What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2024-10-30 compared with 2023-10-27 · 342 added, 304 removed, 839 unchanged (44% of the section changed)

23 unchanged sentences

Name Title Action Date Adopted Expiration Date Aggregate # of Securities to be Purchased/Sold

Walter Woltosz (1)

Director Termination 7/15/2021 6/30/2023 480,000

Walter Woltosz (1)

Director Adoption 7/17/2023 10/3/2025 560,000

John DiBella (1)

Business Unit President Adoption 07/24/2024 10/25/2025 69,689

Jill-Fiedler-Kelly (2)

Business Unit President Adoption 08/08/2024 10/25/2025 20,000

Brett Howell (3)

Business Unit President Termination 01/09/2023 07/31/2024 28,875

John Paglia (4)

Director Adoption 8/9/2023 7/31/2024 13,000

(1) On June 30, 2023, the pre-arranged stock trading plan pursuant to Rule 10b5-1, adopted by Walter Woltosz and his spouse on July 15, 2021 (the “Expired Plan”), automatically terminated pursuant to its terms.

The Expired Plan provided for the potential sale of up to 480,000 shares of Company common stock until June 30, 2023.

On July 17, 2023, Mr.

Woltosz and his spouse entered into a new pre-arranged stock trading plan pursuant to Rule 10b5-1 (the “New Plan”), which provides for the potential sale of up to 560,000 shares of Company common stock.

The New Plan expires on October 3, 2025, or upon the earlier completion of all authorized transactions under the New Plan.

(2) On August 9, 2023, John Paglia entered into a pre-arranged stock trading plan pursuant to Rule 10b5-1, which provides for (i) the potential exercise of vested stock options and the associated sale of up to 11,000 shares of Company common stock underlying such options, and (ii) the potential sale of up to an additional 2,000 shares of Company common stock.

The plan expires on July 31, 2024, or upon the earlier completion of all authorized transactions under the plan.

Director Termination 08/09/2023 07/31/2024 13,000

(1) On July 24, 2024, John DiBella , entered into a pre-arranged stock trading plan pursuant to Rule 10b5-1, which provides for (i) the potential exercise of vested stock options and the associated sale of up to 26,889 shares of Company common stock underlying such options, and (ii) the potential sale of up to an additional 42,800 shares of Company common stock.

The plan expires on October 25, 2025, or upon the earlier completion of all authorized transactions under the plan.

(2) On July 24, 2024, Jill Fiedler-Kelly , entered into a pre-arranged stock trading plan pursuant to Rule 10b5-1, which provides for the potential exercise of vested stock options and the associated sale of up to 20,000 shares of Company common stock underlying such options.

The plan expires on October 25, 2025, or upon the earlier completion of all authorized transactions under the plan.

(3) On July 31, 2024 , the pre-arranged stock trading plan pursuant to Rule 10b5-1, adopted by Brett Howell on January 9, 2023, automatically terminated pursuant to its terms.

The expired plan provided for the potential sale of up to 28,875 shares of Company common stock until July 31, 2024.

(4) On July 31, 2024 , the pre-arranged stock trading plan pursuant to Rule 10b5-1, adopted by John Paglia on August 9, 2023, automatically terminated pursuant to its terms.

The expired plan provided for (i) the potential exercise of vested stock options and the associated sale of up to 11,000 shares of Company common stock underlying such options, and (ii) the potential sale of up to an additional 2,000 shares of Company common stock until July 31, 2024.

Other than those disclosed above, none of our directors or officers adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” in each case as defined in Item 408 of Regulation S-K.

Please refer to the information included in Part II, Item 5 under the heading “Repurchases ” for information regarding the Company’s effective share repurchase program, including sales made by the Company under the ASR Agreement during the quarter ended August 31, 2023.

Please refer to the information included in Part II, Item 5 under the heading “Repurchases” for information regarding the Company’s effective share repurchase program.

ITEM 9C – DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

1 unchanged sentence

ITEM 10 – DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

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.

Information required by this item 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 (the “Proxy Statement”).

We have adopted a Code of Conduct (the "code of conduct") 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 conduct is publicly available on our website at https://www.simulations-plus.com/wp-content/uploads/SLP-Code-of-Conduct-09-25-23.pdf.

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

The code of conduct is publicly available on our website in the “Investors” section of our corporate website at www.simulations-plus.com under “Investors – Shareholder Information.” If we make any substantive amendments to the code of conduct or grant any waiver, including any implicit waiver, from a provision of the code of conduct, we will disclose the nature of the amendment or waiver on our website or in a Current Report on Form 8-K.

ITEM 11 – EXECUTIVE COMPENSATION

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 Report.

The information required by this item is incorporated by reference to the Proxy Statement.

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.

The information required by this item is incorporated by reference to the Proxy Statement.

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.

The information required by this item is incorporated by reference to the Proxy Statement.

ITEM 14 – PRINCIPAL ACCOUNTING FEES AND SERVICES

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

The information required by this item is incorporated by reference to the Proxy Statement.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

EXHIBIT NUMBER DESCRIPTION

2.1^ Agreement and Plan of Merger, dated July 23, 2014, by and among the Company, Cognigen Corporation and the other parties thereto, incorporated by reference to an Exhibit 2.1 to the Company’s Form 8-K/A filed November 18, 2014.

2.2^ Stock Purchase Agreement by and among Simulation Plus, Inc., DILIsym Services, Inc., the Shareholders’ Representative and the Shareholders of DILIsym Services, Inc., incorporated by reference to Exhibit 10.13 to the Company’s Form 10-Q filed July 10, 2017.

Agreement and Plan of Merger, dated July 23, 2014, by and among the Company, Cognigen Corporation and the other parties thereto, incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K/A filed November 18, 2014.

Stock Purchase Agreement by and among Simulations Plus, Inc., DILIsym Services, Inc., the Shareholders’ Representative and the Shareholders of DILIsym Services, Inc., incorporated by reference to Exhibit 10.13 to the Company’s Form 10-Q filed July 10, 2017.

Share Purchase and Contribution Agreement Relating to Lixoft, dated March 31, 2020, incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed April 2, 2020.

Agreement and Plan of Merger, dated June 16, 2023, by and among Simulations Plus, Inc., Insight Merger Sub, Inc., Immunetrics, Inc.

and LaunchCyte LLC, incorporated by reference to an Exhibit 2.1 to the Company’s Form 8-K filed June 20, 2023.

and LaunchCyte LLC, incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed June 20, 2023.

2.5^+ Stock Purchase Agreement, by and among the Company, Pro-ficiency Holdings, Inc.

(“Pro-ficiency”), each of the stockholders of Pro-ficiency (collectively, the “Sellers”) and WRYP Stockholders Services, LLC, solely in its capacity as the Sellers’ Representative, dated June 11, 2024, incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed June 12, 2024.

3.1 Articles of Incorporation of the Company, incorporated by reference to an Exhibit 3.1 to the Company’s Form 10-K filed November 29, 2010.

5 unchanged sentences

333-6680) filed March 25, 1997.

4.3* Description of Securities.

4.3 Description of Securities, incorporated by reference to Exhibit 4.1 to the Company’s 10-K filed October 27, 2023.

10.1(†) The Company’s 2007 Stock Option Plan, as amended, incorporated by reference to Exhibit 10.3 to the Company’s Form 10-K filed April 9, 2014.

2 unchanged sentences

10.4(†) 2017 Equity Incentive Plan, incorporated by reference to Appendix A to the Company’s Definitive Schedule 14A Proxy Statement filed December 29, 2016.

10.5(†) Employment Agreement by and between the Company and Shawn O’Connor dated September 3, 2020 incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed September 9, 2020.

10.6(†) Employment Agreement by and between the Company and Will Frederick, dated December 1, 2020 incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q filed January 11, 2021.

10.7(†) Separation Agreement, dated December 1, 2020, by and between the Company and John Kneisel, incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q filed April 14, 2021.

10.5 Third Amendment to Lease by and between the Company and Crest Development LLC, dated as of December 28, 2020 incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed January 4, 2021.

1 unchanged sentence

2021 Equity Incentive Plan, incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed June 8, 2021.

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

and Shawn O’Connor, dated November 19, 2021 incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed November 19, 2021.

