the contract

Recognition of revenue when, or as, the Company satisfies a performance obligation

Components of Revenue

The following is a description of principal activities

from which the Company generates revenue.

As part of the accounting for these arrangements, the Company must develop assumptions that

require judgment to determine the stand-alone selling price for each performance obligation identified in the contract.

Stand-alone selling

prices are determined based on the prices at which the Company separately sells its services or goods.

Revenue Components

Typical Payment Terms

Software Revenues:

Software revenues are generated primarily from sales of software licenses

at the time the software is unlocked and the term commences.

The license period typically is one year or less.

Along with the license

a di minimis amount of customer support is provided to assist the customer with the software.

Should the customer need more than

a di minimis amount of support they can choose to enter into a separate contract for additional training.

Most software is installed on

our customers’ servers and the Company has no control of the software once the sale is made.

For certain software arrangements the Company hosts the licenses on

servers maintained by the Company, Revenue for those arrangements are accounted as Software as a Service over the life of the contract.

These arrangements are a small portion of software revenues of the Company.

Payments are generally due upon invoicing on a net 30 basis unless other payment terms are negotiated with the customer based on customer history.

Typical industry standards apply.

Consulting Contracts:

Consulting services provided to our customers are generally recognized over time as the contracts are performed and the services are rendered.

The company measures its consulting revenue based on time expended compared to total estimated hours to complete a project.

The Company believes the methods chosen for its contract revenue best depicts the transfer of benefits to the customer under the contracts.

Payment terms vary, depending on the size of the contract, credit history and history with the client and deliverables within the contract.

Consortium Member Based Services:

The performance obligation is recognized on a time elapsed basis, by month, for which the services are provided, as the Company transfers control evenly over the contractual period.

Payment is due at the beginning of the period, generally on a net 30 or 60 basis.

Remaining performance obligations that do not

fall under the expedients, require the Company to perform various consulting and software development services and consortium memberships

of approximately $6.2 million.

It is anticipated these revenues will be recognized within the next year.

Contract Liabilities

During the year ended August 31, 2021, the Company

recognized $430 thousand of revenue that was included in contract liabilities as of August 31, 2020.

Disaggregation of Revenues

The components of disaggregation of revenue for

the years ended August 31, 2021, 2020 and 2019 were as follows:

Schedule of disaggregation of revenues

Year ended August 31,

(in thousands)

Software licenses

Point in time

Consulting services

Total revenue

Contracts in Progress

Contracts in progress are included in the accompanying balance sheets

under the following captions:

Schedule of contract in progress

In October 2021, the FASB issued ASU No.

2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”).

The amendment requires contract assets and contract liabilities acquired in a business combination to be recognized and measured in accordance with ASC 606, Revenue from Contracts with Customers, as if the acquirer had originated the contract.

The amendment is intended to improve the accounting for acquired revenue contracts with customers in a business combination, related to the recognition of an acquired contract liability, and to payment terms and their effect on subsequent revenue recognized by the acquirer.

The amendment also provides certain practical expedients when applying the guidance.

ASU 2021-08 is effective for interim and annual periods beginning after December 15, 2022, on a prospective basis, with early adoption permitted.

The Company expects to adopt ASU 2021-08 in the first quarter of fiscal year 2024.

The Company is currently evaluating the potential impact of ASU 2021-08 to its consolidated financial statements.

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832), which requires business entities to disclose information about transactions with a government that are accounted for by applying a grant or contribution model by analogy (for example, IFRS guidance in IAS 20 or guidance on contributions for not-for-profit entities in ASC 958-605).

For transactions within scope, the new standard requires the disclosure of information about the nature of the transaction, including significant terms and conditions, as well as the amounts and specific financial statement line items affected by the transaction.

The new guidance is effective for annual reporting periods beginning after December 15, 2021.

The Company does not expect that the adoption of this standard will have a material impact on its consolidated financial statements;

however, the Company expects to increase its disclosures with respect to government assistance beginning in the first quarter of fiscal year 2023.

NOTE 3 – OTHER INCOME (EXPENSE), NET

The components of other income (expense), net for the years ended August 31, 2022, 2021, and 2020, were as follows:

Year ended August 31,

(in thousands) 2022 2021 2020

Revenues in excess of billings

Billings in excess of revenues

Revenues over billings on uncompleted contracts

Cost, estimated earnings, and billings on uncompleted contracts are

summarized as follows as of August 31, 2021, 2020 and 2019:

(in thousands)

Revenues earned to date on uncompleted contracts

Billings to date on uncompleted contracts

Revenues over billings on uncompleted contracts

Balance increases and decreases in

these accounts are due to the timing of amounts billed, payments received, and revenue recognized.

Interest income $ 717 $ 201 $ 30

Interest expense — ( 22 ) —

Change in valuation of contingent consideration ( 283 ) ( 486 ) ( 203 )

Gain on sale of assets 1 — —

(Loss) gain on currency exchange ( 231 ) 139 ( 45 )

Total other income (expense), net $ 204 $ ( 168 ) $ ( 218 )

NOTE 4 – PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

(in thousands) 2022 2021

Equipment $ 346 $ 293

Computer equipment 860 606

2 unchanged sentences

Construction in progress — 1,302

Less accumulated depreciation and amortization

Depreciation expense was $ 226 thousand, $ 166 thousand

and $ 132 thousand for the years ended August 31, 2021, 2020, and 2019, respectively.

Subtotal 1,280 2,250

Less accumulated depreciation ( 648 ) ( 412 )

Total $ 632 $ 1,838

Depreciation expense was $ 0.3 million, $ 0.2 million, and $ 0.2 million for the years ended August 31, 2022, 2021, and 2020, respectively.

NOTE 5 – INVESTMENTS

The Company invests a portion of its excess cash

balances in short-term debt securities.

Investments at August 31, 2021, consisted of corporate bonds with maturities remaining of less

than 12 months.

The Company may also invest excess cash balances in certificates of deposits, money market accounts, government-sponsored

enterprise securities, corporate bonds and/or commercial paper.

