What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2021-10-27 compared with 2020-11-16 · 1071 added, 1009 removed, 481 unchanged (81% of the section changed)

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and

Our Chief Executive Officer and our Chief

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

of 1934 (the “Exchange Act”) Rules 13a-15(e) and 15d-15(e) as of the end of the period covered by this Annual Report

on Form 10-K (the “Evaluation Date”), have concluded that as of the Evaluation Date, our disclosure controls and procedures

are effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is

recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and

forms, and to ensure that information required to be disclosed by us in such reports is accumulated and communicated to our management,

including our Chief Executive Officer and Chief Financial Officer, where appropriate, to allow timely decisions regarding required

Management Report on Internal Control

over Financial Reporting

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and our Chief Financial

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

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

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

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

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

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

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

Management Report on Internal Control over

Financial Reporting

Our management is responsible for establishing

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

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

statements for external purposes in accordance with U.S.

Management assessed our internal control over financial reporting

as of August 31, 2020, the end of our fiscal year.

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

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

Management’s assessment

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

accounting policies, and our overall control environment.

Based on this assessment, management has

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

assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external

reporting purposes in accordance with U.S.

We reviewed the results of management’s assessment with the Audit Committee

of our Board of Directors.

Inherent Limitations on Effectiveness

Our management, including the CEO and CFO,

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

all errors and all fraud.

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

assurance that the control system’s objectives will be met.

The design of a control system must reflect the fact that there

are resource constraints, and the benefits of controls must be considered relative to their costs.

Further, because of the inherent

limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or

fraud will not occur or that all control issues and instances of fraud, if any, have been detected.

The design of any system of

controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any

design will succeed in achieving its stated goals under all potential future conditions.

Projections of any evaluation of the effectiveness

of controls to future periods are subject to risks.

Over time, controls may become inadequate because of changes in conditions

or deterioration in the degree of compliance with policies or procedures.

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

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

for external purposes in accordance with U.S.

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

2021, the end of our fiscal year.

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

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

Management’s assessment included

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

policies, and our overall control environment.

Based on this assessment, management has concluded

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

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

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

Inherent Limitations on Effectiveness of Controls

Our management, including the CEO and CFO, does

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

and all fraud.

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

control system’s objectives will be met.

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

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

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

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

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

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

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

future conditions.

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

Over time, controls

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

Changes in Internal Control over Financial

No change in the Company’s internal

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

most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over

financial reporting.

Attestation Report of the Registered

Public Accounting Firm

This annual report does not include an attestation report of

our independent registered public accounting firm as the Company is a non-accelerated filer and is thus not required to provide

such a report.

No change in the Company’s internal controls

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

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

ITEM 9B – OTHER INFORMATION

ITEM 10 – DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE

ITEM 10 – DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

Information required by Item 10 is incorporated

by reference from the sections entitled “Board Matters and Corporate Governance,” “Election of Directors,”

“Executive Compensation and Other Information,” and “Security Ownership of Certain Beneficial Owners and Management”

in our definitive proxy statement on Schedule 14A to be distributed in connection with our 2020 Annual Shareholders’ Meeting

(the “Proxy Statement”).

There have been no material changes to

the procedures by which security holders may recommend nominees to our board of directors since we last described such procedures.

The Company has a Corporate Code of Ethics

which is posted on our website:

www.simulations-plus.com.

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

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

ITEM 11 – EXECUTIVE COMPENSATION

The information required by Item 11 is

incorporated by reference from the sections entitled “Executive Compensation and Other Information” and “Board

Matters and Corporate Governance” in the Proxy Statement.

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by Item 12 is

incorporated by reference from the sections entitled “Security Ownership of Certain Beneficial Owners and Management”

and “Executive Compensation and Other Information” in the Proxy Statement.

The information required by Item 11 is incorporated

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

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

ITEM 12 – SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

AND RELATED STOCKHOLDER MATTERS

The information required by Item 12 is incorporated

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

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

ITEM 13 – CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,

AND DIRECTOR INDEPENDENCE

The information required by Item 13 is

incorporated by reference from the subsection entitled “Certain Relationships and Related Transactions;

Transactions with

Related Persons” and the section entitled “Board Matters and Corporate Governance” in the Proxy Statement.

The information required by Item 13 is incorporated

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

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

ITEM 14 – PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by Item 14 is

incorporated by reference from the section of the proposal entitled “Ratification of Selection of Independent Registered

Public Accounting Firm” in the Proxy Statement.

ITEM 15 – EXHIBITS, FINANCIAL

STATEMENT SCHEDULES

The information required by Item 14 is incorporated

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

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

ITEM 15 – EXHIBITS, FINANCIAL STATEMENT

(1) Financial

2 unchanged sentences

Statement Schedules.

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

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

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

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

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

9 unchanged sentences

Amended and Restated Bylaws of the Company.

Certificate of Amendment to the Amended and Restated Bylaws of Simulations Plus, Inc .

Form of Common Stock Certificate.

2 unchanged sentences

Credit Agreement, dated as of March 31, 2020, by and between the Company, as borrower, and Wells Fargo Bank, National Association, as lender.

The Company’s 1996 Stock Option Plan and forms of agreements relating thereto.

The Company’s 2007 Stock Option Plan, as amended.

8 unchanged sentences

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

10.10 (9) (†)

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

3 unchanged sentences

Employment Agreement by and between the Company and Shawn O’Connor dated September 3, 2020 .

10.13 (17) (†)

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

10.14 (18)(†)

Separation Agreement, dated December 1, 2020, by and between the Company and John Kneisel .

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

10.16 (19)(†)

Simulation Plus, Inc.

2021 Equity Incentive Plan.

List of Subsidiaries.

3 unchanged sentences

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

XBRL Instance Document.

XBRL Taxonomy Extension Schema Document.

XBRL Taxonomy Extension Calculation Linkbase Document.

XBRL Taxonomy Extension Definition Linkbase Document.

XBRL Taxonomy Extension Label Linkbase Document.

XBRL Taxonomy Extension Presentation Linkbase Document.

Inline XBRL Instance Document

Inline XBRL Taxonomy Extension Schema Document

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Inline XBRL Taxonomy Extension Definition Linkbase Document

Inline XBRL Taxonomy Extension Label Linkbase Document

Inline XBRL Taxonomy Extension Presentation Linkbase Document

__________________________

19 unchanged sentences

Incorporated by reference to an exhibit to the Company’s Form 8-K filed September 9, 2020.

Incorporated by reference to Appendix A to the Company’s Definitive Schedule 14A filed December 31, 2018.

Incorporated by reference to an exhibit to the Company’s Form 8-K filed January 4, 2021.

Incorporated by reference to an exhibit to the Company’s Form 10-Q filed January 11, 2021.

Incorporated by reference to an exhibit to the Company’s Form 10-Q filed April 14, 2021.

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

1 unchanged sentence

See Item 15(a)(2) above.

Pursuant to the requirements of Section

13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the

undersigned, thereunto duly authorized.

November 16, 2020

Pursuant to the requirements of Section 13 or

15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned,

thereunto duly authorized.

October 27, 2021

SIMULATIONS PLUS, INC.

/s/ Will Frederick

Chief Financial Officer

Pursuant to the requirements of the Securities

Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities

and on the dates indicated.

/s/ Shawn O’Connor

Chief Executive Officer (Principal executive officer)

Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and

on the dates indicated.

Shawn O’Connor

November 16, 2020

/s/ Walter S.

Chairman of the Board of Directors

November 16, 2020

Chief Executive Officer

(Principal executive officer)

Shawn O’Connor

October 27, 2021

Chairman of the Board of

October 27, 2021

Daniel Weiner

November 16, 2020

Chief Financial Officer (Principal financial

officer and principal accounting officer)

November 16, 2020

October 27, 2021

Will Frederick

Chief Financial Officer

(Principal financial

Will Frederick

officer and principal accounting

October 27, 2021

SIMULATIONS PLUS, INC.

7 unchanged sentences

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC

ACCOUNTING FIRM

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the Board of Directors and

4 unchanged sentences

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

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

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

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

In our opinion, the

consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company

as of August 31, 2020 and 2019, and the consolidated results of its operations and its cash flows for each of the years in the

three-year period ended August 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

In our opinion, the consolidated

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

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

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

We also have audited, in accordance with the standards

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

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

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

Basis for Opinion

These consolidated financial statements

are the responsibility of the Company’s management.

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

statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United

States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws

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

We conducted our audits in accordance with

the standards of the PCAOB.

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

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

The Company is not required to have,

nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required

to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the

effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures

to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing

procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and

disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant

estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

that our audits provide a reasonable basis for our opinion.

/s/ Rose, Snyder & Jacobs LLP

These consolidated financial statements are the responsibility

of the Company’s management.

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

based on our audits.

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

Company in accordance with the U.S.

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

and the PCAOB.

We conducted our audits in accordance with the standards

of the PCAOB.

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

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

Our audits included performing procedures to assess the risks of material

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

Such procedures

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

Our audits also included

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

of the financial statements.

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

Critical Audit Matters

The critical audit matters communicated below are

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

audit committee and that:

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

challenging, subjective, or complex judgments.

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

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

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

Revenue Recognition – Contract cost estimates

Description of the Matter

As discussed in Note 2 and Note 3 to the Consolidated

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

For performance obligations related

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

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

Auditing revenue recognition is complex and highly

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

Changes in these

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

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design,

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

those associated with cost to complete estimates.

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

data used in assessing revenue recognized over time.

To test the measures of progress used for performance

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

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

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

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

We also tested the

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

Rose, Snyder & Jacobs LLP

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

We have served as the Company’s

auditor since 2004.

Encino, California

November 16, 2020

October 27, 2021

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the Board of Directors and

Stockholders of Simulations Plus, Inc.

Opinion on Internal Control over Financial Reporting

We have audited Simulations Plus, Inc.

and Subsidiaries

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

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

In our opinion, the Company

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

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

We also have audited, in accordance with the standards

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

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

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

Basis for Opinion

The Company’s management is responsible for

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

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

Our responsibility is

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

We are a public accounting

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

federal securities

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

We conducted our audit in accordance with the standards

of the PCAOB.