10.11(†) Employment Agreement by and between the Company and John DiBella, dated January 1, 2022, incorporated by reference to Exhibit 10.12 to the Company’s Form 10-K filed October 28, 2022.

10.12(†) Employment Agreement by and between the Company and Brett Howell, dated January 1, 2022, incorporated by reference to Exhibit 10.13 to the Company’s Form 10-K filed October 28, 2022.

10.13(†) Employment Agreement by and between the Company and Jill Fiedler-Kelly, dated January 1, 2022, incorporated by reference to Exhibit 10.14 to the Company’s Form 10-K filed October 28, 2022.

Confirmation for Fixed Dollar Accelerated Share Repurchase Transaction, dated as of January 11, 2023, by and between Simulations Plus, Inc.

6 unchanged sentences

10.11(†) Amended and Restated Employment Agreement between Simulations Plus, Inc.

and Steven Chang, dated June 16, 2023, incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed June 20, 2023.

and Shawn O’Connor, dated November 1, 2023, incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed November 1, 2023.

10.12(†) Amended and Restated Employment Agreement between Simulations Plus, Inc.

and Will Frederick, dated November 1, 2023, incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed November 1, 2023.

10.13(†) Amended and Restated Employment Agreement between Simulations Plus, Inc.

and John DiBella, dated November 1, 2023, incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed November 1, 2023.

10.14(†) Amended and Restated Employment Agreement between Simulations Plus, Inc.

and Jill Fiedler-Kelly, dated November 1, 2023, incorporated by reference to Exhibit 10.5 to the Company’s Form 8-K filed November 1, 2023.

10.15(†) Second Amendment to 2021 Equity Incentive Plan, of Simulations Plus, Inc., dated February 8, 2024, incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed February 12, 2024.

19.1 * Simulations Plus, Inc.

Insider Trading Policy

21.1 * List of Subsidiaries.

23.1 * Consent of Independent Registered Public Accounting Firm.

24.1 * Power of Attorney (see signature page)

31.1 * Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

2 unchanged sentences

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

97.1 * Simulations Plus, Inc.

Compensation Recovery Policy

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

101.SCH*** Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents

104*** Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101 attachments).

_____________________________

^ Schedules and exhibits omitted pursuant to Item 601(b)(2) of Registration S-K.

The registrant agrees to furnish supplementally a copy of any omitted schedule to the SEC upon request.

* Filed herewith.

1 unchanged sentence

*** The XBRL related information in Exhibit 101 shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

Schedules, exhibits, and similar supporting attachments or agreements are omitted pursuant to Item 601(b)(2) of Regulation S-K.

The Company agrees to furnish a supplemental copy of any omitted schedule or similar attachment to the Securities and Exchange Commission upon request.

† Refers to management contracts or compensatory plans or arrangements.

+ Portions of the exhibit, marked by brackets, have been omitted because the omitted information (i) is not material and (ii) would likely cause competitive harm if publicly disclosed.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

3 unchanged sentences

Will Fredrick

Chief Financial Officer (Principal financial officer)

Chief Financial Officer & Chief Operating Officer (Principal financial officer)

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Will Frederick his or her true and lawful attorney-in-fact and agent, with full power of substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

16 unchanged sentences

October 30, 2024

/s/ Will Frederick Chief Financial Officer (Principal financial

/s/ Will Frederick Chief Financial Officer & Chief Operating Officer (Principal financial

officer and principal accounting officer)

4 unchanged sentences

August 31, 2024, 2023 and 2022

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

FINANCIAL STATEMENTS

27 unchanged sentences

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

Revenue Recognition – Contract progress estimates

Description of the Matter

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.

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 hours incurred divided by total labor hours 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.

1 unchanged sentence

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.

1 unchanged sentence

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.

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

Rose, Snyder & Jacobs LLP

34 unchanged sentences

Cash and cash equivalents $ 10,311 $ 57,523

Accounts receivable, net of allowance for doubtful accounts of $ 46 and $ 12

10,201 13,787

Accounts receivable, net of allowance for credit losses of $ 149 and $ 46

Prepaid income taxes 2,197 804

4 unchanged sentences

Capitalized computer software development costs, net of accumulated amortization of $ 18,727 and $ 17,199

12,499 11,335

Property and equipment, net 812 671

2 unchanged sentences

Other intangible assets, net of accumulated amortization of $ 3,177 and $ 2,107

23,210 12,825

Goodwill 96,078 19,099

7 unchanged sentences

Accrued expenses 2,043 659

Contracts payable 3,250 —

Contracts payable - current portion 2,440 3,250

Operating lease liability - current portion 475 442

3 unchanged sentences

Deferred income taxes, net 1,608 —

Operating lease liability 755 943

Operating lease liability - net of current portion 531 755

Contracts payable - net of current portion — 3,330

26 unchanged sentences

Research and development 5,754 4,504 3,208

Selling, general, and administrative 34,718 24,965 20,566

Sales and marketing 8,915 6,558 4,879

General and administrative 22,351 28,160 20,086

Total operating expenses 37,020 39,222 28,173

Income from operations 6,131 8,725 14,911

Other income (expense), net 2,970 204 ( 168 )

Other income 6,280 2,970 204

Income before income taxes 12,411 11,695 15,115

7 unchanged sentences

Diluted 20,301 20,465 20,749

Other comprehensive income (loss), net of tax

Other comprehensive (loss) income, net of tax

Foreign currency translation adjustments ( 105 ) 167 ( 265 )

Unrealized losses on available-for-sale securities ( 5 ) — —

Comprehensive income $ 9,844 $ 10,128 $ 12,218

19 unchanged sentences

Balance, beginning of period ( 141 ) ( 308 ) ( 43 )

Other comprehensive income (loss) 167 ( 265 ) ( 101 )

Other comprehensive (loss) income ( 110 ) 167 ( 265 )

Balance, end of period ( 251 ) ( 141 ) ( 308 )

11 unchanged sentences

Change in fair value of contingent consideration ( 1,639 ) 680 283

Amortization of investment (discounts) premiums ( 1,134 ) 1,678 2,350

Amortization of investment discounts ( 1,116 ) ( 1,134 ) 1,678

Stock-based compensation 6,538 4,828 3,037

Deferred income taxes ( 1,765 ) ( 2,095 ) ( 270 )

Loss (gain) from disposal of assets 6 — —

Loss from disposal of assets — 6 —

Impairment of other intangibles — 500 —

14 unchanged sentences

Proceeds from maturities of short-term investments 71,089 114,907 109,121

Proceeds from sales of investments 45,177 — —

Purchased intangibles ( 541 ) ( 601 ) —

Acquisition of Immunetrics, net of cash acquired ( 8,223 ) — —

Business acquisition, net of cash acquired ( 98,773 ) ( 8,223 ) —

Capitalized computer software development costs ( 3,194 ) ( 3,219 ) ( 3,151 )

Net cash provided by (used in) investing activities 7,366 4,305 ( 26,742 )

Net cash (used in) provided by investing activities ( 53,967 ) 7,366 4,305

Cash flows from financing activities

4 unchanged sentences

Net cash used in financing activities ( 6,565 ) ( 23,266 ) ( 7,622 )

Net increase (decrease) in cash and cash equivalents 5,956 14,583 ( 12,223 )

Cash and cash equivalents, beginning of year $ 51,567 $ 36,984 $ 49,207

Net (decrease) increase in cash and cash equivalents ( 47,212 ) 5,956 14,583

Cash and cash equivalents, beginning of period $ 57,523 $ 51,567 $ 36,984

Cash and cash equivalents, end of period $ 10,311 $ 57,523 $ 51,567

8 unchanged sentences

Notes to Consolidated Financial Statements

For the Year Ended August 31, 2023

NOTE 1 – ORGANIZATION AND LINES OF BUSINESS

Simulations Plus, Inc.

(“Simulations Plus”) 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.

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

(“DILIsym”) as a wholly owned subsidiary.

In April 2020, Simulations Plus acquired Lixoft, a French société par actions simplifiée (“Lixoft”), as a wholly owned subsidiary pursuant to a stock purchase and contribution agreement.

In June 2023, Simulations Plus acquired Immunetrics, Inc.