The Company accounts for its investments in accordance with FASB ASC 320,

Investments – Debt and Equity Securities.

As of August 31, 2021, all investments were classified as held-to-maturity securities.

The following tables summarize the Company’s

short-term investments as of August 31, 2021, and 2020:

Schedule of short term investment

The Company invests a portion of its excess cash balances in short-term debt securities.

Investments at August 31, 2022, consisted of corporate bonds and term deposits with maturities remaining of less than 12 months.

The Company may also invest excess cash balances in certificates of deposits, money market accounts, government-sponsored enterprise securities, and/or commercial paper.

The Company accounts for its investments in accordance with ASC 320, Investments – Debt and Equity Securities.

As of August 31, 2022, all investments were classified as held-to-maturity securities, as the Company has the positive intent and ability to hold these securities until maturity.

The Company believes unrealized losses on investments were primarily caused by rising interest rates rather than changes in credit quality and accordingly has not recorded an allowance for credit losses on its debt securities as of August 31, 2022, and 2021.

The following tables summarize the Company’s short-term investments as of August 31, 2022, and 2021:

August 31, 2022

(in thousands)

Amortized Cost

(in thousands) Amortized Cost Gross

Losses Fair Value

Commercial notes (due within one year) $ 72,168 $ — $ ( 839 ) $ 71,329

Term deposits (due within one year) 4,500 4,500

Total $ 76,668 $ — $ ( 839 ) $ 75,829

August 31, 2021

(in thousands)

Amortized Cost

(in thousands) Amortized Cost Gross

Losses Fair Value

Commercial notes (due within one year) $ 86,620 $ — $ ( 136 ) $ 86,484

Total $ 86,620 $ — $ ( 136 ) $ 86,484

NOTE 6 – CONTRACTS PAYABLE

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On June 1, 2017, we acquired DILIsym.

The agreement

provided for a working capital adjustment, an eighteen-month $1.0 million holdback provision against certain representations and warranties,

and an earnout agreement of up to an additional $5.0 million in earnout payments based on earnings over three years following acquisition.

The earnout liability has been recorded at an estimated fair value.

The agreement provided for a working capital adjustment, an 18-month $ 1.0 million holdback provision against certain representations and warranties, and an earnout agreement of up to an additional $ 5.0 million in earnout payments based on earnings over three years following acquisition.

The earnout liability was recorded at an estimated fair value.

Payments under the earnout liability started in fiscal year 2019.

In September 2018, $1.6 million was paid out under the first earnout payment, a second earnout payment was made in August 2019 in the

amount of $1.7 million.

In September 2018, $ 1.6 million was paid out under the first earnout payment.

A second earnout payment was made in August 2019 in the amount of $ 1.7 million.

The final payment of $ 1.8 million was paid in August 2020.

In addition, no claims were made against the holdback

and the $1.0 million holdback provision was released eighteen months after June 1, 2017.

In addition, no claims were made against the holdback and the $ 1.0 million holdback provision was released eighteen months after June 1, 2017.

Lixoft Acquisition Liabilities :

On April 1, 2020, the Company acquired

The agreement provided for a 24-month $2.0 million holdback provision against certain representations and warrantees, comprised

of $1.3 million of cash and shares of stock valued at $666 thousand issued at the date of the Agreement.

In addition, based on a revenue

growth formula for the two years subsequent to April 1, 2020, the agreement calls for earnout payments up to $5.5 million (two thirds

cash and one-third newly issued, unregistered shares of the Company’s common stock).

The former shareholders can earn up to $2.0

million the first year and $3.5 million in year two.

In June 2021, $2.0 million was paid to former Lixoft shareholder under the first

earnout payment, which was comprised of $1.3 million of cash and $666 thousand worth of common stock.

As of August 31, 2021, and 2020 the following

liabilities have been recorded:

Schedule of Liabilities

August 31, 2021

August 31, 2020

On April 1, 2020, the Company acquired Lixoft.

The agreement provided for a 24-month $ 2.0 million holdback provision against certain representations and warranties, comprised of $ 1.3 million of cash and shares of common stock valued at $ 0.7 million issued and deposited into an escrow account at the date of the agreement.

In April 2022, the shares of common stock were released from escrow and $1.3 million of cash was paid to settle the holdback liability.

In addition, based on a revenue-growth formula for the two years subsequent to April 1, 2020, the agreement called for earnout payments up to $ 5.5 million (two-thirds' cash and one-third newly issued, unregistered shares of the Company’s common stock).

The former shareholders could earn up to $ 2.0 million the first year and $ 3.5 million in year two.

In June 2021, $ 2.0 million was paid out under the first earnout payment, which was comprised of $ 1.3 million of cash and shares of common stock valued at $ 0.7 million.

In May 2022, $ 3.5 million was paid out under the second earnout payment, which was comprised of $ 2.3 million cash and shares of common stock valued at $ 1.2 million.

As of August 31, 2022, and 2021 the following liabilities have been recorded:

(in thousands) August 31, 2022 August 31, 2021

Holdback liability $ — $ 1,333

Earnout liability — 3,217

Subtotal $ — $ 4,550

Current portion — 4,550

Long-term $ — $ —

NOTE 7 – COMMITMENTS AND CONTINGENCIES

Our corporate headquarters is located in Lancaster,

California, where we lease 9,255 square feet of office space.

The term of the lease extends to January 31, 2026 and the base rent is approximately

$17 thousand per month.

The lease agreement gives the Company the right, upon 180 days’ prior notice, to opt out of all or part

of the last four years of the term, with no penalty.

We lease 12,623 square feet of office space in

Buffalo, New York.

The initial five-year lease term expired in October 2018;

and was renewed for a three-year option, extending it to

November 2021 at a base rent of approximately $16 thousand per month.

On August 3, 2021, a new lease agreement was signed for a different

property for a five-year term at a base rent of approximately $7 thousand per month with an annual 2% increase, and with two, five-year

renewal options.