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

control over financial reporting was maintained in all material respects.

Our audit of internal control over financial reporting included

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

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

Our audit also included performing

such other procedures as we considered necessary in the circumstances.

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

Definition and Limitations of Internal Control

over Financial Reporting

A company’s internal control over financial

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

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

A company’s internal control

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

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

(2) provide reasonable assurance that transactions

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

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

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

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

Because of its inherent limitations, internal control

over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods

are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the

policies or procedures may deteriorate.

Rose, Snyder & Jacobs LLP

October 27, 2021

SIMULATIONS PLUS, INC.

CONSOLIDATED BALANCE SHEETS

As of August 31,

(in thousands,

except share and per share amounts)

Current assets

8 unchanged sentences

Capitalized computer software development costs, net of accumulated amortization of $ 14,438 and $ 13,582

Property and equipment, net (note 4)

Property and equipment, net

Operating lease right of use asset

1 unchanged sentence

Other intangible assets, net of accumulated amortization of $ 2,186 and $ 1,642

$ 168,421,517

LIABILITIES AND SHAREHOLDERS' EQUITY

2 unchanged sentences

Accrued payroll and other expenses

Current portion - Contracts payable (note 6)

Contracts payable - current portion

Billings in excess of revenues

5 unchanged sentences

Operating lease liability

Payments due under Contracts payable (note 6)

Contracts payable – net of current portion

Total liabilities

Commitments and Contingencies (note 7)

Shareholders' equity (note 8)

Commitments and contingencies

Shareholders' equity

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

Common stock, $ 0.001 par value 50,000,000 shares authorized 19,923,277 and 17,591,834 shares issued and outstanding

Additional paid-in capital

Accumulated Other Comprehensive Income

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

Retained earnings

Accumulated other comprehensive income (loss)

Total shareholders' equity

Total liabilities and shareholders' equity

$ 168,421,517

The accompanying notes are an integral part

of these consolidated financial statements.

The accompanying notes are an integral part of

these consolidated financial statements.

SIMULATIONS PLUS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

For the years ended August 31,

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE

Years Ended August 31,

(in thousands,

except per common share amounts)

Cost of revenues

Operating expenses

Selling, general, and administrative

Research and development

Selling, general and administrative

Total operating expenses

2 unchanged sentences

Interest income

Interest expense

Change in value of contingent consideration

(Loss) income on currency exchange

Total other income (expense)

Income before provision for income taxes

Gain (loss) on currency exchange

Total other income (expense), net

Income before income taxes

Provision for income taxes

( 2,054,989 )

( 1,973,147 )

( 1,204,130 )

Earnings per share

Weighted-average common shares outstanding

Other Comprehensive Income, net of tax

Other comprehensive income (loss), net of tax

Foreign currency translation adjustments

Comprehensive income

The accompanying notes are an integral part

of these consolidated financial statements.

The accompanying notes are an integral part of

these consolidated financial statements.

SIMULATIONS PLUS, INC.

STATEMENTS OF SHAREHOLDERS' EQUITY

For the years ended August 31, 2020, 2019 and 2018

Accumulated Other

Comprehensive

Balance, August 31, 2017

Exercise of stock options

Stock-based Compensation

Shares issued to Directors for services

Declaration of Dividend

( 4,161,740 )

Balance, August 31, 2018

Cumulative Effect of Changes related to adoption of ASC 606

Exercise of stock options

Stock-based Compensation

Shares issued to Directors for services

Declaration of Dividend

( 4,197,055 )

Balance, August 31, 2019

Year ended August 31,

(in thousands,

except per common share amounts)

Common stock and additional paid in capital

Balance, beginning of period

Exercise of stock options

1 unchanged sentence

Shares issued to Directors for services

Declaration of Dividend

( 4,250,470 )

Shares issued - Lixoft

Common stock issued for cash, net

Foreign Currency Translation Adjustments

Balance, August 31, 2020

$ 128,531,427

$ 156,035,945

The accompanying notes are an integral part

of these consolidated financial statements.

Balance, end of period

Retained earnings

Balance, beginning of period

Cumulative effect of changes related to adoption of ASC 606

Declaration of dividends

Balance, end of period

Accumulated other comprehensive income

Balance, beginning of period

Other comprehensive

income (loss)

Balance, end of period

Total shareholders’ equity

Other comprehensive income (loss)

Total shareholders’ equity

Cash dividends declared per common share

The accompanying notes are an integral part of

these consolidated financial statements.

SIMULATIONS PLUS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended August 31, 2020, 2019 and 2018

Year ended August 31,

(in thousands)

Cash flows from operating activities

2 unchanged sentences

Change in value of contingent consideration

Amortization of investment premiums

Stock-based compensation

Deferred income taxes

( 1,731,821 )

Currency translation adjustments

(Increase) decrease in

Accounts receivable

( 2,017,792 )

( 1,465,803 )

Revenues in excess of billings

( 1,248,063 )

Prepaid income taxes

4 unchanged sentences

Billings in excess of revenues

Accrued income taxes

Deferred revenue

Net cash provided by operating activities

Cash flows used in investing activities

Cash flows from investing activities

Purchases of property and equipment

1 unchanged sentence

Purchase of short-term investments

( 67,248,924 )

Proceeds from sale of short-term investments

Cash used to acquire subsidiaries

( 9,471,352 )

Cash received in acquisition

Capitalized computer software development costs

( 2,353,188 )

( 1,767,996 )

( 2,145,429 )

Net cash used in investing activities

( 75,505,710 )

( 1,955,741 )

( 2,328,720 )

Cash flows provided by (used in) financing activities

Cash flows from financing activities

Payment of dividends

( 4,250,470 )

( 4,197,055 )

( 4,161,740 )

Payments on contracts payable

( 1,761,028 )

( 4,238,973 )

Proceeds from the exercise of stock options

1 unchanged sentence

Net cash provided by (used in) financing activities

( 7,647,881 )

( 3,773,485 )

Net increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of year

6 unchanged sentences

Right of use assets capitalized

The accompanying notes are an integral part

of these consolidated financial statements.

The accompanying notes are an integral part of

these consolidated financial statements.

Simulations Plus, Inc.

Notes to Financial Statements

Notes to Consolidated Financial Statements

For the Year Ended August 31, 2021

1 unchanged sentence

Simulations Plus, Inc.

(“Simulations

Plus”, “Lancaster”) was incorporated on July 17, 1996.

In September 2014, Simulations Plus acquired all of the

outstanding equity interests of Cognigen Corporation (“Cognigen”, “Buffalo”) and Cognigen became a wholly

owned subsidiary of Simulations Plus, Inc.

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

(DILIsym) as a wholly

owned subsidiary.

(“The Company”)

was incorporated on July 17, 1996.

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

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

In June 2017, Simulations Plus acquired

DILIsym Services, Inc.

(“DILIsym”) as a wholly-owned subsidiary.

In April 2020, Simulations Plus, Inc.

acquired Lixoft, a French société par actions simplifiée

(“Lixoft”, “Paris”) as a wholly-owned subsidiary pursuant to a stock purchase and contribution agreement.

acquired Lixoft, a

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

contribution agreement.

(Collectively, “Company”, “we”, “us”, “our”).

Effective September 1,

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

with and into Simulations Plus, Inc.

through short-form

mergers (the “Mergers”).

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

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

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

stockholders.

Lines of Business

The Company designs and develops pharmaceutical

simulation software to promote cost-effective solutions to a number of problems in pharmaceutical research and in the education

of pharmacy and medical students, and it provides consulting services to the pharmaceutical and chemical industries.

the Company has begun to explore developing software applications for defense and for health care outside of the pharmaceutical

We are a premier developer of drug discovery and

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

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

We also provide consulting services ranging from early drug discovery

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

Our software and consulting services

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

for use in the conduct of industry-based research.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING

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The consolidated financial statements include

the accounts of Simulations Plus, Inc.

and, as of September 2, 2014, its wholly owned subsidiary, Cognigen Corporation, as of June

1, 2017, the accounts of DILIsym Services, Inc., and as of April 1, 2020, Lixoft accounts.

All significant intercompany accounts

and transactions are eliminated in consolidation.

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

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

All significant intercompany accounts and transactions are eliminated in consolidation.

Use of Estimates

Our financial statements and accompanying

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

Preparing financial

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

and expenses.

Our financial statements and accompanying notes

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

Preparing financial statements

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

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

Actual results

could differ from those estimates.

Significant accounting policies for us include revenue recognition, accounting for capitalized

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

Actual results could differ from

those estimates.

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

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

Reclassifications

Certain numbers in the prior year have

been reclassified to conform to the current year's presentation.

Certain numbers in the prior year have been reclassified

to conform to the current year's presentation.

Revenue Recognition

In May 2014, the

Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09 and its related amendments regarding

Accounting Standards Codification Topic 606 (ASC Topic 606), Revenue from Contracts with Customers .

The standard provides

principles for recognizing revenue for the transfer of promised goods or services to customers with the consideration to which

the entity expects to be entitled in exchange for those goods or services.

The standard also provides guidance on the recognition

of incremental costs related to obtaining customer contracts.

We adopted ASC Topic 606, effective September 1, 2018, utilizing

the modified retrospective method.

This approach was applied to contracts that were in process as of September 1, 2018, and the

corresponding incremental costs of obtaining those contracts, which resulted in a cumulative effect adjustment of $493,279 to the

opening balance of retained earnings at the date of adoption.

The adoption of this ASU primarily impacts the timing of our revenue

recognition for certain sales contracts, the capitalization and amortization of incremental costs of obtaining a contract, and

related disclosures.

The reported results for fiscal years 2020 and 2019 reflect the application of ASC Topic 606, while the reported

results for fiscal year 2018 are not adjusted and continue to be reported under ASC Topic 605.

We generate revenue primarily from the

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

The Company determines revenue recognition

through the following steps:

We generate revenue primarily from the sale of

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

The Company determines revenue recognition through

the following steps:

Identification of the contract, or contracts, with a customer

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Deferred Commissions

Sales commissions earned by our sales force

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

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

We determined

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

Sales commissions

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

expense is included in sales and marketing expenses on the condensed consolidated statements of operations.