(“Immunetrics”) as a wholly owned subsidiary through a reverse triangular merger.

(Simulations Plus together with its subsidiaries, collectively, the “Company,” “we,” “us,” “our”).

Effective September 1, 2021, the Company merged both Cognigen and DILIsym with and into Simulations Plus 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 (Simulation Plus’ 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 December 20, 2022, Simulations Plus International, Inc.

(“SLPI”), a Delaware corporation, was created as a wholly owned subsidiary of Simulations Plus in order to facilitate future international acquisitions, if any, and global integrations.

In furtherance of this objective, the Company added the trade name “SLP France” to Lixoft, and on April 25, 2023, Simulations Plus transferred its ownership of Lixoft to SLPI pursuant to a contribution and acceptance agreement, resulting in Lixoft becoming a wholly owned subsidiary of SLPI.

The transfer 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-based and machine-learning-based technologies.

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

For the Fiscal Year Ended August 31, 2024

NOTE 1 – DESCRIPTION OF BUSINESS

At the beginning of fiscal year 2024, the Company reorganized its internal structure to create a more integrated and cohesive operating platform based on key product and services offerings rather than separate divisions based on its prior acquisitions.

This business unit restructuring is engendering greater scientific collaboration and knowledge sharing within the Company that leads to identifying new opportunities that both advance the Company’s business objectives and deepen client relationships.

Continuing with our strategic plan of aligning our business units around products and services, the Pro-ficiency acquisition resulted in two new business units, Adaptive Learning & Insights and Medical Communications, giving the Company six business units that include:

• Cheminformatics (“CHEM”);

• Physiologically Based Pharmacokinetics (“PBPK”);

• Clinical Pharmacology and Pharmacometrics (“CPP”);

• Quantitative Systems Pharmacology (“QSP”);

• Adaptive Learning & Insights (“ALI”);

• Medical Communications (“MC”).

For more than 25 years, Simulations Plus has been a leading provider in the biosimulation market, offering end-to-end solutions across the drug development continuum, including guiding early drug discovery, establishing pre-clinical protocols, developing clinical programs, enabling clinical trial operations, facilitating regulatory submissions for product approval, and supporting commercial market launches.

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

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

Our customers use our software programs and scientific consulting services to enhance their understanding of the properties of potential new therapies and to use emerging data to improve formulations, select and justify dosing regimens, support generic pharmaceutical product development, optimize clinical trial designs, and simulate outcomes in special populations, such as in elderly and pediatric patients.

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of Simulations Plus and its wholly owned operating subsidiaries, Lixoft and Immunetrics.

All significant intercompany accounts and transactions are eliminated in consolidation.

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.

All intercompany balances and transactions have been 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.

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

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.

The preparation of consolidated financial statements in conformity with U.S.

generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

Significant estimates include, among other estimates, assumptions used in the allocation of the transaction price to separate performance obligations, estimates towards the measure of progress of completion on fixed-price service contracts, the determination of fair values and useful lives of long-lived assets as well as intangible assets, goodwill, allowance for credit losses for accounts receivable, recoverability of deferred tax assets, recognition of deferred revenue, determination of fair value of equity-based awards, and assumptions used in testing for impairment of long-lived assets.

Actual results could differ from those estimates, and such differences may be material to the consolidated financial statements.

Revenue Recognition

10 unchanged sentences

Standalone 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:

3 unchanged sentences

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.

Most software is installed on our customers’ servers and the Company has no control of the software once the sale is made except for the licensing parameters that control numbers of users, modules, and expiration dates.

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

7 unchanged sentences

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.

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.

Grant revenue:

The Company receives government assistance in the form of cash grants which vary in size, duration, and conditions from domestic governmental agencies.

Accounting for the grant revenue does not fall under ASC 606, Revenue from Contracts with Customers.

For government assistance in which no specific US GAAP applies, the Company accounts for such transactions as revenue and by analogy to a grant model.

The grant revenue is recognized on a gross basis.

The grant revenue is recognized over the duration of the program when the conditions attached to the grant are achieved.

If conditions are not satisfied, the grants are often subject to reduction, repayment, or termination.

The Company classifies the impact of government assistance on the accompanying Consolidated Statements of Operations and Comprehensive Income as services revenue.

The Company received assistance from domestic governmental agencies to provide reimbursement for various costs incurred for research and development.

These include direct grant awards and subawards.

The grants awarded are currently set to expire at various dates through 2025.

The Company recognized $ 1.0 million, $ 1.1 million, and $ 0.7 million for the fiscal years ended August 31, 2024, 2023, and 2022, respectively, within Services revenues on the Consolidated Statements of Operations and Comprehensive Income related to such assistance.

Amounts that have been earned but not yet funded are included in Accounts Receivable.

Computer equipment allowable by the grants are classified under Fixed Assets.

Subawards due to unrelated entities are classified under Accrued Expenses.

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, 2024, remaining performance obligations were $ 10.8 million.

Ninety-five percent of the remaining performance obligations are expected to be recognized over the next 12 months, with the remainder expected to be 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.

Ninety-seven percent of the remaining performance obligations are expected to be recognized over the next twelve months , with the remainder expected to be recognized thereafter.

Disaggregation of Revenues

The components of disaggregation of revenue for the years ended August 31, 2023, 2022, and 2021 were as follows:

The components of revenue for the fiscal years ended August 31, 2024, 2023, and 2022 were as follows:

Years ended August 31,

4 unchanged sentences

Over time 28,989 23,060 21,264

Total revenue $ 59,577 $ 53,906 $ 46,466

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

Geographical revenues for the years ended August 31, 2023, 2022, and 2021 were as follows:

Years ended August 31,

(in thousands) 2023 2022 2021

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

Americas $ 40,817 69 % $ 37,681 70 % $ 32,549 70 %

EMEA 11,713 20 % 10,388 19 % 7,906 17 %

Asia Pacific 7,047 12 % 5,837 11 % 6,011 13 %

Total $ 59,577 100 % $ 53,906 100 % $ 46,466 100 %

Total revenues $ 70,013 $ 59,577 $ 53,906

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, 2023, 2022, and 2021, were $ 2.7 million, $ 1.7 million, and $ 3.2 million, respectively.

During the year ended August 31, 2023, the Company recognized $ 2.6 million of revenue that was included in contract liabilities as of August 31, 2022, and 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.

Contract asset excluding accounts receivable balances as of August 31, 2024, 2023, and 2022, were $ 5.9 million, $ 2.7 million, and $ 1.7 million, respectively.

During the fiscal year ended August 31, 2024, the Company recognized $ 2.9 million of revenue that was included in contract liabilities as of August 31, 2023, and during the fiscal year ended August 31, 2023, the Company recognized $ 2.6 million of revenue that was included in contract liabilities as of August 31, 2022.

Deferred Commissions

1 unchanged sentence

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.

This expense is included in the consolidated statements of operations and comprehensive income as sales and marketing expense.

Cash and Cash Equivalents

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.

Restricted cash that was included within cash and cash equivalents as presented within our consolidated balance sheets as of August 31, 2024 and our consolidated statements of cash flows for the fiscal year ended August 31, 2024 was $ 0.1 million.

The Company determined this to be immaterial.

The restriction required us to maintain a minimum cash deposit in the Pro-ficiency bank account to collateralize an outstanding corporate credit card balance.

The associated corporate credit card program was terminated as part of the integration of Pro-ficiency and the cash restriction was removed as of October 4, 2024.

Accounts Receivable and Allowance for Credit Losses

2 unchanged sentences

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.

In times of economic turmoil, the Company’s estimates and judgments with respect to the collectability of its receivables are 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.

3 unchanged sentences

Balance, beginning of period $ 46 $ 12 $ 78

Provision for expected credit losses 77 ( 66 ) 28

Provision for credit losses 189 77 ( 66 )

Write-offs ( 86 ) ( 43 ) —

8 unchanged sentences

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.

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

For AFS 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 (loss).

For AFS debt securities, the unrealized gains and losses are included in other comprehensive income until realized, at which time they are reported through net 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 years ended August 31, 2023 and 2022, all of our investments were classified as held-to-maturity.

Capitalized Computer Software Development Costs

As of August 31, 2024, all of our investments were classified as AFS, as we sold the previously classified held-to-maturity securities to fund our acquisition of Pro-ficiency.