Due to ongoing construction, the Company has not yet moved into the new property but anticipates doing so and commencing

the lease term no later than November 2021.

We lease approximately 2,700 square feet of space

in Research Triangle Park, North Carolina.

The initial three-year term was due to expire in October 2020.

An amendment to the initial

lease became effective on April 1, 2020, which added 686 square feet and extended the term of the lease to September 30, 2023.

base rent is approximately $8 thousand per month with an annual 3% increase.

We lease approximately 2,300 square feet of office

space in Paris, France.

As of April 1, 2020, the lease agreement had minimum payments equaling approximately $288 thousand.

is for a 9-year term, with an option to terminate every 3 years, and expires in November of 2024.

The base rent is $16 thousand per quarter

(approximately $5.3 thousand per month) and can be adjusted each December based on a consumer price index.

Rent expense, including common area maintenance

fees for the years ended August 31, 2021, 2020 and 2019 was $ 655 thousand, $ 644 thousand and $ 584 thousand, respectively.

Lease liability maturities as of August 31, 2021,

were as follows:

Future minimum lease payments

thousands) Years

Ending August 31,

We lease 9,255 square feet of office space in Lancaster, California, where our corporate headquarters are located.

The lease term extends to January 31, 2026, and the base rent is $ 17 thousand per month.

The lease agreement gives the Company the right, upon 180 days’ prior notice, to opt out of all or part of the last four years of the term, with no penalty.

We lease 4,317 square feet of office space in Buffalo, New York.

The lease term extends to November 30, 2026, and the base rent is $ 7 thousand per month with an annual 2 % increase.

The lease agreement provides the Company with two five-year renewal options and the right to terminate the lease with one year’s prior written notice with certain penalties.

We previously leased 12,623 square feet of office space at a different location in Buffalo, New York.

That lease term extended to November 2021 and the base rent was $ 16 thousand per month.

We have a data center colocation space in Buffalo, New York, with a lease term through November 30, 2026, and rent of $ 4 thousand per month with an annual 3 % increase.

We lease 3386 square feet of office space in Durham, North Carolina.

The lease term extends to September 30, 2023, and the base rent is $ 8 thousand per month with an annual 3 % increase.

We lease 2,300 square feet of office space in Paris, France.

The lease term extends to November 30, 2024, and the rent is $ 5 thousand per month and adjusted each December based on a consumer price index.

Rent expense, including common area maintenance fees for the years ended August 31, 2022, 2021, and 2020 was $ 0.6 million, $ 0.7 million, and $ 0.6 million, respectively.

Lease liability maturities as of August 31, 2022, were as follows:

(in thousands) Years Ending August 31, Amount

Total undiscounted liabilities 1,521

imputed interest ( 117 )

Total future minimum lease payments

Total operating lease liabilities (including current portion) $ 1,404

Line of Credit

On March 31, 2020, the Company entered into a

Credit Agreement with Wells Fargo Bank, N.A.

The Credit Agreement, has provided the Company with a credit facility of $ 3,500,000 through

April 15, 2022 .

As of August 31, 2021, there were no amounts drawn against the line of credit.

Interest accrues daily at the bank’s

The base rate is the rate equal to the highest of (i) the Prime Rate in effect, (ii) 1.5% above Daily One Month LIBOR, and

(iii) the Federal Funds Rate plus 1.5%.

The rate as of August 31, 2021, was 3.25%.

Under the terms of the agreement the borrower is to

maintain a zero balance under this line of credit for a period of thirty consecutive days during each 12-month period commencing March

The Credit Agreement is collateralized by the assets of the Simulations Plus Division and is subject to certain financial covenants.

On March 31, 2020, the Company entered into a Credit Agreement with Wells Fargo Bank, N.A.

The Credit Agreement provided us with a credit facility of $ 3.5 million through April 15, 2022 (the "Termination Date"), on which date the Credit Agreement terminated in accordance with its terms.

As a result, we can no longer draw down against the line of credit.

We chose not to renew or pursue an alternative credit facility as we do not foresee a need to utilize such credit facility within the next twelve months.

As of the Termination Date, there were no amounts drawn against the line of credit.

Employment Agreements

In the normal course of business, the Company

has entered into employment agreements with certain of its key management personnel that may require compensation payments upon termination.

License Agreement

The Company had a royalty agreement with Dassault

Systèmes Americas Corp.

for access to their Metabolite Database for developing our Metabolite Module within ADMET Predictor.

module was renamed the Metabolism Module when we released ADMET Predictor version 6 on April 19, 2012.

Under this agreement, we paid a

royalty of 25% of revenue derived from the sale of the Metabolism/Metabolite module.

This agreement was renegotiated, and the

Company does not bear any royalty obligations towards Dassault Systèmes Americas Corp.

effective June 30, 2019.

the license agreement terminated on September 5, 2020.

Under this agreement for the years ended August 31, 2021, 2020 and 2019 we incurred

royalty expense (benefit) of $ 0 , $( 26 ) thousand and $ 196 thousand, respectively.

We have not experienced any adverse impact on revenue

since terminating the license agreement.

In addition, the Company has developed a database to replace the Metabolite Database, which was

completed at the end of fiscal year 2021.

We are not a party to any legal proceedings and

are not aware of any pending legal proceedings of any kind.

In the normal course of business, the Company has entered into employment agreements with certain of its executive officers that may require compensation payments upon termination.

We are not a party to any legal proceedings and are not aware of any pending legal proceedings of any kind.

NOTE 8 – SHAREHOLDERS' EQUITY

Shares Outstanding

Shares of common stock outstanding for the years

ended August 31, 2021, 2020 and 2019 were as follows:

Shares of common stock outstanding for the years ended August 31, 2022, 2021, and 2020 were as follows:

2022 2021 2020

Common stock outstanding, beginning of year 20,142 19,923 17,592

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Common stock outstanding, end of year 20,260 20,142 19,923

The Company’s Board of Directors declared

cash dividends during the years ended August 31, 2021, and 2020.