We apply the practical expedient in ASC

Topic 606 to expense costs as incurred for sales commissions when the period of benefit would have been one year or less.

of our contracts are of a duration of one year or less, few, if any of the longer-term contracts have commissions associated with

Sales commissions earned by our sales force and

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

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

We determined the period

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

Sales commissions for renewal contracts

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

Amortization expense is included

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

Practical Expedients and Exemptions

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Commission Expense :

We apply the practical expedient in ASC Topic 606 to expense costs as incurred for sales commissions when the period of benefit is one year or less.

Most of our contracts are of a duration of one year or less, few, if any of the longer-term contracts have commissions associated with them .

Transaction Price Allocated to Future

Performance Obligations

ASC 606 requires that the Company disclose

the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied as of August

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

price allocated to unsatisfied performance obligations.

The Company applied the practical expedient

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

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

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

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

Most of our contracts are of a duration of one year

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

This expense is included in the consolidated

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

Transaction Price Allocated to Future Performance

ASC 606 requires that the Company disclose the

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

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

to unsatisfied performance obligations.

The Company applied the practical expedient to

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

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

Cash and Cash Equivalents

For purposes of the statements of cash

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

For purposes of the statements of cash flows,

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

Accounts Receivable

We analyze the age of customer balances,

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

of the Company’s trade accounts receivable balances.

If we determine that the financial conditions of any of our customers

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

receivable are written off when all collection attempts have failed.

We analyze the age of customer balances, historical

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

Company’s trade accounts receivable balances.

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

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

Accounts receivable are written

off when reasonable collection attempts have failed.

We may invest excess cash balances in short-term

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enterprise securities, corporate bonds and/or commercial paper.

The Company accounts for its investment in marketable securities

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

This statement requires debt securities to be

classified into three categories:

Held-to-maturity—Debt securities

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

Trading Securities—Debt securities

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

and losses included in earnings.

Available-for-Sale—Debt securities

not classified as either securities held-to-maturity or trading securities are reported at fair value with unrealized gains or

losses excluded from earnings and reported as a separate component of shareholders’ equity.

The Company classifies its investments

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

years ended August 31, 2020, all of the Company’s investments were classified as held-to-maturity.

Held-to-maturity investments are measured

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

Discounts and premiums to par value of the debt

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

The Company accounts for its investment in marketable securities in accordance

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

This statement requires debt securities to be classified into three

Held-to-maturity—Debt securities that the

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

Discounts and premiums to par value of

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

No gains or losses on investment securities

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

Capitalized Computer Software Development

Software development costs are capitalized

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

Capitalization of software

development costs begins upon the establishment of technological feasibility and is discontinued when the product is available

Trading Securities—Debt securities that

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

included in earnings.

Available-for-Sale—Debt securities not classified

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

and reported as a separate component of shareholders’ equity.

We classify our investments in marketable debt

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

During the year ended August 31, 2021,

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

Held-to-maturity investments are measured and

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

Discounts and premiums to par value of the debt securities

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

No gains or losses on investment securities are realized until

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

Capitalized Computer Software Development Costs

Software development costs are capitalized in

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

Capitalization of software development

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

The establishment of technological feasibility

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

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

estimated economic life, and changes in software and hardware technologies.

Capitalized computer software development costs are

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

software products.

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

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

economic life, and changes in software and hardware technologies.

Capitalized computer software development costs are comprised primarily

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

Amortization of capitalized computer software

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

products not to exceed five years.

Amortization of software development costs amounted to $ 1,225,544 , $ 1,331,753 , and $ 1,300,434

for the years ended August 31, 2020, 2019, and 2018, respectively.

We expect future amortization expense to vary due to increases

in capitalized computer software development costs.

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

(not to exceed five years).

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

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

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

computer software development costs.

We test capitalized computer software development

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Property and Equipment

Property and equipment are recorded at

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

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

Property and equipment are recorded at cost,

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

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

Property and Equipment estimated useful lives

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Shorter of life of asset or lease

Maintenance and minor replacements are

charged to expense as incurred.

Maintenance and minor replacements are charged

to expense as incurred.

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

In February 2016, the FASB issued ASU No.

2016-02—Leases, to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities

on the balance sheet and disclosing key information about leasing arrangements.

A lessee should recognize in the statement of financial

position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying

asset for the lease term.

The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessor

have not significantly changed from previous U.S.

This ASU was effective for annual periods, including interim periods within

those annual periods, beginning after December 15, 2018.

We adopted this ASU on September 1, 2019.

We lease various production, administrative

and sales offices under operating leases.

We evaluate our contracts to determine if an arrangement is a lease at inception and

classify it as a finance or operating lease.

Currently, all our leases are classified as operating leases.

Leased assets and corresponding

liabilities are recognized based on the present value of the lease payments over the lease term.

Our lease terms may include options

to extend when it is reasonably certain that we will exercise that option.

Costs associated with operating leases are recognized

on a straight-line basis within operating expenses over the term of the lease.

With the adoption of ASC 842 on September 1, 2019,

we recognized all leases with terms greater than 12 months in duration on our consolidated balance sheets as right-of-use assets

and lease liabilities.

We adopted the standard using the prospective approach and did not retrospectively apply to prior periods.

Right-of-use assets are recorded in long-term assets on our consolidated balance sheets.

Current and non-current lease liabilities

are recorded as operating lease liabilities within current liabilities and long-term liabilities, respectively, on our consolidated

balance sheets.

As part of the adoption of this standard we recorded the following assets and liabilities as of September 1, 2019:

Schedule of Operating assets and liabilities

Right of use assets

Lease Liabilities, Current

Lease Liabilities, Long-term

We have made certain assumptions and judgments

when applying ASC 842, the most significant of which are:

We elected the package of practical expedients available for transition that allow us to not reassess whether expired or existing contracts contain leases under the new definition of a lease, lease classification for expired or existing leases and whether previously capitalized initial direct costs would qualify for capitalization under ASC 842.

We did not elect to use hindsight when considering judgments and estimates such as assessments of lessee options to extend or terminate a lease or purchase the underlying asset.

For all asset classes, we elected to not recognize a right-of-use asset and lease liability for short-term leases.

The determination of the discount rate used in a lease is our estimated incremental borrowing rate that is based on what we would expect to pay to borrow over a similar term an amount equal to the lease payments.

Supplemental balance sheet information

related to operating leases was as follows as of August 31, 2020:

Internal-use Software

We have a service contract related to the implementation

of internally used software.

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

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

in long-term assets.

The amortization will be classified as Selling,

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

are charged to expense as incurred.

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

No amortization has been

expensed for the project as it is still in progress.

We determine if an arrangement is a lease at inception.

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

in our consolidated balance sheets.

ROU assets represent our right to use an underlying

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

Operating lease

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

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

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

The operating lease ROU asset also includes

any lease payments made and excludes lease incentives.

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

reasonably certain that we will exercise that option.

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

Supplemental balance sheet information related

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

Schedule of lease cost

(in thousands)

Right of use assets

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Intangible Assets and Goodwill

The Company performs valuations of assets

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

and liabilities assumed at their acquisition date fair value.

Acquired intangible assets include customer relationships, software,

trade name, and non-compete agreements.

The Company determines the appropriate useful life by performing an analysis of expected

cash flows based on historical experience of the acquired businesses.

Intangible assets are amortized over their estimated useful

lives using the straight-line method, which approximates the pattern in which the majority of the economic benefits are expected

to be consumed.

Goodwill represents the excess of the cost

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

Goodwill is not amortized, instead it is tested for impairment

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

Events or circumstances that

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

climate, an adverse action or assessment by a regulator, unanticipated competition, a loss of key personnel, significant changes

in the manner of the Company's use of the acquired assets or the strategy for the Company's overall business, significant negative

industry or economic trends or significant under-performance relative to expected historical or projected future results of operations.

Goodwill is tested for impairment at the

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

As of August 31, 2020, the Company determined

that it has four reporting units, Simulations Plus, Cognigen Corporation, DILIsym Services, Inc.

goodwill for impairment, the Company first performs a qualitative assessment to determine whether it is necessary to perform step

one of a two-step annual goodwill impairment test for each reporting unit.

The Company is required to perform step one only if

it concludes that it is more likely than not that a reporting unit's fair value is less than its carrying value.

Should this be

the case, the first step of the two-step process is to identify whether a potential impairment exists by comparing the estimated

fair values of the Company's reporting units with their respective book values, including goodwill.

If the estimated fair value

of the reporting unit exceeds book value, goodwill is considered not to be impaired, and no additional steps are necessary.

however, the fair value of the reporting unit is less than book value, then the second step is performed to determine if goodwill

is impaired and to measure the amount of impairment loss, if any.

The amount of the impairment loss is the excess of the carrying

amount of the goodwill over its implied fair value.

The estimate of implied fair value of goodwill is primarily based on an estimate

of the discounted cash flows expected to result from that reporting unit, but may require valuations of certain internally generated

and unrecognized intangible assets such as the Company's software, technology, patents and trademarks.

If the carrying amount of

goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to the excess.

As of August 31, 2020, the entire balance

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

assets subject to amortization are reviewed for impairment whenever events or circumstances indicate that the carrying amount of

these assets may not be recoverable.

The Company has no t recognized any impairment charges during the periods ended August 31,

2020, 2019 and 2018.

Reconciliation of Goodwill for the period

ended August 31, 2020:

The Company performs valuations of assets acquired

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

assumed at their acquisition-date fair value.

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

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

the acquired businesses.

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

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

Goodwill represents the excess of the cost of

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

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

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

Events or circumstances that could trigger

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

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

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

relative to expected historical or projected future results of operations.

Goodwill is tested for impairment at the reporting

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

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

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

When testing goodwill for impairment, the

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

impairment test for each reporting unit.

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

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

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

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

respective book values, including goodwill.

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

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

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

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

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

The estimate of implied fair

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

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

and trademarks.

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

an amount equal to the excess.

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

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

Intangible assets subject

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

be recoverable.