All of our investments were classified as held-to-maturity for the fiscal year ended August 31, 2023.

Research & Development and Capitalized Software Development Costs

Research and development ("R&D") activities include both enhancement of existing products and development of new products.

Development of new products and adding functionality to existing products are capitalized in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 985-20, “Costs of Software to Be Sold, Leased, or Marketed.” R&D expenditures, which primarily relate to both capitalized and expensed salaries, R&D supplies, and R&D consulting, were $ 9.0 million during fiscal year 2024, of which $ 3.3 million was capitalized.

R&D expenditures were $ 7.8 million during fiscal year 2023, of which $ 3.3 million was capitalized.

R&D expenditures during fiscal year 2022 were $ 6.4 million, of which $ 3.2 million was capitalized.

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

3 unchanged sentences

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 $ 1.5 million, $ 1.2 million, $ 1.4 million for the years ended August 31, 2023, 2022, and 2021, respectively.

Amortization of software development costs amounted to $ 2.1 million, $ 1.5 million, and $ 1.2 million for the fiscal years ended August 31, 2024, 2023, and 2022 , 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 impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

The Company assesses capitalized computer software development costs for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

Property and Equipment

9 unchanged sentences

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.

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

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

We determine if an arrangement is a lease at inception.

6 unchanged sentences

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, 2023:

Supplemental information related to operating leases was as follows as of August 31, 2024:

(in thousands)

Right of use assets $ 1,247

ROU assets $ 1,027

Lease liabilities, current $ 475

3 unchanged sentences

Weighted-average discount rate 5.46 %

Business units and internal restructuring

Consistent with the reorganization of our internal structuring to move away from divisions based on our prior acquisitions to business units organized around key product and service offerings, as of August 31, 2024, our reporting units now include the following business units:

• Cheminformatics, or CHEM;

• Physiologically Based Pharmacokinetics, or PBPK;

• Quantitative Systems Pharmacology, or QSP;

• Clinical Pharmacology and Pharmacometrics, or CPP;

• Adaptive Learning & Insights, or ALI;

• Medical Communications, or MC.

As part of this reorganization, we also took the opportunity to evaluate our departmental structure with a focus on continuing to improve operational performance and profitability.

Accordingly, we moved all services personnel into cost of revenues departments, all research and development (“R&D”) personnel into R&D expense departments, all sales and marketing personnel into sales and marketing expense departments, and all overhead personnel into general and administrative expense departments.

To provide investors improved visibility to our progress, we also decided to report separately our sales and marketing expenses from our general and administrative expenses.

Intangible Assets and Goodwill

7 unchanged sentences

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 the other assets and liabilities acquired as part of the Immunetrics acquisition have been assigned to a separate reporting unit.

The goodwill recorded in the Immunetrics reporting unit as of August 31, 2023, was $ 6.2 million.

Goodwill and the other assets and liabilities acquired as part of the Immunetrics acquisition have been assigned to our QSP reporting unit.

Goodwill and the other assets and liabilities acquired as part of the Pro-ficiency acquisition have been assigned to our ALI and MC reporting units.

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

As of August 31, 2023, we determined that we have five reporting units:

Simulations Plus, Cognigen, DILIsym, Lixoft, and Immunetrics.

We recognized an impairment charge $ 0.5 million for the Cognigen trade name, as management's strategy is to no longer use the Cognigen trade name.

Reconciliation of Goodwill as of August 31, 2023, 2022, and 2021:

(in thousands) Cognigen DILIsym Lixoft Immunetrics Total

Reconciliation of Goodwill for the fiscal year ended August 31, 2024:

(in thousands) CPP QSP ALI MC Total

Balance, August 31, 2022 $ 7,323 $ 5,598 $ — $ — $ 12,921

25 unchanged sentences

Covenants not to compete Straight line 2 years

Other internal use software Straight line 3 to 13 years

Customer relationships Straight line 8 to 14 years

3 unchanged sentences

$ 14,932 $ 2,107 $ 12,825

Total amortization expense for the years ended August 31, 2023, 2022, and 2021 was $ 0.6 million, $ 0.6 million, and $ 0.5 million, respectively.

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

Total amortization expense for the fiscal years ended August 31, 2024, 2023, and 2022 was $ 1.1 million, $ 0.6 million, and $ 0.6 million , respectively.

Estimated future amortization of finite-lived intangible assets for the next five fiscal years are as follows:

(in thousands)

7 unchanged sentences

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 carrying amounts are representative of their fair value due to their short maturities.

We invest a portion of our excess cash balances in short-term debt securities.

Investments at August 31, 2023, consisted of corporate bonds and term deposits with maturities remaining of less than 12 months.

Under the fair-value hierarchy, the fair market values of the Company’s cash equivalents and investments are Level I.

Short-term debt securities investments as of August 31, 2024, and 2023, consisted of corporate bonds and term deposits with maturities remaining of less than 12 months.

In addition, under the fair-value hierarchy, the fair market values of the Company’s cash equivalents and investments are Level I.

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

We account for our investments in accordance with ASC 320, Investments – Debt and Equity Securities.

As of August 31, 2023 and 2022, all investments were classified as held-to-maturity securities, as we have the positive intent and ability to hold these securities until maturity.

We believe unrealized losses on investments were primarily caused by rising interest rates rather than changes in credit quality, and, accordingly, we have not recorded an allowance for credit losses on our debt securities as of August 31, 2023, and 2022.

The following tables summarize our short-term investments as of August 31, 2023, and August 31, 2022:

As of August 31, 2024, all investments were classified as AFS securities, as we recently sold securities previously classified as held-to-maturity to fund the acquisition that closed on June 11, 2024, as discussed in Note 12.

Unrealized losses on investments as of August 31, 2024 were insignificant and not indicative of a change in credit quality, thus no allowance for credit losses has been recorded.

Unrealized losses on investments as of August 31, 2023 were primarily caused by rising interest rates rather than changes in credit quality, thus we did not record an allowance for credit losses.

The following tables summarize our short-term investments as of August 31, 2024, and 2023:

August 31, 2024

(in thousands) Amortized Cost Gross

Losses Fair Value

Commercial notes (due within one year) $ 53,940 $ — $ ( 115 ) $ 53,825

(in thousands) Amortized cost Unrealized gains Unrealized losses Fair value

Term deposits (due within one year) $ 1,500 $ — $ — $ 1,500

Total $ 57,940 $ — $ ( 115 ) $ 57,825

Corporate debt securities (due within one year) 8,448 — ( 4 ) 8,444

Total Level 1 9,948 — ( 4 ) 9,944

Total available-for-sale securities $ 9,948 $ — $ ( 4 ) $ 9,944

August 31, 2023

(in thousands) Amortized Cost Gross

Losses Fair Value

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

(in thousands) Amortized cost Unrealized gains Unrealized losses Fair value

Term deposits (due within one year) $ 4,000 $ — $ — $ 4,000

Total $ 76,668 $ — $ ( 839 ) $ 75,829

As of August 31, 2023, the Company had a liability for contingent consideration related to its acquisition of Immunetrics.

The fair value measurement of the contingent consideration obligations are determined using Level 3 inputs.

The fair value of contingent consideration obligations are based on a discounted cash flow model using a probability-weighted income approach.

government and agency securities (due within one year) 4,453 — ( 5 ) 4,448

Commercial paper (due within one year) 9,070 — ( 9 ) 9,061

Corporate debt securities (due within one year) 40,417 — ( 101 ) 40,316

Total Level 1 57,940 — ( 115 ) 57,825

Total held-to-maturity securities $ 57,940 $ — $ ( 115 ) $ 57,825

As of August 31, 2024 and 2023 , the Company had a liability for contingent consideration related to its acquisition of Immunetrics.

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 markets.

4 unchanged sentences

(in thousands) Amount

Contingent consideration at acquisition date 4,100

Contingent consideration at August 31, 2023 $ 4,780

Contingent consideration payment ( 2,500 )

Change in fair value of contingent consideration ( 1,640 )

Contingent consideration as of August 31, 2023 $ 4,780

Contingent consideration at August 31, 2024 $ 640

Business Combination

10 unchanged sentences

This accounting applies to all of our acquisitions regardless of acquisition date.