The Company’s Board of Directors declared cash dividends during the years ended August 31, 2022, and 2021.

The details of dividends paid are in the following tables:

Schedule of dividends declared and paid

thousands, except dividend per share) Fiscal

Distribution Date

Number of Shares

(in thousands, except dividend per share) Fiscal Year 2022

Record Date Distribution Date Number of Shares

Outstanding on

thousands, except dividend per share) Fiscal Year 2020

Distribution Date

Number of Shares

Record Date Dividend per

Share Total Amount

10/25/2021 11/01/2021 20,148 $ 0.06 $ 1,209

1/31/2022 2/07/2022 20,178 $ 0.06 1,211

4/25/2022 5/02/2022 20,207 $ 0.06 1,212

7/25/2022 8/01/2022 20,239 $ 0.06 1,214

Total $ 4,846

(in thousands, except dividend per share)

Fiscal Year 2021

Record Date Distribution Date Number of Shares

Outstanding on

Record Date Dividend per

Share Total Amount

10/26/2020 11/02/2020 19,924 $ 0.06 $ 1,195

1/25/2021 2/01/2021 20,010 $ 0.06 1,201

4/26/2021 5/03/2021 20,115 $ 0.06 1,207

7/26/2021 8/02/2021 20,139 $ 0.06 1,208

Total $ 4,811

Stock Option Plans

On February 23, 2007, the Board of Directors adopted,

and the shareholders approved, the 2007 Stock Option Plan under which a total of 1,000,000 shares of common stock had been reserved for

On February 25, 2014 the shareholders approved an additional 1,000,000 shares increasing the total number of shares that may

be granted under the Option Plan to 2,000,000.

This plan terminated in February 2017 by its term.

On December 23, 2016 the Board of Directors adopted,

and on February 23, 2017 the shareholders approved, the 2017 Equity Incentive Plan under which a total of 1,000,000 shares of common stock

has been reserved for issuance.

This plan will terminate in December 2026.

Effective April 9, 2021, the Board of Directors

approved, subject to shareholder approval, the adoption of a new 2021 Equity Incentive Plan (the “2021 Plan”) under which

1.3 million shares are reserved for issuance.

The 2021 Plan, which was submitted for shareholder approval at our 2021 Special Meeting

of Shareholders held on June 23, 2021, was approved by the shareholders.

As a result, the 2021 Plan became effective as of April 9, 2021,

and the Company may issue equity awards to permitted recipients thereunder.

The maximum contractual life of the plan is ten years.

As of August 31, 2021, employees and directors

held Qualified Incentive Stock Options (ISOs) and Non-Qualified Stock Options (“NQSOs”) to purchase 1.2 million shares of common

stock at exercise prices ranging from $6.85 to $66.14 per share.

The following tables summarize information about

stock options:

Schedule of stock option activity

(in thousands,

except per share and weighted-average amounts)

On December 23, 2016, the Board of Directors adopted, and on February 23, 2017, the shareholders approved, the 2017 Equity Incentive Plan (the "2017 Plan"), under which a total of 1.0 million shares of common stock were reserved for issuance.

The 2017 plan would have terminated in December 2026.

The 2017 Plan was replaced by the Company’s 2021 Plan (as defined below), and as a result, no further issuances of shares may be made under the 2017 Plan.

On April 9, 2021, the Board of Directors adopted, and on June 23, 2021, the shareholders approved, the 2021 Equity Incentive Plan (the “2021 Plan”), under which a total of 1.3 million shares of common stock have been reserved for issuance.

The 2021 Plan will terminate in 2031.

As of August 31, 2022, employees and directors held Qualified Incentive Stock Options ("ISOs") and Non-Qualified Stock Options ("NQSOs") to purchase 1.2 million shares of common stock at exercise prices ranging from $ 6.85 to $ 66.14 per share.

The following tables summarize information about stock options:

(in thousands, except per share and weighted-average amounts)

Transactions During Fiscal Year 2022

Weighted-Average

Options Weighted-Average

Exercise Price

Weighted-Average

Per Share Weighted-Average

Contractual Life

Outstanding, August 31, 2021 1,184 $ 25.63 6.47

Granted 255 42.13

Exercised ( 104 ) 16.15

Canceled/Forfeited ( 90 ) 42.30

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Vested and Expected to Vest, August 31, 2022 1,236 $ 28.51 6.12

(in thousands,

except per share and weighted-average amounts)

(in thousands, except per share and weighted-average amounts)

Transactions During Fiscal Year 2021

Weighted-Average

Options Weighted-Average

Exercise Price

Weighted-Average

Per Share Weighted-Average

Contractual Life

Outstanding, August 31, 2020 1,224 $ 17.76 6.79

Granted 226 57.60

Exercised ( 204 ) 12.53

Canceled/Forfeited ( 62 ) 29.83

2 unchanged sentences

Vested and Expected to Vest, August 31, 2021 1,173 $ 25.69 6.47

(in thousands,

except per share and weighted-average amounts)

(in thousands, except per share and weighted-average amounts)

Transactions During Fiscal Year 2020

Weighted-Average

Options Weighted-Average

Exercise Price

Weighted-Average

Per Share Weighted-Average

Contractual Life

Outstanding, August 31, 2019 1,163 $ 12.63 7.13

Granted 223 39.23

Exercised ( 121 ) 9.29

Canceled/Forfeited ( 41 ) 14.19

2 unchanged sentences

Vested and Expected to Vest, August 31, 2020 1,194 $ 17.75 6.77

The following table summarizes the Intrinsic Value of options

outstanding and options exercisable:

Intrinsic value of options outstanding and options exercisable

(in thousands)

Intrinsic Value

Fiscal Year 2019

Fiscal Year 2020

The following table summarizes the Intrinsic Value of options outstanding and options exercisable:

(in thousands) Intrinsic Value

Outstanding Intrinsic

Exercisable Intrinsic

Fiscal Year 2020 $ 51,273 $ 29,151 $ 4,086

The weighted-average remaining contractual life

of options outstanding issued under the Plans, for both ISOs and NQSOs, was 6.47 years at August 31, 2021.