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

Reconciliation of Goodwill as of August 31, 2021,

Schedule of reconciliation of goodwill

Balance, August 31, 2017

(in thousands)

Balance, August 31, 2019

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Schedule of other intangible assets

Customer relationships-Cognigen

Customer relationships

Straight line 8 years

Trade Name-Cognigen

Covenants not to compete-Cognigen

Covenants not to compete

Straight line 5 years

Covenants not to compete-DILIsym

Customer relationships

Straight line 10 years

Trade Name-DILIsym

Customer relationships-DILIsym

Covenants not to compete

Straight line 4 years

Customer relationships-Lixoft

Customer relationships

Straight line 14 years

Trade Name-Lixoft

Covenants not to compete-Lixoft

Covenants not to compete

Straight line 3 years

Amortization expense for the year ended

August 31, 2020, 2019 and 2018 was $ 431,725 , $ 357,500 , and $ 357,500 .

Future amortization for the next five years is as follows:

The following table summarizes other intangible

assets as of August 31, 2020:

Customer relationships

Straight line 8 years

Covenants not to compete

Straight line 5 years

Customer relationships

Straight line 10 years

Covenants not to compete

Straight line 4 years

Customer relationships

Straight line 14 years

Covenants not to compete

Straight line 3 years

Total amortization expense for the years ended

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

Future amortization of intangible assets for the next five years is

Schedule of future amortization

(in thousands)

Business Acquisitions

The Company accounted for the acquisition

of Cognigen, DILIsym Services, Inc.

and Lixoft using the purchase method of accounting where the assets acquired and liabilities

assumed are recognized based on their respective estimated fair values.

The excess of the purchase price over the estimated fair

values of the net assets acquired is recorded as goodwill.

Determining the fair value of certain acquired assets and liabilities

is subjective in nature and often involves the use of significant estimates and assumptions, including, but not limited to, the

selection of appropriate valuation methodology, projected revenue, expenses and cash flows, weighted average cost of capital, discount

rates, estimates of advertiser and publisher turnover rates and estimates of terminal values.

Business acquisitions are included

in the Company's consolidated financial statements as of the date of the acquisition.

The Company accounted for the acquisition of Cognigen,

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

their respective estimated fair values.

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

recorded as goodwill.

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

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

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

and estimates of terminal values.

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

of the acquisition.

Fair Value of Financial Instruments

Assets and liabilities recorded at fair

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

their fair value.

Assets and liabilities recorded at fair value

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

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

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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, accrued payroll and other expenses, and accrued bonuses to officers the carrying

amounts approximate fair value due to their short-term nature.

The following table summarizes fair value

measurements at August 31, 2020 and August 31, 2019 for assets and liabilities measured at fair value on a recurring basis:

August 31, 2020:

For certain of our financial instruments, including

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

short-term nature.

The following table summarizes fair value measurements

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

Summarizes fair value measurements

August 31, 2021

(in thousands)

Cash and cash equivalents

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Acquisition-related contingent consideration obligations

As of August 31, 2020 and 2019, the Company

has a liability for contingent consideration related to its acquisition of Lixoft and DILIsym Services, Inc.

The fair value measurement

of the contingent consideration obligations is determined using Level 3 inputs.

The fair value of contingent consideration obligations

is based on a discounted cash flow model using a probability-weighted income approach.

These fair value measurements represent

Level 3 measurements as they are based on significant inputs not observable in the market.

Significant judgment is employed in

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

Accordingly, changes

in assumptions could have a material impact on the amount of contingent consideration expense the Company records in any given

Changes in the value of the contingent consideration obligations are recorded in the Company’s Consolidated Statement

of Operations.

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

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

The fair value measurement of the contingent

consideration obligations is determined using Level 3 inputs.

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

cash flow model using a probability-weighted income approach.

These fair value measurements represent Level 3 measurements as they are

based on significant inputs not observable in the market.

Significant judgment is employed in determining the appropriateness of these

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

Accordingly, changes in assumptions could have a material impact

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

Changes in the value of the contingent consideration

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

The following is a reconciliation of contingent

1 unchanged sentence

Reconciliation of contingent consideration value

Value at August 31, 2019

Purchase price contingent consideration

(in thousands)

Value as of August 31, 2020

Contingent consideration payments

( 1,761,028 )

Change in value of contingent consideration

Value at August 31, 2020

The Company expenses advertising costs

Advertising costs for the years ended August 31, 2020, 2019 and 2018 were approximately $ 63,944 , $ 83,213 and $ 67,848 ,

respectively.

Value as of August 31, 2021

The Company expenses marketing and advertising

costs as incurred.

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

$ 83 thousand, respectively.

Research and Development Costs

Research and development costs are charged

to expense as incurred until technological feasibility has been established.

These costs include salaries, laboratory experiment,

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

The Company accounts for income taxes in

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

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

Under this method, deferred income taxes

are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their

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

the differences are expected to affect taxable income.

Valuation allowances are established, when necessary, to reduce deferred

tax assets to the amount expected to be realized.

The provision for income taxes represents the tax payable for the period and

the change during the period in deferred tax assets and liabilities.

Research and development costs are charged to

expense as incurred until technological feasibility has been established.

These costs include salaries, laboratory experiment, and purchased

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

The Company accounts for income taxes in accordance

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

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

Under this method, deferred income taxes are recognized

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

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

to affect taxable income.

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

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

assets and liabilities.

Intellectual property

On February 28, 2012, we bought out the

royalty agreement with Enslein Research.

The cost of $ 75,000 is being amortized over 10 years under the straight-line method .

expense for each of the fiscal years ended August 31, 2020 and 2019 was $ 7,500 .

Accumulated amortization as of August 31, 2020

and 2019 was $ 63,750 and $ 56,250 , respectively.

On February 28, 2012, we bought out the royalty

agreement with Enslein Research.

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

On May 15, 2014, we entered into a termination

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

agreement entered into between the parties in 1997.

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

and data, and TSRL relinquished any rights and claims to any GastroPlus products and to any claims to royalties or other payments

under that 1997 agreement.

We agreed to pay TSRL total consideration of $ 6,000,000 , which is being amortized over 10 years under

the straight-line method .

Amortization for the year ended August 31, 2020, and 2019 was $ 600,000 .

Accumulated amortization as of

August 31, 2020 and 2019 was $ 3,775,000 and $ 3,175,000 , respectively.

On June 1, 2017, as part of the acquisition

of DILIsym Services, Inc.

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

These technologies were valued at $ 2,850,000 and are being amortized over 9 years under the straight-line method .

expense for the fiscal years ended August 31, 2020 and 2019 was $ 316,667 and $ 316,667 , respectively, and is included in cost of

Total accumulated amortization as of August 31, 2020 and 2019 was $ 1,029,167 and $ 712,500 , respectively.

In September 2018, we purchased certain

intellectual property rights of Entelos Holding Company, a Delaware Corporation.

The cost of $ 50,000 is being amortized over 10

years under the straight-line method .

Amortization expense for the year ended August 31, 2020 and 2019 was $ 5,000 and $ 5,000 .

amortization as of August 31, 2020 and 2019 was $ 10,000 and $ 5,000 , respectively.

On April 1, 2020, as part of the acquisition

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

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

entered into between the parties in 1997.

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

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

We agreed to pay TSRL total consideration of $ 6 million, which is being amortized over 10 years under the straight-line method .

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

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

These technologies

were valued at $ 8,010,000 and are being amortized over 16 years under the straight-line method .

Amortization expense for the fiscal

years ended August 31, 2020 was $ 208,594 and is included in cost of revenues.

Total accumulated amortization as of August 31, 2020

was $ 208,594 .

Total amortization expense for intellectual

property agreements for the years ended August 31, 2020, 2019 and 2018 was $ 1,138,280 , $ 929,167 , and $ 924,167 .

Accumulated amortization

as of August 31, 2020 and 2019 was $ 5,087,031 and $ 3,948,750 , respectively.

Future amortization for the next five years

is as follows:

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

In September 2018, we purchased certain intellectual

property rights of Entelos Holding Company.

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

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

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

These technologies were valued

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

The following table summarizes intellectual property

as of August 31, 2021:

Summary of intellectual property

Royalty Agreement buy out-Enslein Research

Straight line 10 years

Termination/nonassertion agreement-TSRL Inc.

Straight line 10 years

Developed technologies–DILIsym acquisition

Straight line 9 years

Intellectual rights of Entelos Holding Company

Straight line 10 years

Developed technologies–Lixoft acquisition

Straight line 16 years

The following table summarizes intellectual property

as of August 31, 2020:

Royalty Agreement buy out-Enslein Research

Straight line 10 years

Termination/nonassertion agreement-TSRL Inc.

Straight line 10 years

Developed technologies–DILIsym acquisition

Straight line 9 years

Intellectual rights of Entelos Holding Company

Straight line 10 years

Developed technologies–Lixoft acquisition

Straight line 16 years

Total amortization expense for intellectual property

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

Future amortization of intellectual property

for the next five years is as follows:

Schedule of future amortization expenses

DILI-Acquired

Lixoft-Acquired

(in thousands)

Earnings per Share

The Company reports earnings per share

in accordance with FASB ACS 260-10.

Basic earnings per share is computed by dividing income available to common shareholders by

the weighted-average number of common shares available.

Diluted earnings per share is computed similarly to basic earnings per

share except that the denominator is increased to include the number of additional common shares that would have been outstanding

if the potential common shares had been issued and if the additional common shares were dilutive.

The components of basic and diluted

earnings per share for the years ended August 31, 2020, 2019 and 2018 were as follows:

The Company reports earnings per share in accordance

with FASB ACS 260-10.

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

number of common shares available.

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

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

issued and if the additional common shares were dilutive.

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

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

Schedule of earnings per share

(in thousands)

Net income attributable to common shareholders

3 unchanged sentences

Stock-Based Compensation

The Company accounts for stock options

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

Under this method, compensation costs include estimated grant date fair value of the awards amortized over the options’ vesting

Stock-based compensation was $ 1,286,625 , $ 865,848 and $ 562,078 for the fiscal years ended August 31, 2020, 2019 and 2018,

respectively, and is included in the statements of operations as Consulting, Salaries, and Research and Development expense.

Compensation costs related to stock options are

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

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

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

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

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

2019, respectively.

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

and administration and research and development expense.