During the fiscal years ended August 31, 2024, 2023, and 2022, the Company recorded mergers and acquisitions expense of $ 2.6 million, $ 3.3 million, and $ 0.3 million, respectively.

The Company records mergers and acquisition expenses in general and administrative expenses in the consolidated statements of operations and comprehensive income.

Research and Development Costs

6 unchanged sentences

Intellectual property

In February 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.

In May 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.

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

We agreed to pay TSRL total consideration of $ 6.0 million, which was amortized over 10 years under the straight-line method and is fully amortized as of August 31, 2024.

In June 2017, as part of the acquisition of DILIsym, the Company acquired certain developed technologies associated with 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.

5 unchanged sentences

The cost of $ 1.1 million is being amortized over 5 years under the straight-line method.

In June 2024, we purchased certain developed technology of Pro-ficiency.

The cost of $ 16.6 million is being amortized over 5 years under the straight-line method.

The following table summarizes intellectual property as of August 31, 2024:

3 unchanged sentences

Amortization Net Book

Termination/nonassertion agreement-TSRL Inc.

Straight line 10 years

$ 6,000 $ 5,575 $ 425

Developed technologies–DILIsym acquisition Straight line 9 years

1 unchanged sentence

Intellectual rights of Entelos Holding Company Straight line 10 years

Developed technologies–Lixoft acquisition Straight line 16 years

8,010 2,173 5,837

Developed technologies–Immunetrics acquisition Straight line 5 years

1,080 261 819

Developed technologies–Lixoft acquisition Straight line 16 years

Developed technologies–Pro-ficiency acquisition Straight line 5 years

$ 16,630 $ 732 $ 15,898

5 unchanged sentences

Amortization Net Book

Royalty Agreement buy out-Enslein Research Straight line 10 years

$ 75 $ 75 $ —

Termination/nonassertion agreement-TSRL Inc.

6 unchanged sentences

8,010 1,678 6,332

Developed technologies–Immunetrics acquisition Straight line 5 years

1,080 45 1,035

Total amortization expense for intellectual property agreements for the years ended August 31, 2023, 2022, and 2021 was $ 1.4 million, $ 1.4 million, and $ 1.4 million, respectively.

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

$ 17,990 $ 9,301 $ 8,689

Total amortization expense for intellectual property agreements was $ 2.2 million, $ 1.4 million, and $ 1.4 million for the fiscal years ended August 31, 2024, 2023, and, 2022 , respectively.

Estimated future amortization of intellectual property for the next five fiscal years are as follows:

(in thousands)

4 unchanged sentences

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, 2023, 2022, and 2021 were as follows:

The components of basic and diluted earnings per share for the fiscal years ended August 31, 2024, 2023, and 2022 were as follows:

Years ended August 31,

1 unchanged sentence

Net income attributable to common shareholders $ 9,954 $ 9,961 $ 12,483

Weighted-average number of common shares outstanding during the year 20,075 20,196 20,045

Weighted-average number of common shares outstanding during the period 19,987 20,075 20,196

Dilutive effect of stock options 314 390 553

3 unchanged sentences

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 $ 4.3 million, $ 2.7 million, and $ 2.4 million for the years ended August 31, 2023, 2022, and 2021, respectively.

Stock-based compensation costs related to stock options, not including shares issued to directors for services, was $ 6.0 million, $ 4.3 million, and $ 2.7 million for the fiscal years ended August 31, 2024, 2023, and 2022, respectively.

Impairment of Long-lived Assets

3 unchanged sentences

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.

As of August 31, 2023, we recognized a $ 0.5 million impairment charge related to the Cognigen trade name, and it is included in SG&A expenses.

No impairment losses were recorded for the fiscal year ended August 31, 2024.

As of August 31, 2023, we recognized a $ 0.5 million impairment charge related to the Cognigen trade name, and it is included in G&A expenses .

The Cognigen trade name fair valuation was measured during the acquisition of Cognigen.

1 unchanged sentence

As the Company's other acquired trade names relate to marketed products actively sold to customers, and following management's assessment of other possible triggering events that could indicate a risk of impairment, management concluded that no impairment of other intangible assets or goodwill was necessary.

No impairment losses were recorded during the years ended 2022 and 2021.

No impairment losses were recorded for the fiscal year ended August 31, 2022.

Recently Issued Accounting Standards

Recently Adopted Accounting Standards

In October 2021, the FASB issued ASU 2021-08, Business Combinations - Accounting for contract assets and contract liabilities from contracts with customers (Topic 805), which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with Revenues from contracts with customers (Topic 606).

For public companies, the guidance is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years.

The Company adopted the guidance during fiscal year 2023.

The adoption of this guidance did not have a material impact on the Company’s 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 adopted the guidance during fiscal year 2023.

The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

NOTE 3 – OTHER INCOME (EXPENSE), NET

The components of other income (expense), net for the years ended August 31, 2023, 2022, and 2021, were as follows:

In October 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-06 - Disclosure Improvements:

Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative (“ASU 2023-06”).

ASU 2023-06 incorporates 14 of the 27 disclosure requirements published in SEC Release No.

33-10532 - Disclosure Update and Simplification into various topics within the Accounting Standards Codification (“ASC”).

ASU 2023-06's amendments represent clarifications to, or technical corrections of, current requirements.

For SEC registrants, the effective date for each amendment will be the date on which the SEC removes that related disclosure from its rules.

Early adoption is prohibited.

The Company does not expect ASU 2023-06 to have a material effect on its consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses.

The amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The amendments should be applied retrospectively to all prior periods presented in the financial statements.

The Company is currently evaluating the ASU to determine its impact on the Company’s disclosures.

In December 2023, the FASB issued a new standard to improve income tax disclosures.

The guidance requires disclosure of disaggregated income taxes paid, prescribes standardized categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures.

The amendments will be effective for annual periods beginning after December 15, 2024.

Early adoption is permitted.

The amendments should be applied on a prospective basis.

Retrospective application is permitted.

The Company is currently evaluating the ASU to determine its impact on the Company’s disclosures.

NOTE 3 – OTHER INCOME

The components of other income for the fiscal years ended August 31, 2024, 2023, and 2022 were as follows:

Years ended August 31,

1 unchanged sentence

Interest income $ 4,375 $ 4,131 $ 717

Interest expense — — ( 22 )

Change in fair valuation of contingent consideration 1,639 ( 680 ) ( 283 )

(Loss) gain on disposal of assets — ( 6 ) 1

(Loss) gain on currency exchange ( 475 ) ( 231 ) 139

Total other income (expense), net $ 2,970 $ 204 $ ( 168 )

Realized losses from sale of AFS securities ( 125 ) — —

Realized gains from sale of AFS securities 5 — —

Gain (loss) on currency exchange 386 ( 475 ) ( 231 )

Total other income $ 6,280 $ 2,970 $ 204

NOTE 4 – PROPERTY AND EQUIPMENT

9 unchanged sentences

Total $ 812 $ 671

Depreciation expense was $ 0.2 million, $ 0.3 million, and $ 0.2 million for the years ended August 31, 2023, 2022, and 2021, respectively.

Depreciation expense was $ 0.3 million, $ 0.2 million, and $ 0.3 million for the fiscal years ended August 31, 2024, 2023, and 2022, respectively.

NOTE 5 – COMMITMENTS AND CONTINGENCIES

On May 25, 2023, we entered into an amendment, effective October 1, 2023, to the lease agreement for our office space in Durham, North Carolina.

Prior to entering into the amendment, this lease was scheduled to terminate pursuant to its terms effective on September 30, 2023.

The amendment extends the lease through September 30, 2026, and effective October 1, 2023, reduces the leased square footage from 3,386 to approximately 1,510 , and reduces the monthly base rent from $ 8 thousand per month to $ 4 thousand per month with an annual increase of 3 %.

The amended lease agreement gives the Company the right, upon 9 months prior notice, to extend the lease for 60 months.

On February 17, 2023, we entered into an amendment, effective May 1, 2023, to the lease agreement for our office space in Lancaster, California, where our corporate headquarters are located.

Prior to entering into the amendment, this lease was scheduled to terminate pursuant to its terms effective on January 31, 2026.