The total fair value of non-vested

stock options as of August 31, 2021, was $ 6.3 million and is amortizable over a weighted average period of 3.43 years.

fair value of these options was estimated at the date of grant using the Black-Scholes option-pricing model.

The Black-Scholes option

valuation model was developed for use in estimating the fair value of traded options, which do not have vesting restrictions and are fully

transferable.

In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price

The following table summarizes the

fair value of the options, including both ISOs and NQSOs, granted during the current fiscal year 2021 and fiscal year 2020:

Schedule of fair value of options

(in thousands,

except prices)

Fiscal Year 2021 $ 25,705 $ 19,373 $ 11,554

Fiscal Year 2022 $ 39,208 $ 30,187 $ 3,572

The weighted-average remaining contractual life of options outstanding issued under the Plans, for both ISOs and NQSOs, was 6.14 years at August 31, 2022.

The total fair value of non-vested stock options as of August 31, 2022, was $ 9.1 million and is amortizable over a weighted-average period of 3.27 years.

The fair value of these options was estimated at the date of grant using the Black-Scholes option-pricing model.

The Black-Scholes option-valuation model was developed for use in estimating the fair value of traded options, which do not have vesting restrictions and are fully transferable.

In addition, option-valuation models require the input of highly subjective assumptions, including the expected stock price volatility.

The following table summarizes the fair value of the options, including both ISOs and NQSOs, granted during the current fiscal year 2022 and fiscal year 2021:

(in thousands, except prices) Fiscal Year 2022 Fiscal Year 2021

Estimated fair value of awards granted $ 4,597 $ 5,092

5 unchanged sentences

Weighted-average dividend yield 0.58 % 0.42 %

Weighted average expected life

The exercise prices for the options outstanding

at August 31, 2021, ranged from $6.85 to $66.14, and the information relating to these options is as follows:

(in thousands

except prices)

Schedule of options by exercise price range

Exercise Price

Awards Outstanding

Awards Exercisable

During the fiscal years ended August 31, 2021,

2020, and 2019, we issued 5,620,

shares of stock valued at $ 345

thousand, $ 290

thousand, and $ 212

thousand, respectively, to our non-management directors as compensation for board-related duties.

The balance of our par value common stock and

additional paid-in capital as of August 31, 2021, was $ 10 thousand and $ 133.4 million, respectively, and the balance of our par value

common stock and additional paid-in capital as of August 31, 2020 was $ 10 thousand and $ 128.5 million, respectively.

Weighted-average expected life 6.59 years 6.63 years

The exercise prices for the options outstanding at August 31, 2022, ranged from $ 6.85 to $ 66.14 , and the information relating to these options is as follows:

(in thousands except prices)

Exercise Price Awards Outstanding Awards Exercisable

Low High Quantity Weighted -Average

Life Weighted-Average

Price Quantity Weighted-Average

Life Weighted-Average

$ 6.85 $ 9.77 286 2.75 years $ 8.29 286 2.75 years $ 8.29

$ 9.78 $ 18.76 200 4.32 years $ 10.37 200 4.32 years $ 10.37

$ 18.77 $ 33.40 241 6.38 years $ 25.21 121 5.97 years $ 24.16

$ 33.41 $ 47.63 229 8.64 years $ 38.47 41 7.01 years $ 35.41

$ 47.64 $ 66.14 289 8.56 years $ 56.30 63 8.14 years $ 58.92

1,245 6.14 years $ 28.61 711 4.47 years $ 17.65

During the fiscal years ended August 31, 2022, 2021, and 2020, we issued 7,120 , 5,620 and 7,205 shares of stock valued at $ 0.4 million, $ 0.3 million, and $ 0.3 million, respectively, to our nonmanagement directors as compensation for board-related duties.

The balance of our par-value common stock and additional paid-in capital as of August 31, 2022, was $ 11 thousand and $ 138.5 million, respectively, and the balance of our par-value common stock and additional paid-in capital as of August 31, 2021, was $ 10 thousand and $ 133.4 million, respectively.

NOTE 9 – INCOME TAXES

We utilize FASB ASC 740-10, “Income Taxes”

which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been

included in the financial statements or tax returns.

Under this method, deferred income taxes are recognized

for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting

amounts at each year end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected

to affect taxable income.

Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to

The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax

assets and liabilities.

The components of the income tax provision for

the years ended August 31, 2021, 2020 and 2019 were as follows:

Components of the income tax provision

We utilize ASC 740 to account for income taxes which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.

Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income.

Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities.

The components of the income tax provision for the years ended August 31, 2022, 2021, and 2020 were as follows:

(in thousands) 2022 2021 2020

Federal $ 2,518 $ 1,315 $ 2,098

State 611 450 478

Foreign ( 228 ) 166 39

Total current tax expense 2,901 1,931 2,615

Federal ( 4 ) ( 379 ) ( 428 )

State ( 265 ) ( 249 ) ( 132 )

Total deferred federal and state ( 269 ) ( 628 ) ( 560 )

A reconciliation of the expected income tax computed

using the federal statutory income tax rate to the Company's effective income tax rate is as follows for the years ended August 31, 2021,

2020 and 2019:

Effective income tax rate

Total $ 2,632 $ 1,303 $ 2,055

A reconciliation of the expected income tax computed using the federal statutory income tax rate to the Company's effective income tax rate is as follows for the years ended August 31, 2022, 2021, and 2020:

2022 2021 2020

Income tax computed at federal statutory tax rate 21.0 % 21.0 % 21.0 %

7 unchanged sentences

Change in prior year estimated taxes ( 2.4 ) ( 0.1 ) ( 1.8 )

Significant components of the Company's deferred

tax assets and liabilities for income taxes for the years ended August 31, 2021, and 2020 are as follows:

Components of company deferred tax assets and liabilities

Total 17.4 % 11.8 % 18.0 %

Significant components of the Company's deferred tax assets and liabilities for income taxes for the years ended August 31, 2022, and 2021 are as follows:

(in thousands) 2022 2021

Deferred tax assets:

Accrued payroll and other expenses

Accrued compensation $ 563 $ 586

Deferred revenue 241 102

2 unchanged sentences

Research and development credits 347 66

Foreign tax credits 101 —

State taxes 128 72

Allowance for doubtful accounts 3 20

10 unchanged sentences

Net deferred tax liabilities $ ( 1,456 ) $ ( 1,726 )

We follow guidance issued by the FASB with regard

to our accounting for uncertainty in income taxes recognized in the financial statements.