Impairment of Long-lived Assets

The Company accounts for the impairment

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

ASC 360, “Property and Equipment” .

Long-lived assets to be held and used are reviewed for events or changes

in circumstances that indicate that their carrying value may not be recoverable.

We measure recoverability by comparing the carrying

amount of an asset to the expected future undiscounted net cash flows generated by the asset.

If we determine that the asset may

not be recoverable, or if the carrying amount of an asset exceeds its estimated future undiscounted cash flows, we recognize an

impairment charge to the extent of the difference between the fair value and the asset's carrying amount.

No impairment losses

were recorded during the years ended August 31, 2020, 2019 and 2018.

The Company accounts for the impairment and disposition

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

and Equipment” .

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

their carrying value may not be recoverable.

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

undiscounted net cash flows generated by the asset.

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

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

the fair value and the asset's carrying amount.

No impairment losses were recorded during the years ended August 31, 2021, 2020 and 2019.

Recently Issued Accounting Standards

In May 2014, the Financial Accounting Standards

Board (FASB) issued Accounting Standards Update (ASU) 2014-09 and its related amendments regarding Accounting Standards Codification

Topic 606 (ASC Topic 606), Revenue from Contracts with Customers.

The standard provides principles for recognizing revenue for

the transfer of promised goods or services to customers with the consideration to which the entity expects to be entitled in exchange

for those goods or services.

The standard also provides guidance on the recognition of incremental costs related to obtaining customer

We adopted ASC Topic 606, effective September 1, 2018, utilizing the modified retrospective method.

This approach was

applied to contracts that were in process as of September 1, 2018, and the corresponding incremental costs of obtaining those contracts,

which resulted in a cumulative effect adjustment of $493,279 to the opening balance of retained earnings at the date of adoption.

The adoption of this ASU primarily impacts the timing of our revenue recognition for certain sales contracts, the capitalization

and amortization of incremental costs of obtaining a contract, and related disclosures.

The reported results for fiscal year 2019

reflect the application of ASC Topic 606.

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

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

requires all leases to be recognized in the consolidated balance sheet.

ASU 2016-02 is effective for annual and interim reporting

periods beginning after December 15, 2018.

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

all leases to be recognized in the consolidated balance sheet.

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

after December 15, 2018.

The Company adopted this ASU on September 1, 2019.

In April 2016, the FASB issued ASU 2016-10,

Revenue from Contracts with Customers (Topic 606), which amends certain aspects of the Board's new revenue standard, ASU 2014-09,

Revenue from Contracts with Customers.

The standard was adopted concurrently with the adoption of ASU 2014-09 which is effective

for annual and interim periods beginning after December 15, 2017.

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

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

taxes and improve consistent application of Topic 740.

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

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

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

The guidance also simplifies

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

the step-up in the tax basis of goodwill.

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

The adoption of the new standard is

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

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

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

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

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

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

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

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

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

impact on our financial statements or related disclosures.

NOTE 3 – REVENUE RECOGNITION

The Company adopted Topic 606 effective

September 1, 2018 using the modified retrospective method applying this guidance to all open contracts at the date of initial

application, which resulted in an adjustment to retained earnings for the cumulative effect of applying this guidance.

significant impact of Topic 606 on revenue to the Company relates to the timing of revenue recognition for one of its payment contracts.

Under 606 the revenues under the contract are being recognized as time is expended and costs are being expensed as incurred.

ASC 605 revenues were recognized as invoiced and certain costs were capitalized as development.

We generate revenue primarily from the

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

The Company determines revenue recognition

through the following steps:

We generate revenue primarily from the sale of

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

The Company determines revenue recognition through

the following steps:

Identification of the contract, or contracts, with a customer

4 unchanged sentences

Components of Revenue

The following is a description of principal

activities from which the Company generates revenue.

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

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

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

The following is a description of principal activities

from which the Company generates revenue.

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

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

Stand-alone selling

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

Revenue Components

1 unchanged sentence

Software Revenues:

Software revenues are generated primarily from sales of software

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

Software revenues are generated primarily from sales of software licenses

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

The license period typically is one year or less.

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

Should the customer

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

Most software

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

For certain software arrangements the Company hosts the licenses

on servers maintained by the Company, revenue for those arrangements are accounted as Software as a Service over the life

of the contract.

Along with the license

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

Should the customer need more than

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

Most software is installed on

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

For certain software arrangements the Company hosts the licenses on

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

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

9 unchanged sentences

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

Remaining performance obligations

that do not fall under the expedients require the Company to perform various consulting and software development

services and consortium memberships of approximately $ 3,303,461 .

Remaining performance obligations that do not

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

of approximately $6.2 million.

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

Contract Liabilities

During the year ended August 31, 2020 the

Company recognized $ 1,146,000 of revenue that was included in contract liabilities as of August 31, 2019.

During the year ended August 31, 2021, the Company

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

Disaggregation of Revenues

The components of disaggregation of revenue for

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

Schedule of disaggregation of revenues

Disaggregation of Revenues:

August 31, 2020

August 31, 2019

Year ended August 31,

(in thousands)

Software licenses

3 unchanged sentences

Contracts in Progress

Contracts in progress are included in the accompanying balance

sheets under the following captions:

Contracts in progress are included in the accompanying balance sheets

under the following captions:

Schedule of contract in progress

Year ended August 31,

(in thousands)

Revenues in excess of billings

1 unchanged sentence

Revenues over billings on uncompleted contracts

Cost, estimated earnings, and billings

on uncompleted contracts are summarized as follows as of August 31, 2020 and 2019:

Cost, estimated earnings, and billings on uncompleted contracts are

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

(in thousands)

Revenues earned to date on uncompleted contracts

Billings to date on uncompleted contracts

( 17,283,221 )

( 16,819,818 )

Revenues over billings on uncompleted contracts

Balance increases and decreases in these

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

Balance increases and decreases in

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

NOTE 4 – PROPERTY AND EQUIPMENT

Property and equipment at August 31, 2020

and 2019 consisted of the following:

Schedule of property and equipment

Property and equipment consisted of the following:

Computer equipment

1 unchanged sentence

Leasehold improvements

Construction in progress

Less accumulated depreciation and amortization

Depreciation expense was $ 166,379 , $ 131,827 ,

and $ 139,202 for the years ended August 31, 2020, 2019, and 2018, respectively.

Depreciation expense was $ 226 thousand, $ 166 thousand

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

NOTE 5 – INVESTMENTS

The Company invests a portion of its

excess cash balances in short-term debt securities.

Investments at August 31, 2020 consisted of corporate bonds with

maturities remaining of less than 12 months.

The Company may also invest excess cash balances in certificates of deposits,

money market accounts, government-sponsored enterprise securities, corporate bonds and/or commercial paper.

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

At August 31,

2020, all investments were classified as held-to-maturity securities.

The following tables summarize the Company’s short-term

investments as of August 31, 2020.

The Company had no short-term investments for the year ended August 31, 2019.

The Company invests a portion of its excess cash

balances in short-term debt securities.

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

than 12 months.

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

enterprise securities, corporate bonds and/or commercial paper.

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

Investments – Debt and Equity Securities.

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

The following tables summarize the Company’s

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

Schedule of short term investment

August 31, 2021

(in thousands)

Amortized Cost

Commercial notes (due within one year)

August 31, 2020

(in thousands)

Amortized Cost

Commercial notes (due within one year)

NOTE 6 – CONTRACTS PAYABLE

DILIsym Acquisition Liabilities:

On June 1, 2017, the Company acquired DILIsym

Services, Inc.

The agreement provided for a working capital adjustment, an eighteen-month $1,000,000 holdback provision against

certain representations and warrantees, and an Earn-out agreement of up to an additional $5,000,000 in Earn-out payments based

on earnings over the three years following acquisition.

The Earn-out liability has been recorded at an estimated fair value.

under the Earn-out liability will be due starting in FY 2019.

In September 2018, $1,556,644 was paid out under the first earn-out

payment, a second earn-out payment was made in August 2019 in the amount of $1,682,329.

The final payment of $1,761,028 was paid

in August 2020.

On June 1, 2017, we acquired DILIsym.

The agreement

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

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

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

Payments under the earnout liability started in fiscal year 2019.

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

amount of $1.7 million.

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

In addition, no claims were made against the holdback

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

Lixoft Acquisition Liabilities :

On April 1, 2020, the Company

acquired Lixoft.

The agreement provided for a twenty-four month $2,000,000 holdback provision against certain representations and

warrantees, comprised of $1,333,333 of cash and the release from an escrow shares of stock valued at $666,337 issued at the date

of the Agreement.

In addition, based on a revenue growth formula for the two years subsequent to April 1, 2020, the agreement calls

for earn-out payments up to $5,500,000 (two thirds cash and one-third newly issued, unregistered shares of the Company’s

common stock).

The former shareholders can earn up to $2,000,000 the first year and $3,500,000 in year two.

On April 1, 2020, the Company acquired

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

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

In addition, based on a revenue

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

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

The former shareholders can earn up to $2.0

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

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

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

As of August 31, 2021, and 2020 the following

1 unchanged sentence

Schedule of Liabilities

Holdback Liability - Lixoft

Earn-out Liability - Lixoft

Earn-out Liability - Dilisym

August 31, 2021

August 31, 2020

Holdback Liability

Earnout Liability

Current Portion

NOTE 7 – COMMITMENTS AND CONTINGENCIES

We lease approximately 13,500 square feet

of space in Lancaster, California.

The original lease had a five-year term with two, three-year options to extend.

five-year term expired in February 2011, and we extended the lease to February 2, 2014.

In June 2013, the lease was amended to

extend the term to February 2, 2017.

The amended lease also provides for an annual base rent increase of 3% per year and two, two-year

options to extend.

In May 2016 the Company exercised the two, two-year options extending the term of the lease through February

2, 2021 at a fixed rate of $25,000 per month.

The new extension agreement allowed the Company with 90 days’ notice to opt

out of the remaining lease in the last two years of the term upon payment of a recapture payment equal to the 3% base payment increase

that would have been due under the original agreement.

Our Buffalo subsidiary leases approximately

12,623 square feet of space in Buffalo, New York.

The initial five-year term expired in October 2018;

and was renewed for a three-year

option to extending it to November 2021.