The amendment extends the lease term through April 30, 2028, reduces the leased square footage from 9,255 to approximately 4,200 , and reduces the monthly base rent from $ 18 thousand per month to $ 8 thousand per month with an annual increase of 3 %.

The amended lease agreement gives the Company the right, upon 180 days’ prior notice, to opt out of all or part of the last three years of the lease 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 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, which amount is subject to adjustment each December based on a consumer price index.

We lease 7,141 square feet of office space in Pittsburgh, Pennsylvania.

The lease term extends to May 31, 2025, and the base rent is $ 10 thousand per month.

The lease agreement provides the Company with one five-year renewal option.

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.

Rent expense, including common area maintenance fees for the years ended August 31, 2023, 2022, and 2021 was $ 0.5 million, $ 0.6 million, and $ 0.7 million, respectively.

Rent expense, including common area maintenance fees, was $ 0.5 million, $ 0.5 million, and $ 0.6 million for the fiscal years ended August 31, 2024, 2023, and 2022, respectively.

Lease liability maturities as of August 31, 2024, were as follows:

15 unchanged sentences

Shares Outstanding

Shares of Company common stock outstanding for the years ended August 31, 2023, 2022, and 2021 were as follows:

(in thousands) Years ended August 31,

2023 2022 2021

Shares of Company's common stock outstanding for the fiscal years ended August 31, 2024, 2023, and 2022 were as follows:

Years ended August 31,

(in thousands) 2024 2023 2022

Common stock outstanding, beginning of period 19,938 20,260 20,142

2 unchanged sentences

Common stock outstanding, end of period 20,051 19,938 20,260

*Common stock repurchased per the ASR Agreement, as discussed in further detail, below.

The Company’s Board of Directors declared cash dividends during the fiscal years 2023 and 2022.

The Company’s Board of Directors declared cash dividends during the fiscal years ended August 31, 2024 and 2023.

The Board of Directors determined to discontinue the Company’s quarterly cash dividend after the dividend distribution on August 5, 2024.

The details of dividends paid are in the following tables:

25 unchanged sentences

On October 20, 2022, the Company’s Board of Directors approved, and on February 9, 2023, its shareholders approved, an amendment to the 2021 Plan to increase the number of shares of common stock authorized for issuance thereunder from 1.3 million shares to 1.55 million shares of common stock of the Company.

Thereafter, on October 19, 2023, the Company’s Board of Directors approved, and on February 8, 2024, its shareholders approved, an amendment to the 2021 Plan to further increase the number of shares of common stock authorized for issuance thereunder from 1.55 million to 2.5 million shares of common stock of the Company.

The 2021 Plan will terminate in 2031.

As of August 31, 2024, employees and directors of the Company held Qualified Incentive Stock Options (“ISOs”) and Non-Qualified Stock Options (“NQSOs”) to purchase an aggregate of 1.9 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:

The following table summarizes information about stock options:

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

37 unchanged sentences

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

The following table summarizes the Intrinsic Value of options outstanding and options exercisable:

(in thousands) Intrinsic Value

Outstanding Intrinsic

Exercisable Intrinsic

As of August 31, 2023 $ 25,705 $ 19,373 $ 11,554

As of August 31, 2022 $ 39,208 $ 30,187 $ 3,572

As of August 31, 2021 $ 17,875 $ 15,742 $ 5,135

The total grant-date fair value of nonvested stock options as of August 31, 2024, was $ 22.0 million and is amortizable over a weighted-average period of 3.25 years.

2 unchanged sentences

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 years ended August 31, 2023, 2022, and 2021:

The following table summarizes the fair value of the options, including both ISOs and NQSOs, granted during the fiscal years ended August 31, 2024, 2023, and 2022:

(in thousands, except weighted-average amounts) 2024 2023 2022

7 unchanged sentences

Weighted-average expected life 6.59 years 6.55 years 6.59 years

The exercise prices for the options outstanding at August 31, 2023, ranged from $ 6.85 to $ 66.14 , and the information relating to these options are as follows:

The exercise prices for the options outstanding at August 31, 2024, ranged from $ 6.85 to $ 66.14 per share, and the information relating to these options is as follows:

(in thousands except prices and weighted-average amounts)

Exercise Price Awards Outstanding Awards Exercisable

Exercise Price Per Share Awards Outstanding Awards Exercisable

Low High Quantity Weighted -Average

11 unchanged sentences

Share Repurchases

On January 11, 2023, the Company entered into an accelerated share repurchase agreement (the “ASR Agreement”) with Morgan Stanley & Co.

LLC (“Morgan Stanley”) to repurchase an aggregate of $ 20 million of the Company’s outstanding shares of common stock.

The ASR Agreement was executed as part of the Company’s existing $ 50 million share repurchase program.

Pursuant to the terms of the ASR Agreement, the Company made an initial payment, using available cash balances, of $ 20 million to Morgan Stanley and received an initial delivery of 408,685 shares of Company common stock from Morgan Stanley.

No share repurchases were made during the fiscal year ended August 31, 2024.

On December 29, 2022, our Board of Directors authorized and approved a share repurchase program for up to $ 50 million of the outstanding shares of our common stock, and on January 11, 2023, we entered into an accelerated share repurchase agreement (the “ASR Agreement”) with Morgan Stanley & Co.

LLC (“Morgan Stanley”) to repurchase an aggregate of $ 20 million of our outstanding shares of common stock as part of the share repurchase program, which was settled in full in May 2023.

The share repurchase program has no expiration date but may be terminated at any time at our Board of Directors’ discretion.

In January 2023, we received an initial delivery of an aggregate of 408,685 shares of our common stock from Morgan Stanley pursuant to the ASR Agreement, in exchange for which we made an initial payment of $ 20 million to Morgan Stanley.

These 408,685 shares were retired and are treated as authorized, unissued shares.

At final settlement on May 20, 2023, based on the volume-weighted average price of the Company's common stock during the term of the ASR Agreement, Morgan Stanley delivered an additional 83,356 shares of Company common stock to the Company, which shares were also retired and treated as authorized, unissued shares.

At final settlement on May 20, 2023, based on the volume-weighted average price of our common stock during the term of the ASR Agreement, Morgan Stanley delivered an additional 83,356 shares of Company common stock to us, which shares were also retired and treated as authorized, unissued shares.

After completion of the repurchases under the ASR Agreement, $ 30 million remains available for additional repurchases under our authorized repurchase program.

NOTE 7 – INCOME TAXES

3 unchanged sentences

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 Company is subject to the Global Intangible Low-Taxed Income (“GILTI”) rules, and has an annual GILTI inclusion income and deduction.

Based on our assessment, we have not recorded a liability for uncertain tax positions.

The components of the income tax provision for the years ended August 31, 2024, 2023, and 2022 were as follows:

17 unchanged sentences

Foreign-tax-related differences ( 7.0 ) ( 8.2 ) ( 3.2 )

Research & credit adjustments to expense — — 0.2

Change in prior year estimated taxes ( 0.2 ) ( 6.0 ) ( 2.4 )

Total 19.8 % 14.8 % 17.4 %

Significant components of the Company's deferred tax assets and liabilities for income taxes for the years ended August 31, 2023, and 2022 are as follows:

Significant components of the Company's deferred tax assets and liabilities for income taxes for the fiscal years ended August 31, 2024, and 2023 are as follows:

(in thousands) 2024 2023

4 unchanged sentences

Operating lease liability 255 285

Intellectual property — 7

Research and development credits 157 274

Foreign tax credits — 101

State taxes — ( 19 )

Allowance for doubtful accounts 11 3

State tax deferred — 28

Allowance for credit losses 67 11

Capitalized research & development 3,933 1,079

2 unchanged sentences

Total deferred tax assets 10,998 6,540

Valuation allowance — —

Deferred tax asset 6,540 2,121

Deferred tax liabilities:

1 unchanged sentence

Operating lease right-of-use assets ( 259 ) ( 295 )

Unrealized Gain/(Loss) ( 122 ) —

Unrealized loss ( 40 ) ( 122 )

State tax deferred ( 25 ) —

1 unchanged sentence

Capitalized computer software development costs ( 3,086 ) ( 2,242 )

Prepaid expenses ( 73 ) —

Total deferred tax liabilities ( 12,606 ) ( 5,102 )

3 unchanged sentences

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 the years ended August 31, 2023, 2022, and 2021, respectively.