Such guidance prescribes a recognition threshold

of more likely than not and a measurement process for financial statement recognition and measurement of a tax position taken or expected

to be taken in a tax return.

In making this assessment, a company must determine whether it is more likely than not that a tax position

will be sustained upon examination, based solely on the technical merits of the position and must assume that the tax position will be

examined by taxing authorities.

Our policy is to include interest and penalties related to income tax expense.

Interest and penalties

were immaterial for fiscal years 2021, 2020, and 2019, respectively.

We file income tax returns with the IRS and various state jurisdictions

as well as with the countries of India and France.

Our federal income tax returns for fiscal year 2018 thru 2020 are open for audit, and

our state tax returns for fiscal year 2017 through 2020 remain open for audit.

Our review of prior year tax positions using the

criteria and provisions presented in guidance issued by FASB did not result in a material impact on our financial position or results

of operations.

We follow ASC 740 with regard to our accounting for uncertainty in income taxes recognized in the financial statements.

Such guidance prescribes a recognition threshold of more likely than not and a measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

In making this assessment, we determine whether it is more likely than not that a tax position will be sustained upon examination, based solely on the technical merits of the position and assume that the tax position will be examined by taxing authorities.

Interest and penalties were immaterial for fiscal years 2022, 2021, and 2020, respectively.

We file income tax returns with the IRS and various state jurisdictions as well as with the countries of India, Belgium and France.

Our federal income tax returns for fiscal year 2019 through 2021 are open for audit, and our state tax returns for fiscal year 2018 through 2021 remain open for audit.

Our review of prior-year tax positions using the criteria and provisions presented in guidance issued by FASB did not result in a material impact on our financial position or results of operations.

NOTE 10 – CONCENTRATIONS AND UNCERTAINTIES

Financial instruments that potentially subject

the Company to concentration of credit risk consist principally of cash, cash equivalents, trade accounts receivable and short-term investments.

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash, cash equivalents, trade accounts receivable, and short-term investments.

The Company holds cash and cash equivalents at banks located in California, with balances that often exceed FDIC insured limits.

we hold cash at a bank in France that is not FDIC-insured.

In addition, we hold cash at a bank in France that is not FDIC-insured.

Historically, the Company has not experienced any losses in such accounts.

However, we are investigating alternative way to minimize our exposure to such risk.

While the Company may be exposed to credit losses

due to the nonperformance of its counterparties, the Company does not expect the settlement of these transactions to have a material effect

on its results of operations, cash flows or financial condition.

The Company maintains cash at financial institutions that may, at times,

exceed federally insured limits.

Revenue concentration shows that

international sales accounted for 31 %, 29 %

of revenue for the years ended August 31, 2021, 2020 and 2019, respectively.

Three customers accounted for 11 %, 4 %

of revenue for fiscal year 2021.

Three customers accounted for 9 %, 7 %

(a dealer account in Japan representing various customers), and 7 %

of revenue for fiscal year 2020.

Three customers accounted for 8 %, 8 %

(a dealer account in Japan representing various customers), and 7 %

of revenue for fiscal year 2019.

Accounts receivable concentrations show that three

customers each comprised between 5 % and 16 % of accounts receivable as of August 31, 2021, respectively;

two customers comprised 13 % and

10 % of accounts receivable as of August 31, 2020, respectively.

We operate in the computer software industry,

which is highly competitive and changes rapidly.

Our operating results could be significantly affected by our ability to develop new products

and find new distribution channels for new and existing products.

The majority of our customers are in the pharmaceutical

During economic downturns, we have seen consolidations in the pharmaceutical industry.

extent to which the COVID-19 pandemic impacts our business going forward will depend on numerous factors we cannot reliably predict, including

the duration and scope of the pandemic;

businesses and individuals' actions in response to the pandemic;

and the impact on economic activity

including the possibility of recession or financial market instability.

These factors may adversely impact consumer, business, and government

spending as well as customers' ability to pay for our products and services on an ongoing basis .

As a result, our growth rate could

be affected by consolidation and downsizing in the pharmaceutical industry.

NOTE 11 – SEGMENT AND GEOGRAPHIC REPORTING

We account for segments and geographic revenues

in accordance with guidance issued by the FASB.

Our reportable segments are strategic business units that offer different products and

Results for each divisional segment and consolidated

results are as follows for the years ended August 31, 2021, 2020 and 2019:

(in thousands)

ended August 31, 2021

Simulations Plus

Income (loss) from operations

Capital expenditures

Capitalized software costs

Depreciation and amortization

(in thousands)

ended August 31, 2020

Simulations Plus

Income from operations

Capital expenditures

Capitalized software costs

Depreciation and amortization

As Lixoft was purchased on April 1, 2020, five months of

activity is reflected for fiscal year 2020.

(in thousands)

ended August 31, 2019

Simulations Plus

Income from operations

Capital expenditures

Capitalized software costs

Depreciation and amortization

Results for each business unit segment and consolidated

results for the years ended August 31, 2021, 2020 and 2019 were as follows:

(in thousands)

ended August 31, 2021

While the Company may be exposed to credit losses due to the nonperformance of its counterparties, the Company does not expect the settlement of these transactions to have a material effect on its results of operations, cash flows, or financial condition.

The Company maintains cash at financial institutions that may, at times, exceed federally insured limits.