The new base rent is $16,147 per month.

DILIsym leases approximately 2,700 square

feet of space in Research Triangle Park, North Carolina.

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

to the initial lease became effective April 1, 2020.

This amendment added 686 square feet and extended the term of the lease to

September 30, 2023.

The new base rent is approximately $7,500 per month with an annual 3% adjustment.

In Paris, France Lixoft leases approximately

2,300 square feet of office space, which as of April 1, 2020, had minimum payments equaling $288,000.

The lease is for a 9-year

term, with an option to terminate every 3 years, and expires in November of 2024.

The rent is $16,555 per quarter and can be adjusted

each December based on a consumer price index.

Our corporate headquarters is located in Lancaster,

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

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

$17 thousand per month.

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

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

We lease 12,623 square feet of office space in

Buffalo, New York.

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

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

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

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

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

renewal options.

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

the lease term no later than November 2021.

We lease approximately 2,700 square feet of space

in Research Triangle Park, North Carolina.

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

An amendment to the initial

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

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

We lease approximately 2,300 square feet of office

space in Paris, France.

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

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

The base rent is $16 thousand per quarter

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

Rent expense, including common area maintenance

fees for the years ended August 31, 2020, 2019 and 2018 was $ 644,000 , $ 584,000 and $ 567,000 , respectively.

Future minimum lease payments under non-cancelable

operating leases with remaining terms of one year or more at August 31, 2020 were as follows:

Future minimum lease payments

Years Ending August 31,

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

Lease liability maturities as of August 31, 2021,

were as follows:

Future minimum lease payments

thousands) Years

Ending August 31,

Total undiscounted liabilities

imputed interest

Total future minimum lease payments

Line of Credit

On March 31, 2020, Simulations Plus,

entered into a Credit Agreement with Wells Fargo Bank, N.A.

The Credit Agreement, has provided Simulations Plus, Inc.

with a credit facility of $ 3,500,000

through April

On March 31, 2020, the Company entered into a

Credit Agreement with Wells Fargo Bank, N.A.

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

April 15, 2022 .

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

Interest accrues daily at the

bank’s base rate.

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

One Month LIBOR, and (iii) the Federal Funds Rate plus 1.5%.

The rate at August 31, 2020 was 3.25%.

Under the terms of the

agreement the borrower is to maintain a zero No

balance under this line of credit for a period of thirty consecutive days during each 12-month period commencing March 31,

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

financial covenants.

Interest accrues daily at the bank’s

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

(iii) the Federal Funds Rate plus 1.5%.

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

Under the terms of the agreement the borrower is to

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

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

Employment Agreements

In the normal course of business, the Company

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

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

License Agreement

The Company had a royalty agreement with

Dassault Systèmes Americas Corp.

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

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

this agreement, we pay a royalty of 25% of revenue derived from the sale of the Metabolism/Metabolite module.

This agreement was

recently renegotiated, and the Company does not bear any royalty obligations towards Dassault Systèmes Americas Corp.

as of June 30, 2019.

In addition, the license agreement terminated on September 5, 2020.

Under this agreement for the years ended

August 31, 2020, 2019 and 2018 we incurred royalty expense (benefit) of $ ( 26,055 ) , $ 195,828 and $ 175,740 , respectively.

is in the process of replacing the database.

We are not a party to any legal proceedings

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

The Company had a royalty agreement with Dassault

Systèmes Americas Corp.

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

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

Under this agreement, we paid a

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

This agreement was renegotiated, and the

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

effective June 30, 2019.

the license agreement terminated on September 5, 2020.

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

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

We have not experienced any adverse impact on revenue

since terminating the license agreement.

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

completed at the end of fiscal year 2021.

We are not a party to any legal proceedings and

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

NOTE 8 – SHAREHOLDERS' EQUITY

The Company’s Board of Directors

declared cash dividends during fiscal year 2020, 2019 and 2018.

The details of dividend paid are in the following tables:

Shares Outstanding

Shares of common stock outstanding for the years

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

Common stock outstanding, beginning of year

Common stock issued during the year

Common stock outstanding, end of year

The Company’s Board of Directors declared

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

The details of dividends paid are in the following tables:

Schedule of dividends declared and paid

Distribution Date

Number of Shares

Outstanding on

thousands, except dividend per share) Fiscal

Distribution Date

1 unchanged sentence

Outstanding on

thousands, except dividend per share) Fiscal Year 2020

Distribution Date

1 unchanged sentence

Outstanding on

Although dividend distributions are currently

expected to continue on a quarterly basis, the Company’s Board of Directors reserves the right to discontinue the dividend

distribution any time.

Stock Option Plan

On February 23, 2007, the Board of Directors

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

been reserved for issuance.

On February 25, 2014 the shareholders approved an additional 1,000,000 shares increasing the total

number of shares that may be granted under the Option Plan to 2,000,000.

Stock Option Plans

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

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

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

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

This plan terminated in February 2017 by its term.

On December 23, 2016 the Board of Directors

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

of common stock has been reserved for issuance.

On December 23, 2016 the Board of Directors adopted,

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

has been reserved for issuance.

This plan will terminate in December 2026.

Effective April 9, 2021, the Board of Directors

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

1.3 million shares are reserved for issuance.

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

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

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

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

The maximum contractual life of the plan is ten years.

As of August 31, 2021, employees and directors

hold stock options to purchase 1,223,661 shares of common stock at exercise prices ranging from $6.75 to $61.84 per share.

The following table summarizes information

about stock options:

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

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

The following tables summarize information about

stock options:

Schedule of stock option activity

Transactions in FY18

(in thousands,

except per share and weighted-average amounts)

Transactions During Fiscal Year 2021

Weighted-Average

7 unchanged sentences

Vested and Expected to Vest, August 31, 2021

Transactions in FY19

(in thousands,

except per share and weighted-average amounts)

Transactions During Fiscal Year 2020

Weighted-Average

7 unchanged sentences

Vested and Expected to Vest, August 31, 2020

Transactions in FY20

(in thousands,

except per share and weighted-average amounts)

Transactions During Fiscal Year 2019

Weighted-Average

7 unchanged sentences

Vested and Expected to Vest, August 31, 2019

Intrinsic Value of options outstanding and options exercisable

The following table summarizes the Intrinsic Value of options

outstanding and options exercisable:

Intrinsic value of options outstanding and options exercisable

(in thousands)

Intrinsic Value

The weighted-average remaining contractual

life of options outstanding issued under the Plan, both Qualified ISO and Non-Qualified SO, was 6.79 years at August 31, 2020.

The total fair value of non-vested stock options as of August 31, 2020 was $ 22,122,054 and is amortizable over a weighted average

period of 3.39 years.

Fiscal Year 2019

Fiscal Year 2020

Fiscal Year 2021

The weighted-average remaining contractual life

of options outstanding issued under the Plans, for both ISOs and NQSOs, was 6.47 years at August 31, 2021.

The total fair value of non-vested

stock options as of August 31, 2021, was $ 6.3 million and is amortizable over a weighted average period of 3.43 years.

fair value of these options was estimated at the date of grant using the Black-Scholes option-pricing model.

The Black-Scholes

option valuation model was developed for use in estimating the fair value of traded options, which do not have vesting restrictions

and are fully transferable.

In addition, option valuation models require the input of highly subjective assumptions, including

the expected stock price volatility.

Because our stock options have characteristics significantly different from those of traded

options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's

opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its stock options.

The following table summarizes

the fair value of the options, including both ISOs and NQSOs, granted during the current fiscal year 2020 and fiscal year 2019:

The Black-Scholes option

valuation model was developed for use in estimating the fair value of traded options, which do not have vesting restrictions and are fully

transferable.

In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price

The following table summarizes the

fair value of the options, including both ISOs and NQSOs, granted during the current fiscal year 2021 and fiscal year 2020:

Schedule of fair value of options

(in thousands,

except prices)

Fiscal Year 2021

Fiscal Year 2020

Estimated fair value of awards granted

8 unchanged sentences

at August 31, 2021, ranged from $6.85 to $66.14, and the information relating to these options is as follows:

(in thousands

except prices)

Schedule of options by exercise price range

2 unchanged sentences

Awards Exercisable

Follow-on Public Offering

In August 2020, the company closed an

underwritten public offering of 2,090,909

shares of its common stock to the public at $ 55.00

per share, which included the full exercise of the underwriters’ option to purchase 272,727 additional shares of common

The aggregate gross proceeds to the company from this offering were approximately $ 115

million, before deducting underwriting discounts and commissions;

net proceeds were approximately $ 107.7

million 107,747,338 .

The offering was made pursuant to the Company’s automatic shelf registration statement on Form S-3 filed with

the Securities and Exchange Commission on July 9, 2020.

During the fiscal years ended August 31, 2021,

2020, and 2019, we issued 5,620,

shares of stock valued at $ 345

thousand, $ 290

thousand, and $ 212

thousand, respectively, to our non-management directors as compensation for board-related duties.

The balance of our par value common stock and

additional paid-in capital as of August 31, 2021, was $ 10 thousand and $ 133.4 million, respectively, and the balance of our par value

common stock and additional paid-in capital as of August 31, 2020 was $ 10 thousand and $ 128.5 million, respectively.

NOTE 9 – INCOME TAXES

We utilize FASB ASC 740-10, “Income

Taxes” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences

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

Under this method, deferred income taxes

are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their

financial reporting amounts at each year end based on enacted tax laws and statutory tax rates applicable to the periods in which

the differences are expected to affect taxable income.

Valuation allowances are established, when necessary, to reduce deferred

tax assets to the amount expected to be realized.

The provision for income taxes represents the tax payable for the period and

the change during the period in deferred tax assets and liabilities.

The components of the income tax provision

for fiscal year 2020, 2019 and 2018 were as follows:

We utilize FASB ASC 740-10, “Income Taxes”

which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been

included in the financial statements or tax returns.

Under this method, deferred income taxes are recognized

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

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

to affect taxable income.

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

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

assets and liabilities.

The components of the income tax provision for

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

Components of the income tax provision

Total current tax expense (benefit)

( 1,698,201 )

(in thousands)

Total current tax expense

Total deferred federal and state

( 1,731,821 )

A reconciliation of the expected income

tax (benefit) computed using the federal statutory income tax rate to the Company's effective income tax rate is as follows for

fiscal year 2020, 2019 and 2018:

A reconciliation of the expected income tax computed

using the federal statutory income tax rate to the Company's effective income tax rate is as follows for the years ended August 31, 2021,

2020 and 2019:

Effective income tax rate

7 unchanged sentences

Research & credit adjustments to expense

Domestic production activities

Change in deferred income taxes due to statutory rate changes

Change in prior year estimated taxes

Significant components of the Company's

deferred tax assets and liabilities for income taxes for the fiscal years ended August 31, 2020 and 2019 are as follows:

Components of the Company deferred tax assets and liabilities

Significant components of the Company's deferred

tax assets and liabilities for income taxes for the years ended August 31, 2021, and 2020 are as follows:

Components of company deferred tax assets and liabilities

Deferred tax assets:

3 unchanged sentences

Intellectual property

Research and development credits

Allowance for doubtful accounts

7 unchanged sentences

Intellectual property

( 1,876,274 )

( 2,217,234 )

Capitalized computer software development costs

( 1,774,349 )

( 1,334,169 )

Total deferred tax liabilities

( 3,752,001 )

( 3,629,865 )

Net deferred tax liabilities

$ ( 2,353,858 )

$ ( 2,731,616 )

We follow guidance issued by the FASB with

regard to our accounting for uncertainty in income taxes recognized in the financial statements.

Such guidance prescribes a recognition

threshold of more likely than not and a measurement process for financial statement recognition and measurement of a tax position

taken or expected to be taken in a tax return.

In making this assessment, a company must determine whether it is more likely than

not that a tax position will be sustained upon examination, based solely on the technical merits of the position and must assume

that the tax position will be examined by taxing authorities.

Our policy is to include interest and penalties related to income

Interest and penalties totaled $ 332 , $ 2,531 , and $- 0 - for fiscal years 2020, 2019, and 2018, respectively.

income tax returns with the IRS and various state jurisdictions and India.

Our federal income tax returns for fiscal year 2016

thru 2019 are open for audit, and our state tax returns for fiscal year 2015 through 2019 remain open for audit.

In addition, our

California tax return for the fiscal year 2007 and fiscal year 2008 remains open with regard to R&D tax credits as a result

of a previous audit for which we received a letter from the California Franchise Tax Board stating that an audit will not be conducted

for those years at this time;

however it may be subject to future audit.

Our review of prior year tax positions

using the criteria and provisions presented in guidance issued by FASB did not result in a material impact on our financial position

or results of operations.

We follow guidance issued by the FASB with regard

to our accounting for uncertainty in income taxes recognized in the financial statements.

Such guidance prescribes a recognition threshold

of more likely than not and a measurement process for financial statement recognition and measurement of a tax position taken or expected

to be taken in a tax return.

In making this assessment, a company must determine whether it is more likely than not that a tax position

will be sustained upon examination, based solely on the technical merits of the position and must assume that the tax position will be

examined by taxing authorities.

Our policy is to include interest and penalties related to income tax expense.

Interest and penalties

were immaterial for fiscal years 2021, 2020, and 2019, respectively.

We file income tax returns with the IRS and various state jurisdictions

as well as with the countries of India and France.

Our federal income tax returns for fiscal year 2018 thru 2020 are open for audit, and

our state tax returns for fiscal year 2017 through 2020 remain open for audit.

Our review of prior year tax positions using the

criteria and provisions presented in guidance issued by FASB did not result in a material impact on our financial position or results

of operations.

NOTE 10 – CONCENTRATIONS AND UNCERTAINTIES

Financial instruments that potentially

subject the Company to concentration of credit risk consist principally of cash, cash equivalents and trade accounts receivable.

Financial instruments that potentially subject

the Company to concentration of credit risk consist principally of cash, cash equivalents, trade accounts receivable and short-term investments.

The Company holds cash and cash equivalents at banks located in California, with balances that often exceed FDIC insured limits.

Historically, the Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit

risk on cash and cash equivalents.

However, considering the current banking environment, the Company is investigating alternative

ways to minimize its exposure to such risks.

While the Company may be exposed to credit losses due to the nonperformance of its

counterparties, the Company does not expect the settlement of these transactions to have a material effect on its results of operations,

cash flows or financial condition.

The Company maintains cash at financial institutions that may, at times, exceed federally insured

At August 31, 2020, the Company had cash and cash equivalents exceeding insured limits by $ 10,790,000 .

Revenue concentration shows that international

sales accounted for 29 %, 34 % and 39 % of net sales for fiscal years 2020, 2019 and 2018, respectively.

Three customers accounted

for 9 %, 7 % (a dealer account in Japan representing various customers), and 7 % of net sales for fiscal year 2020.

Three customers

accounted for 8 %, 8 % (a dealer account in Japan representing various customers), and 7 % of net sales for fiscal year 2019.

customers accounted for 9 % (a dealer account in Japan representing various customers), 7 %, 6 % and 5 % of net sales for fiscal year

FY20 accounts receivable concentrations

show that two customers comprised 13 % and 10 % of accounts receivable as of August 31, 2020, respectively.

FY19 accounts receivable

concentrations show that one customer comprised 10 % of accounts receivable as of August 31, 2019.

we hold cash at a bank in France that is not FDIC-insured.

Historically, the Company has not experienced any losses in such accounts.

However, we are investigating alternative way to minimize our exposure to such risk.

While the Company may be exposed to credit losses

due to the nonperformance of its counterparties, the Company does not expect the settlement of these transactions to have a material effect

on its results of operations, cash flows or financial condition.

The Company maintains cash at financial institutions that may, at times,

exceed federally insured limits.

Revenue concentration shows that

international sales accounted for 31 %, 29 %

of revenue for the years ended August 31, 2021, 2020 and 2019, respectively.

Three customers accounted for 11 %, 4 %

of revenue for fiscal year 2021.

Three customers accounted for 9 %, 7 %

(a dealer account in Japan representing various customers), and 7 %

of revenue for fiscal year 2020.

Three customers accounted for 8 %, 8 %

(a dealer account in Japan representing various customers), and 7 %

of revenue for fiscal year 2019.

Accounts receivable concentrations show that three

customers each comprised between 5 % and 16 % of accounts receivable as of August 31, 2021, respectively;

two customers comprised 13 % and

10 % of accounts receivable as of August 31, 2020, respectively.

We operate in the computer software industry,

which is highly competitive and changes rapidly.

Our operating results could be significantly affected by our ability to develop

new products and find new distribution channels for new and existing products.

The majority of our customers are in the

pharmaceutical industry.

Our operating results could be significantly affected by our ability to develop new products

and find new distribution channels for new and existing products.

The majority of our customers are in the pharmaceutical

During economic downturns, we have seen consolidations in the pharmaceutical industry.

Although we have

not seen any significant reduction in total revenues to date, our growth rate could be affected by consolidation and downsizing

in the pharmaceutical industry.

extent to which the COVID-19 pandemic impacts our business going forward will depend on numerous factors we cannot reliably predict, including

the duration and scope of the pandemic;

businesses and individuals' actions in response to the pandemic;

and the impact on economic activity

including the possibility of recession or financial market instability.

These factors may adversely impact consumer, business, and government

spending as well as customers' ability to pay for our products and services on an ongoing basis .

As a result, our growth rate could

be affected by consolidation and downsizing in the pharmaceutical industry.

NOTE 11 – SEGMENT AND GEOGRAPHIC REPORTING

We account for segments and geographic

revenues in accordance with guidance issued by the FASB.

Our reportable segments are strategic business units that offer different

products and services.

Results for each segment and consolidated

results are as follows years ended August 31, 2020, 2019 and 2018 (in thousands, because of rounding, numbers may not foot):

Schedule of consolidated results from reportable segments

Year ended August 31, 2020

Simulations Plus, Inc.

Cognigen Corporation

Income from operations before income taxes

We account for segments and geographic revenues

in accordance with guidance issued by the FASB.

Our reportable segments are strategic business units that offer different products and

Results for each divisional segment and consolidated

results are as follows for the years ended August 31, 2021, 2020 and 2019:

(in thousands)

ended August 31, 2021

Simulations Plus

Income (loss) from operations

Capital expenditures

1 unchanged sentence

Depreciation and amortization

Year ended August 31, 2019

Simulations Plus, Inc.

Cognigen Corporation

Income from operations before income taxes

(in thousands)

ended August 31, 2020

Simulations Plus

Income from operations

Capital expenditures

1 unchanged sentence

Depreciation and amortization

Year ended August 31, 2018

Simulations Plus, Inc.

Cognigen Corporation

Income from operations before income taxes

As Lixoft was purchased on April 1, 2020, five months of

activity is reflected for fiscal year 2020.

(in thousands)

ended August 31, 2019

Simulations Plus

Income from operations

Capital expenditures

1 unchanged sentence

Depreciation and amortization

In addition, the Company allocates revenues

to geographic areas based on the locations of its customers.

Geographical revenues for the years ended August 31, 2020, 2019 and

2018 were as follows (in thousands, because of rounding, numbers may not foot):

Schedule of geographical revenues

Year ended August 31, 2020

North & South America

Simulations Plus, Inc.

Cognigen Corporation

DILIsym Services, Inc.

Year ended August 31, 2019

North & South America

Simulations Plus, Inc.

Cognigen Corporation

DILIsym Services, Inc.

Year ended August 31, 2018

North & South America

Simulations Plus, Inc.

Cognigen Corporation

DILIsym Services, Inc.

*Lixoft was acquired on April 1, 2020.

Results for each business unit segment and consolidated

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

(in thousands)

ended August 31, 2021

Cost of revenues

Our software business and services business represented 60% and 40%

of total revenue, respectively, for the year ended August 31, 2021.

(in thousands)

ended August 31, 2020

Cost of revenues

Our software business and services business represented 52% and 48%

of total revenue, respectively, for the 2020 fiscal year.

(in thousands)

ended August 31, 2019

Cost of revenues

Our software business and services business represented 54% and 46%

of total revenue, respectively, for the 2019 fiscal year.

In addition, the Company allocates revenues to

geographic areas based on the locations of its customers.

Geographical revenues for the years ended August 31, 2021, 2020 and 2019 were

(in thousands)

ended August 31,

NOTE 12 – RELATED PARTY TRANSACTIONS

On June 1, 2017 the Company acquired

DILIsym Service, Inc.

As part of that agreement the Company paid $ 1,704,000

to former shareholders of DILIsym Services, Inc.

who are currently employees of the Consolidated Company.

In addition, as

part of the acquisition agreement the Company owes approximately $ 2,260,000

of acquisition liabilities at August 31, 2018 to the former shareholders who are still employees of the Consolidated Company.

One of the former shareholders of DILIsym is currently a director of Simulations Plus, under the agreement he received

approximately $29,000 and could receive up to approximately $30,000 in future earn-out payments.

In September 2018,

subsequent to year end under terms of the agreement the Company made payments in the amount of approximately $ 587,000

and $ 10,000 ,

respectively to the employees and the current director.

In fiscal year 2019, under terms of the agreement the Company made

payments in the amount of approximately $ 1,599,534

and $ 27,312 ,

respectively to the employees and the current director.

In August 2020 the Company made final payments under the agreement in

the amount of approximately $ 664,506

and $ 11,346 ,

respectively to the employees and the current director.

On April 1, 2020, the Company acquired Lixoft.

As part of that agreement the Company paid $ 6,720,615 and issued stock with a value of $ 2,602,081 to former shareholders

of Lixoft who are currently employees of the Consolidated Company.

In addition, as part of the acquisition agreement the Company

owes approximately $ 947,220 of acquisition liabilities at August 31, 2020 to the former shareholders who are still employees of

the Consolidated Company.

As part of that agreement the Company paid $ 6.7 million and issued stock with a value of $ 2.6 million to former shareholders of Lixoft,

some who are currently employees of the Company.

In addition, as part of the acquisition agreement the Company owes approximately $ 947

thousand of acquisition liabilities at August 31, 2021, to the former shareholders who are still employees of the Company.

fiscal year 2021, under the terms of the agreement, the Company made payments totaling $ 2.0 million to the former shareholders of Lixoft

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

NOTE 13 – EMPLOYEE BENEFIT PLAN

We maintain a 401(k) Plan for eligible

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

employee compensation.

We maintain a 401(k) Plan for eligible employees.

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

We can also elect to make a profit-sharing contribution.

We contributed $ 456,484 , $ 404,684 and $ 326,762

for fiscal years 2020, 2019 and 2018, respectively.

NOTE 14 - ACQUISITION/MERGER WITH SUBSIDIARIES

On March 31, 2020, the Company entered

into a Stock Purchase and Contribution Agreement (the “Agreement”) with Lixoft, a French société par

actions simplifiée (“Lixoft”).

On April 1, 2020, the Company consummated the acquisition of all outstanding

equity interests of Lixoft pursuant to the terms of the Agreement, with Lixoft becoming a wholly owned subsidiary of the Company.

We believe the combination of Simulations Plus and Lixoft provides substantial future potential based on the complementary strengths

of each of the companies.

We contributed $ 535 thousand, $ 456 thousand and $ 405 thousand for fiscal years

2021, 2020 and 2019, respectively.

NOTE 14 – ACQUISITION

On March 31, 2020, the Company entered into a

Stock Purchase and Contribution Agreement (the “Agreement”) with Lixoft, a French société par actions simplifiée

On April 1, 2020, the Company consummated the acquisition of all outstanding equity interests of Lixoft pursuant

to the terms of the Agreement, with Lixoft becoming a wholly-owned subsidiary of the Company.

We believe the combination of Simulations

Plus and Lixoft provides substantial future potential based on the complementary strengths of each of the companies.

Under the terms of the Agreement, as described

below, the Company will pay the former shareholders of Lixoft total consideration of up to $16,500,000, consisting of two-thirds

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

In addition, the Company will pay $3,456,029

of excess working capital based on the March 31, 2020 financial statements of Lixoft.

On April 1, 2020, the Company paid the

former shareholders of Lixoft a total of $10,789,362, comprised of cash in the amount of $9,460,129 and the issuance of 111,682

shares of the Company’s common stock valued at $3,662,337, net of adjustments and a holdback for representations and warranties

(under the terms of the Agreement a price of approximately $32.15 dollars per share was used based upon the volume-weighted average

closing price of the Company’s shares of common stock for the 30-consecutive-trading-day period ending two trading days prior

to April 1, 2020).

below, the Company will pay the former shareholders of Lixoft total consideration of up to $16.5 million, consisting of two-thirds cash

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

In addition, the Company will pay $3,456,029 of excess

working capital based on the March 31, 2020 financial statements of Lixoft.

On April 1, 2020, the Company paid the former

shareholders of Lixoft a total of $10.8 million, comprised of cash in the amount of $9.5 million and the issuance of 111,682 shares of

the Company’s common stock valued at $3.7 million, net of adjustments and a holdback for representations and warranties (under the

terms of the Agreement a price of approximately $32.15 dollars per share was used based upon the volume-weighted average closing price

of the Company’s shares of common stock for the 30-consecutive-trading-day period ending two trading days prior to April 1, 2020).

9,669 shares are held in an escrow for offset for representations and warrantees.

Within three business days

following the two-year anniversary of March 31, 2020 (the date of the Agreement) and subject to any offsets for representations

and warrantees, the Company will pay the former shareholders of Lixoft a total of $2,000,000, comprised of $1,333,333 of cash and

the release from an escrow shares of stock valued at $666,337 issued at the date of the Agreement.

The Agreement provides for a

two-year market standoff period in which the newly issued shares may not be sold by the recipients thereof.

In addition, the agreement calls for earn-out

payments up to an additional $5,500,000, two-thirds cash and one-third newly issued, unregistered shares of the Company’s

common stock based on a revenue growth formula each year for the two years subsequent to April 1, 2020.

The former shareholders

can earn up to $2,000,000 the first year and $3,500,000 in year two.

The Earn-out liability has been recorded at fair value.

Under the acquisition method of accounting,

the total purchase price reflects Lixoft’s tangible and intangible assets and liabilities based on their estimated fair values

at the date of the completion of the acquisition (April 1, 2020).

The following table summarizes the preliminary allocation of

the purchase price for Lixoft:

Within three business days following the two-year anniversary

of March 31, 2020 (the date of the Agreement) and subject to any offsets for representations and warrantees, the Company will pay the

former shareholders of Lixoft a total of $2.0 million, comprised of $1.3 million of cash and the release from an escrow shares of stock

valued at $666 thousand issued at the date of the Agreement.

The Agreement provides for a two-year market standoff period in which the

newly issued shares may not be sold by the recipients thereof.

In addition, the agreement calls for earnout payments

up to an additional $5.5 million, two-thirds cash and one-third newly issued, unregistered shares of the Company’s common stock

based on a revenue growth formula each year for the two years subsequent to April 1, 2020.

The former shareholders can earn up to $2.0

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

The earnout liability has been recorded at fair value.

Under the acquisition method of accounting, the

total purchase price reflects Lixoft’s tangible and intangible assets and liabilities based on their estimated fair values at the

date of the completion of the acquisition (April 1, 2020).

The following table summarizes the preliminary allocation of the purchase

price for Lixoft:

Allocation of purchase price

1 unchanged sentence

Developed technologies acquired

Estimated value of Intangibles assets acquired (Customer Lists, trade name etc.)

Estimated value of intangible assets acquired (customer lists, trade name etc.)

Estimated goodwill acquired

Liabilities assumed

( 1,117,519 )

Total consideration

Goodwill has been provided in the transaction

based on estimates of future earnings of this subsidiary including anticipated synergies associated with the positioning of the

combined company as a leader in model-based drug development.

Consolidated supplemental Pro Forma

based on estimates of future earnings of this subsidiary including anticipated synergies associated with the positioning of the combined

company as a leader in model-based drug development.

Consolidated Supplemental Pro Forma Information

The following unaudited consolidated supplemental

pro forma information assumes that the acquisition of Lixoft took place on September 1, 2017 for the income statement years periods

ended August 31, 2020.

These amounts have been calculated after applying the Company’s accounting policies and adjusting

the results of Lixoft to reflect the same expenses in the years ended August 31, 2019 and 2018.

The adjustments include costs of

acquisition, and amortization of intangibles and other technologies acquired during the merger, assuming the fair-value adjustments

applied on September 1, 2017, together with consequential tax effects.

pro forma information assumes that the acquisition of Lixoft took place on September 1, 2017 for the income statement years ended August

These amounts have been calculated after applying the Company’s accounting policies and adjusting the results of Lixoft

to reflect the same expenses in the years ended August 31, 2019 and 2018.

The adjustments include costs of acquisition, and amortization

of intangibles and other technologies acquired during the merger, assuming the fair-value adjustments applied on September 1, 2017, together

with consequential tax effects.

Schedule of statement of income

(in thousands)

Balances include five months actual results for

15 – UNAUDITED QUARTERLY FINANCIAL DATA

The following table presents selected unaudited

quarterly financial data for each full quarterly period for the years ended August 31, 2021, and 2020:

(in thousands)

*Balances include five months actual results

NOTE 15 - UNAUDITED QUARTERLY FINANCIAL

The following table presents selected unaudited quarterly financial

data for each full quarterly period of the years ended August 31, 2020 and 2019 (in thousands except for per share data), because

of rounding, numbers may not foot:

Quarterly Financial Information

Year ended August 31, 2021

1 unchanged sentence

Earnings per share, diluted

(in thousands)

Year ended August 31, 2020

3 unchanged sentences

Dividend Declared

On October 9, 2020, our Board of Directors

On Wednesday, October 13, 2021, our Board of Directors

declared a quarterly cash dividend of $0.06 per share to our shareholders.

The dividend in the amount of $1,195,461 was distributed

The dividend in the amount of $1.2 million will be distributed

on Monday, November 1, 2021, for shareholders of record as of Monday, October 25, 2021.

Effective September 1,

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

with and into Simulations Plus, Inc.

through short form

mergers (the “Mergers”).

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

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

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

stockholders.

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