We file income tax returns with the IRS and various state jurisdictions as well as with the countries of India, Belgium and France.

Interest and penalties were insignificant for the fiscal years ended August 31, 2024, 2023, and 2022, 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 2020 through 2023 are open for audit, and our state tax returns for fiscal year 2019 through 2023 remain open for audit.

Based on our assessment, we have not recorded any liability for uncertain tax positions in the consolidated financial for the fiscal years ended August 31, 2024, 2023, and 2022, respectively.

The Company had no uncertain tax position for all open tax years.

Net Operating Loss is summarized as follows:

8 unchanged sentences

Amount to expire before Section 382 limitation lifts 11,047

North Carolina NOL as of August 31, 2024 1,979

Subject to expiration 1,979

Carried forward indefinitely —

Amount to expire before Section 382 limitation lifts —

California R&D Credit as of August 31, 2024 199

Subject to expiration —

Carried forward indefinitely 199

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.

8 unchanged sentences

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.

Revenue concentration shows that international sales accounted for 31 %, 30 %, and 31 % of revenue for the years ended August 31, 2023, 2022, and 2021, respectively.

Our three largest customers in terms of revenue accounted for 6 %, 4 %, and 3 % of revenue, respectively, for the year ended August 31, 2023.

Our three largest customers in terms of revenue accounted for 5 %, 3 %, and 3 % of revenue, respectively, for the year ended August 31, 2022.

Our three largest customers in terms of revenue accounted for 11 %, 4 %, and 3 % of revenue, respectively, for the year ended August 31, 2021.

Accounts receivable concentrations show that our three largest customers in terms of accounts receivable each comprised between 4 % and 6 % of accounts receivable as of August 31, 2023;

Revenue concentration shows that international sales accounted for 28 %, 31 %, and 30 % of revenue for the fiscal years ended August 31, 2024, 2023, and 2022, respectively.

Our four largest customers in terms of revenue accounted for 7 %, 3 %, 3 %, and 2 % of revenue, respectively, for the fiscal year ended August 31, 2024.

Our three largest customers in terms of revenue accounted for 6 %, 4 %, and 3 % of revenue, respectively, for the fiscal year ended August 31, 2023.

Our three largest customers in terms of revenue accounted for 5 %, 3 %, and 3 % of revenue, respectively, for the fiscal year ended August 31, 2022.

Accounts-receivable concentrations show that our six largest customers in terms of accounts receivable each comprised between 3 % and 9 % of accounts receivable as of August 31, 2024;

our three largest customers in terms of accounts receivable comprised between 4 % and 6 % of accounts receivable as of August 31, 2023.

12 unchanged sentences

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, 2023, 2022, and 2021:

The following tables summarize the results for each segment for the fiscal years ended August 31, 2024, 2023, and 2022:

(in thousands) Year ended August 31, 2024

4 unchanged sentences

Gross margin 84 % 30 % 62 %

Our software business and services business represented 61 % and 39 % of total revenue, respectively, for the year ended August 31, 2023.

Our software business and services business represented 59 % and 41 % of total revenue, respectively, for the fiscal year ended August 31, 2024.

(in thousands) Year ended August 31, 2023

4 unchanged sentences

Gross margin 90 % 65 % 80 %

Our software business and services business represented 61 % and 39 % of total revenue, respectively, for the year ended August 31, 2022.

Our software business and services business represented 61 % and 39 % of total revenue, respectively, for the fiscal year ended August 31, 2023.

(in thousands) Year ended August 31, 2022

4 unchanged sentences

Gross margin 91 % 63 % 80 %

Our software business and services business represented 60 % and 40 % of total revenue, respectively, for the year ended August 31, 2021.

Our software business and services business represented 61 % and 39 % of total revenue, respectively, for the fiscal year ended August 31, 2022.

The Company allocates revenues to geographic areas based on the locations of its customers.

Geographical revenues for the fiscal years ended August 31, 2024, 2023, and 2022 were as follows:

Years ended August 31,

(in thousands) 2024 2023 2022

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

Americas $ 50,473 72 % $ 40,817 69 % $ 37,681 70 %

EMEA 14,072 20 % 11,713 20 % 10,388 19 %

Asia Pacific 5,468 8 % 7,047 12 % 5,837 11 %

Total $ 70,013 100 % $ 59,577 100 % $ 53,906 100 %

NOTE 10 – EMPLOYEE BENEFIT PLAN

1 unchanged sentence

We make matching contributions equal to 100 % of the employee’s elective deferral, not to exceed 4 % of the employee’s gross salary.

We contributed $ 0.6 million, $ 0.6 million, and $ 0.5 million for the years ended August 31, 2023, 2022, and 2021, respectively.

NOTE 11 - ACQUISITION

On June 16, 2023, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, Insight Merger Sub, Inc., a wholly-owned subsidiary of the Company (“Merger Sub”), Immunetrics, a company specializing in quantitative systems pharmacology modeling, and LaunchCyte LLC, as representative of the stockholders of Immunetrics (the “Stockholder Representative”).

At closing of the Merger, certain key stockholders of Immunetrics delivered executed Joinder Agreements, pursuant to which they became parties to the Merger Agreement.

The Merger closed on June 16, 2023 (the “Closing”).

Pursuant to the Merger Agreement, at Closing, Merger Sub merged with and into Immunetrics through a reverse triangular merger, with Immunetrics surviving as a wholly-owned subsidiary of the Company (the “Surviving Corporation”) (the “Merger”).

As consideration for the Merger, the Company agreed to pay the stockholders, former holders of stock options and former holders of phantom shares of Immunetrics (collectively, the “Equityholders”) the following cash compensation (collectively, the “Merger Consideration”):

At Closing, a cash payment in the amount of $ 13,705,083 (i.e., $ 12.0 million plus Immunetrics’ Closing cash, net of estimated net working capital adjustments at Closing, minus Immunetrics’ estimated transaction expenses, minus the Closing estimated indebtedness, minus the Holdback Amount (as defined below), minus the Stockholder Representative Expense Fund (as defined below));

An amount equal to $ 1.8 million, which was held-back by the Company at Closing, to cover any negative net working capital adjustments (if any) and Immunetrics’ indemnification obligations under the Merger Agreement (the “Holdback Amount”);

Two future earn-out payments in the aggregate amount of up to $ 8.0 million (the “Earnout Payments”), subject to the terms described below.

Additionally, at Closing, the Company funded the payment of Stockholder Representative $ 250,000 as an expense fund to cover expenses that it incurs in its role as Stockholder Representative (the “Stockholder Representative Expense Fund”), the excess amount of which, if any, will be distributed to Immunetrics’ stockholders (subject to certain exceptions) at such time as the Stockholder Representative may determine in its sole discretion.

The Company deducted this payment from the closing price.

The Merger Consideration is subject to adjustment based on post-closing adjustments to net working capital, closing cash, indebtedness, and transaction expenses of Immunetrics within 90 days of closing.

The Merger Agreement contains standard representations, warranties, covenants, indemnification and other terms customary in similar transactions.

Concurrently with execution of the Merger Agreement, the Company, Merger Sub, Immunetrics and the Stockholder Representative entered into an Earnout Agreement, which sets forth the terms and conditions applicable to the Earnout Payments.

Pursuant to the Earnout Agreement, the Company shall pay the Equityholders an aggregate amount of up to $ 8.0 million of Earnout Payments if the Surviving Corporation achieves certain revenue milestones for the calendar years 2023 and 2024.

We contributed $ 0.8 million, $ 0.6 million, and $ 0.6 million for the fiscal years ended August 31, 2024, 2023, and 2022, respectively.

NOTE 11 - ACQUISITIONS

On June 16, 2023, the Company completed the acquisition of Immunetrics for an estimated consideration of $ 15.3 million.

The Company has a remaining obligation for the Immunetrics acquisition for up to $ 5.5 million and $ 1.8 million hold back liability.

The Company made the first cash earnout payments in the aggregate amount of $ 2.5 million to the former equity holders and employees of Immunetrics in March 2024.