Revenue concentration shows that international sales accounted for 30 %, 31 %, and 29 % of revenue for the years ended August 31, 2022, 2021, and 2020, respectively.

Our three largest customers in terms of revenue accounted for 5 %, 3 %, and 3 % of revenue for fiscal year 2022.

Our three largest customers in terms of revenue accounted for 11 %, 4 %, and 3% of revenue for fiscal year 2021.

Our three largest customers in terms of revenue accounted for 9 %, 7 %, and 7 % of revenue for fiscal year 2020.

Accounts receivable concentrations show that our three largest customers in terms of accounts receivable each comprised between 4 % and 8 % of accounts receivable as of August 31, 2022, respectively;

our two largest customers in terms of accounts receivable comprised 5 % and 16 % of accounts receivable as of August 31, 2021, respectively.

We operate in the biosimulation market, which is highly competitive and changes rapidly.

Our operating results could be significantly affected by our ability to develop new products and find new distribution channels for new and existing products.

NOTE 11 – SEGMENT REPORTING

The Company applies ASC 280, Segment Reporting, in determining reportable segments.

The Company has two reportable segments:

Software and Services.

Segment information is presented in the same manner that the chief operating decision maker ("CODM") reviews certain financial information based on these reportable segments.

The CODM reviews revenue and gross profit for both of the reportable segments.

Gross profit is defined as revenue less cost of revenue incurred by the segment.

No operating segments have been aggregated to form the reportable segments.

The Company does not allocate assets at the reportable segment level as these are managed on an entity-wide group basis and, accordingly, the Company does not report asset information by segment.

The Company does not allocate operating expenses that are managed on an entity-wide group basis and, accordingly, the Company does not allocate and report operating expenses at segment level.

There are no internal revenue transactions between the Company’s segments.

The following tables summarize the results for each segment as follows for the years ended August 31, 2022, 2021 and 2020:

(in thousands) Year ended August 31, 2022

Software Services Total

Revenues $ 32,642 $ 21,264 $ 53,906

Cost of revenues 3,060 7,762 10,822

Our software business and services business represented 60% and 40%

of total revenue, respectively, for the year ended August 31, 2021.

(in thousands)

ended August 31, 2020

Gross profit $ 29,582 $ 13,502 $ 43,084

Gross margin 91 % 63 % 80 %

Our software business and services business represented 61 % and 39 % of total revenue, respectively, for the year ended August 31, 2022.

(in thousands) Year ended August 31, 2021

Software Services Total

Revenues $ 27,670 $ 18,796 $ 46,466

Cost of revenues 3,235 7,365 10,600

Our software business and services business represented 52% and 48%

of total revenue, respectively, for the 2020 fiscal year.

(in thousands)

ended August 31, 2019

Gross profit $ 24,435 $ 11,431 $ 35,866

Gross margin 88 % 61 % 77 %

Our software business and services business represented 60 % and 40 % of total revenue, respectively, for the year ended August 31, 2021.

(in thousands) Year ended August 31, 2020

Software Services Total

Revenues $ 21,587 $ 20,002 $ 41,589

Cost of revenues 2,883 7,766 10,649

Our software business and services business represented 54% and 46%

of total revenue, respectively, for the 2019 fiscal year.

In addition, the Company allocates revenues to

geographic areas based on the locations of its customers.

Geographical revenues for the years ended August 31, 2021, 2020 and 2019 were

(in thousands)

ended August 31,

NOTE 12 – RELATED PARTY TRANSACTIONS

On April 1, 2020, the Company acquired Lixoft.

As part of that agreement the Company paid $ 6.7 million and issued stock with a value of $ 2.6 million to former shareholders of Lixoft,

some who are currently employees of the Company.

In addition, as part of the acquisition agreement the Company owes approximately $ 947

thousand of acquisition liabilities at August 31, 2021, to the former shareholders who are still employees of the Company.

fiscal year 2021, under the terms of the agreement, the Company made payments totaling $ 2.0 million to the former shareholders of Lixoft

comprised of two-thirds cash and one-third newly issued, unregistered shares of the Company’s common stock.

Gross profit $ 18,704 $ 12,236 $ 30,940

Gross margin 87 % 61 % 74 %

Our software business and services business represented 52 % and 48 % of total revenue, respectively, for the year ended August 31, 2020.

NOTE 12 – EMPLOYEE BENEFIT PLAN

We maintain a 401(k) Plan for eligible employees.

We make matching contributions equal to 100% of the employee’s elective deferral, not to exceed 4% of the total employee compensation.

We can also elect to make a profit-sharing contribution.

We contributed $ 535 thousand, $ 456 thousand and $ 405 thousand for fiscal years

2021, 2020 and 2019, respectively.

We make matching contributions equal to 100 % of the employee’s elective deferral, not to exceed 4 % of the employee's total compensation.

We contributed $ 0.6 million, $ 0.5 million, and $ 0.5 million for fiscal years 2022, 2021, and 2020, respectively.

NOTE 13 – ACQUISITION

On March 31, 2020, the Company entered into a

Stock Purchase and Contribution Agreement (the “Agreement”) with Lixoft, a French société par actions simplifiée

On April 1, 2020, the Company consummated the acquisition of all outstanding equity interests of Lixoft pursuant

to the terms of the Agreement, with Lixoft becoming a wholly-owned subsidiary of the Company.

We believe the combination of Simulations

Plus and Lixoft provides substantial future potential based on the complementary strengths of each of the companies.

Under the terms of the Agreement, as described

below, the Company will pay the former shareholders of Lixoft total consideration of up to $16.5 million, consisting of two-thirds cash

and one-third newly issued, unregistered shares of the Company’s common stock.

In addition, the Company will pay $3,456,029 of excess

working capital based on the March 31, 2020 financial statements of Lixoft.