The primary purpose of this acquisition is to be able to capitalize on a tremendous growth opportunity by providing support for quantitative systems pharmacology (“QSP”) in a greater range of therapeutic areas, including oncology.

7 unchanged sentences

Net working capital adjustment ( 377 )

D&O Tail ( 7 )

D&O tail insurance ( 7 )

Bonus compensation to Immunetrics staff ( 1,586 )

11 unchanged sentences

Lease liability 227

Selling shareholders' D&O tail responsibility 7

Selling shareholders' D&O tail insurance responsibility 7

Deferred revenue 60

10 unchanged sentences

The following table presents the details of intangible assets acquired.

Estimated useful life Amount

(in thousands) Estimated useful life Amount

Indefinite-lived:

6 unchanged sentences

Total intangible assets $ 6,690

The total acquisition-related costs which includes activities for Immunetrics acquisition for the years ended August 31, 2023, 2022, and 2021 were $ 3.3 million, $ 0.3 million, and none , respectively.

These transactions costs are reflected in the Selling, general, and administrative expense line item within our consolidated statements of operations and comprehensive income as they were incurred.

On June 11, 2024, the Company entered into a stock purchase agreement, pursuant to which it acquired Pro-ficiency Holdings, Inc.

(“Pro-ficiency”) for estimated consideration of $ 100.2 million.

The primary purpose of this acquisition was to bring together two businesses, each with complementary expertise and services that are grounded in science and focused on applying advanced technologies like AI to enhance actionable data analytics.

Under the acquisition method of accounting, the total purchase price reflects Pro-ficiency’s tangible and intangible assets and liabilities based on their estimated fair values at the date of the completion of the acquisition (June 11, 2024).

The following table summarizes the allocation of the preliminary purchase price for Pro-ficiency:

(in thousands)

Base merger consideration $ 100,000

Net working capital adjustment ( 85 )

Excess cash adjustment 1,731

Adjustment to purchase price for closing indebtedness ( 1,484 )

Total purchase price 100,162

Fair value of identifiable assets acquired:

Accounts receivable 2,064

Prepaids and other current assets 1,807

ROU asset 212

Trade names 8,400

Customer relationships 2,310

Developed technology 16,630

Non-competes 70

Other non-current assets 17

Fair value of liabilities assumed:

Accounts payable 935

Payroll and other current liabilities 2,302

Deferred revenue 1,456

Lease liability 212

Deferred tax liabilities 4,811

Other liabilities 1,124

Fair value of identifiable assets acquired and liabilities assumed 23,183

Goodwill $ 76,979

The total purchase consideration related to the Pro-ficiency acquisition consisted of cash consideration.

The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributed to the developed technologies and other intangibles such as customer relationships and trade names.

Proficiency is structured into two business units:

ALI primarily contributes to the software segment and MC primarily contributes to the services segment of the Company.

Goodwill acquired as part of the Pro-ficiency acquisition has been assigned to the ALI and MC reporting units and the assets and liabilities of Pro-ficiency are assigned to the same reporting units.

This goodwill is not expected to be deductible for income tax purposes.

Intangible assets consist of indefinite-lived intangible asset trade names and definite-lived intangibles as customer relationships, developed technologies, and covenants not to compete.

We amortize purchased definite-lived intangible assets on a straight-line basis over their respective useful lives.

The weighted-average life of the total acquired identifiable definite-lived intangible assets is 5.3 years.

The following table presents the details of intangible assets acquired.

Estimated useful life Amount

Indefinite-lived:

Trade names Indefinite $ 8,400

Definite-lived:

Customer relationships 10 years 2,310

Developed technologies 5 years 16,630

Non-competes 3 years 70

Total definite-lived intangible assets 19,010

Total intangible assets $ 27,410

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

2 unchanged sentences

Consolidated Supplemental Pro Forma Information

The following unaudited consolidated supplemental pro forma information assumes that the acquisition of Immunetrics took place on September 1, 2021 for the income statement years ended August 31, 2023.

These amounts have been calculated after applying the Company’s accounting policies and adjusting the results of Immunetrics to reflect the same expenses in the years ended August 31, 2023 and 2022.

The adjustments include costs of acquisition directly attributable to Immunetrics of $ 2.9 million consists of $ 1.6 million of bonus compensation and $ 1.3 million of other professional fees, and amortization of intangibles including developed technologies acquired during the merger, assuming the fair-value adjustments applied on September 1, 2021, together with consequential tax effects.

The following unaudited consolidated supplemental pro forma information assumes that the acquisition of Pro-ficiency took place on September 1, 2022 for the income statement years ended August 31, 2024.

These amounts have been calculated after applying the Company’s accounting policies and adjusting the results of Pro-ficiency to reflect the same expenses in the fiscal years ended August 31, 2024 and 2023.

The adjustments include costs of acquisition directly attributable to Pro-ficiency of $ 2.3 million and amortization of intangibles including developed technologies acquired during the acquisition, assuming the fair-value adjustments applied on September 1, 2022, together with consequential tax effects.

The adjustments also consist of acquisition costs directly attributable to Immunetrics of $ 2.9 million consisting of $ 1.6 million of bonus compensation and $ 1.3 million of other professional fees, and amortization of intangibles including developed technologies acquired during the merger, assuming the fair-value adjustments applied on September 1, 2022, together with consequential tax effects.

The pro forma information in below table includes actual revenues and net loss of $ 2.3 million and $ 1.9 million, respectively for Pro-ficiency from the acquisition date of June 11, 2024 to August 31, 2024 and the revenues and net loss of $ 1.3 million and $ 0.4 million, respectively, for Immunetrics from the acquisition date of June 16, 2023 to August 31, 2023.

2024 * (Pro forma)

1 unchanged sentence

Revenue $ 83,243 $ 76,892

Net income $ 11,422 $ 11,889

* Balances include actual results from acquisition date of June 16, 2023 through August 31, 2023.

NOTE 12 - GOVERNMENT ASSISTANCE

The Company receives government assistance in the form of cash grants which vary in size, duration, and conditions from domestic governmental agencies.

Accounting for the grant revenue does not fall under ASC 606, Revenue from Contracts with Customers, as the Government will not benefit directly from our offerings.

For government assistance in which no specific US GAAP applies, the Company accounts for such transactions as revenue and by analogy to a grant model.

Under such model, the Company recognizes the impact of the government assistance on the Consolidated Statements of Income upon complying with the conditions of the grant.

The grant revenue is recognized on a gross basis.

The Company's accounting policy is to recognize a benefit to the income statement over the duration of the program when the conditions attached to the grant are achieved.

If conditions are not satisfied the grants are often subject to reduction, repayment, or termination.

The Company classifies the impact of government assistance on the Consolidated Statements of Income as Services Revenue.

During the fiscal year ended August 31, 2023, government assistance received primarily consisted of the following:

The Company received assistance from domestic governmental agencies to provide reimbursement for various costs incurred for research and development.

These include direct grant awards and subawards.

The grants awarded are currently set to expire at various dates through 2025.

During the fiscal year ended August 31, 2023, the Company recognized $ 1.5 million within Services revenues on the Consolidated Statements of Operations and Comprehensive Income related to such assistance.

To the extent amounts have been earned but not yet funded, the amounts are in Account Receivable.

Computer equipment allowable by the grants is classified under Fixed Assets.

Subawards due to unrelated entities are classified under Accrued Expenses.

Net (loss) income $ 7,790 $ 4,547

* Balances include actual results from acquisition date of June 16, 2023 through August 31, 2023 for Immunetrics and from acquisition date of June 11, 2024 through August 31, 2024 for Pro-ficiency business.

NOTE 12 - SUBSEQUENT EVENTS

Dividend Declared

On Thursday, October 19, 2023, our Board of Directors declared a quarterly cash dividend of $ 0.06 per share to our shareholders.

The dividend in the amount of approximately $ 1.2 million will be distributed on Monday, November 6, 2023, for shareholders of record as of Monday, October 30, 2023.

Effective September 1, 2023, the Company merged Immunetrics with and into Simulations Plus, Inc.

through a short-form mergers (the “Merger”).

To effectuate the Merger, the Company filed Certificates of Ownership with the Secretaries of State of the states of Delaware (Immunetrics’ state of incorporation) and California (Simulation Plus, Inc.’s state of incorporation).

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

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