On April 1, 2020, the Company paid the former

shareholders of Lixoft a total of $10.8 million, comprised of cash in the amount of $9.5 million and the issuance of 111,682 shares of

the Company’s common stock valued at $3.7 million, net of adjustments and a holdback for representations and warranties (under the

terms of the Agreement a price of approximately $32.15 dollars per share was used based upon the volume-weighted average closing price

of the Company’s shares of common stock for the 30-consecutive-trading-day period ending two trading days prior to April 1, 2020).

9,669 shares are held in an escrow for offset for representations and warrantees.

Within three business days following the two-year anniversary

of March 31, 2020 (the date of the Agreement) and subject to any offsets for representations and warrantees, the Company will pay the

former shareholders of Lixoft a total of $2.0 million, comprised of $1.3 million of cash and the release from an escrow shares of stock

valued at $666 thousand issued at the date of the Agreement.

The Agreement provides for a two-year market standoff period in which the

newly issued shares may not be sold by the recipients thereof.

In addition, the agreement calls for earnout payments

up to an additional $5.5 million, two-thirds cash and one-third newly issued, unregistered shares of the Company’s common stock

based on a revenue growth formula each year for the two years subsequent to April 1, 2020.

The former shareholders can earn up to $2.0

million the first year and $3.5 million in year two.

The earnout liability has been recorded at fair value.

Under the acquisition method of accounting, the

total purchase price reflects Lixoft’s tangible and intangible assets and liabilities based on their estimated fair values at the

date of the completion of the acquisition (April 1, 2020).

The following table summarizes the preliminary allocation of the purchase

price for Lixoft:

Allocation of purchase price

On March 31, 2020, we entered into a Share Purchase and Contribution Agreement (the “SPCA”) with Lixoft.

Under the terms of the SPCA, we agreed to pay the former shareholders of Lixoft total consideration of up to $ 16.5 million, consisting of two-thirds cash and one-third newly issued, unregistered shares of our common stock.

At closing, we paid the former shareholders of Lixoft a total of $ 10.8 million, comprised of cash in the amount of $ 9.5 million and the issuance of 111,682 shares of our common stock valued at $ 3.7 million, net of adjustments and a $ 2.0 million holdback for representations and warranties.

In addition, we paid $ 3.5 million of excess working capital based on the March 31, 2020, financial statements of Lixoft.

In addition, the SPCA called for earnout payments of up to an additional $ 5.5 million, payable in two-thirds cash and one-third newly issued, unregistered shares of our common stock, based on a revenue-growth formula each year for the two years subsequent to April 1, 2020.

The former shareholders could earn up to $ 2 million the first year and $ 3.5 million in year two.

In June 2021, $ 2.0 million was paid out under the first earnout payment, which was comprised of $ 1.3 million of cash and shares of our common stock valued at $ 0.7 million.

In April 2022, we released from escrow and distributed the $ 2.0 million holdback consideration, consisting of $ 1.3 million in cash and shares of our common stock valued at $ 0.7 million (amounting to an aggregate of 20,326 unregistered shares of our common stock), to the former shareholders of Lixoft.

In May 2022, $ 3.5 million was paid out under the second earnout payment, which was comprised of $ 2.3 million of cash and shares of our common stock valued at $ 1.2 million (amounting to an aggregate of 23,825 unregistered shares of our common stock), to the former shareholders of Lixoft in accordance with the SPCA.

Under the acquisition method of accounting, the total purchase price reflects Lixoft’s tangible and intangible assets and liabilities based on their estimated fair values at the date of the completion of the acquisition (April 1, 2020).

The following table summarizes the allocation of the purchase price for Lixoft:

(in thousands)

Assets acquired, including cash of $ 3,799 and accounts receivable of $ 629

4 unchanged sentences

Total consideration $ 18,593

Goodwill has been provided in the transaction

based on estimates of future earnings of this subsidiary including anticipated synergies associated with the positioning of the combined

company as a leader in model-based drug development.

Consolidated Supplemental Pro Forma Information

The following unaudited consolidated supplemental

pro forma information assumes that the acquisition of Lixoft took place on September 1, 2017 for the income statement years ended August

These amounts have been calculated after applying the Company’s accounting policies and adjusting the results of Lixoft

to reflect the same expenses in the years ended August 31, 2019 and 2018.

The adjustments include costs of acquisition, and amortization

of intangibles and other technologies acquired during the merger, assuming the fair-value adjustments applied on September 1, 2017, together

with consequential tax effects.

Schedule of statement of income

(in thousands)

Balances include five months actual results for

15 – UNAUDITED QUARTERLY FINANCIAL DATA

The following table presents selected unaudited

quarterly financial data for each full quarterly period for the years ended August 31, 2021, and 2020:

(in thousands)

Year ended August 31, 2021

Earnings per share, basic

Earnings per share, diluted

(in thousands)

Year ended August 31, 2020

Earnings per share, basic

Earnings per share, diluted

Goodwill has been provided in the transaction based on estimates of future earnings of this subsidiary including anticipated synergies associated with the positioning of the combined company as a leader in model-based drug development.

NOTE 14 - SUBSEQUENT EVENTS

Dividend Declared

On Wednesday, October 13, 2021, our Board of Directors

declared a quarterly cash dividend of $0.06 per share to our shareholders.

The dividend in the amount of $1.2 million will be distributed

on Monday, November 1, 2021, for shareholders of record as of Monday, October 25, 2021.

Effective September 1,

2021, the Company merged both Cognigen Corporation and DILIsym, Services, Inc.

with and into Simulations Plus, Inc.

through short form

mergers (the “Mergers”).

To effectuate the Mergers, the Company filed Certificates of Ownership with the Secretaries of State

of the states of Delaware (Cognigen’s and DILIsym’s state of incorporation) and California (the Company’s state of incorporation).

Consummation of the Mergers was not subject to approval of the Company’s stockholders and did not impact the rights of the Company’s

stockholders.

On Thursday, October 20, 2022, our Board of Directors declared a quarterly cash dividend of $ 0.06 per share to our shareholders.

The dividend in the amount of $ 1.2 million will be distributed on Wednesday, November 7, 2022, for shareholders of record as of Monday, October 31, 2022.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures