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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-K

xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended August 31, 2020

2023

or

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission file number: 001-32046
001-32046

 

SLP_TopLogo.gif

Simulations Plus, Inc.

(Exact name of registrant as specified in its charter)

California

(State or other jurisdiction of incorporation or organization)

95-4595609

(I.R.S. Employer Identification No.)

42505 Tenth Street West

Lancaster, CA 93534-7059
(661) 723-7723
Lancaster, CA93534-7059

(Address of principal executive offices including zip code)

(661)723-7723

(Registrant’s telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

Title of Each Class

Common Stock, par value $0.001 per share

Trading Symbol(s)
SLP

Name of Each Exchange on Which Registered

Common Stock, par value $0.001 per shareSLPNASDAQ Stock Market LLC

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filingsfiling requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated FileroxAccelerated Filero
Non-accelerated FilerxoSmaller reporting companyxo
Emerging growth companyo

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ox

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x

The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of February 28, 2023, the last business day of February 29, 2020,the registrant’s most recently completed second fiscal quarter, based upon the closing price of the common stock as reported by The Nasdaq CapitalGlobal Select Market on such date, was approximately $412,688,004.$604,304,239. This calculation does not reflect a determination that persons are affiliates for any other purposes.

As of November 16, 2020, 19,931,709 sharesOctober 20, 2023, 19,938,382 shares of the registrant’s common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of the registrant’s definitive proxy statement to be delivered to its shareholders in connection with the registrant’s 20202024 Annual Meeting of Shareholders are incorporated by reference into Part III of this Annual Report on Form 10-K. Such definitive proxy statement will be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this annual reportAnnual Report on Form 10-K.

Table of Contents
Simulations Plus, Inc.
FORM 10-K
For the Fiscal Year Ended August 31, 2020

2023

Table of Contents

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PART I
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PART II
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ITEM 9C – DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
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PART III
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PART IV
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS


This Annual Report on Form 10-K contains forward-looking(this "Report") includes estimates, projections, statements relating to our business plans, objectives, and expected operating results that are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, concerning our business, operations,Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and financial performanceSection 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements may appear throughout this Report, including, without limitation, in the following sections: “Business” (Part I, Item 1 of this Report), “Risk Factors” (Part I, Item 1A of this Report), and condition, as well as our plans, objectives,“Management’s Discussion and expectations for our business operationsAnalysis of Financial Condition and financial performance and condition. Any statements contained herein that are not statementsResults of historical facts may be deemed to be forward-looking statements. In some cases, you can identifyOperations” (Part II, Item 7 of this Report). These forward-looking statements generally are identified by terminology such as “aim,the words “believe,” “project,” “expect,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,“strategy,” “objective,“future,” “opportunity,” “plan,” “predict,” “potential,” “positioned,” “seek,“may,” “should,” “target,” “will,” “would,” “will be,” “will continue,” “will likely result,” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

·the continued growth in demand for our software products and consulting services in the pharmaceutical drug development industry;

·our sales, marketing, and distribution prospects;

·the continuing productivity and effectiveness of our commercial infrastructure and worldwide salesforce;

·our financial performance;

·our expectations regarding the worldwide market for modeling and simulation services;

·the continued competitive positioning of our software products and services;

·our expectations regarding the potential market size and the continuing expansion of modeling and simulation usage in the drug development sector;

·

the scope of protection we are able to maintain for intellectual property rights covering our software products;

·the modeling and simulation software and services market;
·the continued expectations of growth for pharmaceutical drug development research and development expenditures;

·our ability to grow our consulting staff to meet demand and retain scientific employees to perform consulting services for our customers;

·the continuing support of the use of modeling and simulation by regulatory authorities like the U.S. Food and Drug Administration (FDA);

·the implementation of our business model and strategic plans for our business and technology;

·our expectations regarding the effects of the COVID-19 pandemic on our business and our clients’; and

·developments and projections relating to our competitors and our industry.

These forward-lookingexpressions. Forward-looking statements are based on management’s current expectations and assumptions, as well as current plans, expectations, estimates, forecasts, and projections about our business and the industry in which we operate, that are subject to risks and management’s beliefs and assumptions and are not guarantees of future performance or development anduncertainties that may cause actual results to differ materially. These forward-looking statements involve known and unknown risks, uncertainties, and other factors that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this Annual Report on Form 10-K may turn out to be inaccurate. FactorsWe describe certain risks and uncertainties that maycould cause actual results and events to differ materially from current expectations include, among other things, those listed underin “Risk Factors”Factors,” “Management’s Discussion and elsewhere inAnalysis of Financial Condition and Results of Operations,” and “Quantitative and Qualitative Disclosures about Market Risk” (Part II, Item 7A of this Annual ReportReport). Readers are cautioned not to place undue reliance on Form 10-K. Investors are urged to consider these factors carefully in evaluating the forward-looking statements. These forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K.they are made. Except as otherwise required by law, we assume no obligation to update or revise thesepublicly any forward-looking statements, for any reason, even ifwhether because of new information, becomes available in the future.

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future events, or otherwise.

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PART I

ITEM 1 –BUSINESS

As used in this report,Report, each of the terms “we,” “us,” “our,” the “Company”“Company,” and “Simulations Plus” refers to Simulations Plus, Inc. and its wholly owned subsidiaries Cognigen Corporation,(both current and previous, as applicable), Simulations Plus International, Inc. (“SLPI”), which owns 100% of Buffalo, New York; DILIsym Services, Inc.the outstanding equity interests of Research Triangle Park, North Carolina; and Lixoft of Paris, France, and Immunetrics, Inc., unless otherwise stated or the context otherwise requires.


On December 20, 2022, SLPI, a Delaware corporation, was created as a wholly owned subsidiary of Simulations Plus, Inc. in order to facilitate future international acquisitions, if any, and global integrations. In furtherance of this objective, the Company added the trade name “SLP France” to Lixoft, and on April 25, 2023, Simulations Plus, Inc. transferred its ownership of Lixoft to SLPI pursuant to a contribution and acceptance agreement, resulting in Lixoft becoming a wholly owned subsidiary of SLPI. The transfer did not impact the rights of the Company’s stockholders.
On June 16, 2023, Simulations Plus, Inc. acquired Immunetrics, Inc. (“Immunetrics”) through a reverse triangular merger. Pursuant to the Agreement and Plan of Merger (the “Merger Agreement”), at closing, Simulation Plus, Inc.’s newly created wholly owned subsidiary, Insight Merger Sub, Inc., merged with and into Immunetrics, with Immunetrics surviving as a wholly owned subsidiary of the Company. Effective September 1, 2023, the Company merged Immunetrics with and into Simulations Plus, Inc. through a short-form mergers (the “Merger”). To effectuate the Merger, the Company filed Certificates of Ownership with the Secretaries of State of the states of Delaware (Immunetrics’ state of incorporation) and California (Simulation Plus, Inc.’s state of incorporation). Consummation of the Merger was not subject to approval of the Company’s stockholders and did not impact the rights of the Company’s stockholders.
OVERVIEW

Simulations Plus, Inc., incorporated in 1996, is a premier developer of modeling and simulation software for drug discovery and development, including the prediction of properties of molecules utilizing artificial-intelligence-both artificial intelligence (“AI”) and machine-learning-basedmachine-based technology. We also provide consulting services ranging from early drug discovery through preclinical and clinical trial development to regulatory submissions in support ofsupporting product approval. Our software and consulting services are provided to major pharmaceutical, biotechnology, agrochemical, cosmetics, and food industry companies and to academic and regulatory agencies worldwide for use in the conduct of industry-based research. SLPThe Company is headquartered in Southern California, with offices in Buffalo, NY, Research Triangle Park, NC, Pittsburgh, PA, and Paris, France. The Company’sOur common stock tradeshas traded on the Nasdaq Global Select Market under the symbol “SLP” since May 13, 2021, prior to which it traded on the Nasdaq Capital Market under the symbol “SLP”.

same symbol.

We are a global leader, focused on improving the ways scientists use knowledge and data to predict the properties and outcomes of pharmaceutical and biotechnology agents by providing a wide range of early discovery, preclinical, and clinical consulting services and software. Our innovations in integrating new and existing science in medicinal and computational chemistry, pharmaceutical science, biology, physiology, and machine learning into our software have enabled us to be a leading software provider for physiologically based pharmacokinetics (PBPK) modeling and simulation, pharmacometric modeling and simulation, prediction of molecular properties from structure, and prediction of the propensity of drugs to induce liver injury or to treat nonalcoholic fatty liver disease. Our scientific consulting staff draw upon extensive experience across multiple therapeutic areas and a full range of modeling and simulation techniques to assist our clients across the full spectrum of drug development.

We generate revenue by delivering relevant, cost-effective software and creative and insightful consulting services. Pharmaceutical and biotechnology companies and hospitals use our software programs and scientific consulting services to guide early drug discovery (molecule design screening and lead optimization), preclinical, and clinical development programs, and the development of generic medicines after patent expiration, including using our software products and services to enhance their understanding of the properties of potential new medicinestherapies and to use emerging data to improve formulations, select and justify dosing regimens, support the generics industry,generic pharmaceutical product development, optimize clinical trial designs, and simulate outcomes in special populations, such as in elderly and pediatric patients.

Simulations Plus acquired Cognigen Corporation (Cognigen) as a wholly owned subsidiary in September 2014. Cognigen

SEGMENT INFORMATION
During the year ended August 31, 2023, our business was originally incorporated in 1992. Through the integration of Cognigenorganized into Simulations Plus, Simulations Plus became a leading provider of population modeling and simulation contract research services for the pharmaceutical and biotechnology industries. Our clinical-pharmacology-based consulting services include pharmacokinetic and pharmacodynamic modeling, clinical trial simulations, data programming, and technical writing services in support of regulatory submissions. We have also developed software for harnessing cloud-based computing in support of modeling and simulation activities and secure data archiving, and we provide consulting services to improve interdisciplinary collaborations and research and development productivity.

Simulation Plus acquired DILIsym Services, Inc. (DILIsym) as a wholly owned subsidiary in June 2017. The acquisition of DILIsym positioned the Company as the leading provider of Drug Induced Liver Injury (DILI) modeling and simulationtwo reportable segments, software and related scientific consulting services. In addition to the DILIsym® software for analysis of potential drug-induced liver injury, DILIsym Services, Inc. also has developed a simulation program for analyzing nonalcoholic fatty liver disease (NAFLD) called NAFLDsym™. Both the DILIsym and NAFLDsym software programs require outputs from physiologically based pharmacokinetics (PBPK) software as inputs. Outputs generated by the GastroPlus™ PBPK software that are required by DILIsym software can be automatically mapped to DILIsym applications; thus, the integration of these technologies provides a seamless capability for analyzing the potential for drug-induced liver injury for new drug compounds and for investigating the potential for new therapeutic agents to treat NAFLD. Since the acquisition, DILIsym has applied its mechanistic modeling resources in other disease areas including idiopathic pulmonary fibrosis (IPF).

Simulations Plus acquired Lixoft as a wholly owned subsidiary on April 1, 2020. Lixoft brings to Simulations Plus its powerful software products, Monolix, Simulx and PKanalix, which can take modeling projects from data exploration to clinical trial simulations. In addition, Lixoft provides training and focused consulting services which can accelerate pharmacometric studies. Lixoft’s technologies were developed as a result of a research program led by the French national research institute for digital science and technology (Inria), on nonlinear mixed effect models for advanced population analysis, pharmacometrics, pre-clinical, and clinical trial modeling and simulation. Lixoft continues to work with Inria.

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SOFTWARE

PRODUCTS

General

We currently offer eleventwelve software products for pharmaceutical research and development: fivedevelopment, as follows:
•Three simulation programsproducts that provide time-dependent results based on solving large sets of mechanistic differential equations: GastroPlus®;
◦GastroPlus®
◦DDDPlus™;
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◦MembranePlus™; DILIsym®;
•Two products that predict and NAFLDsym™; three programsanalyze static properties of chemicals utilizing both AI and machine-learning technologies:
◦ADMET Predictor®
◦MedChem Designer™
•Six products that are based on predictingmechanistic, mathematical models:
◦DILIsym®
◦NAFLDsym®
◦ILDsym™
◦IPFsym®
◦RENAsym®
◦MITOsym®
•One product designed for modeling and analyzing static (not time-dependent) properties of chemicals: ADMET Predictor®; MedChem Designer™; and MedChem Studio™ (the combination of ADMET Predictor, MedChem Designer, and MedChem Studio is called our ADMET Design Suite™); a program which is designedsimulation that allows for population analyses, rapid clinical trial data analysisanalyses and regulatory submissions called PKPlus™; a program called KIWI™ fromsubmissions:
◦MonolixSuite™ (the combination of Monolix(c), PKanalix(c), and Simulx(c)).
Our software business represented 61% of our Cognigen division that provides an integrated platform for data analysis and reporting through our proprietary secure cloud; and in April 2020 withtotal revenue during the acquisition of Lixoft, we addedyear ended August 31, 2023, primarily generated by the Monolix Suite™ of products – a modeling and simulation solution that allows nonparametric analyses, population PKPD analyses, and modeling and clinical trial simulation.

GastroPlus®

following products:

GastroPlus
Our flagship product, originallyinitially introduced in 1998, and currently our largest single source of software revenue, is GastroPlus. GastroPlus mechanistically simulates the absorption pharmacokinetics, pharmacodynamics, and drug-drug interactionsdrug interaction of compounds administered to humans and animals andanimals. It is currently one of the most widely used commercial software products of its type by industry the U.S. Food and Drug Administration (FDA), the U.S. National Institutes of Health (NIH), and other governmentregulatory agencies in the U.S. and around the world.

globally. Our goal with GastroPlus is to integrate the most advanced science into user-friendly software to enable researchers and regulators to perform sophisticated analyses of complex compound behaviors in humans and laboratory animals. GastroPlus is one of the most widely used program in the world for physiologically based biopharmaceutics (PBBM)/PBPK modeling with a user base including early pharmaceutical research and development, biopharmaceuticals, food, cosmetics, and general toxicology. We work to release updated versions of the program on an ongoing basis.

In June 2019, we released Version 9.7 of GastroPlus.October 2022, GastroPlus version 9.8.3, which included new mechanisms and updated documentation for key drug interaction standards models, was released. This version also added several important new capabilities, including improvements to nonalcoholic fatty liver disease (“NAFLD”) and nonalcoholic steatohepatitis (“NASH”) disease population simulations dissolution, absorption, PBPKto inform the NAFLDsym® platform, additional dosage route models, and drug-drug interactions, among others.

·The ability to add lysosomal trapping effect to PBPK tissues
·New mechanistic pregnancy PBPK model (with fetus compartment)
·Additional solubility inputs for different drug forms (crystalline, amorphous)
·New standard compound models (substrates/inhibitors/inducers) in the DDI Module
·Expanded fed state conditions based on meal type
·New ability to allow different tissue model types (perfusion- or permeability-limited) between parent and metabolites or victim perpetrator in metabolite tracking/DDI simulations
·PK/PD model additions to PKPlus Module
·Updates to the dermal absorption (TCAT) model through our Cosmetics Europe project
·New effect of immune response with intramuscular injection models
·Updated default populations for extensive, intermediate, and poor metabolizers based on specific genotypes

In vitro transdermal model: as partimproved reporting templates for the Monolix™ software to support the statistical analysis of the Research Collaboration Agreement (RCA) awarded by the FDA in September 2018 to improve the TCAT model in GastroPlus, we developed a novel simulation tool to analyze data from in vitro skin penetration studies to better inform in vivo predictions within GastroPlus.

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virtual physiologically-based pharmacokinetic (“PBPK”) population results.


Because of the widespread use of GastroPlus, we have been able to enter into both funded and unfunded collaborations with industry and government agencies to drive advances to modeling and simulation science. In all Simulations Plus ownssuch collaborations, we own the intellectual property developed within the GastroPlus program, and updates are integrated into future versions and made available to clients:

Ocular absorption model:all clients. In the year ended August 31, 2023, we received six funded grants from the U.S. FDA to enhance PBPK modeling science. Recent collaborations include:


•Animal health models: in September 2014,November 2022, we entered into an RCAa funded collaboration with the FDA to enhance the Ocular Compartmental Absorption and Transit (OCAT™) model within the Additional Dosage Routes ModuleUniversity of GastroPlus. The objective of this agreement was to provide a tool for generic drug companiesBath and the FDA to assess the likely bioequivalence of generic drug formulations dosed to the eye. After a successful second year, the RCA was extended for two additional years in September 2016, with primary tasks completed in September 2018. Additional functionality was further requested by the FDA, and a new funded contract was awarded for the 2018-19 period. In May 2020, we were awarded yet another grant from the FDA to support interspecies translation for ocular drug delivery in GastroPlus.

Long-acting injectable (LAI) product models: in September 2015, we were awarded an RCA by the FDA to expand the capabilities of GastroPlus to simulate the dosing of long-acting injectable microspheres for both small and large molecules (biologics). Under this agreement, we developed simulation models to deal with the very slow dissolution/decomposition of microsphere carrier materials that gradually release active drugs over periods as long as weeks or months. After a successful second year, the RCA was renewed for the third year in September 2017 and was completed in September 2018. In September 2019, we entered a new funded collaboration with a clinical-stage biotechnology company to develop an intra-articular (IA) delivery model, using much of the technology developed through the LAI collaboration with the FDA. This collaboration enhances the GastroPlus PBBM/PBPK model for drug dosing into joints through IA injection products and incorporates mechanistic models for different species and population groups that assist in efficient evaluation of IA injection strategies.

Transdermal absorption model: in July 2018 we entered a research collaboration with a large European consortium to further develop and validate the mechanistic Transdermal Compartmental Absorption and Transit (TCAT™) model in GastroPlus. This project contributed substantially to improvements in the program, specifically directed toward the predictions of local exposure within the skin layer following topical administration of various chemicals. In September 2018, we were awarded another funded RCA by the FDA to integrate drug product quality attributes into the mechanistic TCAT™ model in GastroPlus. This grant award focuses on the incorporation of drug product quality attributes into PBPK models developed for dermatological topical dosage forms and transdermal delivery systems.

Virtual bioequivalence trials: in October 2019, we entered a new funded collaboration with a large pharmaceutical company to develop the Virtual Bioequivalence (BE) Trial Simulator™ in GastroPlus. This collaboration will enhance the GastroPlus PBBM/PBPK platform to evaluate population and formulation variability on the BE of different products. We intend to improve virtual BE trial simulation methodologies and efficiently address regulatory concerns as model results are reviewed.

Oral absorption – Advanced Compartmental Absorption and Transit (ACAT™) model: in November 2019, we entered a new funded collaboration with a large pharmaceutical company to modify the mechanistic ACAT™ model in GastroPlus to support gastrointestinal disease research. This collaboration will enhance and advance understanding of local drug disposition in gut tissue and improve the accuracy of drug concentration predictionsconcentrations predicted locally within gut tissue and to assist with the development ofoutline novel strategies for applying in vitro systems and in silico models to assess new therapiesformulation approaches for gastrointestinaladdressing GI diseases.

Unfunded research collaborations:


•Long-acting injectable (LAI) formulation model: in addition to the active funded efforts with the FDA and industry described above, we also have two unfunded RCAs with the FDA: one with the Office of Generic Drugs (OGD) that began in 2014, and one announced in July 2019 with the Center for Veterinary Medicine (CVM). With OGD, the objective is directed toward the FDA’s evaluation of mechanistic IVIVCs (in vitro-in vivo correlations) to determine whether a mechanistic absorption modeling (MAM) can relate laboratory (in vitro) dissolution experiment results to the behavior of dosage forms in humans and animals (in vivo) better than traditional empirical methods. With CVM, the objective is to use GastroPlus, with in vitro and in vivo data, to investigate how bioequivalence (BE) of non-systemically absorbed products can be evaluated in canines without the need for clinical endpoint trials.

In October 2020,2022, through a joint proposal with the St. LouisUniversity of Florida’s College of Pharmacy, at University of Health Sciences and Pharmacy in St. Louis, we were awarded a newnewly funded cooperative agreementcontract from the FDA to establish novel in vitro/in silico models for the oral cavity route of administration in GastroPlus to accelerate pharmaceutical research and regulatory assessment of innovative and generic drug products delivered intraorally.

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advance DDDPlus™

DDDPlus mechanistically simulates in vitro (laboratory) experiments that measure the rate and (patho) physiology-based PBPK models to understand and predict pulmonary absorption and tissue retention of dissolutioninhaled drugs.

MonolixSuite
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The MonolixSuite is a drug as well as, if desired, the additives (excipients) in a particular dosage form (e.g., powder, tablet, capsule, or injectable solids) under a variety of experimental conditions. This unique software program is used by formulation scientists in industrysolution for modeling and the FDA to: (1) understand the physical mechanisms affecting the disintegrationsimulation for pharmaceutical companies, biotechnology enterprises, and dissolution rates of various formulations, (2) reduce the number of cut-and-try attempts to design new drug formulations, (3) design in vitro dissolution experiments to better mimic in vivo (animalhospitals. It supports nonparametric analyses, population analyses and human) conditions,modeling, and (4) justify product specifications. Version 6.0 of DDDPlusclinical trial simulation. The extended MonolixSuite contains three main products: Monolix, Simulx, and PKanalix. Monolix 2023R1 was released in January 2019 and offeredMarch 2023, which combines the most advanced algorithms with a seriesunique ease of new capabilities, including:

·simulation of the in vitro dissolution of long-acting injectable dosage forms (funded by an FDA grant supporting GastroPlus development)
·simulation of the in vitro dissolution of controlled release bead formulations
·new simulation of artificial stomach-duodenum (ASD) experiments
·ability to fit models from precipitation experiments
·new dissolution apparatus models
·improved output reporting

MembranePlus™

Like DDDPlus, MembranePlus mechanistically simulates laboratory experiments, but in this case, the experimentsuse. The products are for measuring permeability or clearance of drug-like molecules through various membranes, including several different standard cell cultures (Caco-2, MDCK), as well as hepatocytes. The value of such simulations derives from the fact that when the same molecules are measured in different laboratories using (supposedly) the same experimental conditions, the results are often significantly different. These differences are caused by a complex interplay of factors in how the experiment was set up and run. MembranePlus simulates these experiments with their specific experimental details, and this enables scientists to better interpret how results from specific experimental protocols can be used to predict permeability or clearance mechanisms in human and animals.

In vitro transdermal model: as part of the RCA awarded by the FDA in September 2018 to improve the TCAT model in GastroPlus, we developed a novel simulation tool to analyze data from in vitro skin penetration studies to better inform in vivo predictions within GastroPlus.

PKPlus™

The standalone PKPlus program, originally based on the internal PKPlus Module in GastroPlus that has been available since 2000, provides the full level of functionality needed by pharmaceutical industry scientistscompanies across the globe at each step of drug development, from preclinical to perform the analysesfirst-in-human, clinical, and generate the outputs needed to fully satisfy regulatory agency requirements for noncompartmental analysis (NCA) and provides limited support for compartmental PK modeling.

PKPlus version 2.5 was released in July 2019. This version incorporated a wide variety of requested features from current users, including:

·Import CDISC SEND packages with PC domain as source data

·Improved command-line functionality

·64-bit system optimization for improved performance

·Streamlined auto-reports

·Additional workflow refinements

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post-approval.

Automated PK/TK data analysis: in November 2019, we entered a new funded collaboration with a large pharmaceutical company to enhance PKPlus. Following a rigorous evaluation of multiple commercial offerings, our partner selected PKPlus as the pharmacokinetics/toxicokinetic (PK/TK) modeling program to support the internal data platform that connects their global teams. Our objectives for this project are to design the next-generation engine that automates the import and mapping of data, selection of calculation templates, and generation of reports within a streamlined, validated system.

ADMET Predictor®

Predictor

ADMET (Absorption, Distribution, Metabolism, Excretion, and Toxicity) Predictor is a top-ranked, chemistry-based computer program that takes molecular structures (i.e., drawings of molecules represented in various formats) as inputs and uses machine learningAI/machine-learning technology to predict approximately 175 different properties for them at an average rate of over 200,000 compounds per hour on a modern laptop computer.them. This capability allows chemists to generate estimates for a large number ofmany important molecular properties without the need to synthesize and test the molecules, as well as to generate estimates of unknown properties for molecules that have been synthesized, but for which only a limited number of experimental properties have been measured. Thus, amolecules. A chemist can then assess the likely success of a large number ofmany existing molecules in a company’s chemical library, as well as molecules that have never been made, by providing only their molecular structures, either by drawing them using a tool such as our MedChem Designer software, or by automatically generating large numbers of molecules using various computer algorithms, including those embedded in our MedChem Studio™ Module.

made.

The optional ADMET Modeler™ Module in ADMET Predictor enables scientists to use their own experimental data to quickly create proprietary high-quality predictive models using the same powerful artificial intelligence (AI)AI engine we use to build our top-ranked property predictions.

Version 9.511 of ADMET Predictor was released in April 2019, adding:

·Novel approaches to calculate uncertainty estimates on all regression models
·New machine learning models for important metabolism and transporter endpoints
·New machine learning models for AMES mutagenicity, a primary toxicity endpoint required during risk assessment
·New Structure Sensitivity Analysis visualization tool to easily map atom-level contributions to model predictions
·Improved rat-specific models to more accurately inform HTPK Simulation predictions
·Improved Pipeline Pilot and KNIME components to extend deployment options and enterprise support for ADMET Predictor
·Updates to output displays in MedChem Designer™

July 2023, which added many new features including:

•New industry partner data that more than doubles the training dataset of ionization constants (“pKa”), leading to enhanced predictive accuracy and wider applicability of our S+pKa model
•New functionality to perform 3D virtual screening based on shape and pharmacophore-feature similarity
•New CYP inhibition (“Ki”) models to allow for rapid drug-drug interaction (“DDI”) risk assessment
•Significant enhancements to the AI-driven drug design (“AIDD”) module

We have made significant investments in twothree key areas with recent versions: improving integration of our top-ranked ADMET Predictor and GastroPlus models to leverage our novel ‘Discovery PBPK’high-throughput pharmacokinetic (“HTPK”) simulation approaches for chemists and safety researchers, and further enhancing our best-in-class machine learningAI/machine-learning engine to assist with drug discovery. discovery, and advancing on our innovative AIDD Module to apply generative AI technology to design and optimize lead molecules for any combination of properties.

Recent publications from pharmaceutical and chemical companies describing how they have leveraged our ‘Discovery PBPK’ methods to guide lead optimization and risk assessment illustrate how our unique offerings provide substantial valuecollaborations include:
•Machine-learning models for ionization constants (“pKa”): in these spaces.

Drug discovery workflows: in December 2019,August 2022, we entered into a new collaboration agreement with Bayer AG to advance our ADMET Predictor machine learning software for use within integrated drug discovery workflows by developing improved structure and tautomer handling capabilities that will support data integrity across the different discovery platforms.

High-throughput pharmacokinetic (HTPK) simulations: in April 2020, we entered into a new collaboration agreement with a large pharmaceutical company to develop enhanced capabilities inleverage their expansive internal databases to improve the accuracy of predictions, and extend the chemical coverage space, of our existing HTPK Simulation Module which will incorporate PBPK modeling intopKa models using the partner’s discovery platform to support compound screening activities.

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MedChem Designer™

MedChem Designer was initially a molecule-drawing program, or “sketcher”, but now has capabilities far exceeding those of other molecule-drawing programs because of its integration withnovel AI/machine-learning and atomic descriptor calculation methods within ADMET Predictor. We provide MedChem DesignerIn February 2023, we entered another new data-sharing collaboration with a large agrochemicals company to further extend our top-rated AI/machine learning models for free becausepredicting ionization descriptors and endpoints.

•Drug design collaboration using the AIDD Module: in March 2023, we believe thatentered into a collaborative research agreement with the Polish Academy of Sciences (“PAS”) to jointly design new compounds for the RORγ/RORγT nuclear receptors using our cutting-edge AI/machine learning (“ML”) technology in the long run itADMET Predictor® software platform. Emerging intellectual property, in the form of encouraging lead compounds, will helpbe jointly owned by the Company and PAS for further development opportunities.
•Strategic collaboration to increase demand for ADMET Predictor. Over 34,000 copies of MedChem Designer have been downloaded by scientists arounddiscover anticancer therapies using the worldAIDD Module: in March 2023, we entered into a strategic research collaboration with the Sino-American Cancer Foundation (“SACF”) to date. Our free version includes a small set of ADMET Predictor’s best-in-class property predictions, allowing the chemist to modify molecular structuresleverage our staff and then see a few key properties very quickly. When used with a license for ADMET Predictor, MedChem Designer becomes a de novo molecule design tool. With it, a researcher can draw one or more molecular structures, then click on the ADMET Predictor icon and have approximately 175 properties for each structure calculated in seconds, including our proprietary ADMET Risk™ index which provides a single number that instantly compares the effects of different structural changes in many dimensions. Researchers can also click on an icon to generate the likely metabolites of a molecule and then predict all the properties of those metabolites from ADMET Predictor, including each of their ADMET Risk scores.

KIWI™

Drug development programs rely increasingly on modeling and simulation analyses to support decision-making and submissions to regulatory agencies. To ensure high-quality reliable analyses, organizations must not only apply high-quality science, but must also be ableAIDD Module to support the science with validateddiscovery and reproducible results.

KIWI is a cloud-based web application that provides scientists with a secure, validated, enterprise-scale environment wherein they can efficiently organize, process, maintain, and communicate the volumedesign of data and results generated over the durationnovel inhibitors of a drug development program. KIWI enables global teams to collaborate on model-based decision-making and has been proven to support and encourage interdisciplinary discussions about the model development process and the interpretation of results.

In addition to providing a structured workflow for model-based analyses, key features of the application include powerful visualization tools to support exploratory analyses, a data repository to facilitate management and organization of data and documents, and a Model Wizard module to streamline coding and model development.

New versions of KIWI are released on a regular basis. KIWI Versionmethylenetetrahydrofolate dehydrogenase 2 was released in December 2017, KIWI 3 was released in August 2018, and KIWI 4 was released in June 2019. In fiscal year 2020, we have:

·further improved the visualization tools,

·introduced kiwiConnect, an R-based API to improve interaction and interconnectivity between R and KIWI, and

·completed a major update to the Oracle database infrastructure, including new hardware, additional storage, and increased bandwidth.

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DILIsym

The DILIsym software is a quantitative systems pharmacology (QSP) program that has been in development since 2011. QSP software models are based on the fundamental understanding of complex biological pathways, disease processes, and drug mechanisms of action, integrating information from experiments and forming hypotheses for the next experimental model. DILIsym deals with the propensity for some drug molecules to induce temporary or permanent changes in biological functions within liver cells (hepatocytes) that can result in damage(“MTHFD2”), an emerging cancer target. SACF will provide upfront funding to the liver (i.e., drug-induced liver injury or DILI).

Version 8A of the DILIsym software was released in January of 2019. This version is delivered asCompany to design a secure executable file that incorporates new proprietary code enabling tighter integration with our GastroPlus PBPK software. Aset number of important new capabilities were added, including new exemplar compounds new biomarkers, and new mechanisms of DILI. DILIsym version X is expected to be released in late Fall of 2020. DILIsym Xfor efficacy against MTHFD2 which will be a completely refactored, much faster, and more user-friendly software tool.

NAFLDsym

Where DILIsym is usedexclusive to investigate the likelihood that a known drug molecule would cause injurySACF. Subsequent milestone payments will be made to the liver, NAFLDsym is concerned with a liver that is already diseased (NAFLD/NASH) by excess fat, fibrosis, and inflammation, and investigates the likelihood that various molecules might provide therapeutic benefits to treat or cure the disease. DILIsym can be considered a “shrink wrap” software product, usable across many companies and drug development projects. NAFLDsym, on the other hand, requires modification for each of a number of different mechanisms of action that potential new drug compounds could use to treat the disease, and so is a customized tool used in consulting projects for each new client project. NAFLDsym version 2A was released in the summer of 2019 for licensing and consulting use. The software now includes the three most important components of NAFLD/NASH: steatosis, inflammation, and fibrosis, along with a host of other important updates.

RENAsym

RENAsym will be focused on investigating and predicting drug-induced kidney injury, or acute kidney injury (AKI). RENAsym will be another “shrink wrap” software product, usable across many companies and drug development projects. The software will utilize predictions of drug exposure in the kidney from PBPK platforms suchCompany as GastroPlus, along with in vitro data related to certain kidney injury mechanisms, to make predictions. The first expected release of RENAsym will be available in summer of 2021. The initial development is being funded via an NIH small business grant.

IPFsym

IPFsym is a software tool that will investigate the likelihood that various molecules might provide beneficial therapeutic benefits to treat or cure idiopathic pulmonary fibrosis (IPF). IPFsym, like NAFLDsym, requires modification for each of a number of different mechanisms of action that potential new drug compounds could use to treat the disease, and so is a customized tool used in consulting projects for each new client project. IPFsym is targeted for release for licensing and consulting use in late 2020. The software will include the most important mechanisms of IPF and will be closely coupled with GastroPlus for drug concentration predictions within the lungs.

Monolix Suite

The Monolix Suite is a unique solution for modeling and simulation for pharmaceutical companies, biotechs, and hospitals. It supports nonparametric analyses, population PKPD analyses and modeling, and clinical trial simulation. The extended MonolixSuite contains three main products: Monolix, Simulx, and PKanalix. These products are interconnected and interoperable, i.e., the user can go from one application to another one without changing anything in terms of data set or of biological models.

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The products are used by many pharmaceutical companies across the globe at each step of drug development, from preclinical to first-in-human, clinical, and post approval. These products are well established in thekey research and drug development communities and have been accepted by most regulatory agencies.

Lixoft's technologies come from an eight-year research program in modeling and biostatistics led by Inria and sponsored by the pharmaceutical industry. The extended MonolixSuite was developed in viewgoals are met.

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Table of the increasing importance of pharmacometrics experts in drug development, taking a modeling project from the first data exploration up to clinical trial simulations.

Contents

SERVICES
MonolixGeneral

Monolix (Nonlinear mixed-effects models or “MOdèles NOn LInéaires à effets miXtes” in French) is a platform of reference for model-based drug development. It combines the most advanced algorithms with unique ease of use. Pharmacometricians of preclinical and clinical groups can rely on Monolix for population analysis and to model PK/PD and other complex biochemical and physiological processes. Monolix is an easy, fast, and powerful tool for parameter estimation in nonlinear mixed-effects models, model diagnosis and assessment, and advanced graphical representation. 

Simulx

Simulx is a powerful and flexible simulator for clinical trial pharmacometrics that runs on top of the Lixoft simulation engine. It allows simulation of any type of model output (continuous, event, categorical…). It directly connects with Monolix for seamless modeling and simulation, or can be used as a standalone application to simulate a new model. Potential applications include comparison of different trial designs, extrapolation to different populations, non-adherence to treatment, optimal dosing, and dose individualization after therapeutic drug monitoring.

Simulx is currently available via the comprehensive R package mlxR. Starting with the 2020 version, it will have a user interface to easily define groups of simulations as well as simulation outcomes to compare.

PKanalix

PKanalix performs analysis on PK data sets. Several analyses are performed including:

·noncompartmental analysis (NCA),
·compartmental analysis (CA) consisting in finding parameters of a model representing the PK as the dynamics in compartments for each individual. Notice that this compartmental analysis does not include population analysis that could be performed in Monolix.

PKanalix provides a clear user interface with a simple workflow to perform NCA and CA analysis in an efficient way.

Consulting Services

Our scientists and engineers have extensive expertise in drug absorption via various dosing routes, (oral, intravenous, subcutaneous, intramuscular, ocular, nasal/pulmonary, and dermal), pharmacokinetics, pharmacodynamics, drug-drug interactions, and othersother areas related to the drug development process. They have attended over 200 scientific meetings worldwide in the past four years, often speaking and presenting. We conduct contracted consulting studies for large customers (including many of the top twenty global pharmaceutical companies) who have particularlywith complex problems and who recognize our expertise in solving them, as well as for smaller customers who prefer to have studies run by our scientists rather than to license our software and train someone to use it.customers. The demand for our consulting services has been steadily increasing, and we have expanded our consulting teams to meet the increased workload.

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Our services business represented 39% of our total revenue during the year ended August 31, 2023, primarily generated by the following service offerings:

PKPD
Our clinical-pharmacology-based consulting services include population pharmacokinetic and pharmacodynamic (“PKPD”) modeling, exposure-response analyses, clinical trial simulations, data programming, and technical writing services in support of regulatory submissions. In addition to modeling and simulation consulting services, we provide expertise and assistance with development-related decision-making and support for regulatory interactions related to dose selection, clinical trial design, and understanding of the determinants of safety and efficacy for new medicines.
QSP/QST
We have a reputation for high-quality analysesprovide creative and regulatory reporting of data collected during preclinical experimentsinsightful consulting services to support our quantitative systems pharmacology/quantitative systems toxicology (“QSP/QST”) modeling focused on NAFLD, and NASH, idiopathic pulmonary fibrosis (“IPF”), heart disease, liver and kidney safety, as well as clinical trials of new and existing pharmaceutical products, typically working on 80-100 drug projects per year. Traditionally, model-based analysis of clinical trial data was different from the modeling analysis offered by GastroPlus or our quantitative systems toxicology/pharmacology software (DILIsym and NAFLDsym); the former relied more on statistical and semi-mechanistic models, whereas the latter is based on very detailed mechanistic models. Statistical models rely on direct observation and mathematical equations that are used to fit data collected across multiple studies along with describing the variability within and between patients. Mechanistic models are based on a detailed understanding of the human body and the chemistry of the drug and involve deep mathematical and scientific representation of the phenomena involved in drug dissolution/precipitation, absorption, distribution, metabolism, and elimination. Collectively, the models support safety and efficacy decisions, first-in-human estimations, formulation optimization, and drug-drug interaction assessments. Beginning inother areas.
PBPK
In 2014, the FDA and other regulatory agencies began to emphasize the need to encourage mechanistic PBPK modeling and simulation in clinical pharmacology, with final guidance documents completed in 2018,2018. New draft guidance documents, which were released in October 2020, focused on additional biopharmaceutics applications for oral drug product development, manufacturing changes, and controls. This has resulted in an increased need for our scientific consulting staff to drawn upon its extensive experience across multiple therapeutic areas of modeling and simulation methods to provide consulting-related services in support of this sophisticated technique. We support Model-Informed Drug Discovery and Development throughout the entire product lifecycle, from discovery through translational research and clinical development, when an organization does not have the time or resources to use our software directly. More specifically, our clients seek out our consulting services to acquire scientific, therapeutic-area-related modeling and simulation expertise that they do not have in-house.
Early Drug Discovery (“EDD”)

At Simulations Plus, we have seena team of experts, including computational and medicinal chemists, cheminformatics specialists, and drug development professionals with decades of experience, all here to facilitate small and large companies’ drug discovery and development journeys.

With our EDD services offering, we provide end-to-end in silico drug design and optimization services as well as help with individual steps in the benefitprocess, including:
•AIDD enabled drug discovery and optimization
•High-throughput screening (“HTS”) library design and hit visualization and analysis
•QSAR/QSPR modeling and simulation

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Table of having our clinical pharmacology teams across all three divisions working together to achieve this goal. To date, there have been approximately 40 approved drug products on the market today whose submissions were informedContents
Below is a summary of revenue percentages by results from GastroPlus.

PRODUCT DEVELOPMENT

Developmenteach of our software is focused on expanding product lines, designing enhancements to our core technologies, and integrating existing and new products into our principal software architecture and platform technologies. We intend to continue to offer regular updates to our products and to continue to lookservices businesses for opportunities to expand our existing suite of products and services.

To date, we have developed products internally, sometimes also licensing or acquiring products, or portions of products, from third parties. These arrangements at times have required that we pay royalties to third parties. We intend to continue to license or otherwise acquire technology or products from third parties when it makes business sense to do so. 

MARKETINGthe fiscal years ended August 31:

202320222021
Software61 %61 %60 %
Services39 %39 %40 %
Total100 %100 %100 %
SALES AND DISTRIBUTION

We distribute our products and offer our services throughout the world.

MARKETING

We market our pharmaceutical software and consulting services globally through attendance and presentations at scientific meetings, exhibits at trade shows, seminars at pharmaceutical companies and government agencies, online presentations, our website, and various communication channels to our database of prospects and customers. At various yearly scientific meetings around the world each year there areworldwide, numerous presentations and posters reportingreport research that was performed using our software. Many of these presentations are from industry and FDA scientists; some are from our staff. Numerous peer-reviewed scientific journal articles are published, and conference presentations are delivered each year using our software, mostlyprimarily by our customers, further supporting its use in a wide range of preclinical and clinical studies.

Our sales and marketing efforts are handled primarily internally by sales and marketing staff, and with our scientific team and several senior management staff assisting our marketing and sales staff with trade shows, seminars, and customer trainingstraining both online and on-site. During fiscal year 2023, the Company invested in learning management software which streamlined our ability to offer online training to customers. In addition, enhancements were made to our customer relationship management software providing insights about our targeted markets and customers.
We also have independent distributors in Japan, China, India, South Korea, and KoreaBrazil, who sell and market our products with support from our scientists and engineers.

We provide support to

In March 2021, we launched our MIDD+ (Model-Informed Drug Development) scientific conference, where speakers shared their real-world impact using modeling and simulation technology. During the GastroPlus User Grouptwo-day event, representatives from the U.S. FDA Offices of Clinical Pharmacology, New Drug Products, Research and Standards, and Translational Sciences, and from the U.S. FDA Centers of Drug Evaluation and Research and the National Center for Toxicological Research, as well as ANVISA (The Brazilian Health Regulatory Agency) and Health Canada, provided case studies and software demonstrations on a wide range of topics. The event also featured a panel discussion on the ascent of model-informed drug development and the increasing importance of developing next-generation technology. The conference was well received, and we hosted it again in Japan, which was organized by Japanese researchers in 2009. In early 2013, a group of scientists in EuropeFebruary 2022 and North America organized another GastroPlus User Group following the example set in Japan. Over 1,000 members have joined this group to date. We support this group through coordination of online meetings each month and managing the user group website for exchange of information among members. These user groups provide us valuable feedback with respect to desired new features and suggested interface changes.

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February 2023.

COMPETITION

PRODUCTION

Our pharmaceutical software products are designed and developed by our development teams managed out of offices in California, North Carolina (Research Triangle Park), New York (Buffalo), and Paris, France.

We also employ people who are able to work remotely using collaboration software. Our products and services are delivered electronically.

COMPETITION

In our pharmaceutical software and services business, we compete against a number of established companies that provide screening, testing, and research services, and products that are not based on simulation software. There are also software companies whose products do not compete directly with ours but are sometimes closely related to, ours.related. Our competitors in this field include some companies with financial, personnel, research, and marketing resources that are larger than ours. Our flagship product, GastroPlus, is a leading commercial PBPK modeling platform and has one significant competitor; others could be developed over time, but with the high barrier to entry, it would be difficult to validate new software to levels required to support regulatory submissions. Our PKPlus software product competes with one major and a few minor software programs. MedChem Studio, MedChem Designer, and ADMET Predictor/ADMET Modeler operate in a more competitive environment. Several other companies presently offer simulation or modeling software, or simulation-software-based services, to the pharmaceutical industry. Lixoft’s Monolix Suite competes with a few established software products offered within the pharmaceutical software industry. We believe DILIsym and NAFLDsym enjoy a unique market position, with no significant competition.

Major pharmaceutical companies conduct drug discovery and development efforts through their internal development staffsstaff and through outsourcing. Smaller companies generally need to outsource a greater percentage of this effort. Thus, we compete not only with other software suppliers and scientific consulting service providers, but also with the in-house development and scientific consulting teams at some of the larger pharmaceutical companies.

Although competitive products exist, both new licenses and license renewals for our software products have continued to grow. We believe that we enjoy a dominant market share in this segment. We believe our GastroPlus, ADMET Predictor/ADMET Modeler, MedChem Studio, MedChem Designer, DDDPlus, MembranePlus, PKPlus, KIWI, DILIsym, NAFLDsym and Monolix Suite software offerings are each unique in their combination of capabilities and remain a focus of our marketing strategy.

Based on our technical knowledge and expertise, the Company iswe believe that we are strategically placedpositioned to offer competitive modeling and simulation consulting services to companies. Our clients seek out our services for multiple reasons: (1)reasons including: (i) to acquire scientific, therapeutic-area-related modeling expertise that they do not have in-house, (2)(ii) to address a need for modeling and simulation efforts beyond the capacity of in-house resources, (3)(iii) to fulfill their modeling requirements more efficiently than they could do in-house, and (4)(iv) to utilize our software when they do not have the in-house expertise to do so. We apply our software and assist companies in such areas as: physiologically based pharmacokinetic modeling (PBPK), pharmacokinetic/pharmacodynamic (PK/PD) data analysis;as PKPD, PBPK, and quantitative systems pharmacology/toxicology (QSP/T).QSP/QST. We compete against numerous service providers, ranging from departments within large contract research organizations (CROs)("CROs") to independent consulting organizations of various sizes, as well as individual consultantsconsultants.
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We believe the key factors in our ability to successfully compete in this field are our ability to: (1)(i) continue to invest in research and development, and develop and support industry-leading simulation and modeling software and related products and services, (2)(ii) develop and maintain a proprietary database of results of physical experiments that serve as a basis for simulated studies and empirical models, (3)(iii) continue to attract and retain a highly skilledhighly-skilled scientific and engineering team, (4)(iv) aggressively promote our products and services to our global market, and (5)(v) develop and maintain relationships with research and development departments of pharmaceutical companies, universities, and government agencies.

In addition, we are actively seekseeking strategic acquisitions to expand both our pharmaceutical software portfolio and services business.

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offerings.

TRAINING AND TECHNICAL SUPPORT

Customer training and technical support are important factors in customer satisfaction for our pharmaceutical products, and we believe we are an industry leader in providing strong customer training and technical support in our business areas. We provide in-house seminars at customers’ and potential customers’ sites, as well as at selected universities to train students who will soon be industry scientists. These seminars often serve as initial training in the event the potential customer decides to license or evaluate our software. Technical support is provided after the sale of any software in the form of on-site training (at the customer’s expense), web meetings and telephone, fax, and e-mail assistance to the customer’s users during the customer’s license period.

We provide free telephone, e-mail, and web-based support for all of our pharmaceutical software products worldwide from our offices in the United States.

Technical support for pharmaceuticalour software is provided by our life sciences teams and our inside sales and support staff. TechnicalWe have found that most clients need minimal technical support for pharmaceuticalour software products is generally minimal, averagingproducts.
We provide support to the GastroPlus User Group in Japan, which was organized by Japanese researchers in 2009. In early 2013, a few person-hours per product sale.

group of scientists in Europe and North America organized another GastroPlus User Group following the example set in Japan. Over 1,575 members have joined this group to date. We support this group through coordination of online meetings each month and managing the user group website for exchange of information among members. These user groups provide us valuable feedback for desired new features and suggested interface changes.

RESEARCH AND DEVELOPMENT

The development of our software is focused on expanding our product portfolio, designing enhancements to our core technologies, and integrating existing and new products into our principal software architecture and platform technologies. We intend to continue to offer regular updates to our products and to continue to look for opportunities to expand our existing suite of products and services.
To date, we have developed products internally, sometimes also licensing or acquiring products, or portions of products, from third parties. In certain instances, these arrangements have required that we pay royalties to third parties; we paid no royalties during the year ended August 31, 2023. We intend to continue to license or otherwise acquire technology or products from third parties when we believe that it makes business sense to do so.
Research and development (R&D)("R&D") activities include both enhancement of existing products and development of new products. Development of new products and adding functionality to existing products are capitalized in accordance with Financial Accounting Standards Board (FASB)("FASB") Accounting Standards Codification (ASC)("ASC") 985-20, “Costs of Software to Be Sold, Leased, or Marketed”.Marketed.” R&D expenditures, which primarily relate to both capitalized and expensed salaries, R&D supplies, laboratory testing, and R&D consulting, were approximately $5,328,000$7.8 million during fiscal year 2020,2023, of which $2,353,000$3.3 million was capitalized. R&D expenditures were approximately $4,268,000$6.4 million during fiscal year 2019,2022, of which $1,768,000$3.2 million was capitalized. R&D expenditures during fiscal year 20182021 were approximately $3,936,000$6.9 million, of which $2,145,000$2.9 million was capitalized.

Our software products are designed and developed by our development teams, which work remotely using collaboration software. Our products and services are delivered electronically.



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CUSTOMERS

Our customers include large, medium-sized,companies involved in pharmaceuticals, biotechnology, agrotechnology, and smaller biotechcosmetics, as well as universities, hospitals, and pharmaceutical companies, universities, and regulatory agencies and other government research organizations. We concentrate on serving the needs of our customers in drug discovery, development, clinical trials, and post-patent generic formulation development. Our current customer base is highly fragmented;fragmented. For the year ended August 31, 2023, our three largest customers in 2020 threeterms of our customers wererevenue each 9%accounted for 6%, 7%4%, and 7% of our revenues. With those exceptions, no other customers made up more than 9%3% of our revenues, inrespectively.
SEASONALITY
Our revenues exhibit seasonal fluctuations, with the last 3 years.

SEASONALITY

We have traditionally experienced seasonal revenue weakness during ourfirst fiscal fourth quarter (June-August) due to summer vacations and reduced activities at our customers’ sites. Our net sales figures for any quarter are not necessarily indicative of sales for any future period; our pharmaceutical software is typically licensed on an annual basis which means renewal revenues are usually recognized in(September-November) generally having the same quarter year after year. In recent years as we have grown revenues, we have seen a bit of flattening from quarter to quarter and we have reported seasonally higher revenue in our second and third quarters.lowest revenues. This is due to pharmaceutical industry buying patterns as well as our revenue recognition policies for software, consulting service slowdowns due to summer vacations in the previous quarter, and lower customer and employee conference attendance in those periods.

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Revenues for any quarter are not necessarily indicative of revenues for any future period; however, because our pharmaceutical software is licensed on an annual basis, renewals are usually within the same quarter year after year, even though there are certain instances in which the license renewal term may not immediately follow the initial license term, and therefore result in a shift of certain customer revenues to a subsequent quarter.

ENVIRONMENTAL REGULATORY MATTERS

We believe we are in compliance in all material respects with all applicable environmental laws. Presently, we do not anticipate that efforts to maintain such compliance will have a material effect on capital expenditures, earnings, or competitive position with respect to any of our operations.

HUMAN CAPITAL RESOURCES

We are committed to our people, and we embrace a culture of engagement, empowerment, and equity. Over 95% of our global employees are employed full-time, and more than 75% work within our life sciences software or consulting divisions. Given the specialized nature of our business, candidates for our open positions are strategically selected for their unique education and skills. The majority of our employees have advanced degrees with over 70% of our technical and scientific staff holding a doctoral degrees in mathematics, chemistry, biomedical engineering, and/or the pharmaceutical sciences.
As of August 31, 2020, Simulations Plus and its subsidiaries Cognigen Corporation, DILIsym, and Lixoft,2023, we employed a total of 137197 persons, including 129192 full-time employees and 85 part-time employees, consisting of 95127 in scientific, technical, and research and development, 818 in marketing and sales, and 3452 in administration, operations, and accounting. Currently 73 employees hold PhDs. (including PharmDs) in their respective science or engineering disciplines, and 26 employees hold one or more Master’s degrees. Most of the senior management team and all of the members of our Board of Directors hold graduate degrees.


We believe that our future success will depend, in part, on our ability to continue to attract, hire, and retain qualified personnel. To continue to support the endeavor, we have focused heavily on our total rewards program, which includes components of compensation, training, time off, recognition and support for business travel. At the end of 2022, we were recognized by Comparably for several workplace accolades including Best Company for Women, A+ culture rating and A+ Diversity rating. We continue to seek additions to our science and technical staff, although the competition for such personnel in the pharmaceutical industry is intense. We added 10 new scientists via direct recruiting and 19 scientific and technical staff with the acquisition of Immunetrics this past year. We also achieved a turnover rate of under 8%. None of our employees isare represented by a labor union, and we have never experienced a work stoppage. We believe that our relations with our employees are good.

Diversity, Equity, and Inclusion

We embrace diversity with the knowledge that it can lead to greater innovation, and in our workplace, we foster inclusion, so all employees feel they are a part of our team with equal access to all opportunities. One of our goals is to continue expanding our focus on diversity, equity, and inclusion. In terms of gender equity, women currently comprise 48% of our workforce and 52% of our scientific staff. We have also increased racial diversity with over 39% of our employees from minority backgrounds. We have implemented the ADP workforce now platform, which allows us to access and better understand trends in our staff and hiring relative to diversity. We are utilizing the recruitment platform to track our applicants and push job postings out to reach as many diverse applicants as possible. We continue to refine our policies and benefits to be inclusive, and implemented a new parental leave program in 2023 allowing all of our employees to take company paid time off after birth or adoption.

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Compensation, Training, and Awareness Programs

We are continuing to refine career paths for the different functions within our organization. We use these career paths as a basis for promoting employee career development and growth within the organization, as well as in recruiting and hiring new talent. We have continued the effort to provide top tier benefits and in fiscal year 2023, we also added a paid parental leave program.
Over the past two years, we have focused on mandated compliance, soft-skill and data privacy training. In the coming year, we will be rolling out an education and training reimbursement program that will allow all employees access to company paid technical, leadership or skills training opportunities.
In addition to these new employee training and development initiatives, we have an ongoing program of cross-specialty training consisting of presentations by expert modelers from each division. These monthly sessions serve to familiarize all divisions with the applications and techniques unique to each division and, in so doing, create opportunities to find synergies, expand the knowledge base across all divisions, and build a shared sense of purpose.
Health & Safety
We place a high value on maintaining a clean, safe, and healthy environment for our employees. In 2023, we implemented a new Human Rights Policy confirming our commitment to basic human rights worldwide. We also updated our Code of Conduct to ensure we require our employees and vendors work within our established principals of ethics.

The well-being of our employees, whether they are working in our divisional offices or remotely from home offices, is paramount. We believe that we are substantially in compliance with all applicable laws, regulations, and standards, and we make every reasonable effort to be attentive and responsive to our employees’ needs. In our offices, we have provided employees with ergonomic equipment, including ergonomic chairs and standing desks, and for their home offices, we provide an allowance for the purchase of home office equipment. We continue to provide very competitive health and wellness benefits, and in 2023, we ran a wellness challenge that had monetary incentives to encourage a healthy and less sedentary lifestyle.
We also consider open and transparent channels of communication to be a critical component of our employee health and wellness program. Toward this end, on a quarterly basis, we hold a company-wide virtual meeting to keep our employees engaged, informed, and apprised of activities occurring at the company and at each division, including quarterly financial results, future goals, and notable milestones.
INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS

We primarily protect our intellectual property through copyrights and trade secrets. Our intellectual property consists primarily of source code for computer programs and data files for various applications of those programs in the pharmaceutical software businesses. The expertise of our staff is a considerable asset closely related to intellectual property and attracting and retaining highly qualified scientists and engineers is essential to our business.

EFFECT OF GOVERNMENT REGULATIONS

The Company believes

We believe that itsour operations are substantially in compliance with all applicable laws and regulations and that it holdswe hold all necessary permits to operate itsour business in each jurisdiction in which itsour facilities are located. Laws and government regulations are subject to change and interpretation. Our pharmaceutical software products are tools used in research and development and are neither approved nor approvable by the FDA or other government agencies.

No significant pollution or other types of hazardous emission result from our operations and it is not anticipated that our operations will be materially affected by federal, state, or local provisions concerning environmental controls. Our costs of complying with environmental, health, and safety requirements have not been material. Furthermore, compliance with federal, state, and local requirements regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, have not had, nor are they expected to have, any material effect on the capital expenditures, earnings, or competitive position of the Company.
COMPANY WEBSITE

We maintain a corporate Internet website at: www.simulations-plus.com.

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The contents of this website are not incorporated in or otherwise to be regarded as part of this Annual Report. We file reports with the SEC, which are available on our website free of charge. These reports include annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, “Section 16” filings on Form 3, Form 4, and Form 5, and other related filings, each of which is provided on our website as soon as reasonably practical after we electronically file such materials with or furnish them to the SEC. In addition, the SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including the Company.

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ENVIRONMENTAL, SOCIAL, GOVERNANCE
We are committed to providing consistent and excellent return to our shareholders, all while maintaining a strong sense of good corporate citizenship that places a high value on the welfare of our employees, the communities in which we operate, and the world as a whole. We believe that effectively prioritizing and managing our Environmental, Social, and Governance ("ESG") factors will help create long-term value for our investors. We also believe that transparently disclosing the goals and relevant metrics related to our ESG programs will allow our stakeholders to be informed about our progress.
The topics covered in this section are identified through third-party ESG reporting frameworks, standards and metrics, such as the Sustainability Accounting Standards Board ("SASB"), and United Nations Sustainable Development Goals ("SDGs"). More information regarding our key ESG programs, goals and commitments, and key metrics can be found on our website and within our 2022 ESG Update and 2020 ESG Report.
Our ESG highlights include the following:
Environmental Matters
We participate in a recycling program through our local waste management facilities to divert all recyclable materials – bottles, cans, plastics, paper, and cardboard – from landfills. Across the Company, our facilities provide for recycling, and our electronic waste is sent to local approved e-waste recycling centers. We have achieved 90% reduction in energy usage for data center cooling. We have implemented a policy of using exclusively IT hardware vendors that embrace environmental sustainability. We are continuing with the commitment to work-from-home, with 74% employees working remotely.

Greenhouse gas emission:
Our purpose is to calculate the greenhouse gas (GHG) emissions for better visibility of environmental impact. We have identified our base year to calculate emissions inventory for the year ended August 31, 2023. We have used control approach to identify and determine the organizational boundaries. Our U.S.A. offices are in Pittsburgh-PA with 7,141 square feet of leased office space, Lancaster-CA with 4,200 square feet of leased office space, Buffalo-NY with 4,317 square feet of leased office space, and Raleigh-NC with 1,510 square feet of leased office space. Our Data Center is located in Buffalo-NY. We lease 2,300 square feet of office in Paris, France. Currently, we have identified our U.S.A. offices including data center for calculating GHG emissions.

Scope:

Scope 1: Scope 1 covers emissions are direct greenhouse (GHG) emissions that occur from sources that are controlled or owned by an organization (e.g., emissions associated with fuel combustion in boilers, furnaces, vehicles).

Scope 1 is not applicable to our organization as it does not own or control any sources that produces direct greenhouse gas emissions (GHG).

Scope 2: The Scope 2 Guidance standardizes how corporations measure emissions from purchased or acquired electricity, steam, heat, and cooling (called “scope 2 emissions”).

We have identified electricity as our source of greenhouse gas (GHG) emissions that produces greenhouse gas (GHG) emissions.

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Scope 3: Scope 3 encompasses emissions that are not produced by the company itself and are not the result of activities from assets owned or controlled by them, but by those that it’s indirectly responsible for up and down its value chain. An example of this is when we buy, use and dispose of products from suppliers. Scope 3 emissions include all sources not within the scope 1 and 2 boundaries.

We believe that we do not produce greenhouse gas (GHG) emissions that falls within Scope 3.

We have identified and determined our source of emission is the electricity usage at facilities referenced within organizational boundaries in U.S.A. We have used EPA Simplified GHG Emissions Calculator (SGEC) for calculating the GHG emission. For the year ended August 31, 2023, using the SGEC calculator, the total CO2 equivalent GHG emissions is 470.6 metric tons. Our operations are built on continual improvements in efficiency and clean energy.

We are attentive to energy use in our office operations and strive to only use what is necessary for business purposes. In 2023, we reduced the footprint of our US-based facilities by 35%, decreasing it from 19,300 sf to 12,400 sf. We also implemented LearnUpon LMS and Adobe e-signature to reduce travel for in-person training and the need for printed materials, with virtual on-demand programs using only digital materials.
We believe we are in compliance in all material respects with all applicable environmental laws. Presently, we do not anticipate that such compliance will have a material effect on capital expenditures, earnings, or competitive position with respect to any of our operations.
Social Impact and Supporting our Communities
•We donated $100,000 to four different charities selected by our employees.
•We released ILDsym® version 1A, which targets treatments to reduce the progression of ILD in patients with systemic sclerosis (SSc), an underserved condition.
•Our support for the academic community is broad and deep. We provide certain distinguished professors at academic institutions with free reference site licenses for nonprofit research and teaching, including providing free access to our software in university instruction. In addition to reference site licenses, academic and research institutions are entitled to a 95% discount off commercial license fees, and we offer students and professors either free or substantially reduced fees to attend our training courses and workshops. In recent years, we have sponsored several students with awards given by the Society of Toxicology. In 2022, we provided 245 free software licenses to recipients in 53 countries through our University+ program to support the next generation of scientists. In 2023, we expanded our University+ program to provide 307 free software licenses to recipients in 51 different countries to further promote education in our industry and support the next generation of scientists.
•We provide sponsorships to numerous conferences, symposia, and associations such as the American Conference on Pharmacometrics ("ACoP"), American Association of Pharmaceutical Scientists ("AAPS"), American Chemical Society ("ACS"), Controlled Release Society ("CRS"), Groupe de Métabolisme et Pharmacocinétique ("GMP"), and the Gordon Research Conferences.
•We encourage employees to volunteer in their local communities, and we offer our employees the flexibility they need to participate, from sponsoring and participating in charity golf tournaments to volunteering to serve hot meals to the disadvantaged. In recent years, we have joined the global GivingTuesday movement and donated food, clothing, and financial support to several organizations that serve those in need in our communities.
•We focus on maintaining policies that support our social commitments worldwide. This past year we updated our Company privacy policy and processes in the PDP Program to reflect changes to global personal data protection laws and developed and implemented a Human Rights Policy to support our Company commitment to all basic human rights around the globe.
Our People
•Our commitment to our people lies in our continued efforts to support and value our most important asset, our employees.
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•This past year we conducted an employee engagement survey and received over 80% engagement to ensure culture alignment and success of internal programs and to further support their needs.
•In 2023, we established a paid parental leave program to support working parents and implemented a new recognition system to encourage peer to peer and leader to employee recognition.
•We also implemented a program to ensure that all our employee have the opportunity to attend in person employee events to collaborate face to face with their colleagues around the globe.
•This past year, we added additional supplemental benefits to our health benefit offerings increased our focus on physical and mental wellness with all our teams through an online wellness challenge hosted by the Company.
•We continue to engage with our employees and listen to their feedback in order to work toward building a culture of trust, collaboration and transparency.
•We have conducted compensation benchmarking study with external compensation consultant, and aligned all roles to market salary ranges.
Customer Privacy & Data Security
•We value customer privacy, and the data we collect are only as needed to deliver company information, software products, and consulting services. Our website includes our comprehensive Privacy Policy, which details what and how data are collected, how data are used and stored, and the options for controlling personal data, including opting out, accessing, updating, or deleting it.
•In recognition of the critical importance of Data Security to our operations, including Cybersecurity, Data Protection, and Customer Privacy, our leadership team conducts a thorough examination of all elements of Data Security. Our objective is to ensure the security, confidentiality, and privacy of our systems and information assets, and to follow and be compliant with all relevant laws, regulations, and guidelines, including, but not limited to:
◦U.S. and State Data Privacy Laws
◦The EU’s General Data Protection Regulation ("GDPR")
◦Pharmaceutical Good Practice Quality Guidelines, including FDA 21 CFR Part 11
◦The Sarbanes-Oxley Act
◦The Personal Information Protection Law of the People’s Republic of China ("PIPL")
•Our corporate-level IT department brings greater consistency, efficiency, and functional IT support across all divisions. The IT department is responsible for centralizing divisional data processing, storage, and backup capabilities at each of our geographical locations. The IT department is also responsible for ensuring that corporate IT policies are aligned and compliant with all applicable regulatory provisions and current best practices.
•We have appointed VeraSafe as our Data Protection Officer ("DPO"). The DPO is responsible for ensuring that we have a Personal Data Protection program that is compliant with data privacy laws such as the EU’s GDPR, UK GDPR, China’s PIPL, and data privacy laws enacted at the state level, as applicable to us. Our corporate Personal Data Protection program includes policies, practices, and training directed to protecting personal data.
Business Ethics
•From the Company’s inception, we have placed the highest emphasis on conducting our business with honesty and integrity. The highest ethical standards are expected of management and employees alike, and we continuously strive to create a corporate culture of honesty, integrity, and trust. Throughout our operations and in our dealings with our stakeholders, we endeavor to engender the confidence that the Company’s conduct is beyond reproach.
•The policies we have developed are intended to:
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◦Define and disseminate our core values and the legal requirements applicable to good business conduct and ethical behavior
◦Offer guidance in understanding Company policies, interpreting laws, and handling Company-related issues and situations
◦Foster clear, ethical behaviors and conduct to create an atmosphere of respect, trust, cooperation, and collaboration throughout the Company and its activities
◦Provide clear and well-defined procedures by which employees can easily obtain information, ask questions, and, if necessary, report any suspected violations of any of our Business Ethics policies
•In addition to abiding by all applicable laws, all management and employees are required to comply fully with our Code of Conduct, which sets forth the Company’s values, business culture, and practices. The Code of Conduct also governs conduct between our employees and our customers and vendors with whom we do business. Because many of our customers are companies in the pharmaceutical and biotech industries, we have incorporated in our Code of Conduct the principles of the Pharmaceutical Supply Chain Initiative, including Leadership, Partnering, Presence, Consistency & Quality, Learning, and Innovation & Discovery.
Human Rights
•The Company was founded on the belief that our software technologies could lead to important advances in healthcare, thereby improving patient outcomes, advancing and improving global health, and bettering the lives of humankind. This objective cannot be accomplished without a commitment to human rights, and we are committed to ensuring that, in our day-to-day business practices, in our business relationships, and in matters of employment, we will uphold our own principles as delineated in our Code of Conduct. Furthermore, we support the principles set forth in the United Nations International Bill of Human Rights, specifically the Universal Declaration of Human Rights, and the ILO Declaration on Fundamental Principles and Rights at Work and have a written Human Rights Policy to uphold these commitments. As we evolve this policy, we will look to the UN Guiding Principles on Business and Human Rights ("UNGPs") for guidance.
Governance
•We are committed to ensuring strong corporate governance practices on behalf of our shareholders and other stakeholders. We believe strong corporate governance provides the foundation for financial integrity and shareholder confidence. Our Board of Directors is responsible for the oversight of risks facing the Company, while our management is responsible for the day-to-day management of risk. The Board has three committees: Audit Committee, Compensation Committee, and Nominating & Corporate Governance Committee. The Board, as a whole, directly oversees our strategic and business risk, including risks related to financial reporting, compensation practices, cybersecurity, ESG, and product developments. In addition, all our employees, contractors, and vendors are required to follow our Code of Conduct as a part of our good governance practice. We have increased gender and racial diversity of the Board of Directors with appointment of new independent director. Our ESG steering committee oversees and executes matters related to ESG. More information about our corporate governance features can be found in our Proxy Statement for the 2024 Annual Meeting of Shareholders (the "Proxy Statement"), which we intend to file with the SEC within 120 days after August 31, 2023, the close of our fiscal year covered by this Report.

ITEM 1A – RISK FACTORS

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You should carefully consider the risks described below, as well as the other information in this Report, including our financial statements and the related notes and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before investing in our publicly traded securities. The occurrence of any of the events or developments described below could harm our business, financial condition, operating results, and/or growth prospects. The risks described below are not the only ones facing us. Our business is also subject to the risks that affect many other companies, such as competition, technological obsolescence, labor relations, general economic conditions, geopolitical changes, and international operations. We operate in a rapidly changing environment that involves a number of risks, some of which are beyond our control. Additional risks not currently known to us or that we currently believe are immaterial also may impair our business operations and our liquidity. The risks described below could cause our actual results to differ materially from those contained in the forward-looking statements we have made in this Annual Report, on Form 10-K, the information incorporated herein by reference, and those forward-looking statements we may make from time to time. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider the following to be a complete discussion of all potential risks or uncertainties.

Certain Risks Related to Our Business


Risk Factor Summary
Below is a summary of the principal factors that make an investment in our common stock speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below and should be carefully considered, together with other information included in this Report.

•Our business is subject to risks arising from epidemic diseases, such as the recent outbreak of the COVID-19 illness.

We are subject to risks related to public health crises such as the global pandemic associated with COVID-19. In December 2019, a novel strain of coronavirus, SARS-CoV-2, was reported to have surfaced in Wuhan, China. Since then, SARS-CoV-2, and the resulting disease COVID-19, has spread to most countries, and all 50 states within the United States. COVID-19 poses the risk that we or our employees, contractors, suppliers, and other partners may be prevented from conducting business activities for an indefinite period of time, including due to shutdowns that may be requested or mandated by governmental authorities. The governors of California (where our headquarters is located) and over forty other states, as well as mayors of many cities, ordered their residents to cease traveling to nonessential jobs and to curtail all unnecessary travel, and to stay in their homes as much as possible. If the current economic conditions worsen or last for an extended period of time, we may be forced to significantly scale back our business and growth plans, which could have a material adverse effect on our business.

We have undertaken several measures in an effort to mitigate the spread of COVID-19, including adjusting our business practices to combat the effects by restricting employee travel, closing our offices in compliance with local guidelines and, when reopened, implementing social distancing at our office locations and additional sanitary measures. There have been no reductions in the workforce as a result of COVID-19. During the last half of fiscal year 2020, software renewal revenue and services revenues generated primarily from contracts signed prior to the effects of the pandemic have not been materially impacted. Revenue from new software licenses and new service contracts has been negatively impacted with our clients’ increased focus on opportunities to address COVID-19 mitigation efforts and shift away from other therapeutic areas.

While the COVID-19 pandemic has not materially adversely affected our business operations as of the date of this annual report, the continued spread of COVID-19 and the measures taken by the governments of countries affected could disrupt the supply chain and adversely impact our business, financial condition, or results of operations. The COVID-19 outbreak and mitigation measures may also have an adverse impact on global economic conditions, which could have an adverse effect on our business and financial condition. The extent to which the COVID-19 outbreak further impacts our results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock.

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Certain Risks Related to Our Marketplace and Environment

•Our ability to sustain or increase revenues will depend upon our success in entering new markets, continuing to increase our customer base, and in deriving additional revenues from our existing customers.

•A decrease in, or resistance to, the acceptance of model-informed biopharmaceutical discovery and development could damage our reputation or reduce the demand for our products and services.
•Consolidation within the pharmaceutical and biotechnology industries may continue to lead to fewer potential customers for our products and services.
•We face strong competition, and increasing competition and costs within the industries and markets we operate in may negatively affect the demand for our products and services.
•Health care reform and restrictions on reimbursement may affect the customers that purchase or license our products or services, which may negatively affect our results of operations and financial condition.
•We are subject to price pressures in some of the markets we serve.
•Our operations may be interrupted by the occurrence of a natural disaster or other catastrophic event.
•Our insurance coverage may not be sufficient to avoid material impact on our financial position or results of operations resulting from claims or liabilities against us.
•Changes in government regulation or in practices relating to the industries in which we operate, including potential health care reform, could decrease the need for the services we provide.
•Any failure by us to comply with applicable regulations and related guidance could harm our reputation and operating results, and compliance with new regulations and guidance may result in additional costs.
•Our sales cycle is lengthy, and customers may delay entering into contracts or decide not to adopt our products or solutions after we have expended significant time and resources and supported evaluation by them of our technology.
•Many of our contracts are fixed price and may be delayed or terminated or reduced in scope for reasons beyond our control, or we may underprice or overrun cost estimates with these contracts, potentially resulting in financial losses.
•We could experience a breach of the confidentiality of the information we hold or of the security of our computer systems.
•Impairment of goodwill or intangible assets may adversely impact future results of operations.
•Software defects or malfunctions in our products could negatively impact our reputation and results of operations.
•Delays in the release of new or enhanced products or services or undetected errors in our products or services may result in increased cost to us, delayed market acceptance of our products, and delayed or lost revenue.
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•We are subject to various risks associated with the operation of a global business, including foreign currency exchange rate risk and complex regulatory frameworks, amongst other things.
•Changes in applicable tax laws or regulations and the resolution of tax disputes could negatively affect us.
•Contract research services create a risk of liability.
•Upgrading our software could result in implementation issues and business disruptions.
•The industries in which we operate have a history of intellectual property litigation, involvement in intellectual property lawsuits is often very costly.
•We may not be able to successfully develop and market new services and products.
•Failure on our part to retain key personnel and to recruit adequate replacements could harm our business.
•Failure to successfully select and integrate the businesses and technologies we acquire could harm our business.
•Our periodic operating results fluctuate and may continue to fluctuate in the future, and if we fail to meet the expectations of analysts or investors, our stock price and the value of your investment could decline substantially.
•Loss of our major customers could materially and adversely affect our business.
•A significant portion of our operating expenses is relatively fixed and planned expenditures are based in part on expectations regarding future revenues.
•If our security is breached or we fail to properly protect customer data, our business could be disrupted, our operating results could be harmed, and customers could be deterred from using our products and services.
•Changes in and/or failure to comply with other applicable laws, regulations, and interpretations of such laws and regulations could materially adversely affect our reputation, business and financial performance.
•We rely upon a single internal hosting facility and Amazon Web Services to deliver certain solutions to our customers and any disruption of or interference with our hosting systems, operations, or use of the Amazon Web Services could harm our business and results of operations.
•If we are not able to reliably meet our data storage and management requirements, or if we experience any failure or interruption in the delivery of our services over the Internet, our business could be harmed.
•Some of our software solutions and services utilize open-source software, and any failure to comply with the terms of one or more of these open-source licenses could adversely affect our business.
•We may be unable to adequately enforce or defend our ownership and use of our intellectual property rights.
•Litigation or claims made against us, which may arise in the ordinary course of our business, could be costly and time-consuming to defend.
•Our business depends on the clinical trial market, and a downturn in this market could harm our business.
•Any failure to do maintain proper and effective internal control over financial reporting in the futurecould impair our ability to produce timely and accurate financial statements or comply with applicable laws and regulations.
•As a public company, we may incur significant administrative workload and expenses in connection with new and changing compliance requirements.
•Cash expenditures associated with our acquisition of Immunetrics may create certain liquidity and cash flow risks.
•The business acquired through the Immunetrics acquisition may not perform as we or the market expects, which could have an adverse effect on the price of our common stock.
•The obligations and liabilities of Immunetrics, some of which may be unanticipated or unknown, may be greater than we have anticipated, which may diminish the value of the Immunetrics business to us.
•Our Board of Directors may (in its discretion) suspend the quarterly dividend that we typically pay, and, consequently, which could negatively impact your ability to achieve a return on your investment.
•If our operating and financial performance in any given period does not meet any guidance that we provide to the public, the market price of our common stock may decline.
•The price of our common stock may fluctuate significantly, and investors could lose all or part of their investment.
•If securities or industry analysts issue an adverse or misleading opinion regarding our stock, or our inclusion in the S&P 600 discontinues, our stock price and trading volume could decline.
•We may raise capital through the issuance of our common stock, convertible debt, or equity-linked securities, which could result in dilution to our stockholders or a negative impact on the price of our common stock.
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•We cannot guarantee that our share repurchase program will be fully consummated or that it will enhance long-term shareholder value, and share repurchases could increase the volatility of the price of our common stock.
•Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults, or non-performance by financial institutions or transactional counterparties, could adversely affect our current and projected business operations and our financial condition and results of operations.

Certain Risks Related to Our Business
Our business is subject to risks arising from epidemic diseases, such as the outbreak of the COVID-19 illness.
The occurrence of regional epidemics or a global pandemic, such as COVID-19, may adversely affect our operations, financial condition, and results of operations. In the last few years, the COVID-19 pandemic has had widespread, rapidly evolving, and unpredictable impacts on global society, economies, financial markets, and business practices. The extent to which global pandemics impact our business going forward will depend on factors such as the duration and scope of the pandemic; governmental, business, and individuals' actions in response to the pandemic; and the impact on economic activity including the possibility of recession or financial market instability.
Certain Risks Related to Our Marketplace and Environment
Our ability to sustain or increase revenues will depend upon our success in entering new markets, continuing to increase our customer base, and in deriving additional revenues from our existing customers.
Our products are currently used primarily by modeling and simulation specialists in pharmaceutical,companies involved in pharmaceuticals, biotechnology, agrotechnology, and cosmetics, as well as universities, hospitals, and government research organizations. One component of our overall business strategy is to derive more revenues from our existing customers by expanding their use of our products and services. Such strategy would have our customers utilize our scientific informatics platforms and our tools and components to leverage vast amounts of information stored in both corporate databases and public data sources in order to make informed scientific and business decisions during the research and development process. In addition, we seek to expand into new markets, and new areas within our existing markets, by acquiring businesses in these markets, attracting and retaining personnel knowledgeable in these markets, identifying the needs of these markets, and developing marketing programs to address these needs. If successfully implemented, these strategies would increase the usage of our software and services by pharmacologists or pharmacometricians operating within our existing pharmaceutical, biotechnology, and chemical customers, as well as by new customers in other industries. However, if our strategies are not successfully implemented, our products and services may not achieve market acceptance or penetration in targeted new departments within our existing customers or in new industries. As a result, we may incur additional costs and expend additional resources without being able to sustain or increase revenue.


A decrease in, or resistance to, the acceptance of model-informed biopharmaceutical discovery and development by regulatory authorities or academic institutions could damage our reputation or reduce the demand for our products and services.

In recent years, there has been a steady increase in the recognition by regulatory and academic institutions of the role that modeling and simulation can play in the biopharmaceutical development and approval process, as demonstrated by new regulations and guidance encouraging the use of modeling and simulation in the biopharmaceutical discovery, development, testing, clinical trial and approval process, which has positively impacted our business. Changes in government or regulatory policy, or a stagnation or reversal in the trend toward increasing the acceptance of and reliance upon use of computer modeling and simulation in the drug approval process, could decrease the demand for our products and services or lead our customers to cease use of, or to recommend against the use of, our products and services. This, in turn, could negatively impact our reputation and/or have a material adverse impact on our business prospects and results of operations.
Consolidation within the pharmaceutical and biotechnology industries may continue to lead to fewer potential customers for our products and services.

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A significant portion of our customer base consists of pharmaceutical and biotechnology companies. Consolidation within the pharmaceutical and biotechnology industries may result in fewer customers for our products and services. Although the industry consolidation that has taken place over the past 20 years has not prevented our business from growing to date, if one of the parties to a consolidation uses the products or services of our competitors, we may lose existing customers as a result of such consolidation.

Increasing competition and increasing costs within the pharmaceutical and biotechnology industries, drug development and services industry, and the life science market for modeling and simulation software and cheminformatics products may affect the demand for our products and services, which may affect our results of operations and financial condition.

Our pharmaceutical and biotechnology customers'customers’ demand for our products is impacted by continued demand for their products and by our customers'customers’ research and development costs. Demand for our customers'customers’ products could decline, and prices charged by our customers for their products may decline, as a result of governmental regulations and increasing competition, including competition from companies manufacturing generic drugs. In addition, our customers'customers’ expenses could continue to increase as a result of increasing costs of complying with government regulations and other factors. A decrease in demand for our customers'customers’ products, pricing pressures associated with the sales of these products, and additional costs associated with product development, could cause our customers to reduce research and development expenditures. Although our products increase productivity and reduce costs in many areas, because our products and services depend on such research and development expenditures, our revenues may be significantly reduced.

Health care reform and restrictions on reimbursement may affect the pharmaceutical, biotechnology, and industrial chemical companies that purchase or license our products or services, which may affect our results of operations and financial condition.

The continuing efforts of government and third-party payers in the markets we serve to contain or reduce the cost of health care may reduce the profitability of pharmaceutical, biotechnology, and industrial chemical companies, causing them to reduce research and development expenditures. Because some of our products and services depend on such research and development expenditures, our revenues may be significantly reduced. We cannot predict what actions federal, state, or private payers for health care goods and services may take in response to any health care reform proposals or legislation.

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We face strong competition in the life science market for modeling and simulation software and for cheminformatics products.

The market for our modeling and simulation software products for the life science market is intensely competitive. We currently face competition from other scientific software providers, larger technology and solutions companies, in-house development by our customers and academic and government institutions, and the open-source community. Some of our competitors and potential competitors have longer operating histories in certain segments of our industry than we do and could have greater financial, technical, marketing, research and development, and other resources. Many of our competitors offer products and services directed at more specific markets than those we target, enabling these competitors to focus a greater proportion of their efforts and resources on these markets. Some offerings that compete with our products are developed and made available at lower cost by government organizations and academic institutions, and these entities may be able to devote substantial resources to product development and also offer their products to users for little or no charge. We could also face competition from open-source software initiatives, in which developers provide software and intellectual property free over the Internet. In addition, some of our customers spend significant internal resources in order to develop their own software. Moreover, we intend to leverage our scientific informatics platform in order to enable our customers to more effectively utilize the vast amounts of information stored in both their databases and public data sources in order to make informed scientific and business decisions during the research and development process. This strategy could lead to competition from much larger companies that provide general data storage and management software. There can be no assurance that our current or potential competitors will not develop products, services, or technologies that are comparable to, superior to, or render obsolete, the products, services, and technologies we offer. There can be no assurance that our competitors will not adapt more quickly than we to technological advances and customer demands, thereby increasing such competitors'competitors’ market share relative to ours. Any material decrease in demand for our technologies or services may have a material adverse effect on our business, financial condition, and results of operations.

We are subject to pricingprice pressures in some of the markets we serve.

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The market for modeling and simulation products for the life science industry is intensely competitive. Although the average price of our software licenses has increased slightly or remained relatively constant for fiscal years 2018, 2019,2023, 2022, and 2020,2021, we may experience a decline in the future. In response to increased competition and general adverse economic conditions in this market, we may be required to modify our pricing practices. Changes in our pricing model could adversely affect our revenues and earnings.

Our operations may be interrupted by the occurrence of a natural disaster or other catastrophic event at our primary facilities.

Our research and development operations and administrative functions are primarily conducted at our facilities in Lancaster, California,California; Buffalo, New York,York; Paris, France andFrance; Research Triangle Park, North Carolina.Carolina; and Pittsburgh, Pennsylvania. Although we have contingency plans in effect for natural disasters or other catastrophic events, the occurrence of such events could still disrupt our operations. For example, our Lancaster, California facility is located in a state that is particularly susceptible to earthquakes.earthquakes and wildfires. Any natural disaster or catastrophic event in our facilities or the areas in which they are located could have a significant negative impact on our operations.

Our insurance coverage may not be sufficient to avoid material impact on our financial position or results of operations resulting from claims or liabilities against us, and we may not be able to obtain insurance coverage in the future.

We maintain insurance coverage for protection against many risks of liability. The extent of our insurance coverage is under continuous review and is modified as we deem it necessary. Despite this insurance, it is possible that claims or liabilities against us may have a material adverse impact on our financial position or results of operations. In addition, we may not be able to obtain any insurance coverage, or adequate insurance coverage, when our existing insurance coverage expires. For example, we do not carry earthquake insurance for our facilities in Lancaster, California, because we do not believe the costs of such insurance are reasonable in relation to the potential risk for our part of California.

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Changes in government regulation or in practices relating to the pharmaceutical or biotechnology industries, including potential health care reform, could decrease the need for the services we provide.

Governmental agencies throughout the world, but particularly in the U.S., strictly regulate the drug development process. Our business involves helping pharmaceutical and biotechnology companies, among others, navigate the regulatory drug approval process. Accordingly, many regulations, and often new regulations, are expected to result in higher regulatory standards and often additional revenues for companies that service these industries. However, some changes in regulations, such as a relaxation in regulatory requirements or the introduction of streamlined or expedited drug approval procedures, or an increase in regulatory requirements that we have difficulty satisfying or that make our services less competitive, could eliminate or substantially reduce the demand for our services.

Any negative commentaries made by any regulatory agencies or any failure by us to comply with applicable regulations and related guidance could harm our reputation and operating results, and compliance with new regulations and guidance may result in additional costs.

Any negative commentaries made by any regulatory agencies or any failure on our part to comply with applicable regulations could result in the termination of ongoing research or the disqualification of data for submission to regulatory authorities. This could harm our reputation, our prospects for future work, and our operating results. If our operations are found to violate any applicable law or other governmental regulations, we might be subject to civil and criminal penalties, damages, and fines. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses, divert our management'smanagement’s attention from the operation of our business, and damage our reputation.

Our sales cycle is lengthy, and customers may delay entering into contracts or decide not to adopt our products or solutions after we have expended significant time and resources and supported evaluation by them of our technology, which could result in delays in recognizing revenue and negatively impact our results of operations.
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Ongoing negotiations and evaluation projects for new products, with new customers or in new markets may not result in significant revenues for us if we are unable to close new engagements on terms favorable to us in a timely manner, or at all. Unexpected delays in our sales cycle could cause our revenues to fall short of expectations. Further, the timing and length of negotiations required to enter into agreements with our customers and the ultimate enforcement of complex negotiated contractual provisions as we intended is difficult to predict. If we do not successfully negotiate certain key complex contractual provisions, there are disputes regarding such provisions, or if they are not enforceable as we intended, our revenues and results of operations would suffer. Further, if we were to incur significant effort and then fail to enter into final contracts with prospective customers, or if a contract is terminated earlier than expected, our revenues and results of operations could suffer.
Many of our contracts are fixed-pricefixed price and may be delayed or terminated or reduced in scope for reasons beyond our control, or we may underprice or overrun cost estimates with these contracts, potentially resulting in financial losses.

Many of our contracts provide for services on a fixed-price or fee-for-service with a cap basis and, accordingly, we bear the financial risk if we initially underprice our contracts or otherwise overrun our cost estimates. In addition, these contracts may be terminated or reduced in scope either immediately or upon notice. Cancellations may occur for a variety of reasons, and often at the discretion of the client. The loss, reduction in scope, or delay of a large contract or the loss or delay of multiple contracts could materially adversely affect our business, although our contracts frequently entitle us to receive the costs of winding down the terminated projects, as well as all fees earned by us up to the time of termination. Some contracts also entitle us to a predetermined termination fee and irrevocably committed costs/expenses.

We could experience a breach of the confidentiality of the information we hold or of the security of our computer systems.

We operate large and complex computer systems that contain significant amounts of client data. As a routine element of our business, we collect, analyze, and retain substantial amounts of data pertaining to the clinical study data analysis we conduct for our clients. Unauthorized third parties could attempt to gain entry to such computer systems for the purpose of stealing data or disrupting the systems. We believe that we have taken appropriate measures to protect them from intrusion, and we continue to improve and enhance our systems in this regard, but in the event that our efforts are unsuccessful, we could suffer significant harm. Our contracts with our clients typically contain provisions that require us to keep confidential the information generated from these studies. In the event the confidentiality of such information was compromised, we could suffer significant harm.

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Impairment of goodwill or intangible assets may adversely impact future results of operations.

We have intangible assets, including goodwill, capitalized computer software development costs, intellectual property, and other intangible assets, on our balance sheet due to our acquisitions of businesses. The initial identification and valuation of these intangible assets and the determination of the estimated useful lives at the time of acquisition involve use of management judgments and estimates. These estimates are based on, among other factors, input from accredited valuation consultants, reviews of projected future income cash flows, and statutory regulations. The use of alternative estimates and assumptions might have increased or decreased the estimated fair value of our goodwill and intangible assets that could potentially result in a different impact to our results of operations. If the future growth and operating results of our business are not as strong as anticipated and/or our market capitalization declines, this could impact the assumptions used in calculating the fair value of goodwill or intangibles. To the extent goodwill or intangibles are impaired, their carrying value will be written down to itstheir implied fair value and a charge will be made to our income from continuing operations. Such an impairment charge could materially and adversely affect our operating results. As of August 31, 2020 and August 31, 2019, the carrying amount of goodwill and intangibles was $37,914,808 and $23,653,183, respectively, on our consolidated balance sheet.

Certain Risks Related to Our Operations

Software defects or malfunctions in our products could hurt our reputation among our customers, result in delayed or lost revenue, and expose us to liability.

Our business and the level of customer acceptance of our products depend upon the continuous, effective, and reliable operation of our software and related tools and functions. To the extent that defects cause our software to malfunction, and our customers'customers’ use of our products is interrupted, our reputation could suffer, and our revenue could decline or be delayed while such defects are remedied. We may also be subject to liability for the defects and malfunctions of third-party technology partners and others with whom our products and services are integrated.

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Delays in the release of new or enhanced products or services or undetected errors in our products or services may result in increased cost to us, delayed market acceptance of our products, and delayed or lost revenue.

To achieve market acceptance, new or enhanced products or services can require long development and testing periods, which may result in delays in scheduled introduction. Any delays in the release schedule for new or enhanced products or services may delay market acceptance of these products or services and may result in delays in new customer orders for these new or enhanced products or services, or the loss of customer orders. In addition, new or enhanced products or services may contain a number of undetected errors or “bugs” when they are first released. Although we extensively test each new or enhanced software product or service before it is released to the market, there can be no assurance that significant errors will not be found in existing or future releases. As a result, in the months following the introduction of certain releases, we may need to devote significant resources to correct these errors. There can be no assurance, however, that all of these errors can be corrected.

We are subject to various risks associated with the operation of a global business.

We derive a significant portion of our total revenue from our operations in international markets. During the years ended August 31, 2020, 20192023, 2022, and 2018, 29%2021, 31%, 34%30%, and 39%31%, respectively, of our total revenue was derived from our international operations. Our global business may be affected by local economic conditions, including inflation, recession, and currency exchange ratecurrency-exchange-rate fluctuations. In addition, political and economic changes, including the imposition of import restrictions or tariffs, geopolitical instability, international conflicts and terrorist acts, throughout the world may interfere with our or our customers'customers’ activities in particular locations and result in a material adverse effect on our business, financial condition, and operating results. Potential trade restrictions, exchange controls, adverse tax consequences, and legal restrictions may affect the repatriation of funds into the U.S. Also, we could be subject to unexpected changes in regulatory requirements, the difficulties of compliance with a wide variety of foreign laws and regulations, potentially negative consequences from changes in or interpretations of U.S. and foreign tax laws, import and export licensing requirements, and longer accounts receivable cycles in certain foreign countries. These risks, individually or in the aggregate, could have an adverse effect on our results of operations and financial condition. For example, we are subject to compliance with the U.S. Foreign Corrupt Practices Act and similar anti-bribery laws, which generally prohibit companies and their intermediaries from making improper payments to foreign government officials for the purpose of obtaining or retaining business. While our employees, distributors, and agents are required to comply with these laws, we cannot be sure that our internal policies and procedures will always protect us from violations of these laws despite our commitment to legal compliance and corporate ethics. The occurrence or allegation of these types of risks may adversely affect our business, performance, prospects, value, financial condition, and results of operations.

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The drug discovery and development services industry is highly competitive.

Our clinical pharmacology division often competes for business not only with other clinical research organization (CROs)(“CROs”), but also with internal discovery and development departments within our larger clients, who may have greater resources than ours. We also compete with universities and teaching hospitals for outsourced services. We compete based on a variety of factors, including:

·reputation for on-time quality performance;
·reputation for regulatory compliance;
·expertise and experience in multiple specialized areas;
·scope and breadth of service and product offerings across the drug discovery and development spectrum;
·ability to provide flexible and customized solutions to support our clients' drug discovery and development needs;
·price/value;
·technological expertise and efficient drug development processes;
·financial stability;
·accessibility of client data through secure portals; and
·ability to acquire, process, analyze, and report data in an accurate manner.

including without limitation:

•reputation for on-time quality performance
•reputation for regulatory compliance
•expertise and experience in multiple specialized areas
•scope and breadth of service and product offerings across the drug discovery and development spectrum
•ability to provide flexible and customized solutions to support our clients’ drug discovery and development needs
•price/value
•technological expertise and efficient drug development processes
•financial stability
•accessibility of client data through secure portals
•ability to acquire, process, analyze, and report data in an accurate manner
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If we do not compete successfully, our business could suffer. Increased competition mightcould lead to price and other concessions that might adversely affect our operating results. The drug discovery and development services industry has continued to see a trend towards consolidation, particularly among biotechnology companies, who are acquisition targets for each other and for larger pharmaceutical companies. If this trend continues, it is likely to produce more competition among the larger companies and CROs generally, with respect to both clients and acquisition candidates. In addition, while there are substantial barriers to entry for large, global competitors with broad-based services, small, specialized entities considering entering the CRO industry will continue to find lower barriers to entry, and private equity firms may determine that there are opportunities to acquire and consolidate these companies, thus further increasing possible competition. More generally, our competitors or others might develop technologies, services, or products that are more effective or more commercially attractive than our current or future technologies, services, or products, or that render our technologies, services, or products less competitive or obsolete. If competitors introduce superior technologies, services, or products and we cannot make enhancements to ours to remain competitive, our competitive position, and in turn our business, revenue, and financial condition, would be materially and adversely affected. In the aggregate, these competitive pressures may affect the attractiveness of our technologies, services, or products and could adversely affect our financial results.

Potential changes

Changes in applicable U.S. and international tax law.

Tax proposalslaws or regulations and the resolution of tax disputes could negatively affect our financial results.

We are subject to reform corporate tax law are constantly being considered. Proposals includeincome taxes, as well as non-income-based taxes, in both increasing and reducing the corporate statutory tax rate, broadening the corporate tax base through the elimination or reduction of deductions, exclusions, and credits, implementing a territorial regime of taxation, limiting the ability of U.S. corporations to deduct interest expense associated with offshore earnings, modifying the foreign tax credit rules, and reducing the ability to defer U.S. tax on offshore earnings. These or other changes in the U.S. and various foreign jurisdictions in which we do business. Significant judgment is required in determining our worldwide provision for income taxes and other tax liabilities. Changes in tax laws could increaseor tax rulings may have a significant adverse impact on our effective tax rate. For example, the U.S. and many countries where we do business are actively considering or have recently enacted changes in relevant tax, accounting, and other laws, regulations, and interpretations. Recently, the Biden Administration committed to increasing the corporate income tax rate, which would affectand to increasing the tax rate applied to profits earned outside the U.S. If enacted, the impact of these potential new rules could be material to our profitability.

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tax provision and the value of our deferred tax assets and liabilities.

Further, in the ordinary course of a global business, there are many intercompany transactions and calculations where the ultimate tax determination could change if tax laws or tax rulings were to be modified. We are also subject to non-income-based taxes, such as payroll, sales, use, value-added, net-worth, property, and goods-and-services taxes, in both the U.S. and various foreign jurisdictions. Although we believe that our income and non-income-based tax estimates are appropriate, there is no assurance that the final determination of tax audits or tax disputes will not be different from what is reflected in our historical income tax provisions and accruals.

Given the unpredictability of possible further changes to the U.S. or foreign tax laws and regulations and their potential interdependency, it is very difficult to predict the cumulative effect of such tax laws and regulations on our results of operations and cash flow, but such laws and regulations (and changes thereto) could adversely impact our financial results.
Contract research services create a risk of liability.

As a CRO, we face a range of potential liabilities which may include:

·Errors or omissions in reporting of study detail in preclinical studies that may lead to inaccurate reports, which may undermine the usefulness of a study or data from the study, or which may potentially advance studies absent the necessary support or inhibit studies from proceeding to the next level of testing; and
·Risks associated with our possible failure to properly care for our clients' property, such as research models, records, work in progress, or other archived materials.

•Errors or omissions in reporting of study detail in preclinical studies that may lead to inaccurate reports, which may undermine the usefulness of a study or data from the study, or which may potentially advance studies absent the necessary support or inhibit studies from proceeding to the next level of testing
•Risks associated with our possible failure to properly care for our clients’ property, such as data, research models, records, work in progress, or other archived materials
Contractual risk transfer indemnifications generally do not protect us against liability arising from certain of our own actions, such as negligence or misconduct. We could be materially and adversely affected if we are required to pay damages or bear the costs of defending any claim that is outside any contractual indemnification provision, or if a party does not fulfill its indemnification obligations, or the damage is beyond the scope or level of insurance coverage. We also often contractually indemnify our clients (subject to a limitation of liability), similar to the way they indemnify us, and we may be materially adversely affected if we have to fulfill our indemnity obligations. Furthermore, there can be no assurance that we nor a party required to indemnify us will be able to maintain such insurance coverage (either at all or on terms acceptable to us).

Upgrading our software could result in implementation issues and business disruptions.

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We update our software on a regular basis and are continually in the process of refactoring our software programs. In doing so, we face the possibility that existing users will find the software unacceptable, or new users may not be as interested as they have been in the past versions. Translation errors might introduce new software bugs that will not be caught.

The drug discovery and development industry has a history of patent and other intellectual property litigation, and we might be involvedinvolvement in costly intellectual property lawsuits.

lawsuits is often very costly.

The drug discovery and development industry has a history of patent and other intellectual property litigation and these lawsuits will likely continue. Accordingly, we face potential patent infringement suits by companies that have patents for similar products and methods used in business or other suits alleging infringement of their intellectual property rights. Legal proceedings relating to intellectual property could be expensive, take significant time, and divert management'smanagement’s attention from other business concerns, whether we win or lose. If we do not prevail in an infringement lawsuit brought against us, we might have to pay substantial damages, including treble damages, and we could be required to stop the infringing activity or obtain a license to use technology on unfavorable terms.

We may not be able to successfully develop and market new services and products.

We may seek to develop and market new services and products that complement or expand our existing business or service offerings. We cannot guarantee that we will be able to identify new technologies of interest to our customers. Even if we are able to identify new technologies of interest, we may not be able to negotiate license agreements on acceptable terms, or at all. If we are unable to develop new services and products and/or create demand for those newly developed services and products, our future business, results of operations, financial condition, and cash flows could be adversely affected.

Ability to incur debt could adversely affect our business and growth prospects.

On March 31, 2020 we established a line of credit with a bank in the amount of $3,500,000 and, to date, we have not accessed the line. Prior to the establishment of the line we have not had any borrowed debt and have no need to do so to fund normal operations in the foreseeable future. Should circumstances require us to incur additional debt and a lender could not be found to provide that debt, this could have a significant adverse effect on our business, including making it more difficult for us to obtain financing on favorable terms, limiting our ability to capitalize on significant business opportunities, and making us more vulnerable to rising interest rates.

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We depend on key personnel and may not be able to retain these employees or recruit additional qualified personnel, which could harm our business.

Our success depends to a significant extent on the continued services of our senior management and other members of management. We have employment agreements with our CEO, CFO, and division presidentscertain of our other members of our leadership team that range from one to three years. If our CEO, ourCFO, division presidents, or other members of senior management do not continue in their present positions, our business may suffer. Because of the specialized scientific nature of our business, we are highly dependent upon attracting and retaining qualified scientific and technical and managerial personnel. While we have a strong record of employee retention, there is still significant competition for qualified personnel in the software, pharmaceutical, and biotechnology fields. Therefore, we may not be able to attract and retain the qualified personnel necessary for the development of our business. The loss of the services of existing personnel, as well as the failure to recruit additional key scientific, technical, and managerial personnel in a timely manner, could harm our business.

If we are not successful in selecting and integrating the businesses and technologies we acquire, or in managing our current and future divestitures, our business may suffer.


Over the years, we have expanded our business through acquisitions.acquisitions, including our most recent acquisition of Immunetrics. We continue to search to acquire businesses and technologies and form strategic alliances. However, businesses and technologies may not be available on terms and conditions we find acceptable. We risk spending time and money investigating and negotiating with potential acquisition or alliance partners, but not completing transactions. Even if completed, acquisitions and alliances, including our most recent acquisition of Immunetrics, involve numerous risks which may include: difficulties in achieving business and continuing financial success; difficulties and expenses incurred in assimilating and integrating operations, services, products, technologies, or pre-existing relationships with our customers, distributors, and suppliers; challenges with developing and operating new businesses, including those which are materially different from our existing businesses and which may require the development or acquisition of new internal capabilities and expertise; challenges of maintaining staffing at the acquired entities, including loss of key employees; potential losses resulting from undiscovered liabilities of acquired companies that are not covered by the indemnification we may obtain from the seller(s); the presence or absence of adequate internal controls and/or significant fraud in the financial systems of acquired companies; diversion of management'smanagement’s attention from other business concerns; acquisitions could bethat become dilutive to earnings, or in the event of acquisitions made through the issuance of our common stock to the shareholders of the acquired company, dilutive to the percentage of ownership of our existing shareholders; new technologies and products may be developed by others which cause businesses or assets we acquire to become less valuable; and risks that disagreements or disputes with prior owners of an acquired business, technology, service, or product may result in litigation expenses and distributiondilution of our management'smanagement’s attention. In the event that an acquired business or technology or an alliance does not meet our expectations, our results of operations may be adversely affected.

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Some of the same risks exist when we decide to sell a business, site, or product line. In addition, divestitures could involve additional risks, including, without limitation, the following: difficulties in the separation of operations, services, products, and personnel;personnel, and the need to agree to retain or assume certain current or future liabilities in order to complete the divestiture. We evaluate the performance and strategic fit of our businesses. These and any divestitures may result in significant write-offs, including those related to goodwill and other intangible assets, which could have an adverse effect on our results of operations and financial condition. In addition, we may encounter difficulty in finding buyers or alternative exit strategies at acceptable prices and terms and in a timely manner. We may not be successful in managing these or any other significant risks that we encounter in divesting a business, site, or product line, and as a result, we may not achieve some or all of the expected benefits of the divestitures.

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Our quarterly and annual operating results fluctuate and may continue to fluctuate in the future, and if we fail to meet the expectations of analysts or investors, our stock price and the value of your investment could decline substantially.

We believe that operating results for any particular quarter are not necessarily a meaningful indication of future results. Nonetheless, fluctuations in our quarterly operating results could negatively affect the market price of our common stock. Our results of operations in any quarter or annual period have varied in the past and may vary from quarter to quarter or year to year andyear. Our results of operations are influenced by suchvarious factors, as:

·changes in the general global economy;
·the number and scope of ongoing client engagements; the commencement, postponement, delay, progress, completion, or cancellation of client contracts in the quarter;
·changes in customer budget cycles;
·the number and scope of ongoing client engagements;
·the commencement, postponement, delay, progress, completion, or cancellation of client contracts in the quarter;
·changes in the mix of our products and services;
·competitive pricing pressures;
·the extent of cost overruns;
·buying patterns of our clients;
·budget cycles of our clients;
·the effect of potential acquisitions and consequent integration;
·the timing of new product releases by us or our competitors;
·general economic factors, including factors relating to disruptions in the world credit and equity markets and the related impact on our customers’ access to capital;
·changes in tax laws, rules, regulations, and tax rates in the locations in which we operate;
·the timing and charges associated with completed acquisitions and other events;
·the financial performance of our investments; and
·exchange rate fluctuations.

many of which are out of our control, including without limitation:

•changes in the general global economy
•the number and scope of ongoing client engagements; the commencement, postponement, delay, progress, completion, or cancellation of client contracts in the quarter
•changes in customer budget cycles
•the number and scope of ongoing client engagements
•the commencement, postponement, delay, progress, completion, or cancellation of client contracts in the quarter
•changes in the mix of our products and services
•competitive pricing pressures
•the extent of cost overruns
•buying patterns of our clients
•budget cycles of our clients
•the effect of potential acquisitions and consequent integration
•the timing of new product releases by us or our competitors
•general economic factors, including factors relating to disruptions in the world credit and equity markets and the related impact on our customers’ access to capital
•changes in tax laws, rules, regulations, and tax rates in the locations in which we operate
•the timing and charges associated with completed acquisitions and other events, including our most recent acquisition of Immunetrics
•the financial performance of our investments
•exchange rate fluctuations
We derive a significant percentage of our revenues from a concentrated group of customers and the loss of more than one of our major customers could materially and adversely affect our business, results of operations or financial condition.

Three customers accounted for 9%6%, 7%4%, and 7% (a dealer account in Japan representing various customers)3%, respectively, of net salesrevenue for fiscal year 2020.2023. Three customers accounted for 8%5%, 8%3%, and 7% (a dealer account in Japan representing various customers)3%, respectively, of net salesrevenues for fiscal year 2019. Four2022. Three customers accounted for 9% (a dealer account in Japan representing various customers)11%, 7%4% and 3%, 6% and 5%respectively, of net salesrevenues for fiscal year 2018.2021. The loss of any of our major customers could have a material adverse effect on our results of operations and financial condition. We may not be able to maintain our customer relationships, and our customers may delay payment under, or fail to renew, their agreements with us, which could adversely affect our business, results of operations, or financial condition. Any reduction in the amount of revenues that we derive from these customers, without an offsetting increase in new salesrevenues to other customers, could have a material adverse effect on our operating results. A significant change in the liquidity or financial position of our customers could also have a material adverse effect on the collectability of our accounts receivable, our liquidity, and our future operating results.

We conduct business outside the US,U.S., which exposes us to foreign currency exchange rate risk, amongst other risk, and could have a negative impact on our financial results.

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We operate on a global basis. In the three years ended August 31, 2020, 20192023, 2022, and 2018,2021, we had salesrevenues of $4,961,000, $4,148,000,$7.3 million, $6.7 million, and $3,574,000,$4.8 million, respectively, denominated in foreign currency in certain Asian and European markets. In 2020 we expanded our operations in Europe with the addition of Lixoft in Paris, France.

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As we continue to increase our international operations, our salesrevenues and expenditures in foreign currencies are expected to become more material and subject to greater foreign currency exchange rateexchange-rate fluctuations. Also, our foreign distributors typically sell our products in local currency, which impacts the price to foreign consumers. One of our subsidiaries operates with their localAdditionally, Lixoft's functional currency as their functional currency.is the Euro. Future foreign currency exchange rate fluctuations and global credit markets may cause changes in the USU.S. dollar value of our purchases or sales and materially affect our sales,revenues, profit margins, and results of operations, when converted to USU.S. dollars. Changes in the value of the USU.S. dollar relative to other currencies could result in material foreign currency exchange rateexchange-rate fluctuations and, as a result, our net earnings could be materially adversely affected.

As we continue to expand international operations and increase purchases and sales in foreign currencies, we may utilize derivative instruments, as needed, to hedge our foreign currency exchange rateexchange-rate risk. Our hedging strategies will depend on our forecasts of sales,revenues, expenses, and cash flows, which are inherently subject to inaccuracies. Foreign currency exchange rateexchange-rate hedges, transactions, re-measurements, or translations could materially impact our consolidated financial statements.

A significant portion of our operating expenses is relatively fixed and planned expenditures are based in part on expectations regarding future revenues.

Accordingly, unexpected revenue shortfalls may decrease our gross margins and could cause significant changes in our operating results from year to year. As a result, in future quarters, our operating results could fall below the expectations of securities analysts or investors, in which event our stock price would likely decrease.

If our customers cancel their contracts or terminate or delay their clinical trials, we may lose or delay revenues and our business may be harmed.

adversely impacted.

Certain of our customer contracts are subject to cancellation by our customers at any time with limited notice. Customers engaged in clinical trials may terminate or delay a clinical trial for various reasons, including the failure of the tested product to satisfy safety or efficacy requirements, unexpected or undesired clinical results, decisions to deemphasizede-emphasize a particular product or forgo a particular clinical trial, decisions to downsize clinical development programs, insufficient patient enrollment or investigator recruitment, and production problems resulting in shortages of required clinical supplies. Any termination or delay in the clinical trials would likely result in a consequential delay or termination in those customers’ service contracts. We have experienced terminations and delays of our customer service contracts in the past (although no such past terminations have had a significant impact on our results of operations), and we expect to experience additional terminations and delays in the future. The termination of single-study arrangements could result in decreased revenues and the delay of our customers’ clinical trials could result in delayed professional services revenues, which could materially harmadversely impact our business.

If our security is breached, our business could be disrupted, our operating results could be harmed, and customers could be deterred from using our products and services.

Our business relies on the secure electronic transmission, storage, and hosting of sensitive information, including clinical data, financial information, and other sensitive information relating to our customers, company, and workforce. As a result, we face some risk of a deliberate or unintentional incident involving unauthorized access to our computer systems (including, among other methods, cyber- attackscyberattacks or social engineering) that could result in misappropriation or loss of assets or sensitive information, data corruption, or other disruption of business operations. In light of this risk, we have devoted significant resources to protecting and maintaining the confidentiality of our information, including implementing security and privacy programs and controls, training our workforce, and implementing new technology. We have no guarantee that these programs and controls will be adequate to prevent all possible security threats. We believe that any compromise of our electronic systems, including the unauthorized access, use, or disclosure of sensitive information, or a significant disruption of our computing assets and networks, would adversely affect our reputation and our ability to fulfill contractual obligations, and would require us to devote significant financial and other resources to mitigate such problems, and could increase our future cyber securitycybersecurity costs. Moreover, unauthorized access, use, or disclosure of such sensitive information could result in contractual or other liability. In addition, any real or perceived compromise of our security or disclosure of sensitive information may result in lost revenues by deterring customers from using or purchasing our products and services in the future or prompting them to use competing service providers.

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Changes in and/or failure to comply with other laws, regulations, and interpretations of such laws and regulations specific to the businesses and jurisdictions in which we operate could materially adversely affect our reputation, market position, or our business and financial performance.

The collection, use, disclosure, storage, disposal, protection and other processing of information about individuals, in particular healthcare data and sensitive personal information, is highly regulated in the United States, EU, and other jurisdictions, including but not limited to, under the U.S. Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”) and other U.S. privacy, security and breach notification and healthcare information laws; the European Union’s General Data Protection Directive (“GDPR” and its national implementing laws); United Kingdom’s data privacy laws (The Data Protection Act 2018 (“UK GDPR”)), data privacy laws in other countries around the world (e.g., China’s Personal Information Protection Law (“PIPL”)), as well as data privacy laws in individual states in the U.S. (e.g., the California Consumer Privacy and Protection Act (“CCPA”) and the California Privacy Rights Act (“CPRA”)). Although we require our customers who send their clinical data to us for analyses to provide it in de-identified form within the meaning of HIPAA, in certain parts of our business, such as in conjunction with certain services we offer customers, we may process personal information relating to persons who have been, are, and may in the future be involved in clinical trials. The collection, retention, use, disclosure, and other processing of such personal information is governed, by the applicable data privacy and cybersecurity laws.

While we do not consider our service offerings to generally cause us to be considered a covered entity under HIPAA., HIPAA does require the use of standard contract language in contracts with our customers who are covered entities under HIPAA which define our obligations to safeguard the protected health information of patients if provided by our covered-entity customers. We have adopted policies, practices, procedures, and training to safeguard the receipt, maintenance, processing, retention and transmission of such personal information.

In addition to the laws specifically passed to regulate the processing of personal information, the Federal Trade Commission (the “FTC”) and many state attorneys may generally interpret federal, state and local consumer protection laws to impose evolving standards for the handling and security of personal information. Thus, such consumer protection laws may require us to publicly disclose how we process personal information about individual consumers and choices such individuals may have about the way we handle their personal information. The interpretation and application of the consumer protection laws to personal information are still evolving and remain uncertain.

As noted above, certain states have also adopted personal data privacy laws. For example, the CCPA and CPRA impose obligations and restrictions on businesses regarding their collection, use, and sharing of personal information of, as well as defining certain data privacy rights to, California residents. Such data privacy rights include the right to access or have deleted their personal information that is processed by businesses and the right to opt out of certain sharing or processing of their personal information. Most state data privacy laws also impose monetary penalties for violations of the respective law. The interpretation and application of the new state data privacy laws are still evolving, which provides some uncertainty.

The GDPR and the UK GDPR also impose numerous requirements on companies that process personal data of residents from those respective jurisdictions, including requirements relating to processing health and other sensitive personal data, cross-border transfers, notice and consent, and contractual obligations with vendors and service providers who process personal data on behalf of a business. Both the GDPR and UK GDPR also provide individuals who are residents with certain data privacy rights with respect to an individual’s personal data processed by a business such as, for example, the right of access, the right to rectification, the right to erasure, the right to restrict processing, and the right to data portability. The GDPR permits data protection authorities to impose significant penalties for violations of the GDPR including potential fines of up to €20 million or 4% of annual global revenues, whichever is greater. The UK GDPR provides for similar penalties for violations of the UK GDPR. The interpretation and application of these laws by the judicial systems are still evolving.

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Legal developments in Europe have created complexity and uncertainty regarding transfers of personal data from the EU to the United States. Recently, the EU and the U.S. agreed to a new Data Privacy Framework which will allow businesses to transfer data from the EU to the US in a secure and compliant way. We also currently rely on the standard contractual clauses with our customers to transfer personal data outside the EU to the U.S., among other data transfer mechanisms pursuant to the GDPR or the UK GDPR. While the standard contractual clauses and the new Data Privacy Framework have been determined to be adequate personal data transfer mechanism for transfer of personal information from the EU to the U.S. by some regulatory authorities, there remains the possibility that challenges will be raised to the sufficiency of such transfer mechanisms which has created uncertainty.

In view of the trend for enactment of data privacy laws globally, we have implemented a comprehensive data privacy management program that includes physical, technological, and operational safeguards (such as policies, notices, processes, contractual provisions, and employee trainings) to help ensure that we process personal information about our employees and personal information received from our customers in a compliant manner. We have also appointed VeraSafe, a global leader in privacy law and data protection, as our Data Protection Officer. As data protection laws expand in number and scope with relevance to the kinds of personal information we process, we may need to modify our data privacy program and practices, and incur additional expenses, to accommodate such expansion and adjustments.
Any failure by us to properly protect customer data we possess or are deemed to possess, in connection with the conduct of clinical trials, could subject us to significant liability.

Our customers use our solutions to collect, manage, and report information in connection with the conduct of clinical trials. This information may be considered our customers’ proprietary information. Since we receive and process our customers’ data from customers utilizing our hosted solutions, there is a risk that we could be liable if there were a breach of any obligation to a protected person under contract, standard of practice, or regulatory requirement. If we fail to properly protect our customers’ data that is in our possession or deemed to be in our possession, we could be subjected to significant liability and our reputation would be harmed.

We rely upon a single internal hosting facility and Amazon Web Services to deliver ourcertain solutions to our customers and any disruption of or interference with our hosting systems, operations, or use of the Amazon Web Services could harm our business and results of operations.

Substantially all of the computer hardware necessary to deliverprovide Cognigen solutions to our CRO and KIWI solutionscustomers is located at our internal hosting facility in Buffalo, New York. In addition to our dedicated hosting facility, we utilize third-party cloud computing services from Amazon Web Services ("AWS") to help us efficiently scale our cloud-based solutions and provide training. Because we cannot easily switch our AWS-serviced operations to another cloud provider, any disruption of or interference with our use of AWS would impact our operations, and our business would be adversely impacted. Our systems and operations or those of AWS could suffer damage or interruption from human error, fire, flood, power loss, telecommunications failure, break-ins, terrorist attacks, acts of war, and similar events. The occurrence of a natural disaster, an act of terrorism or other unanticipated problems at our or AWS'AWS’ hosting facilities could result in lengthy interruptions in our service. Although we and AWS maintain backup facilities and disaster recovery services in the event of a system failure, these may be insufficient or fail. Any system failure, including network, software, or hardware failure, thatwhich causes an interruption in our Buffalo data center or our use of AWS,or that causes a decrease in responsiveness of our cloud-based solutions, could damage our reputation and cause us to lose customers, which could harm our business and results of operations. Our business may be harmed if our customers and potential customers believe our service is unreliable.

Defects or errors in our software applications could harm our reputation, result in significant cost to us and impair our ability to market our solutions.

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Our software applications are inherently complex and may contain defects or errors, some of which may be material. Errors may result from our own technology or from the interface of our cloud-based solutions with legacy systems and data which we did not develop. The risk of errors is particularly significant when a new product is first introduced or when new versions or enhancements of existing products are released. The likelihood of errors is increased when we do more frequent releases of new products and enhancements of existing products. We have, from time to time, found defects in our solutions. Although these past defects have not resulted in any litigation against us to date, we have invested significant capital, technical, managerial, and other resources to investigate and correct these past defects and we have needed to divert these resources from other development efforts. In addition, material performance problems or defects in our solutions may arise in the future. Material defects in our cloud-based solutions could result in a reduction in sales,revenues, delay in market acceptance of our solutions, or credits or refunds to our customers. In addition, such defects may lead to the loss of existing customers and difficulty in attracting new customers, diversion of development resources, or harm to our reputation. Correction of defects or errors could prove to be impossible or impractical. The costs incurred in correcting any defects or errors or in responding to resulting claims or liability may be substantial and could adversely affect our operating results.

If we are not able to reliably meet our data storage and management requirements, or if we experience any failure or interruption in the delivery of our services over the Internet, customer satisfaction and our reputation could be harmed, and customer contracts may be terminated.

As part of our current business model, we deliver our software over the Internet and store and manage hundreds of terabytes of data for our customers, resulting in substantial information technology infrastructure and ongoing technological challenges, which we expect to continue to increase over time. If we do not reliably meet these data storage and management requirements, or if we experience any failure or interruption in the delivery of our services over the Internet, customer satisfaction and our reputation could be harmed, leading to reduced revenues and increased expenses. Our hosting services are subject to service-level agreements and, in the event that we fail to meet guaranteed service or performance levels, we could be subject to customer credits or termination of these customer contracts. If the cost of meeting these data storage and management requirements increases, our results of operations could be harmed.

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Some of our software solutions and services utilize open sourceopen-source software, and any failure to comply with the terms of one or more of these open sourceopen-source licenses could adversely affect our business.

Some of our software solutions utilize software covered by open-source licenses. Open-source software is typically freely accessible, usable and modifiable, and is used by our development team in an effort to reduce development costs andto speed up the development process. Certain open-source software licenses require a user who intends to distribute the open-source software as a component of the user'suser’s software to disclose publicly part or all of the source code to the user'suser’s software. In addition, certain open-source software licenses require the user of such software to make any derivative works of the open-source code available to others on unfavorable terms or at no cost. This can subject previously proprietary software to open-source license terms. While we monitor the use of all open-source software in our products, processes, and technology and try to ensure that no open-source software is used in such a way as to require us to disclose or make available the source code to the related product or solution, such use could inadvertently occur. This could harm our intellectual property position and have a material adverse effect on our business.

We may be unable to adequately enforce or defend our ownership and use of our intellectual property and other proprietary rights.

Our success is heavily dependent upon our intellectual property and other proprietary rights. We rely upon a combination of trademark, trade secret, copyright, patent, and unfair competition laws, as well as license and access agreements and other contractual provisions, to protect our intellectual property and other proprietary rights. In addition, we attempt to protect our intellectual property and proprietary information by requiring certain of our employees and consultants to enter into confidentiality, noncompetition, and assignment-of-inventions agreements. The steps we take to protect theseour intellectual property rights may not be adequate to prevent misappropriation of our technology by third parties or may not be adequate under the laws of some foreign countries, which may not protect our intellectual property rights to the same extent as do the laws of the United States.
The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States. Many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions. This could make it difficult for us to stop infringement or the misappropriation of our intellectual property rights.
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Our attempts to protect our intellectual property may be challenged by others or invalidated through administrative process or litigation, and agreement terms that address noncompetition are difficult to enforce in many jurisdictions and may not be enforceable in any particular case. In addition, there remains the possibility that others will “reverse engineer” our products in order to introduce competing products, or that others will develop competing technology independently. If we resort to legal proceedings to enforce our intellectual property rights or to determine the validity and scope of the intellectual property or other proprietary rights of others, the proceedings could be burdensome and expensive, even if we were to prevail. The failure to adequately protect our intellectual property and other proprietary rights may have a material adverse effect on our business, results of operations, or financial condition.

Current and future litigation against us, which may arise in the ordinary course of our business, could be costly and time-consuming to defend.

We are subject to claims that arise in the ordinary course of business, such as claims brought by our customers in connection with commercial disputes and employment claims made by our current or former employees. Third parties may in the future assert intellectual property rights to technologies that are important to our business and demand back royalties or demand that we license their technology. Litigation may result in substantial costs and may divert management’s attention and resources, which may seriously harm our business, overall financial condition, and operating results. Insurance may not cover such claims, may not be sufficient for one or more such claims, and may not continue to be available on terms acceptable to us. A claim brought against us that is uninsured or underinsured could result in unanticipated costs, negatively affecting our business, results of operations, and financial condition.

We could incur substantial costs resulting from product liability claims relating to our products or services or our customers’ use of our products or services.

Any failure or errors in a customer’s clinical trial caused or allegedly caused by our products or services could result in a claim for substantial damages against us by our customers or the clinical trial participants, regardless of our responsibility for the failure. Although we are generally entitled to indemnification under our customer contracts against claims brought against us by third parties arising out of our customers’ use of our products, we might find ourselves entangled in lawsuits against us that, even if unsuccessful, may divert our resources and energy and adversely affect our business. Further, in the event we seek indemnification from a customer, a court may not enforce our indemnification right if the customer challenges it or the customer may not be able to fund any amounts for indemnification owed to us. In addition, our existing insurance coverage may not continue to be available on reasonable terms or may not be available in amounts sufficient to cover one or more large claims, or the insurer may disclaim coverage as to any future claim.

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Our business depends on the clinical trial market, and a downturn in this market could cause our revenues to decrease.

Our

Some of our business depends on clinical trials conducted or sponsored by pharmaceutical, biotechnology, and medical device companies, CROs, and other entities. Our revenues may decline as a result of conditions affecting these industries, including general economic downturns, increased consolidation, decreased competition, or fewer products under development. Other developments that may affect these industries and harm our operating results include product liability claims, changes in government regulation, changes in governmental price controls or third-party reimbursement practices, and changes in medical practices. Disruptions in the world credit and equity markets may also result in a global downturn in spending on research and development and clinical trials and may impact our customers’ access to capital and their ability to pay for our solutions. Any decrease in research and development expenditures or in the size, scope, or frequency of clinical trials could materially adversely affect our business, results of operations, or financial condition.

As a public company, we are obligated to maintain proper and effective internal control over financial reporting. As our business expands both organically and through acquisitions, we may be unable to effectively adapt our current systems to our changing business needs and may fail to develop and maintain an effective system of disclosure controls and internal control over financial reporting which could impair our ability to produce timely and accurate financial statements or comply with applicable laws and regulations.

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As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), and other applicable securities rules and regulations. Compliance with these rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time consuming, time-consuming, and/or costly, and increase demand on our systems and resources. The Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business and operating results. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. As a company, we continually review and evaluate the adequacy of our disclosure controls and procedures and internal controls over financial reporting for deficiencies and improvements.

As we expand our operations through acquisitions and organic growth, our current systems for disclosure controls and procedures and internal control over financial reporting may be inadequate to meet our growing and changing business. Accordingly, we may require significant resources and management oversight to maintain and, if necessary, improve our disclosure controls and procedures and internal control over financial reporting. As a result, management’s attention may be diverted from other business concerns, which could adversely affect our business and operating results. In addition, we may need to hire more employees in the future or engage outside consultants with respect to developing and maintaining our disclosure controls and internal control over financial reporting, which would increase our costs and expenses.

In addition, as a public company, we are required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting. Effective internal control over financial reporting is necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, areis designed to prevent fraud. As a result of the growth of our business both organically and through acquisitions, we may fail to implement required new or improved controls, or experience difficulties in their implementation, which may cause us to not meet our reporting obligations. If we or our independent registered public accounting firm were to identify a material weakness, and/or if we are unable to assert that our internal control over financial reporting is effective, we could lose investor confidence in the accuracy and completeness of our financial reports, which could cause the price of our common stock to decline, and we may be subject to investigation by the SEC.

As a public company, we may incur significant administrative workload and expenses in connection with new and changing compliance requirements.

As a public company with common stock listed on The Nasdaq CapitalGlobal Select Market, we must comply with various laws, regulations, and requirements. New laws and regulations, as well as changes to existing laws and regulations affecting public companies, including the provisions of the Sarbanes-Oxley Act, the Dodd-Frank Act, and rules adopted by the SEC and by Thethe Nasdaq CapitalGlobal Select Market, may result in increased general and administrative expenses and a diversion of management'smanagement’s time and attention as we respond to new requirements.

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Cash expenditures associated with the acquisition of Immunetrics may create certain liquidity and cash flow risks for us.


We incurred significant transaction costs and integration costs in connection with our acquisition of Immunetrics on June 16, 2023. While we expected that the transactions costs would be incurred, there are many factors beyond our control that could affect the total amount of the integration expenses associated with the acquisition. Moreover, many of the expenses that will be incurred are, by their nature, difficult to estimate accurately. In addition to integration-related expenses that we will incur, pursuant to the Merger Agreement we agreed to pay the equity holders of Immunetrics up to $1.8 million that was held back at closing and an aggregate of $8.0 million in earnout payments if Immunetrics achieves specified financial goals through December 31, 2024. To the extent the integration expenses are higher than anticipated, we may experience liquidity or cash flow issues.
The Immunetrics business we acquired may not perform as we or the market expects, which could have an adverse effect on the price of our common stock.
The Immunetrics business, which was merged into the Company through a short form merger in September 2023, may not perform as we or the market expects. Risks associated with the Immunetrics acquisition include, without limitation:
•integrating businesses is a difficult, expensive, and time-consuming process, and the failure to successfully integrate our businesses with the business of Immunetrics in the expected time frame could adversely affect our financial condition and results of operation
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•the addition of Immunetrics has increased the size of our operations, and, if we are not able to manage our expanded operations effectively, our common stock price may be adversely affected
•the extent to which we may realize the expected synergies and cost savings is uncertain at this time
•the success of the Immunetrics acquisition will also depend upon relationships with third parties and Immunetrics’ and our pre-existing customers, which relationships may be affected by customer preferences or public attitudes about the Immunetrics acquisition. Any adverse changes in these relationships could adversely affect our business, financial condition, and results of operations.
The obligations and liabilities of Immunetrics, some of which may be unanticipated or unknown, may be greater than we have anticipated, which may diminish the value of Immunetrics to us.
Immunetrics’ obligations and liabilities, some of which may not have been fully disclosed to us, may be greater than we have anticipated. The obligations and liabilities of Immunetrics could have a material adverse effect on our business or Immunetrics’ value to us or on our business, financial condition, or results of operations. Although we have held back $1.8 million of the merger consideration to cover any negative net working capital adjustments (if any) and Immunetrics’ indemnification obligations under the Merger Agreement, such holdback amount may not be sufficient to cover all claims brought against us or Immunetrics in the future in relation to Immunetrics’ business or operations. In the event that we are responsible for liabilities substantially in excess of the $1.8 million holdback amount and/or any other amounts recovered through rights to indemnification or alternative remedies that might be available to us, or any applicable insurance, we could suffer consequences that would substantially reduce our earnings and cash flows or otherwise materially and adversely affect our business, financial condition, or results of operations.

Certain Risks Related to Ownership of Our Common Stock

We have been paying quarterly dividends on shares of our common stock, and although there has been a consistent track record of paying these dividends, theour Board of Directors may suspend the dividend, and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.

Should theour Board of Directors suspend the dividend and decide to use those funds to invest more into theour business, you may not receive any dividends on your investment in our common stock for the foreseeable future and the success of an investment in shares of our common stock will depend upon any future appreciation in its value. Shares of our common stock may depreciate in value or may not appreciate in value.

If our operating and financial performance in any given period does not meet any guidance that we provide to the public, the market price of our common stock may decline.
We may, but are not obligated to, provide public guidance on our expected operating and financial results for future periods. Any such guidance will be comprised of forward-looking statements subject to the risks and uncertainties described in this prospectus and in our other public filings and public statements. Our actual results may not always be in line with or exceed any guidance we have provided, especially in times of economic uncertainty. If, in the future, our operating or financial results for a particular period do not meet any guidance we provide or the expectations of investment analysts, or if we reduce our guidance for future periods, the market price of our common stock may decline. Even if we do issue public guidance, there can be no assurance that we will continue to do so in the future.
The price of our common stock may fluctuate significantly, and investors could lose all or part of their investments.

Shares of our common stock were sold in our initial public offering ("IPO"(“IPO”) in 1996 at a price of $1.25 per share (on a post-split basis), and our common stock has subsequently traded as high as $73.58$90.92 and as low as $0.38 from our IPO through August 31, 2020.2023. However, an active, liquid, and orderly market for our common stock on Thethe Nasdaq CapitalGlobal Select Market or otherwise may not be sustained, which could depress the trading price of our common stock. The trading price of our common stock may be subject to wide fluctuations in response to various factors, some of which are beyond our control, including:

·our quarterly or annual earnings or those of other companies in our industry;
·announcements by us or our competitors of significant contracts or acquisitions;
·changes in accounting standards, policies, guidance, interpretations, or principles;
·general economic and stock market conditions, including disruptions in the world credit and equity markets;
·the failure of securities analysts to cover our common stock or changes in financial estimates by analysts;
·future sales of our common stock; and
·the other factors described in these “Risk Factors.”

including without limitation:

•our quarterly or annual earnings or those of other companies in our industry
•announcements by us or our competitors of significant contracts or acquisitions
•changes in accounting standards, policies, guidance, interpretations, or principles
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•general economic and stock market conditions, including disruptions in the world credit and equity markets
•the failure of securities analysts to cover our common stock or changes in financial estimates by analysts
•future sales of our common stock
•the other factors described in these “Risk Factors”
In recent years, the stock market in general, and the market for technology-related companies in particular, has experienced wide price and volume fluctuations. This volatility has had a significant impact on the market price of securities issued by many companies, including companies in our industry. The price of our common stock could fluctuate based upon factors that have little to do with our performance, and these fluctuations could materially reduce our stock price.

In the past, some companies, including companies in our industry, have had volatile market prices for their securities and have had securities class action suits filed against them. The filing of a lawsuit against us, regardless of the outcome, could have a material adverse effect on our business, financial condition, and results of operations, as it could result in substantial legal costs and a diversion of our management’s attention and resources.

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The price of our common stock may be volatile, and our stockholders may not be able to resell shares of our common stock at or above the price they paid.

The trading price of our common stock is volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. Factors that could cause volatility in the market price of our common stock include, but are not limited to:

·achievement of expected software product and consulting service sales and profitability, including the effects of seasonality on our results of operations, as well as adjustments to our sales forecasts;

·the ongoing COVID-19 pandemic, see “—Certain Risks Related to our Business—Our business is subject to risks arising from epidemic diseases, such as the recent outbreak of the COVID-19 illness.”

·announcements of new products by us or our competitors;

·announcements or developments in any intellectual property infringement actions in which we may become involved;

·our operating results;

·results from, or any delays in, clinical trial programs of our clients and their need for our services;

·changes or developments in laws or regulations applicable to our products;
·

consolidation within the pharmaceutical and biotechnology industries leading to fewer potential customers for our products and services;

·delays in the release of new or enhanced products or services or undetected errors in our products or services may result in increased cost to us, delayed market acceptance of our products, and delayed or lost revenue;
·adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain, or sales and marketing activities;

·the success of our efforts to acquire or develop additional products;

·announcements concerning our competitors or the pharmaceutical industry in general;

·actual or anticipated fluctuations in our operating results;

·FDA or other U.S. or foreign regulatory actions affecting us or our industry or other healthcare reform measures in the United States;

·changes in financial estimates or recommendations by securities analysts;

·trading volume of our common stock;

·sales of our common stock by us, our executive officers and directors, or our stockholders in the future;

·general economic and market conditions and overall fluctuations in the United States equity markets, including as a result of volatility related to the recent coronavirus outbreak and related health concerns; and

·the loss of any of our key scientific or management personnel.

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•achievement of expected software product and consulting service revenues and profitability, including the effects of seasonality on our results of operations, as well as adjustments to our revenues forecasts

•announcements of new products by us or our competitors
•announcements or developments in any intellectual property infringement actions in which we may become involved
•our operating results
•results from, or any delays in, clinical trial programs of our clients and their need for our services
•changes or developments in laws or regulations applicable to our products
•consolidation within the pharmaceutical and biotechnology industries leading to fewer potential customers for our products and services
•delays in the release of new or enhanced products or services or undetected errors in our products or services may result in increased cost to us, delayed market acceptance of our products, and delayed or lost revenue
•adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain, or sales and marketing activities
•the success of our efforts to acquire or develop additional products
•announcements concerning our competitors or the pharmaceutical industry in general
•actual or anticipated fluctuations in our operating results
•FDA or other U.S. or foreign regulatory actions affecting us or our industry or other healthcare reform measures in the United States
•changes in financial estimates or recommendations by securities analysts
•trading volume of our common stock
•sales of our common stock by us, our executive officers and directors, or our stockholders in the future
•general economic and market conditions and overall fluctuations in the United States equity markets, including volatility related to the coronavirus outbreak and related health concerns and/or global political instability
•the loss of any of our key scientific or management personnel
Broad market fluctuations may adversely affect the trading price or liquidity of our common stock. In the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the issuer. If any of our stockholders were to bring such a lawsuit against us, we could incur substantial costs defending the lawsuit and the attention of our management would be diverted from the operation of our business, which could seriously harm our financial position. Any adverse determination in litigation could also subject us to significant liabilities.

If securities or industry analysts issue an adverse or misleading opinion regarding our stock, or our inclusion in the S&P 600 discontinues, our stock price and trading volume could decline.

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The trading market for our common stock is influenced by the research and reports that industry or securities analysts publish about us or our business as well as the stock indices that our common stock is included in. If any of the analysts who cover us issue an adverse or misleading opinion regarding us, our business model, our intellectual property or our stock performance, or if our operating results fail to meet the expectations of analysts, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, or if the S&P 600 removes us from its index, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

We may raise capital through the issuance of our common stock, convertible debt, or equity linkedequity-linked securities, which could result in dilution to our stockholders or negativelya negative impact on the price of our common stock.

In August 2020 we issued 2,090,909 shares of our common stock in a follow-on public offering.

We may choose to raise additional capital due to market conditions or strategic considerations. To the extent that additional capital is raised through the sale of equity, convertible debt or other equity linkedequity-linked securities, the issuance of these securities could result in dilution to our stockholders or result in downward pressure on the price of our common stock.

We cannot guarantee that our share repurchase program will be fully consummated or that it will enhance long-term shareholder value, and share repurchases could increase the volatility of the price of our common stock.
Pursuant to the share repurchase program authorized by our Board of Directors on December 29, 2022, we are authorized to repurchase up to an aggregate of $50 million of outstanding shares of our common stock from time to time through a combination of open market repurchases, privately negotiated transactions, 10b5-1 trading plans, accelerated stock repurchase transactions, and/or other transactions, in accordance with federal securities laws. Such program may be suspended or discontinued at any time. On January 11, 1023, we entered into the ASR Agreement with Morgan Stanley, pursuant to which we repurchased $20 million of shares of our common stock, amounting to an aggregate of 492,041 shares. Repurchases under the ASR Agreement were completed in the quarter ended May 31, 2023, and we may not repurchase any additional shares thereunder. As of August 31, 2023, we have not made any repurchases outside of the ASR Agreement. As a result, we may repurchase up to $30 million more of our shares of common stock pursuant to our repurchase program. However, we are not obligated to repurchase any additional shares, and the timing, manner, price, and actual amount of further share repurchases will depend on a variety of factors, including stock price, market conditions, other capital management needs and opportunities, and corporate and regulatory considerations. The timing of additional repurchases pursuant to our share repurchase program, if any, could affect our stock price and increase its volatility. We cannot guarantee that we will repurchase any additional shares, and there can be no assurance that any share repurchases will enhance shareholder value because the stock price of our common stock may decline below the levels at which we effected repurchases.
Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults, or non performance by financial institutions or transactional counterparties, could adversely affect our current and projected business operations and our financial condition and results of operations.
Actual events involving reduced or limited liquidity, defaults, nonperformance or other adverse developments that affect financial institutions or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds, have in the past and may in the future lead to market-wide liquidity problems. For example, in March 2023, Silicon Valley Bank and Signature Bank, and subsequently in May 2023 First Republic Bank, were closed and taken over by the Federal Deposit Insurance Corporation (“FDIC”) as receiver. Although we did not have any cash or cash equivalent balances on deposit with Silicon Valley Bank, Signature Bank, First Republic Bank, or any other regional banks, investor concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us to acquire financing on acceptable terms or at all. Any decline in available funding or access to our cash and liquidity resources could, among other risks, adversely impact our ability to meet our operating expenses, financial obligations or fulfill our other obligations. Any of these impacts, or any other impacts resulting from the factors described above or other related or similar factors not described above, could have material adverse impacts on our liquidity and our current and/or projected business operations and financial condition and results of operations.

ITEM 1B – UNRESOLVED STAFF COMMENTS

None.

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ITEM 2 – PROPERTIES

We

On May 25, 2023, we entered into an amendment, effective October 1, 2023, to the lease approximately 13,500 square feet ofagreement for our office space in Lancaster, California. The original lease had a five-year term with two, three-year optionsDurham, North Carolina. Prior to extend. The initial five-year term expired in February 2011, and we extendedentering into the lease to February 2, 2014. In June 2013, theamendment, this lease was amendedscheduled to extend the termterminate pursuant to February 2, 2017.its terms effective on September 30, 2023. 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 two, two-year options extending the term ofamendment extends the lease through February 2, 2021 at a fixed rateSeptember 30, 2026, and effective October 1, 2023, reduces the leased square footage from 3,386 to approximately 1,510, and reduces the monthly base rent from $8 thousand per month to $4 thousand per month with an annual increase of $25,000 per month.3%. The new extensionamended lease agreement gives the Company the right, upon 909 months prior notice, to extend the lease for an additional 60 months.
On February 17, 2023, we entered into an amendment, effective May 1, 2023, to the lease agreement for our office space in Lancaster, California, where our corporate headquarters are located. Prior to entering into the amendment, this lease was scheduled to terminate pursuant to its terms effective on January 31, 2026. The amendment extends the lease term through April 30, 2028, reduces the leased square footage from 9,255 to approximately 4,200, and reduces the monthly base rent from $18 thousand per month to $8 thousand per month with an annual increase of 3%. The amended lease agreement gives the Company the right, upon 180 days’ prior notice, to terminate the lease inopt out of all or part of the last twothree years of the lease 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 12,623with no penalty.

We lease 4,317 square feet of office space in Buffalo, New York. The initial five-yearlease term expired in October 2018 and was renewed for a three-year option to extending itextends to November 2021. The new30, 2026, and the 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. An amendment 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$7 thousand per month with an annual 3% adjustment.

In Paris, France Lixoft leases approximately2% increase. The lease agreement provides the Company with two five-year renewal options and the right to terminate the lease with one year’s prior written notice with certain penalties.

We lease 7,141 square feet of office space in Pittsburgh, Pennsylvania. The lease term extends to May 31, 2025, and the base rent is $10 thousand per month. The lease agreement provides the Company with one five-year renewal option.
We lease 2,300 square feet of office space which as of April 1, 2020, had minimum payments equaling approximately $288,000.in Paris, France. The lease is for a 9-year term with an optionextends to terminate every 3 years,November 30, 2024, and expires in November of 2024. Thethe rent is $16,555$5 thousand per quarter and can be adjustedmonth, which amount is subject to adjustment each December based on a consumer price index.

Rent expense, including common area maintenance fees for the fiscal years ended August 31, 2020, 2019

We have a data center colocation space in Buffalo, New York, with a lease term through November 30, 2026, and 2018 was $644,000, $584,000, and $567,000, respectively.

rent of $4 thousand per month with an annual 3% increase.

The Company believes its existing facilities and equipment are in good operating condition and are suitable for the conduct of its business.

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ITEM 3 – LEGAL PROCEEDINGS

We may become subject to litigation, claims, investigations, and audits arising from time to time in the ordinary course of our business. At this time, however, we are not a party to any legal proceedings and are not aware of pending legal proceedings.

ITEM 4 – MINE SAFETY DISCLOSURES.

Not applicable.

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PART II

ITEM 5 – MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information
The Company’s common stock, par value $0.001 per share, tradeshas traded on the Nasdaq Global Select Market under the symbol “SLP” since May 13, 2021, prior to which it traded on the Nasdaq Capital Market under the symbol “SLP.”

Price Range of Common Stock

The following table shows high and low sales prices for the Company’s common stock for each quarter during the past two fiscal years:

   High  Low 
FY19:         
Quarter ended November 30, 2018  $21.25  $18.04 
Quarter ended February 28, 2019  $21.66  $17.18 
Quarter ended May 31, 2019  $27.33  $19.74 
Quarter ended August 31, 2019  $41.95  $24.08 
FY20:         
Quarter ended November 30, 2019  $38.32  $31.53 
Quarter ended February 29, 2020  $40.22  $27.71 
Quarter ended May 31, 2020  $52.73  $26.00 
Quarter ended August 31, 2020  $73.58  $46.77 

same symbol.

Holders

As of November 16, 2020,October 20, 2023, there were 46 50 shareholders of record.

Dividends

We paid a total A substantially greater number of approximately $4.3 million in cashholders of our common stock are “street name” or beneficial holders, whose shares are held by banks, brokers, and other financial institutions.

Dividends
The following dividends were declared by our Board of Directors during the fourth quarter of fiscal year 2020, and $4.2 million 2023:
(in fiscal year 2019 as set forth in the table below. We expect to paythousands, except dividend per share amounts)
Fiscal YearRecord DateDistribution
Date		# of Shares
Outstanding on
Record Date		Dividend per
Share		Total
Amount
20237/31/20238/07/202319,931$0.06 $1,196 
Although we paid quarterly dividends of $0.06 per share of common stock in each quarter of fiscal year 2023, all future dividends are subject to declaration by our Board of Directors. However, thereThere can be no assurances that our Board of Directors will continue the dividend distributions for any specified number of quarters.

Fiscal Year Record Date Distribution
Date		 # of Shares
Outstanding on
Record Date		  Dividend per
Share		  Total
Amount		 
2019 11/01/2018 11/08/2018  17,417,875  $0.06  $1,045,073 
  1/25/2019 2/01/2019  17,481,450  $0.06  $1,048,887 
  4/24/2019 5/01/2019  17,515,228  $0.06  $1,050,914 
  7/25/2019 8/01/2019  17,536,454  $0.06  $1,052,181 
2020 10/25/2019 11/01/2019  17,606,314  $0.06  $1,056,379 
  1/27/2020 2/03/2020  17,645,639  $0.06  $1,058,740 
  4/24/2020 5/01/2020  17,769,134  $0.06  $1,066,148 
  7/27/2020 8/03/2020  17,820,057  $0.06  $1,069,203 

30
Refer to Note 6 – Shareholders’ Equity of the Notes to Financial Statements (Part II, Item 8 of this Report) for further details regarding dividends.

Securities authorized for issuance under equity compensation plans

On December 23, 2016, the Board of Directors adopted, and on February 23, 2017, the shareholders approved, the Company's 2017 Equity Incentive Plan (the "2017 Plan"), under which a total of 1.0 million shares of common stock were initially reserved for issuance. The 2017 plan would have terminated pursuant to its terms in December 2026; however, the 2017 Plan was replaced by the Company’s 2021 Plan (as defined below), and as a result, no further issuances of shares may be made under the 2017 Plan.

On April 9, 2021, the Board of Directors adopted, and on June 23, 2021, the shareholders approved, the Company's 2021 Equity Incentive Plan (the “2021 Plan”), under which a total of 1.3 million shares of common stock were initially reserved for issuance. On February 9, 2023, the Company's shareholders approved, and the Company adopted, an amendment to the 2021 Plan to increase the number of shares of common stock authorized for issuance thereunder by an additional 250,000 shares. The 2021 Plan will terminate in 2031.
As of August 31, 2023, employees and directors of the Company held Qualified Incentive Stock Options ("ISOs") and Non-Qualified Stock Options (“NQSOs”) to purchase an aggregate of 1.5 million shares of common stock at exercise prices ranging from $6.85 to $66.14 per share.





34
Table of Contents
Equity Compensation Plan Information

The following table provides information as of August 31, 2023, regarding our equity compensation plans:
(in thousands, except weighted-average amounts)
Plan categoryNumber of securities to be issued upon exercise of outstanding optionsWeighted-average exercise price of outstanding optionsNumber of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Column reference(a)(b)(c)
Equity Compensation Plans Approved by Security Holders1,478 $34.62 847 
Equity compensation plans not approved by security holders— $— — 
Total1,478 $34.62 847 
Shareholder Return Performance Graph

The following graph compares the cumulative total stockholder return on ourSimulations-Plus, Inc. (SLP) common stock of a $100 investment from August 31, 20162018, through August 31, 20202023, assuming reinvestment of dividends, with a similar investment in the Russell 3000 index (the “Russell(“Russell 3000”) and with the companies listed in the Nasdaq Composite - Total Returns (“IXIC”), and the S&P600 Health Care Equipment & Services Industry Group Index (SP600-3510)("SP600-3510"). The historical information set forth below is not necessarily indicative of future performance. This performance graph shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference into any of our filings under the Securities Act of 1933, as amended, of the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

 

3265
20192020202120222023
SLP$176.28$292.59$218.39$299.69$225.25
NASDAQ$98.41$145.53$188.59$146.86$173.27
Russell 3000$99.54$118.67$155.69$134.09$150.36
SP600-3510$85.58$87.53$135.98$102.81$96.18
Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities
During the year ended August 31, 2023, there were no other unregistered sales of our securities that were not reported in a Current Report on Form 8-K or our Quarterly Reports on Form 10-Q.
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Table of Contents
Repurchases

There is currently no

On December 29, 2022, our Board of Directors authorized and approved a share repurchase program pending,for up to $50 million of the outstanding shares of our common stock, and on January 11, 2023, we entered into an accelerated share repurchase agreement (the “ASR Agreement”) with Morgan Stanley & Co. LLC (“Morgan Stanley”) to repurchase an aggregate of $20 million of our outstanding shares of common stock as part of the share repurchase program, which was settled in full in May 2023. The share repurchase program has no expiration date but may be terminated at any time at our Board of Directors’ discretion.
In January 2023, we received an initial delivery of an aggregate of 408,685 shares of our common stock from Morgan Stanley pursuant to the ASR Agreement, in exchange for which we made an initial payment of $20 million to Morgan Stanley. These 408,685 shares were retired and are treated as authorized, unissued shares. At final settlement on May 20, 2023, based on the volume-weighted average price of our common stock during the term of the ASR Agreement, Morgan Stanley delivered an additional 83,356 shares of Company has made nocommon stock to us, which shares were also retired and treated as authorized, unissued shares.
After completion of the repurchases of its securities since fiscal year 2011.

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

Total Number of Shares PurchasedAverage Price Paid Per ShareTotal Number of Shares Purchased as Part of Publicly Announced ProgramMaximum
Approximate Dollar
Value of Shares that
May Yet Be Purchased
Under the Program
12/01/2022 - 12/31/2022— $—— $— 
01/01/2023 - 01/31/2023408,685 (1)408,685 $30,000,000 
02/01/2023 - 02/28/2023— $—— $— 
03/01/2023 - 03/31/2023— $—— $— 
04/01/2023 - 04/30/2023— $—— $— 
05/01/2023 - 05/31/202383,356 (1)83,356 $30,000,000 
Total492,041 (1)492,041 $30,000,000 
(1) On January 11, 2023, we entered into the ASR Agreement with Morgan Stanley to repurchase an aggregate of $20 million of our outstanding shares of common stock and received an initial delivery of an aggregate of 408,685 shares of our common stock. At final settlement on May 20, 2023, based on the volume-weighted average price of our common stock during the term of the ASR Agreement, Morgan Stanley delivered an additional 83,356 shares of Company common stock to us, which shares were also retired and treated as authorized, unissued shares. The average price paid per share pursuant to the ASR Agreement was approximately $40.65.

ITEM 6 – SELECTED FINANCIAL DATA

The following tables set forth the selected consolidated financial data for each[RESERVED]

36
Table of the fiscal years in the five-year period ended August 31, 2020. We derived the selected consolidated financial data from our audited consolidated financial statements, which should be read in conjunction with Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II of this Annual Report on Form 10-K and our consolidated financial statements and the related notes included elsewhere in this report.

   Year ended August 31, 
Statements of operations data  

 

2020[c][d]

   2019   2018[b]   2017[a]   2016 
Net Revenues $41,589,084  $33,970,440  $29,666,524  $24,137,913  $19,972,079 
Cost of revenues  10,649,230   9,025,704   7,994,228   6,307,800   4,601,513 
Gross margin  30,939,854   24,944,736   21,672,296   17,830,113   15,370,566 
                     
SG&A expenses  16,360,053   11,796,027   9,583,852   8,198,184   6,693,691 
R&D  2,974,623   2,499,980   1,790,656   1,367,645   1,445,069 
Total operating expenses  19,334,676   14,296,007   11,374,508   9,565,829   8,138,760 
                     
Income from operations  11,605,178   10,648,729   10,297,788   8,264,284   7,231,806 
                     
Other income (expense)  (218,129)  (92,253)  (158,846)  (24,017)  4,586 
                     
Income from operations before income taxes  11,387,049   10,556,476   10,138,942   8,240,267   7,236,392 
Provision for income taxes  (2,054,989)  (1,973,147)  (1,204,130)  (2,452,670)  (2,286,256)
Net Income $9,332,060  $8,583,329  $8,934,812  $5,787,597  $4,950,136 
                     
Earnings per share                    
Basic $0.52  $0.49  $0.52  $0.34  $0.29 
Diluted $0.50  $0.48  $0.50  $0.33  $0.29 
                     
Weighted-average common shares outstanding                    
Basic  17,819,064   17,492,258   17,328,707   17,239,490   17,028,566 
Diluted  18,538,373   18,057,431   17,860,392   17,515,917   17,209,506 
                     
Dividend per common share $0.24  $0.24  $0.24  $0.20  $0.20 
Dividends $4,250,470  $4,197,055  $4,161,740  $3,448,489  $3,413,274 
                     
Other comprehensive Income (Loss), net of tax                    
Foreign currency translation adjustments $58,467  $–  $–  $–  $– 

32
Contents

  As of August 31, 
Balance sheet data at year end 

 

2020

  2019  2018  2017  2016 
                
Cash and cash equivalents $49,207,314  $11,435,499  $9,400,701  $6,215,718  $8,030,284 
Net working capital $123,586,788  $16,381,665  $12,996,901  $10,625,437  $10,574,712 
Total assets $168,421,517  $45,196,697  $43,279,016  $38,512,468  $27,814,317 
Total liabilities associated with business and intangible acquisitions $6,063,833  $1,761,028  $5,890,940  $5,985,516  $1,000,000 
Total liabilities $12,385,572  $7,515,093  $11,356,391  $12,707,581  $5,081,723 
Total shareholders’ equity $156,035,945  $37,681,604  $31,922,625  $25,804,887  $22,732,594 

Notes to Five-Year Summary

[a] Effective June 1, 2017, we acquired DILIsym Services, Inc. and incurred approximately $620,000 of acquisition related costs in FY2017.

[b] In FY2018 we posted a $1.5 million deferred tax benefit due to the effect of new tax rates enacted under the Tax Cuts and Jobs Act of 2017.

[c] Effective April, 2020, we acquired Lixoft and incurred approximately $1,416,000 of acquisition-related costs in FY2020.

[d] In August 2020 the company issued 2,090,909 of shares in a follow-on public offering, priced at $55.00 per share. Net proceeds from this offering after underwriting discounts and commissions and other offering expenses were $107.7 million.

ITEM 7 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussionManagement’s Discussion and analysisAnalysis is intended to assist the reader in understanding our results of operations and financial condition. Management’s Discussion and Analysis is provided as a supplement to, and should be read in conjunction with, our audited consolidated financial statements beginning on page F-1 of this Report. This Report includes certain statements that may be deemed to be “forward-looking statements” within the Financial Statements and related notesmeaning of Section 27A of the Securities Act. All statements, other than statements of historical fact, included in this Annual Report that address activities, events or developments that we expect, project, believe, or anticipate will or may occur in the future, including matters having to do with expected and future revenue, our ability to fund our operations and repay debt, business strategies, expansion and growth of operations and other such matters, are forward-looking statements. These statements are based on Form 10-K.

33
certain assumptions and analyses made by our management in light of its experience and its perception of historical trends, current conditions, expected future developments, and other factors it believes are appropriate in the circumstances. These statements are subject to a number of assumptions, risks and uncertainties, including general economic and business conditions, the business opportunities (or lack thereof) that may be presented to and pursued by us, our performance on our current contracts and our success in obtaining new contracts, our ability to attract and retain qualified employees, and other factors, many of which are beyond our control. You are cautioned that these forward-looking statements are not guarantees of future performance and those actual results or developments may differ materially from those projected in such statements.

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Table of Contents
Management Overview

Fiscal year 2020 highlights:

·We acquired Lixoft of Paris, adding the Monolix Suite to our product offerings
·We completed a follow-on public offering in August 2020; net proceeds from the offering were $107.7 million
·Entered into several funded collaborations to enhance Gastro Plus to include an intra-articular delivery model, a virtual bioequivalence trial simulator; and expansion of Mechanistic Oral Absorption (ACAT)
·Entered a funded collaboration with large pharmaceutical company to enhance PKPlus
·Entered a collaboration agreement with Bayer AG to advance ADMET predictor, improving structure and tautomer handling capabilities supporting data integrity across their discovery platforms
·Entered into an agreement with a large pharmaceutical company for a new component, a QSP (Quantitative Systems Pharmacology) model focused on treating heart failure, such as can occur after myocardial infarction
·Entered a collaboration agreement to advance ADMET Predictor software for use within integrated drug discover workflows, by enhancing the HTPK Simulation Model that incorporates PBPK modeling into the partner’s discovery platform to support compound screening activities
·Received notice of an FDA funded agreement to develop physiologically based pharmacokinetics/pharmacodynamics (PBPK/PD) approaches to support inter species translation for ocular drug delivery in GastroPlus
·We released Version 4.3 of our KIWI™ Pharmacometric Communication and Collaboration Platform
·Continued quarterly payment of dividend of 6 cents per share

Fiscal Year 20202023 Financial Summary:Highlights:
•

·Consolidated net revenues increased by $7.62 million, or 22.4%, to $42 million in fiscal year 2020 from $34 million in fiscal year 2019
·Consolidated gross margin increased $6.0 million or 24.0%, to $30.9 million in fiscal year 2020 from $24.9 million in fiscal year 2019
·Net income from operations increased $956,000, or 9.0%, to $11.6 million in fiscal year 2020 from $10.6 million in fiscal year 2019. Fiscal year 2020 includes one-time acquisition costs of $1.4 million related to Lixoft
·Net income increased by $749,000, or 8.7%, to $9.33 million in fiscal year 2020 from $8.58 million in fiscal year 2019
·Diluted earnings per share increased by $0.02 or 4.2% to $0.50 in 2020 from $0.48 in 2019

Consolidated revenues increased by $5.7 million, or 11%, to $59.6 million for the year ended August 31, 2023, compared to $53.9 million for the year ended August 31, 2022

•Consolidated gross profit increased by $4.9 million, or 11%, to $47.9 million for the year ended August 31, 2023, compared to $43.1 million for the year ended August 31, 2022
•Income from operations decreased by $6.2 million, or 41%, to $8.7 million for the year ended August 31, 2023, from $14.9 million for the year ended August 31, 2022
•Net income decreased by $2.5 million, or 20%, to $10.0 million for the year ended August 31, 2023, compared to $12.5 million for the year ended August 31, 2022
•Diluted earnings per share decreased by $0.11, or 18%, to $0.49 for the year ended August 31, 2023, compared to $0.60 for the year ended August 31, 2022
Strategy Going Forward:

·Continue to pursue funded and unfunded collaborations in support of improving our products and services
·Continue our aggressive marketing and sales campaign, including numerous scientific conferences and meetings
·Continue to expand our use of social media and advertising
·Continue to expand our sales staff, both in-house and in the field
·Continue to recruit scientific and other resources to support our product and scientific consulting services
·Seek accretive acquisitions that complement our existing offerings and expand our markets
·Expand infrastructure to support corporate growth

34

•Continue to invest in research and development to enhance and expand our scientific product functionality and service capabilities

•Continue to pursue customer collaborations to support expansion of our products and services portfolio
•Continue our aggressive marketing campaigns to open new market opportunities
•Continue to expand our sales and marketing staff and distributor channels
•Continue to recruit and retain scientific staff to support our product and services innovation
•Continue to seek strategic acquisitions that complement our existing solutions portfolio and expand our markets

Fiscal year 20202023 was yet another recorda successful year for the Company. We saw increased growthenhanced our leadership in modeling and simulation with the midstrelease of a COVID-19 economic environment.new technology. We expanded our collaborations with industry and regulatory leaders. We executed on our strategy to expand our business and market opportunity through acquisitions. We also grew our scientific staff through excellent retention and recruiting efforts. We believe the continued growth of our pharmaceutical software and services business is the result of steadily increasing adoption and awareness of the value of simulation and modeling software tools across the pharmaceutical industry, the continuing push by regulatory agencies for increased use of modeling and simulation, and the expertise we offer as consultants to assist companies involved in the research and development of new medicines. We have receivedcontinue to be a continuing seriesleader in the fast-growing global biosimulation market.








38
Table of study contracts with pharmaceutical companies ranging from severalContents
Results of Operations
Comparison of fiscal years 2023 and 2022
(in thousands)Years ended August 31,
20232022$ Change% Change
Revenue$59,577 $53,906 $5,671 11 %
Cost of revenue11,630 10,822 808 7 %
Gross profit47,947 43,084 4,863 11 %
Research and development4,504 3,208 1,296 40 %
Selling, general, and administrative34,718 24,965 9,753 39 %
Total operating expenses39,222 28,173 11,049 39 %
Income from operations8,725 14,911 (6,186)(41)%
Other income, net2,970 204 2,766 1,356 %
Income before income taxes11,695 15,115 (3,420)(23)%
Provision for income taxes(1,734)(2,632)898 (34)%
Net income$9,961 $12,483 $(2,522)(20)%
Revenues
Revenues increased by $5.7 million, or 11%, to $59.6 million for the year ended August 31, 2023, compared to $53.9 million for the year ended August 31, 2022. This increase is primarily due to an increase of $3.9 million, or 12% in software-related revenue driven by timing of the largest insoftware license renewals and foreign currency exchange rate fluctuations when comparing the world to a number of medium-sized and smaller companies in the U.S., Europe, and Japan.

In August 2020 we completed a follow-on public offering that will enable an expedited approach to potential acquisitions, continue our research and development activities, and invest in staffing and infrastructure to meet the needs of a wider customer base and the growth of the business.

We do not have any stock repurchase programs currently in place or pending; however, our Board of Directors may consider such programs from time to time.

Results of Operations

FY20 COMPARED WITH FY19

The following sets forth selected items from our statements of operations (in thousands) and the percentages that such items bear to net sales for the fiscal years ended August 31, 2020 (FY20)2023, and August 31, 2019 (FY19) (Because of rounding, numbers may not foot.)

  Fiscal year ended 
   8/31/20   8/31/19 
Net revenues $41,589   100.00%  $33,970   100.00% 
Cost of revenues  10,649   25.6   9,025   26.6 
Gross margin  30,940   74.4   24,945   73.4 
Selling, general and administrative  16,360   39.3   11,796   34.6 
Research and development  2,975   7.2   2,500   7.4 
Total operating expenses  19,335   46.5   14,296   42.1 
Income from operations  11,605   27.9   10,649   31.4 
Other income (expense)  (218)  (0.5)  (92)  (0.3)
Net income before taxes  11,387   27.4   10,556   31.2 
(Provision) for income taxes  (2,055)  (4.9)  (1,973)  (5.8)
Net income $9,332   22.4%  $8,583   25.4% 

Net Revenues

Consolidated net revenues increased by 22.4% or $7.6 million to $41.59 million in FY20 from $33.97 million in FY19. Our Lancaster, California division increased revenues by $2.42022 and a $1.8 million, or 12.1%8%, to $22.0 millionincrease in FY20 from $19.6 million in FY19. $1.78 million was an increase from revenues generatedservice-related revenue driven by our Buffalo subsidiary (Cognigen), an increaseaddition of 19.1%. DILIsym Services, Inc. (DILIsym) increased revenues by $1.88 million or 37.2%. $1.58 million of revenue was generated by our French subsidiary (Lixoft), which was acquired April 1, 2020. FY20 software and software-related revenues increased $3.1 million or 16.8% while consulting revenues increased by $4.5 million or 29.1% compared to FY19.

35
Immunetrics services revenue.

Cost of Revenues

Consolidated costrevenues

Cost of revenues increased by $0.8 million, or 7%, for the year ended August 31, 2023, compared to the year ended August 31, 2022. The increase is primarily due to an increase of $0.6 million, or 19%, in software-related cost of revenue and an increase of $0.2 million, or 3%, in service-related cost of revenue driven by addition of Immunetrics services cost when compared to the year ended August 31, 2022.
Gross profit
Gross profit increased by $4.9 million, or 11%, to $47.9 million for the year ended August 31, 2023, compared to $43.1 million, for the year ended August 31, 2022. The increase in gross profit is primarily due to an increase in gross profit for our software business of $3.3 million, or 11%, and an increase in gross profit for our services business of $1.6 million, or 18.0% to $10.612%.
Overall gross margin percentage was 80% and 80% for the years ended August 31, 2023, and 2022, respectively.
Research and development
We incurred $7.8 million in FY20 from $9.0of research and development costs during year ended August 31, 2023. Of this amount, $3.3 million in FY19. Labor-related cost incurred increased by $1.6 million, mainly in support of increased consulting revenues. Cost of revenues for direct contract-related cost increased by $274,000, offset bywas capitalized as a decrease of approximately $217,000 of royalty expenses as well as $212,000 in training-related expenses in FY2020.

A significant portion of cost of revenues for pharmaceutical software products is the systematic amortizationpart of capitalized software development costs and $4.5 million was expensed. We incurred $6.4 million of research and development costs during year ended August 31, 2022. Of this amount, $3.2 million was capitalized and $3.2 million was expensed. The overall increase in research and development costs is primarily due to development of the newest version of our MonolixSuite product, version 2023R1, which iswas released on February 28, 2023, the development of the newest version of our GastroPlus product, version X, and the development of the newest version of our ADMET Predictor, version 11, with significant enhancements to the AIDD module; as well as an independent fixed cost rather thanincrease in personnel costs from market compensation adjustments following the Company’s engagement during fiscal year 2022 of an external consulting firm, Arthur J. Gallagher & Co., to complete a variable cost relatedfull market study on the compensation payable to revenues. This amortization cost of $2.36 million in FY20 increased by approximately $103,000 asour employees compared to FY19.

Costthose of revenues as a percentageour “peers”. The Company rebuilt its career grading system based on the results of revenue remained fairly consistent at 25.6%the compensation study to ensure competitive and equitable pay for all our employees across the organization in FY20 as comparedbase salary, cash bonus, and stock option grants. We believe that the market study and resulting compensation adjustments were necessary in light of the highly competitive employment market to 26.6% in FY19, a decreaseattract and retain superior talent.

39
Table of 1.0% year over year.

Gross MarginContents

Consolidated gross margin increased $6.0 million or 24.0%, to $30.9 million in FY20 from $24.9 million in FY19. $2.7 million of this increase is from the California division, which showed an 86.7% gross margin. The Buffalo Division gross margin increased $959,000 or 19% with margins of 53.3%. DILIsym of North Carolina recorded a $997,000 increase, a 67.3% margin, versus a 72.7% margin in FY19. Lixoft recorded a margin of $1.3 million or 83.1%.

Overall gross margin has increased to 74.4% in FY20 as compared to 73.4% in FY19 an increase of 1.0% year over year.

Selling, General and Administrative Expenses

Selling, general, and administrative (SG&A)expenses
Selling, general, and administrative (“SG&A”) expenses increased $4.56by $9.8 million, or 38.7%39%, to $16.4$34.7 million for the year ended August 31, 2023, compared to $25.0 million for the year ended August 31, 2022. This increase was primarily due to a $5.4 million increase in FY20employee and labor-related expenses from $11.80a 11% headcount increase to meet the robust and growing demand for our services, as well as market compensation adjustments following the Company’s engagement during fiscal year 2022 of an external consulting firm, Arthur J. Gallagher & Co., to complete a full market study on the compensation payable to our employees compared to those of our “peers”. The Company rebuilt its career grading system based on the results of the compensation study to ensure competitive and equitable pay for all our employees across the organization in base salary, cash bonus, and stock option grants. We believe that the market study and resulting compensation adjustments were necessary in light of the highly competitive employment market to attract and retain superior talent. The $5.4 million increase in FY19. personnel costs includes an increase in base salaries of $1.7 million, an increase in accrued bonuses of $1.2 million, an increase in stock compensation of $1.6 million, and an increase in employee benefits of $0.4 million.
Additionally, the overall increase in SG&A expenses is due to an increase in one-time charges such as merger and acquisition costs of $3.0 million, including a $1.6 million bonus compensation charge for Immunetrics employees, an impairment charge $0.5 million for Cognigen trade name due to management strategy to no longer use Cognigen trade name. In addition, SG&A also increased due to an increase in director compensation of $0.2 million, an increase in accounting and tax fees of $0.2 million, an increase in commissions to distributors of $0.1 million, and an increase of $0.1 million due to the newly required excise tax on share repurchases completed during fiscal year 2023.
As a percent of revenues, SG&A expense was 39.3%58% for FY20,the year ended August 31, 2023, compared to 34.7%46% for the year ended August 31, 2022.
Other income
Total other income was $3.0 million for the year ended August 31, 2023, compared to total other income of $0.2 for the year ended August 31, 2022. The increase is primarily due to an increase in FY19.

interest income of $3.4 million driven by an increase in interest rates, partially offset by the change in the fair value of contingent consideration of $0.4 million mainly driven by increase in the fair value of contingent consideration by $0.7 million for the Immunetrics earnout, when compared to $0.2 million for the year ended August 31, 2022.

Provision for income taxes
The major increasesprovision for income taxes was $1.7 million for the year ended August 31, 2023, compared to $2.6 million for the year ended August 31, 2022. Our effective tax rate decreased to 15% mainly due to favorable foreign income tax rates for the year ended August 31, 2023, when compared to 17% for the year ended August 31, 2022.
Comparison of fiscal years 2022 and 2021
(in thousands)Years ended August 31,
20222021$ Change% Change
Revenue$53,906 $46,466 $7,440 16 %
Cost of revenue10,822 10,600 222 2 %
Gross profit43,084 35,866 7,218 20 %
Research and development3,208 4,047 (839)(21)%
Selling, general, and administrative24,965 20,566 4,399 21 %
Total operating expenses28,173 24,613 3,560 14 %
Income from operations14,911 11,253 3,658 33 %
Other income, net204 (168)372 221 %
Income before income taxes15,115 11,085 4,030 36 %
Provision for income taxes(2,632)(1,303)(1,329)102 %
Net income$12,483 $9,782 $2,701 28 %
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Table of Contents
Revenues
Revenues increased by $7.4 million or 16%, to $53.9 million for the year ended August 31, 2022, compared to $46.5 million for the year ended August 31, 2021. This increase is primarily due to a $5.0 million, or 18%, increase in SG&A expense were:

·During the year the Company incurred approximately $1,416,000 of costs associated with the acquisition of Lixoft.  These fees included legal and accounting, due diligence, and M&A related consulting.
·Commission expenses were up $226,000, this increase is related to increased sales in Asia as well as domestic sales
·Contract labor increased $152,000 for other temporary labor and consulting costs related to various corporate initiatives
·G&A salaries and wages increased by $1.49 million; this increase is a combination of increased headcount both from acquisitions and salaries in support of corporate growth
·Insurance expense increased $259,000; $136,000 was health-related medical costs from increased headcount and rate increases
·Payroll tax expense increased $478,000, the effect of higher employee count and salary expense
·Director compensation increase by $394,000, based on an increase in the number of paid directors and compensation increases
·401k expense increased $52,000 due to increased staffing

software-related revenue and $2.5 million, or 13%, increase in service-related revenue when comparing the years ended August 31, 2022, and 2021.

Cost of revenues
Cost of revenues remained relatively consistent with a slight increase of $0.2 million, or 2%, for the year ended August 31, 2022, compared to the year ended August 31, 2021. The major decreasesincrease is primarily due to a $0.4 million, or 5%, increase in SG&A expense were:

·Trade show and travel related costs decreased by $145,000 mainly due to lower attendance and less travel costs due to COVID-19
·Recruiting fees decreased by $86,000

36
service-related cost of revenue, partially offset by a decrease of $0.2 million, or 5%, in software-related cost of revenue when compared to the year ended August 31, 2021.

Gross profit

Gross profit increased by $7.2 million, or 20%, to $43.1 million for the year ended August 31, 2022, compared to $35.9 million, for the year ended August 31, 2021. The higher gross profit is due to an increase in gross profit for our software business of $5.1 million, or 21%, and an increase in gross profit for our services business of $2.1 million, or 18%.
Overall gross margin percentage was 80% and 77% for the years ended August 31, 2022, and 2021, respectively.
Research and Development

development

We incurred approximately $5,328,000$6.4 million of research and development costs during FY20.the year ended August 31, 2022. Of this amount, $2,353,000$3.2 million was capitalized as a part of capitalized software development costs and $2,975,000$3.2 million was expensed. We incurred approximately $4,268,000$6.9 million of research and development costs during FY19.year ended August 31, 2021. Of this amount, $1,768,000$2.9 million was capitalized and $2,500,000$4.0 million was expensed.
Selling, general, and administrative expenses
Selling, general, and administrative ("SG&A") expenses increased by $4.4 million, or 21%, to $25.0 million for the year ended August 31, 2022, compared to $20.6 million for the year ended August 31, 2021. The increase was primarily due to an increase in personnel costs of $2.9 million, an increase in insurance costs of $0.6 million related to cyber and D&O premiums, and an increase in travel costs of $0.4 million.
As a percent of revenues, SG&A expense was 46% for the year ended August 31, 2022, compared to 44% for the year ended August 31, 2021.
Other income/expense
Total other income was $0.2 million for the year ended August 31, 2022, compared to total other expense of $0.2 million for the year ended August 31, 2021. The increase of $1,060,000, or 24.8%,$0.4 million is primarily due to an increase in total researchnet interest income of $0.5 million and development expenditures from FY19 to FY20 was mainly from increased costsa change in the Lancaster and DILIsym divisions.

value of contingent consideration by $0.2 million, partially offset by an increase in the loss on currency exchange of $0.4 million.

Provision for Income Taxes

income taxes

The provision for income taxes was $2.05$2.6 million for FY20the year ended August 31, 2022, compared to $1.97$1.3 million for FY19.the year ended August 31, 2021. Our effective tax rate decreased slightlyincreased by 5% to 18.0% in FY2017% for the year ended August 31, 2022, from 18.7% in FY19.

12% for the year ended August 31, 2021. The effective rate differs from anticipated combined statutory rates of approximately 25.7%25% due to R&D credits, foreign tax relatedforeign-tax-related items (tax credits and foreign deemedforeign-deemed intangible income deductions), and the tax effect of stock compensation related items for stock compensation and disqualifying dispositions. InDuring the last part of FY20, as occurred also in FY19,year ended August 31, 2021, as a result of an increase in the Company's stock prices,price, a number of employees exercised and sold incentive stock optionsISOs granted to them under their corporate incentive plans, creating corporate tax deductions that lowered the effective tax rate.

Net Income

Net income increased by $749,000 or 8.7%, to $9.3 million in FY20 from $8.6 million in FY19.

FY19 COMPARED WITH FY18

The following sets forth selected items from our statements of operations (in thousands) andrate, whereas disqualifying dispositions were not as prevalent during the percentages that such items bear to net sales for the fiscal yearsyear ended August 31, 2019 (FY19)2022.


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Table of Contents
Results of Operations by Business Unit
Comparison of fiscal years 2023 and 2022
Revenues
(in thousands)Years ended August 31,
20232022Change ($)Change (%)
Software$36,517 $32,642 $3,875 12 %
Services23,060 21,264 1,796 8 %
Total$59,577 $53,906 $5,671 11 %
Cost of Revenues
(in thousands)Years ended August 31,
20232022Change ($)Change (%)
Software$3,627 $3,060 $567 19 %
Services8,003 7,762 241 3 %
Total$11,630 $10,822 $808 7 %
Gross Profit
(in thousands)Years ended August 31,
20232022Change ($)Change (%)
Software$32,890 $29,582 $3,308 11 %
Services15,057 13,502 1,555 12 %
Total$47,947 $43,084 $4,863 11 %
Software Business
For the year ended August 31, 2018 (FY18) (Because2023, the revenue increase of rounding, numbers may not foot.)

  Fiscal year ended 
   8/31/19   8/31/18 
Net revenues $33,970   100.00%  $29,667   100.00% 
Cost of revenues  9,025   26.6   7,994   26.9 
Gross margin  24,945   73.4   21,672   73.1 
Selling, general and administrative  11,796   34.6   9,584   32.3 
Research and development  2,500   7.4   1,791   6.0 
Total operating expenses  14,296   42.1   11,375   38.3 
Income from operations  10,649   31.4   10,298   34.7 
Other income (expense)  (92)  (0.3)  (159)  (0.5)
Net income before taxes  10,556   31.2   10,139   34.2 
(Provision) for income taxes  (1,973)  (5.8)  (1,204)  (4.1)
Net income $8,583   25.4%  $8,935   30.1% 

Net Revenues

Consolidated net revenues increased by 14.5% or $4.3 million to $33.97 million in FY19 from 29.67 million in FY18. Our Lancaster, California division increased revenues by $2.03$3.9 million, or 11.6%12%, to $19.6 million in FY19 from $17.6 million in FY18. $1.46 million of this increase was from revenues generated by our Buffalo subsidiary (Cognigen), an increase of 18.6%. DILIsym Services, Inc. (DILIsym) increased revenues by $807,000 or 19%. FY19 software and software-related revenues increased $1.8 million or 11.0% while consulting revenues increased by $2.5 million or 19.0% compared to FY18.

37

Costthe year ended August 31, 2022, was primarily due to higher revenue from GastroPlus® of Revenues

Consolidated cost$2.0 million, higher revenue from MonolixSuite of $0.9 million, and higher revenue from ADMET Predictor® of $0.4 million. Cost of revenues increased by $1.03$0.6 million, or 12.9% to $9.0 million in FY19 from $8.0 million in FY18. Labor-related cost incurred by our Lancaster19%, during the same periods, and Buffalo divisionsgross profit increased by $190,000$3.3 million, or 11%, for the year ended August 31, 2023, compared to the year ended August 31, 2022.

Services Business
For the year ended August 31, 2023, the revenue increase of $1.8 million, or 8%, compared to the year ended August 31, 2022, was primarily due to higher revenues from PKPD services of $1.0 million and $1.06an increase in revenues from PBPK services of $1.0 million, respectively mainlyslight increase in supportrevenues from QSP driven by addition of increased consulting revenues. This wasImmunetrics services revenue, partially offset by a $380,000 decrease in cost of revenues for direct contract expenses paid for testing at DILIsym. We saw a decrease of approximately $52,000 in training-related expenses in FY2019.

A significant portion of cost of revenues for pharmaceutical software products is the systematic amortization of capitalized software development costs, which is an independent fixed cost rather than a variable cost related to$0.2 million from other revenues. This amortization cost of $1.33 million in FY19 increased by approximately $31,000 in FY19.

Cost of revenues as a percentageincreased by $0.2 million, or 3%. Gross profit increased by $1.6 million, or 12%, for the same periods.

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Table of Contents
Comparison of fiscal years 2022 and 2021
Revenues
(in thousands)Years ended August 31,
20222021Change ($)Change (%)
Software$32,642 $27,670 $4,972 18 %
Services21,264 18,796 2,468 13 %
Total$53,906 $46,466 $7,440 16 %
Cost of Revenues
(in thousands)Years ended August 31,
20222021Change ($)Change (%)
Software$3,060 $3,235 $(175)(5)%
Services7,762 7,365 397 5 %
Total$10,822 $10,600 $222 2 %
Gross Profit
(in thousands)Years ended August 31,
20222021Change ($)Change (%)
Software$29,582 $24,435 $5,147 21 %
Services13,502 11,431 2,071 18 %
Total$43,084 $35,866 $7,218 20 %
Software Business
For the year ended August 31, 2022, the revenue increase of $5.0 million, or 18%, compared to the year ended August 31, 2021, was primarily due to higher revenues from GastroPlus of $2.4 million and an increase in revenue from MonolixSuite Software of $1.6 million. Cost of revenue remained fairly consistent at 26.6%decreased by $0.2 million, or 5%, during the same periods, and gross profit increased by $5.1 million, or 21%, primarily due to the increase in FY19 asrevenue.
Services Business
For the year ended August 31, 2022, the revenue increase of $2.5 million, or 13%, compared to 26.9%the year ended August 31, 2021, was primarily due to higher revenues from PBPK of $1.4 million and an increase in FY18, a decreaserevenues from QSP/QST of 0.3% year over year.

Gross Margin

Consolidated gross margin$0.5 million. Cost of revenue increased $3.27by $0.4 million, or 15.1%, to $24.94 million in FY19 from $21.67 million in FY18. $1.8 million of this increase is from the California division, which showed an 83.3% gross margin. The Buffalo Division gross margin5%. Gross profit increased $325,000 or 7% with a margin of 53.2%. DILIsym of North Carolina recorded a $1.14 million increase, a 72.7% margin, versus a 59.6% margin in FY18.

Overall gross margin has remained fairly consistent at 73.4% in FY19 as compared to 73.1% in FY18, an increase of 0.3% year-over-year.

Selling, General and Administrative Expenses

Selling, general, and administrative (SG&A) expenses increased $2.22by $2.1 million, or 23.1% to $11.80 million in FY19 from $9.58 million in FY18. As a percent of revenues, SG&A was 34.6% for FY19, compared to 32.3% in FY18.

The major increases in SG&A expense were:

·Commission expenses were up $122,000, mainly related to increased sales through representatives in Asia
·Accounting and audit fees increased by $73,000, associated with costs of consolidated audits and other compliance-related expenses
·Contract labor increased $172,000 due to increased director fees and consulting related to various corporate initiatives
·G&A salaries and wages increased by $939,000; this increase is a combination of increased headcount and salaries in support of corporate growth
·Insurance expense increased $218,000; $174,000 was health-related medical costs from increased headcount and rate increases
·Payroll tax expense increased $116,000, the effect of higher salary expense
·401k expense increased $78,000 due to the increased staffing
·Recruiting and hiring costs increased $214,000 mainly due to recruiting fees of scientific personnel  
·Software licenses costs increased $87,000 mainly due to sales volume related license fee increases

The major decreases in SG&A expense were:

·Trade-show-related costs decreased by $52,000 mainly due to lower attendance costs

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Research and Development

We incurred approximately $4,268,000 of research and development costs during FY19. Of this amount, $1,768,000 was capitalized and $2,500,000 was expensed. We incurred approximately $3,936,000 of research and development costs during FY18. Of this amount, $2,145,000 was capitalized and $1,791,000 was expensed. The increase of $332,000, or 8.4%18%, in total research and development expenditures from FY18 to FY19 was mainly from $316,000 of costs incurred by DILIsym Services Inc.

Provision for Income Taxes

The provision for income taxes was $1.97 million for FY19, compared to $1.20 million for FY18. Our effective tax rate increased to 18.7% in FY19 from 11.9% in FY18.

This increase results mainly from a second quarter 2018 assessment of deferred taxes based on the new tax rates enacted under the Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”). Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 740, Income Taxes (“ASC 740”) requires that the company recognize the effects of changes in tax laws or tax rates in the financial statements for the period in which such changes were enacted. Among other things, changes in tax laws or tax rates can affect the amountsame periods.

43
Table of taxes payable for the current period, as well as the amount and timing of deferred tax liabilities and deferred tax assets. Based on the assessment, the Company posted a one-time tax benefit in the amount of $1,500,000 in the second fiscal quarter of 2018, the result of estimating future deferred liabilities at the lower tax rates under the newly enacted tax laws.

The effective rate differs from anticipated combined statutory rates of approximately 25.4% due to R&D credits and the tax effect of disqualifying dispositions. In the last part of FY19, as a result of increase in stock prices, a number of employees exercised and sold incentive stock options granted to them under their corporate incentive plans, creating corporate tax deductions that lowered the effective rate.

Net IncomeContents

Net income decreased by $351,000 or 3.9%, to $8.6 million in FY19 from $8.93 million in FY18. The decrease in income was substantially effected by the deferred tax benefit of $1.5 million discussed above in the note on Provision for Income Taxes, which reduced taxes in FY18.

SEASONALITY

Our sales exhibit some seasonal fluctuations, with the fourth fiscal quarter (June-August) generally having the lowest sales due to summer vacations and reduced activities at our customers’ sites. This unaudited quarterly sales information has been prepared on the same basis as the annual information presented elsewhere in this Annual Report on Form 10-K and, in the opinion of management, reflects all adjustments (consisting of normal recurring entries) necessary for a fair presentation of the information presented. Net sales for any quarter are not necessarily indicative of sales for any future period; however, because our pharmaceutical software is licensed on an annual basis, renewals are usually within the same quarter year after year. (Numbers may not foot because of rounding.)

Net Sales (in thousands of dollars)
FY First Quarter  Second Quarter  Third Quarter  Fourth Quarter  Total 
2020 $9,401  $

10,350

  $12,298  $9,540  $41,589 
2019 $7,536  $8,472  $9,937  $8,026  $33,971 
2018 $7,069  $7,357  $8,553  $6,688  $29,667 
2017 $5,418  $5,706  $6,748  $6,265  $24,138 
2016 $4,839  $5,164  $6,011  $3,958  $19,972 
2015 $4,086  $4,574  $5,942  $3,712  $18,314 
2014 $2,641  $3,081  $3,741  $1,998  $11,461 
2013 $2,290  $3,118  $3,095  $1,568  $10,071 
2012 $2,248  $2,789  $2,772  $1,640  $9,449 
2011 $2,050  $2,622  $2,640  $1,427  $8,739 

39

LIQUIDITY AND CAPITAL RESOURCES

As of August 31, 2023, the Company had $57.5 million in cash and cash equivalents, $57.9 million in short-term investments, and working capital of $118.4 million. Our principal sources of capital have been a follow-on public offering in August 2020 for $107.7 million and cash flows from our operations. We have achieved continuous positive operating cash flow over the last elevenfourteen fiscal years. In August 2020,
On December 29, 2022, our Board of Directors authorized and approved a share repurchase program for up to $50 million of the company closed an underwritten public offering of 2,090,909outstanding shares of itsour common stock, including the repurchase of up to $20 million of our outstanding shares through an accelerated share repurchase transaction. Under the publicrepurchase program, shares may be repurchased at $55.00 per share, which included the full exerciseour discretion based on ongoing assessment of the underwriters’ optioncapital needs of our business, the market price of shares of our common stock, and general market conditions. Repurchases may be made pursuant to purchase 272,727 additionalcertain SEC regulations, which permit common shares to be repurchased when we would otherwise be prohibited from doing so under insider trading laws. There is no time limit in place for the completion of our share repurchase program, and the program may be suspended or discontinued at any time. Except as was required by the ASR Agreement, we are not obligated to repurchase any shares under the repurchase program. We have funded share repurchases to date, and will fund future repurchases, if any, through cash on hand and cash generated from operations.
On January 11, 2023, the Company entered into the ASR Agreement with Morgan Stanley to repurchase an aggregate of $20 million of our outstanding shares of common stock. The aggregate gross proceedsASR Agreement was executed as part of our existing $50 million share repurchase program.

Pursuant to the companyterms of the ASR Agreement, we made an initial payment, using available cash balances, of $20 million to Morgan Stanley and received an initial delivery of 408,685 shares of Company common stock from this offeringMorgan Stanley. These 408,685 shares were retired and are treated as authorized, unissued shares. At final settlement on May 20, 2023, based on the volume-weighted average price of our common stock during the term of the ASR Agreement, Morgan Stanley delivered an additional 83,356 shares of Company common stock to the Company, which shares were also retired and treated as authorized, unissued shares.

On June 16, 2023, the Company acquired Immunetrics through a reverse triangular merger, pursuant to which Immunetrics became a wholly owned subsidiary of the Company. As consideration for the acquisition, at closing, the Company paid the equity holders of Immunetrics a cash payment in the aggregate amount of approximately $115$13.7 million, before deducting underwriting discounts and commissions; net proceeds were approximately $107.7 million. The company intendsalso paid the representative of the Immunetrics stockholders $250,000 as an expense fund to usecover expenses that it incurs in its role as such (collectively, the net proceeds from“Closing Payments”). In addition to the offering for strategic mergers and acquisitions (althoughClosing Payments, the company has no present commitments or agreementsCompany held back $1.8 million to enter intocover any such mergers or acquisitions),negative working capital requirements,adjustments (if any) and other general corporate purposes, including investing in enhanced information and accounting systems, and personnel in supportImmunetrics’ indemnification obligations under the Merger Agreement (the “Holdback Amount”), the balance of corporate growth. Aswhich, less any deductions, if any, will be distributed to the Immunetrics stockholders after expiration of August 31, 2020,the applicable hold back period. Furthermore, the Company had $49.2agreed to pay the Immunetrics equity holders an aggregate amount of up to $8.0 million in cashearnout payments if Immunetrics achieves certain revenue milestones for the calendar years 2023 and cash equivalents2024 (the “Earnout Payments,” and $66.8 million in short-term investments.

together with the Closing Payments and Holdback Amount, the “Merger Consideration”).


We believe that our existing capital and anticipated funds from operations will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for the foreseeable future.future, including to complete the remaining repurchases available under our $50 million share repurchase program, if we so choose. Thereafter, if cash generated from operations is insufficient to satisfy our capital requirements, we may draw from our revolving line of credit with the bank, or we may have to sell additional equity or debt securities or obtain expanded credit facilities.securities. In the event suchthat additional financing is needed in the future, there can be no assurance that such financing will be available to us, or, if available, that it will be in amounts and on terms acceptable to us.

We continue to seek opportunities for strategic acquisitions, investments, and partnerships. If one or more such strategic opportunities are identified, a substantial portion of our cash flows from operations became insufficientreserves may be required to complete it; however, we intend to maintain sufficient cash reserves to provide reasonable assurance that outside financing will not be necessary to continue operations atoperations. If we identify an attractive strategic opportunity that would require more cash to complete than we are willing or able to use from our cash reserves, we will consider financing options to complete the current level,transaction, including obtaining loans and if noissuing additional financing was obtained, then management would restructure the Companysecurities.

Except as discussed elsewhere in a way to preserve its pharmaceutical business while maintaining expenses within operating cash flows.

Wethis Report, we are not aware of any trends or demands, commitments, events, or uncertainties that are reasonably likely to result in a decrease in liquidity of our assets. The trend over the last ten years has been increasing cash deposits from our operating cash flows, and we expect that trend to continue for the foreseeable future.

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

44
Table of all outstanding equity interests of Lixoft pursuant to the terms of the Agreement, with Lixoft becoming a wholly owned subsidiary of the Company. Under the terms of the Agreement, the Company will pay the former shareholders of Lixoft total consideration of up to $16,500,000, consisting of two-thirdsContents
Cash Flows
Operating Activities
Net cash and one-third newly issued, unregistered shares of the Company’s common stock. In addition, the Company paid $3,456,029 of excess working capital based on the March 31, 2020 financial statements of Lixoft. As part of the total consideration, the agreement calls for earnout 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 yearprovided by operating activities was $21.9 million 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. See Note 14 for a further description of the Agreement.

On May 1, 2017 we signed a stock acquisition agreement with DILIsym Services, Inc. of Research Triangle Circle, North Carolina, and on June 1, 2017 consummated the acquisition of all the outstanding capital stock of DILIsym Services, Inc. pursuant to a Stock Purchase Agreement. DILIsym became a wholly-owned subsidiary of Simulations Plus. Under the terms of the Agreement, the Company: (1) paid to the DILIsym Shareholders Five Million Dollars, $4,515,982 payable at the closing of the Acquisition subject to certain adjustments and holdbacks. As part of the consideration there were certain earnout provisions in the agreement, subject to those provisions the company paid $5,000,000 in payments over the 3 years ended August 31, 2020 based on earnings of DILIsym before income taxes.

We will continue to seek opportunities for strategic acquisitions. If one or more such acquisitions is identified, a substantial portion of our2023. Our operating cash reserves may be required to complete it; however, we intend to maintain sufficient cash reserves after any acquisition to provide reasonable assurance that outside financing will not be necessary to continue operations. If we identify an attractive acquisition that would require more cash to complete than we are willing or able to useflows resulted in part from our net income of $10.0 million, which was generated by cash reserves,received from our customers, offset by cash payments we will considermade to third parties for their services and employee compensation. In addition, $5.1 million related to changes in balances of operating assets and liabilities was added to net income and $6.8 million related to non-cash charges was added to net income to reconcile to cash flow from operations.

Net cash provided by operating activities was $17.9 million for the year ended August 31, 2022. Our operating cash flows resulted primarily from our net income of $12.5 million, which was generated by cash received from our customers, offset by cash payments we made to third parties for their services and employee compensation. In addition, $2.6 million related to changes in balances of operating assets and liabilities was subtracted from net income and $8.0 million related to non-cash charges was added to net income to reconcile to cash flow from operations.
Investing Activities
Net cash provided by investing activities during the year ended August 31, 2023, was $7.4 million, primarily due to the proceeds from maturities of short-term investments of $114.9 million, offset by purchase of short-term investments of $95.0 million, $8.2 million for acquisition of Immunetrics, net of cash, and computer software development costs of $3.2 million.
Net cash provided by investing activities during the year ended August 31, 2022, was $4.3 million, primarily due to the proceeds from maturities of short-term investments of $109.1 million, offset by purchase of short-term investments of $100.8 million and computer software development costs of $3.2 million.
Financing Activities
Net cash used in financing optionsactivities during the year ended August 31, 2023, was $23.3 million, primarily due to complete the acquisition, including obtaining loansshare repurchases of $20.0 million and issuing additional securities.

40

Quarterly dividend payments madetotaling $4.8 million, partially offset by proceeds from the exercise of stock options totaling $1.5 million.

Net cash used in FY19financing activities during the year ended August 31, 2022, was $7.6 million, primarily due to payments on contracts payable of $3.7 million related to the Lixoft acquisition, and FY20 are listed individend payments totaling $4.8 million, partially offset by proceeds from the following table.

Fiscal Year  Record Date Distribution
Date		 # of Shares
Outstanding on
Record Date		  Dividend per
Share		  Total
Amount
 2019  11/01/2018 11/08/2018  17,417,875  $0.06  $1,045,073
    1/25/2019 2/01/2019  17,481,450  $0.06  $1,048,887
    4/24/2019 5/01/2019  17,515,228  $0.06  $1,050,914
    7/25/2019 8/01/2019  17,536,454  $0.06  $1,052,181
 2020  10/25/2019 11/01/2019  17,606,314  $0.06  $1,056,379
    1/27/2020 2/03/2020  17,645,639  $0.06  $1,058,740
    4/24/2020 5/01/2020  17,769,134  $0.06  $1,066,148
    7/27/2020 8/03/2020  17,820,057  $0.06  $1,069,203

The Boardexercise of directors has indicated its intentionstock options totaling $0.9 million.


DIVIDENDS

Refer to pay $0.06 quarterly dividends; however, there can be no assurances that our BoardNote 6 – Shareholders’ Equity of Directors will continue the dividend distributions as the decision is made on a quarterly basis based on current financial conditions and strategic plans. In October 2020, our BoardNotes to Financial Statements (Part II, Item 8 of Directors declared a dividend distributionthis Report) for details regarding dividends.

45
Table of $0.06 per share. The dividend was paid in November 2020.

Contents

KNOWN TRENDS OR UNCERTAINTIES

Although we have not seen any significant reduction in revenues to date, we

We have seen some consolidation in the pharmaceutical industry during economic downturns. Thesedownturns, although these consolidations have not had a negative effect on our total sales to that industry; however, shouldrevenues. Should customer delay, holds, program cancellations, or consolidations and downsizing in the industry continue to occur, those events could adversely impact our revenues and earnings going forward.

As discussed in the risk section of this 10-K, the world has been affected due to the COVID-19 pandemic. Though there has not been a substantial impact on sales revenues, until the pandemic has passed, there remains uncertainty as to the effect on our business in both the short and long-term.

We believe that the need for improved productivity in the research and development activities directed toward developing new medicines will continue to result in increasing adoption of simulation and modeling tools and consulting services such as those we produce.provide. New product developments in theour pharmaceutical business segments could result in increased revenues and earnings if they are accepted by our markets; however, there can be no assurances that new products will result in significant improvements to revenues or earnings. For competitive reasons, we do not disclose all of our new product development activities.

The world has been affected by the ongoing conflict between Russia and Ukraine, the developing conflict between Israel and Hamas, other geopolitical instability, and general economic uncertainty, amongst other things. Inflation has risen, Federal Reserve interest rates have increased, and the general consensus among economists suggests that we should expect a recession risk to continue for the near future. These factors, amongst other things, could result in further economic uncertainty and volatility in the capital markets in the near term, and could negatively affect our operations.
Historically, we have paid cash dividends of $0.06 per share to holders of shares of our common stock on a quarterly basis. The declaration of any future dividends will be determined by our Board of Directors each quarter and will depend on earnings, financial condition, capital requirements, and other factors.
Our continued quest for strategic acquisitions could result in a significant change to revenues and earnings if one or more such acquisitions are completed.

The potential for growth in new markets (e.g., healthcare) is uncertain. We will continue to explore these opportunities until such time as we either generate salesrevenues in these new markets or determine that resources would be more efficiently used elsewhere.

INFLATION

We have not been affected materially by inflation during the periods presented, and no material effect is expected in the near future.

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OFF-BALANCE SHEET ARRANGEMENTS

As of August 31, 2020, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not materially exposed to any financing, liquidity, market, or credit risk that could arise if we had engaged in such relationships.

We do not have relationships or transactions with persons or entities that derive benefits from their non-independent relationship with us or our related parties.

CONTRACTUAL OBLIGATIONS

The following table provides aggregate information regarding our contractual obligations as of August 31, 2020 (in thousands).

  Payments due by period 
Contractual obligations: Total  1 year  2–3
years		  4–5
years		  More than
5 years		 
    
Operating lease obligations $961  $486  $389  $86  $– 
Contracts Payable  6,064   2,000   4,064   –   – 
                     
Total $7,025  $2,486  $4,453  $86  $– 

2023:

(in thousands)Payments due by period
Contractual obligations:Total1 year2–3 years4–5 yearsMore than 5 years
Contracts payable(1)
$6,580 $3,250 $3,330 $— $— 
(1) Contracts payable are related to our Merger Agreement that the Company entered into with Immunetrics on June 16, 2023. Under the terms of the agreement, we agreed to pay the former stockholders of Immunetrics earnout payments up to an $8.0 million, consisting of two payouts of up to $4.0 million each, subject to a potential catch-up increase in certain circumstances. Additionally, a portion of the consideration, in an amount equal to $1.8 million, which was held-back by the Company at closing to cover any negative net working capital adjustments (if any) and Immunetrics’ indemnification obligations under the Merger Agreement. For further details regarding our contracts payable, refer to Note 11 to the “Notes to Consolidated Financial Statements” in Part II, Item 8 of this of this Report.
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RECENTLY ISSUED OR NEWLY ADOPTED ACCOUNTING STANDARDS

In May 2014,October 2021, the FinancialFASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09for Contract Assets and its related amendments regarding Accounting Standards Codification TopicContract Liabilities from Contracts with Customers (“ASU 2021-08”). The amendment requires contract assets and contract liabilities acquired in a business combination to be recognized and measured in accordance with ASC 606, (ASC Topic 606), Revenue from Contracts with Customers.Customers, as if the acquirer had originated the contract. The standard provides principlesamendment is intended to improve the accounting for recognizingacquired revenue for the transfer of promised goods or servicescontracts with customers in a business combination, related 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 relatedan acquired contract liability, and to obtaining customer contracts. We adopted ASC Topic 606, effective September 1, 2018, utilizingpayment terms and their effect on subsequent revenue recognized by the modified retrospective method. This approach was applied to contracts that were in process as of September 1, 2018, andacquirer. The amendment also provides certain practical expedients when applying 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 thisguidance. 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 2016-022021-08 is effective for annualinterim and interim reportingannual periods beginning after December 15, 2018.2022, on a prospective basis, with early adoption permitted. The Company adopted thisexpects to adopt ASU on September 1, 2019.

In April 2016,2021-08 in the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606), which amends certain aspectsfirst quarter of fiscal year 2024. The Company is currently evaluating the Board's new revenue standard, ASU 2014-09, Revenue from Contracts with Customers. The standard was adopted concurrently with the adoptionpotential impact of ASU 2014-09 which is effective for annual and interim periods beginning after December 15, 2017.

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2021-08 to its consolidated financial statements.

SIGNIFICANT

CRITICAL ACCOUNTING POLICIES

AND ESTIMATES

Estimates

Our financial statements and accompanying notes are prepared in accordance with GAAP. 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 software development costs, valuation of stock options, and accounting for income taxes.


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. The most 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. Under 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:

i.Identification of the contract, or contracts, with a customer
ii.Identification of the performance obligations in the contract
iii.Determination of the transaction price
iv.Allocation of the transaction price to the performance obligations in the contract
v.Recognition of revenue when, or as, the Company satisfies a performance obligation


i.Identification of the contract, or contracts, with a customer
ii.Identification of the performance obligations in the contract
iii.Determination of the transaction price
iv.Allocation of the transaction price to the performance obligations in the contract
v.Recognition of revenue when, or as, the Company satisfies a performance obligation

The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance, and collectability of consideration is probable. Contracts generally have fixed pricing terms and are not subject to variable pricing. The Company considers the nature and significance of each specific performance obligation under a contract when allocating the proceeds under each contract. Accounting for contracts includes significant judgement in the estimation of estimated hours/cost to be incurred on consulting contracts, and the di minimis nature of the post-sales costs associated with software sales.

Cash and Cash Equivalents

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

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 deteriorated, whether due to customer-specific or general economic issues, an increase in the allowance may be made. Accounts receivable are written off when all collection attempts have failed.

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Capitalized Computer Software Development Costs

Software development costs are capitalized in accordance with FASB 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 computer 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 or licensing of existing software to be used in the Company’s software products. Total capitalized computer software development costs were $2,353,000, $1,768,000$3.3 million, $3.2 million, and $2,145,000$2.9 million for the fiscal years ending August 31, 2020, 20192023, 2022, and 2018,2021, respectively.


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Amortization of capitalized computer software development costs is calculated on a product-by-product basis on the straight-line method over the estimated economic life of the products, not to exceed five years. Amortization of software development costs amounted to $1,225,544, $1,331,753$1.5 million, $1.2 million, and $1,300,434$1.4 million for the fiscal years ending August 31, 2020, 20192023, 2022, and 2018,2021, respectively. We expect future amortization expense to vary due to increases in capitalized computer software development costs.


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

Property and Equipment

Property and equipment are recorded at cost, less accumulated depreciation and amortization. Depreciation and amortization are provided using the straight-line method over the estimated useful lives as follows:

Equipment5 years
Computer equipment3 to 7 years
Furniture and fixtures5 to 7 years
Leasehold improvementsShorter of life of asset or lease

Maintenance and minor replacements are charged to expense as incurred. Gains and losses on disposals are included in the results of operations.

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 noncompete 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.

44


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, 2020,2023, the Company determined that it has fourhad five reporting units, Simulations Plus, Cognigen, Corporation, DILIsym, Services, Inc.Lixoft, and Lixoft. 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. 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.

Immunetrics.


As of August 31, 2020,2023, the entire balance of goodwill was attributed to threefour of the Company's reporting units, Cognigen, DILIsym, Lixoft, and Lixoft.Immunetrics. 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 CompanyAs of August 31, 2023, we recognized any$0.5 million of impairment charges during FY20, FY19charge for the Cognigen trade name, as management determined we will no longer use the Cognigen trade name. Management determined that this impairment is immaterial and FY18.

Reconciliation of Goodwill for FY20, FY19 and FY18:

   Cognigen  DILIsym  Lixoft  Total 
Balance, August 31, 2017  $4,789,248  $5,597,950  $–  $10,387,198 
Addition   –   –   –   – 
Impairments   –   –   –   – 
Balance, August 31, 2018   4,789,248   5,597,950   –   10,387,198 
Addition   –   –   –   – 
Impairments   –   –   –   – 
Balance, August 31, 2019   4,789,248   5,597,950   –   10,387,198 
Addition   –   –   2,533,987   2,533,987 
Impairments   –   –   –   – 
Balance, August 31, 2020  $4,789,248  $5,597,950  $2,533,987  $12,921,185 

Other Intangible Assets

The following table summarizeshas no bearing on any other intangible assets as of August 31, 2020:

  Amortization
Period		 Acquisition
Value		  Accumulated
Amortization		  Net book
value		 
Customer relationships-Cognigen Straight line 8 years $1,100,000  $825,000  $275,000 
Trade Name-Cognigen None  500,000   –   500,000 
Covenants not to compete-Cognigen Straight line 5 years  50,000   50,000   – 
Covenants not to compete-DILIsym Straight line 4 years  80,000   65,000   15,000 
Trade Name-DILIsym None  860,000   –   860,000 
Customer relationships-DILIsym Straight line 10 years  1,900,000   617,500   1,282,500 
Customer relationships-Lixoft Straight line 14 years  2,550,000   75,892   2,474,108 
Trade Name-Lixoft None  1,550,000   –   1,550,000 
Covenants not to compete-Lixoft Straight line 3 years  60,000   8,333   51,667 
    $8,650,000  $1,641,725  $7,008,275 

Amortization expense for FY20, FY19,including goodwill. No impairment losses were recorded during the years ended 2022 and FY18 was $431,725, $357,500, and $357,500, respectively.

45
2021.


Business Acquisitions

The Company accounted for the acquisition of Cognigen, DILIsym, Services Inc.,Lixoft, and LixoftImmunetrics using the purchaseacquisition 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, 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 Condensed Balance Sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair value. The categories, as defined by the standard are as follows:

Level Input:Input Definition:
Level IInputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.
Level IIInputs, other than quoted prices included in Level I, that are observable for the asset or liability through corroboration with market data at the measurement date.
Level III

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

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

Research and Development Costs

Research and development costs are charged to expense as incurred until technological feasibility has been established.established, or when the costs are for maintenance and minor modification of existing software products that do not add significant new capabilities to the products. These costs include salaries, laboratory experiment, and purchased software that was developed by other companies and incorporated into, or used in the development of, our final products.


Income Taxes

The Company accounts for income taxes in accordance with ASC 740-10, “Income“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.


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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.


Stock-Based Compensation

The Company accounts for stock options using the modified prospective method in accordance with FASB ASC 718-10, “Compensation-Stock“Compensation-Stock Compensation”. Under this method, compensation costs include the estimated grant dategrant-date fair value of the awards amortized over the options’ vesting period. Stock-based compensation expense, not including shares issued to directors for services, was $1,286,625, $865,848$4.3 million, $2.7 million and $562,079$2.4 million for the fiscal years ended August 31, 2020, 20192023, 2022, and 2018,2021, respectively, and is included in the statements of operations as Consulting, Salaries, and Research and Development expense.

46

ITEM 7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of August 31, 2020,2023, and August 31, 2019,2022, we had cash and cash equivalents of $49.21$57.5 million and $11.44$51.6 million, respectively. We hold held-to-maturity short-term investments that are exposed to market risk related to changes in interest rates, which could affect the value of our assets and liabilities. We do not hold any trading and and/or available-for-sale securities. Some of our cash and cash equivalents are held in money market accounts; however, they are not exposed to market-rate risk.

In the years ended August 31, 2020, 2019,2023, 2022, and 20182021, we sold $4.96$7.3 million, $4.15$6.7 million, and $3.57$4.8 million, respectively, of software licenses through representatives in certain Asian markets in local currencies. As a result, our financial position, results of operations, and cash flows can be affected by fluctuations in foreign currency exchange rates, particularly fluctuations in the yenYen and RMB exchange rates. These transactions give rise to receivables that are denominated in currencies other than the entity’s functional currency. The value of these receivables is subject to changes because the receivables may become worth more or less due to changes in currency exchange rates. The majority of our software license agreements are denominated in U.S. dollars. We record foreign gains and losses as they are realized. We mitigate our risk from foreign currency fluctuations by adjusting prices in our foreign markets on a periodic basis. We base these changes on market conditions while working closely with our representatives. Our Paris, France, division sells mainly in U.S. Dollarsdollars and Euros and uses the Euro as a functional currency. As such, we are subject to currency translation and exchange rate changes. We do not hedge currencies or enter into derivative contracts.

ITEM 8 -– FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See the financial statements included elsewhere in this reportReport beginning at page F-1, which are incorporated herein by reference.

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

None.

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ITEM 9A.9A – CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and our Chief Financial Officer, after evaluating our “disclosure controls and procedures” (as defined in Securitiesthe 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. GAAP. Management assessed our internal control over financial reporting as of August 31, 2020,2023, 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.

47

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. GAAP. 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 CEOour Chief Executive Officer and CFO,Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well-designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of controls to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

Changes in Internal Control over Financial Reporting

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

Attestation Report

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Table 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.

Contents

ITEM 9B -– OTHER INFORMATION

None.


Rule 10b5-1 Trading Plans

The adoption or termination of contracts, instructions or written plans for the purchase or sale of our securities by our Section 16 officers and directors for the quarter ended August 31, 2023, each of which is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act (“Rule 10b5-1 Plan”), were as follows:

48
NameTitleActionDate AdoptedExpiration DateAggregate # of Securities to be Purchased/Sold
Walter Woltosz (1)
DirectorTermination7/15/20216/30/2023480,000 
Walter Woltosz (1)
DirectorAdoption7/17/202310/3/2025560,000 
John Paglia (2)
DirectorAdoption8/9/20237/31/202413,000 


(1) On June 30, 2023, the pre-arranged stock trading plan pursuant to Rule 10b5-1, adopted by Walter Woltosz and his spouse on July 15, 2021 (the “Expired Plan”), automatically terminated pursuant to its terms. The Expired Plan provided for the potential sale of up to 480,000 shares of Company common stock until June 30, 2023. On July 17, 2023, Mr. Woltosz and his spouse entered into a new pre-arranged stock trading plan pursuant to Rule 10b5-1 (the “New Plan”), which provides for the potential sale of up to 560,000 shares of Company common stock. The New Plan expires on October 3, 2025, or upon the earlier completion of all authorized transactions under the New Plan.

(2) On August 9, 2023, John Paglia entered into a pre-arranged stock trading plan pursuant to Rule 10b5-1, which provides for (i) the potential exercise of vested stock options and the associated sale of up to 11,000 shares of Company common stock underlying such options, and (ii) the potential sale of up to an additional 2,000 shares of Company common stock. The plan expires on July 31, 2024, or upon the earlier completion of all authorized transactions under the plan.

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

Please refer to the information included in Part II, Item 5 under the heading “Repurchases” for information regarding the Company’s effective share repurchase program, including sales made by the Company under the ASR Agreement during the quarter ended August 31, 2023.
ITEM 9C – DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
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PART III

ITEM 10 – DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

Information required by Item 10 is incorporated herein 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 ourCompany’s definitive proxy statement, on Schedule 14A to be distributed in connectionfiled with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Report. We have adopted a Code of Conduct (the "code of conduct") that applies to each of our 2020 Annual Shareholders’ Meeting (the “Proxy Statement”).

There have been no material changesdirectors and employees, including our principal executive officer, principal financial officer, controller, and all other employees performing similar functions. The code of conduct is publicly available on our website at https://www.simulations-plus.com/wp-content/uploads/SLP-Code-of-Conduct-09-25-23.pdf. If we make any substantive amendments to the procedures by which security holders may recommend nominees to our boardcode of directors sinceconduct or grant any waiver, including any implicit waiver, from a provision of the code of conduct, we last described such procedures.

The Company has a Corporate Codewill disclose the nature of Ethics which is postedthe amendment or waiver on our website: www.simulations-plus.com.

website or in a Current Report on Form 8-K.

ITEM 11 – EXECUTIVE COMPENSATION

The information required by Item 11 is incorporated herein by reference from the sections entitled “Executive CompensationCompany’s definitive proxy statement, to be filed with the Securities and Other Information” and “Board Matters and Corporate Governance” inExchange Commission within 120 days after the Proxy Statement.

end of the fiscal year covered by this Report.

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

The information required by this Item pursuant to Item 201(d) of Regulation S-K is set forth under the caption “Market for Registrants Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities” in Part II, Item 5 of this Report, and is incorporated herein by reference.
The information required by this Item 12 pursuant to Item 403 of Regulation S-K is incorporated herein by reference from the sections entitled “Security OwnershipCompany’s definitive proxy statement, to be filed with the Securities and Exchange Commission within 120 days after the end of Certain Beneficial Owners and Management” and “Executive Compensation and Other Information” in the Proxy Statement.

fiscal year covered by this Report.

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


The information required by this Item 13 is incorporated herein by reference from the subsection entitled “Certain RelationshipsCompany's definitive proxy statement to be filed with the Securities and Related Transactions; Transactions with Related Persons”Exchange Commission within 120 days after the end of the fiscal year covered by this Report and the section entitled “Board Matters and Corporate Governance” in the Proxy Statement.

is incorporated herein by reference.

ITEM 14 – PRINCIPAL ACCOUNTING FEES AND SERVICES

Our independent registered public accounting firm is Rose, Snyder & Jacobs LLP, Encino, CA, Auditor Firm ID: 468.
The information required by Item 14 is incorporated by reference from the sectionCompany’s definitive proxy statement, to be filed with the Securities and Exchange Commission within 120 days after the end of the proposal entitled “Ratificationfiscal year covered by this Report.
52
Table of Selection of Independent Registered Public Accounting Firm” in the Proxy Statement.

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Contents

PART IV

ITEM 15 – EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)        

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

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

(3)       List of Exhibits required by Item 601 of Regulation S-K. See part (b) below.

(b)       Exhibits. The following exhibits are filed or furnished with this report. Those exhibits marked with a (†) refer to management contracts or compensatory plans or arrangements.

EXHIBIT NUMBERDESCRIPTION
2.1 (4)^2.1^
Agreement and Plan of Merger, dated July 23, 2014, by and among the Company, Cognigen Corporation and the other parties thereto.thereto, incorporated by reference to an Exhibit 2.1 to the Company’s Form 8-K/A filed November 18, 2014.
2.2 (12)^2.2^
Stock Purchase Agreement by and among Simulation Plus, Inc., DILIsym Services, Inc., the Shareholders’ Representative and the Shareholders of DILIsym Services, Inc., incorporated by reference to Exhibit 10.13 to the Company’s Form 10-Q filed July 10, 2017.
2.3^
Share Purchase and Contribution Agreement Relating to Lixoft, dated March 31, 2020, incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed April 2, 2020.
2.4^
Agreement and Plan of Merger, dated June 16, 2023, by and among Simulations Plus, Inc., Insight Merger Sub, Inc., Immunetrics, Inc. and LaunchCyte LLC, incorporated by reference to an Exhibit 2.1 to the Company’s Form 8-K filed June 20, 2023.
3.1 (2)
Articles of Incorporation of the Company.Company, incorporated by reference to an Exhibit 3.1 to the Company’s Form 10-K filed November 29, 2010.
3.2 (2)
Amended and Restated Bylaws of the Company.Company, incorporated by reference to an exhibit to the Company’s Form 10-K filed November 29, 2010.
3.3
Certificate of Amendment to the Amended and Restated Bylaws of Simulations Plus, Inc., incorporated by reference to Appendix A to the Company’s Definitive Schedule 14A Proxy Statement filed December 31, 2018.
4.1 (1)Form of Common Stock Certificate.Certificate, incorporated by reference to the Company’s Registration Statement on Form SB-2 (Registration No. 333-6680) filed March 25, 1997.
4.2 (1)Share Exchange Agreement.Agreement, incorporated by reference to the Company’s Registration Statement on Form SB-2 (Registration No. 333-6680) filed March 25, 1997.
4.3(13)4.3*
Revolving LineDescription of Credit Note, dated as of March 31, 2020, by and between the Company, as borrower, and Wells Fargo Bank, National Association, as lender.Securities.
4.4(13)Credit Agreement, dated as of March 31, 2020, by and between the Company, as borrower, and Wells Fargo Bank, National Association, as lender.
10.1 (1) (†10.1(†)
The Company’s 1996 Stock Option Plan and forms of agreements relating thereto.
10.2 (3) (†)The Company’s 2007 Stock Option Plan, as amended.amended, incorporated by reference to Exhibit 10.3 to the Company’s Form 10-K filed April 9, 2014.
10.3 (10)10.2
Second Amendment to Lease by and between the Company and Crest Development LLC, dated as of May 1, 2016, incorporated by reference to Exhibit 10.4(d) to the Company’s Form 10-K filed November 14, 2016.
10.4 (5) (†)10.3
Employment Agreement by and between the Company and Walter S. Woltosz, dated as of August 8, 2016.
10.5 (6)Form of Indemnification Agreement.Agreement, incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed August 10, 2016.
10.6 (8)10.4(†)
2017 Equity Incentive Plan.Plan, incorporated by reference to Appendix A to the Company’s Definitive Schedule 14A Proxy Statement filed December 29, 2016.
10.7 (7)Stock Purchase Agreement by and among Simulation Plus, Inc., DILIsym Services, Inc., The Shareholders’ Representative and The Shareholders of DILIsym Services, Inc., dated as of May 1, 2017.
10.8 (9)(†10.5(†)
Employment Agreement by and between the Company and Walter S. Woltosz, dated as of September 1, 2017.
10.9 (9) (†)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.
10.11 (11) (†)Employment Agreement by and between the Company and Shawn O’Connor dated June 26, 2018
10.12 (14) (†)Employment Agreement by and between the Company and Shawn O’Connor dated September 3, 2020 incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed September 9, 2020.

10.6(†)50
Employment Agreement by and between the Company and Will Frederick, dated December 1, 2020 incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q filed January 11, 2021..
10.7(†)
Separation Agreement, dated December 1, 2020, by and between the Company and John Kneisel, incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q filed April 14, 2021.
10.8
Third Amendment to Lease by and between the Company and Crest Development LLC, dated as of December 28, 2020 incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed January 4, 2021..
10.9(†)
Simulation Plus, Inc. 2021 Equity Incentive Plan, incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed June 8, 2021.
10.10(†)
First Amendment to Employment Agreement, by and between Simulations Plus, Inc. and Shawn O’Connor, dated November 19, 2021 incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed November 19, 2021.
10.11(†)
Employment Agreement by and between the Company and John DiBella, dated January 1, 2022, incorporated by reference to Exhibit 10.12 to the Company’s Form 10-K filed October 28, 2022.
10.12(†)
Employment Agreement by and between the Company and Brett Howell, dated January 1, 2022, incorporated by reference to Exhibit 10.13 to the Company’s Form 10-K filed October 28, 2022.

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10.13(†)
Employment Agreement by and between the Company and Jill Fiedler-Kelly, dated January 1, 2022, incorporated by reference to Exhibit 10.14 to the Company’s Form 10-K filed October 28, 2022.
10.14^
Confirmation for Fixed Dollar Accelerated Share Repurchase Transaction, dated as of January 11, 2023, by and between Simulations Plus, Inc. and Morgan Stanley & Co. LLC, incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed January 12, 2023.
10.15
First Amendment to 2021 Equity Incentive Plan of Simulations Plus, Inc., dated February 9, 2023, incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed February 13, 2023.
10.16
Fourth Amendment to Lease by and between the Company and Crest Development LLC, dated as of February 17, 2023, incorporated by reference to Exhibit 10.3 to the Company’s Form 10-Q filed April 7, 2023.
10.17^
Earnout Agreement by and among Simulations Plus, Inc., Insight Merger Sub, Inc., Immunetrics, Inc. and LaunchCyte LLC, dated June 16, 2023, incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed June 20, 2023.
10.18
Amended and Restated Employment Agreement between Simulations Plus, Inc. and Steven Chang, dated June 16, 2023, incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed June 20, 2023.
21.1 *
List of Subsidiaries.
23.1 *
Consent of Independent Registered Public Accounting Firm.
31.1 *
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 – Certification of the Principal Executive Officer.Sarbanes-Oxley Act of 2002.
31.2 *
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 – Certification of the Principal Financial Officer.Sarbanes-Oxley Act of 2002.
32.1 ***
Section 906 – Certification of the Chief Executive OfficeOfficer and Chief Financial Officer.Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS***Inline XBRL Instance Document
101.INS **101.SCH***XBRL Instance Document.
101.SCH **Inline XBRL Taxonomy Extension Schema Document.Document
101.CAL **101.CAL***Inline XBRL Taxonomy Extension Calculation Linkbase Document.Document
101.DEF **101.DEF***Inline XBRL Taxonomy Extension Definition Linkbase Document.Document
101.LAB **101.LAB***Inline XBRL Taxonomy Extension Label Linkbase Document.Document
101.PRE **101.PRE***Inline XBRL Taxonomy Extension Presentation Linkbase Document.Document
104***Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101 attachments).

 __________________________

_____________________________
^Schedules and exhibits omitted pursuant to Item 601(b)(2) of Registration S-K. The registrant agrees to furnish supplementally a copy of any omitted schedule to the SEC upon request.
*Filed herewith.
**Furnished herewith.
***The XBRL related information in Exhibit 101 shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.
(†)Refers to management contracts or compensatory plans or arrangementsarrangements.
(1)Incorporated by reference to the Company’s Registration Statement on Form SB-2 (Registration No. 333-6680) filed on March 25, 1997.
(2)Incorporated by reference to an exhibit to the Company’s Form 10-K for the fiscal year ended August 31, 2010.
(3)Incorporated by reference to an exhibit to the Company’s Form 10-Q filed April 9, 2014.
(4)Incorporated by reference to an exhibit to the Company’s Form 8-K/A filed November 18, 2014.
(5)Incorporated by reference to an exhibit to the Company’s Form 8-K filed August 11, 2016.
(6)Incorporated by reference to an exhibit to the Company’s Form 8-K filed August 10, 2016.
(7)Incorporated by reference to an exhibit to the Company’s Form 10-Q filed July 10, 2017.
(8)Incorporated by reference to Appendix A to the Company’s Schedule 14A filed December 29. 2016.
(9)Incorporated by reference to an exhibit to the Company’s Form 8-K filed September 6, 2017.
(10)Incorporated by reference to an exhibit to the Company’s Form 10-K for the fiscal year ended August 31, 2016.
(11)Incorporated by reference to an exhibit to the Company’s Form 10-Q filed July 10, 2018.
(12)Incorporated by reference to an exhibit to the Company’s Form 8-K filed April 2, 2020.
(13)Incorporated by reference to an exhibit to the Company’s Form 8-K filed April 3, 2020.
(14)Incorporated by reference to an exhibit to the Company’s Form 8-K filed September 9, 2020.

(c)       Financial Statement Schedule.

See Item 15(a)(2) above.

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SIGNATURES

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

November 16, 2020

October 27, 2023
SIMULATIONS PLUS, INC.
By:/s/ John R. KneiselWill Frederick
John R. KneiselWill Fredrick
Chief Financial Officer (Principal financial officer)

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

SignatureTitle
/s/ Shawn O’ConnorChief Executive Officer (Principal executive officer)
Shawn O’Connor
November 16, 2020October 27, 2023
/s/ Walter S. WoltoszChairman of the Board of Directors
Walter S. Woltosz
November 16, 2020October 27, 2023
/s/ Dr. Lisa LaVangeDirector
Dr. Lisa LaVange
November 16, 2020October 27, 2023
/s/ Dr. Daniel WeinerDirector
Dr. Daniel Weiner
November 16, 2020October 27, 2023
/s/ Dr. David L. RalphSharlene EvansDirector
Dr. David L. RalphSharlene Evans
November 16, 2020October 27, 2023
/s/ Dr. John K. PagliaDirector
Dr. John K. Paglia
November 16, 2020October 27, 2023
/s/ John R. KneiselWill FrederickChief Financial Officer (Principal financial
John R. Kneisel
officer and principal accounting officer)
November 16, 2020Will Frederick
October 27, 2023

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SIMULATIONS PLUS, INC. & SUBSIDIARY

SUBSIDIARIES

CONTENTS

August 31, 2020, 20192023, 2022 and 2018

2021
Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
F-2F-2 - F-4
FINANCIAL STATEMENTS
Consolidated Balance Sheets
F-5
F-3
Consolidated Statements of Operations and Comprehensive Income
F-4F-6
Consolidated Statements of Shareholders’ Equity
F-5F-7
Consolidated Statements of Cash Flows
F-6F-8
Notes to Consolidated Financial Statements
F-7F-9 – F-31F-33

F-1

F-1

Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and
Stockholders of Simulations Plus, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Simulations Plus, Inc. and subsidiariesSubsidiaries (the Company) as of August 31, 20202023, and 2019,2022, and the related consolidated statements of operations and comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended August 31, 2020,2023, and the related notes (collectively referred to as the consolidated 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, 20202023, and 2019,2022, and the consolidated results of its operations and its cash flows for each of the years in the three-year period ended August 31, 2020,2023, 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, 2023, 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, 2023, expressed an unqualified opinion.
Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)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 consolidated 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. We believe that our audits provide a reasonable basis for our opinion.

/s/ Rose, Snyder & Jacobs LLP

Rose, Snyder & Jacobs LLP

We have served

Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated 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 consolidated 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 consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Revenue Recognition – Contract cost estimates
Description of the Matter
As discussed in Note 2 to the Consolidated Financial Statements, the Company earns a portion of its revenue through consulting service agreements. For performance obligations related to services that are required to be recognized over time, the Company generally measures its progress to completion using an input measure of total labor costs incurred divided by total labor costs expected to be incurred.
F-2
Table of Contents
Auditing revenue recognition is complex and highly judgmental due to the variability and uncertainty associated with the Company’s auditor since 2004.

Encino, California

November 16, 2020

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. We evaluated whether the selected measures of progress towards satisfaction of performance obligations were applied consistently. We also tested the completeness and accuracy of the underlying data used for the measure of progress by testing the underlying cost data.
F-2
Rose, Snyder & Jacobs LLP
We have served as the Company’s auditor since 2004.
Encino, California
October 27, 2023

F-3

Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2023, 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, 2023, 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 and the related consolidated statements of operations and comprehensive income, shareholders’ equity, and cash flows for the Company, and our report dated October 27, 2023 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. 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 company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Rose, Snyder & Jacobs LLP
Encino, CA
October 27, 2023
F-4
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SIMULATIONS PLUS, INC.

CONSOLIDATED BALANCE SHEETS

As of August 31,

       
  2020  2019 
ASSETS        
Current assets        
Cash and cash equivalents $49,207,314  $11,435,499 
Accounts receivable, net of allowance for doubtful accounts of $50,000 and $0  7,421,970   5,026,558 
Revenues in excess of billings  3,093,343   3,233,659 
Prepaid income taxes  969,688   765,110 
Prepaid expenses and other current assets  1,595,447   704,316 
Short-term investments  66,803,595   0 
Total current assets  129,091,357   21,165,142 
Long-term assets        
Capitalized computer software development costs, net of accumulated amortization of $13,581,599 and $12,356,055  6,087,378   4,959,736 
Property and equipment, net (note 4)  437,787   341,145 
Operating lease right of use asset  926,600   0 
Intellectual property, net of accumulated amortization of $5,087,031 and $3,948,750  11,897,970   5,026,249 
Other intangible assets net of accumulated amortization of $1,641,725 and $1,210,000  7,008,275   3,280,000 
Goodwill  12,921,185   10,387,198 
Other assets  50,965   37,227 
Total assets $168,421,517  $45,196,697 
         
LIABILITIES AND SHAREHOLDERS' EQUITY        
Current liabilities        
Accounts payable $349,939  $204,075 
Accrued payroll and other expenses  2,250,692   1,639,038 
Current portion - Contracts payable (note 6)  2,000,000   1,761,028 
Billings in excess of revenues  140,991   798,549 
Operating Lease Liability, current portion  463,465   0 
Deferred revenue  299,482   380,787 
Total current liabilities  5,504,569   4,783,477 
         
Long-term liabilities        
Deferred income taxes, net  2,353,858   2,731,616 
Operating Lease Liability  463,312   0 
Payments due under Contracts payable (note 6)  4,063,833   0 
Total liabilities  12,385,572   7,515,093 
         
Commitments and Contingencies (note 7)  –   – 
         
Shareholders' equity (note 8)        
Preferred stock, $0.001 par value 10,000,000 shares authorized 0 shares issued and outstanding $0  $0 
Common stock, $0.001 par value 50,000,000 shares authorized 19,923,277 and 17,591,834 shares issued and outstanding  9,926   7,595 
Additional paid-in capital  128,531,427   15,319,474 
Accumulated Other Comprehensive Income  58,467   0 
Retained earnings  27,436,125   22,354,535 
Total shareholders' equity  156,035,945   37,681,604 
Total liabilities and shareholders' equity $168,421,517  $45,196,697 

(in thousands, except share and per share amounts)August 31, 2023August 31, 2022
ASSETS
Current assets
Cash and cash equivalents$57,523 $51,567 
Accounts receivable, net of allowance for doubtful accounts of $46 and $1210,201 13,787 
Prepaid income taxes804 1,391 
Prepaid expenses and other current assets3,904 3,377 
Short-term investments57,940 76,668 
Total current assets130,372 146,790 
Long-term assets
Capitalized computer software development costs, net of accumulated amortization of $17,199 and $15,67211,335 9,563 
Property and equipment, net671 632 
Operating lease right-of-use assets1,247 1,420 
Intellectual property, net of accumulated amortization of $9,301 and $7,9288,689 9,057 
Other intangible assets, net of accumulated amortization of $2,107 and $2,66212,825 7,560 
Goodwill19,099 12,921 
Deferred tax assets1,438 — 
Other assets425 439 
Total assets$186,101 $188,382 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable$144 $225 
Accrued compensation4,392 3,254 
Accrued expenses659 931 
Contracts payable3,250 — 
Operating lease liability - current portion442 461 
Deferred revenue3,100 2,864 
Total current liabilities11,987 7,735 
Long-term liabilities
Deferred income taxes, net— 1,456 
Operating lease liability755 943 
Contracts payable – net of current portion3,330 — 
Total liabilities16,072 10,134 
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 and additional paid-in capital —50,000,000 shares authorized; 19,937,961 and 20,260,070 shares issued and outstanding144,974 138,512 
Retained earnings25,196 40,044 
Accumulated other comprehensive loss(141)(308)
Total shareholders' equity170,029 178,248 
Total liabilities and shareholders' equity$186,101 $188,382 

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

F-3
Consolidated Financial Statements.

F-5

Table of Contents
SIMULATIONS PLUS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

For the years ended August 31,

             
  2020  2019  2018 
          
Revenues $41,589,084  $33,970,440  $29,666,524 
Cost of revenues  10,649,230   9,025,704   7,994,228 
Gross margin  30,939,854   24,944,736   21,672,296 
Operating expenses            
Selling, general, and administrative  16,360,053   11,796,027   9,583,852 
Research and development  2,974,623   2,499,980   1,790,656 
Total operating expenses  19,334,676   14,296,007   11,374,508 
             
Income from operations  11,605,178   10,648,729   10,297,788 
             
Other income (expense)            
Interest income  29,468   33,522   27,122 
Change in value of contingent consideration  (202,500)  (109,078)  (153,034)
(Loss) income on currency exchange  (45,097)  (16,697)  (32,934)
Total other income (expense)  (218,129)  (92,253)  (158,846)
             
Income before provision for income taxes  11,387,049   10,556,476   10,138,942 
Provision for income taxes  (2,054,989)  (1,973,147)  (1,204,130)
Net Income $9,332,060  $8,583,329  $8,934,812 
             
Earnings per share            
Basic $0.52  $0.49  $0.52 
Diluted $0.50  $0.48  $0.50 
             
Weighted-average common shares outstanding            
Basic  17,819,064   17,492,258   17,328,707 
Diluted  18,538,373   18,057,431   17,860,392 
             
Other Comprehensive Income, net of tax            
Foreign currency translation adjustments $58,467  $0  $0 
Comprehensive Income $9,390,527  $0  $0 

Years ended August 31,
(in thousands, except per common share amounts)202320222021
Revenues
Software$36,517 $32,642 $27,670 
Services23,060 21,264 18,796 
Total revenues59,577 53,906 46,466 
Cost of revenues
Software3,627 3,060 3,235 
Services8,003 7,762 7,365 
Total cost of revenues11,630 10,822 10,600 
Gross profit47,947 43,084 35,866 
Operating expenses
Research and development4,504 3,208 4,047 
Selling, general, and administrative34,718 24,965 20,566 
Total operating expenses39,222 28,173 24,613 
 
Income from operations8,725 14,911 11,253 
Other income (expense), net2,970 204 (168)
 
Income before income taxes11,695 15,115 11,085 
Provision for income taxes(1,734)(2,632)(1,303)
Net income$9,961 $12,483 $9,782 
Earnings per share
Basic$0.50 $0.62 $0.49 
Diluted$0.49 $0.60 $0.47 
Weighted-average common shares outstanding
Basic20,075 20,196 20,045 
Diluted20,465 20,749 20,743 
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments167 (265)(101)
Comprehensive income$10,128 $12,218 $9,681 
The accompanying notes are an integral part of these consolidated financial statements.

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Consolidated Financial Statements.

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Table of Contents
SIMULATIONS PLUS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

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

                         
        Additional  Accumulated Other       
  Common Stock  Paid-In  Comprehensive Retained     
  Shares  Amount  Capital  Income Earnings   Total 
                   
Balance, August 31, 2017  17,277,604  $7,278  $12,109,141  $–  $13,688,468   $25,804,887 
Exercise of stock options  130,006   131   635,452   0   0   635,583 
Stock-based Compensation   –   –   562,078   –   –   562,078 
Shares issued to Directors for services  8,835   8   146,997   0   0   147,005 
Declaration of Dividend  –   –   –   –   (4,161,740)  (4,161,740)
Net income  –   –   –   –   8,934,812   8,934,812 
Balance, August 31, 2018  17,416,445  $7,417  $13,453,668  $0  $18,461,540   $31,922,625 
Cumulative Effect of Changes related to adoption of ASC 606  –   –   –   –   (493,279)  (493,279)
Exercise of stock options  166,703   168   787,979   –   –   788,147 
Stock-based Compensation  –   –   865,848   –   –   865,848 
Shares issued to Directors for services  8,686   10   211,979   0   0   211,989 
Declaration of Dividend  –   –   –   –   (4,197,055)  (4,197,055)
Net income  –   –   –   –   8,583,329   8,583,329 
Balance, August 31, 2019  17,591,834  $7,595  $15,319,474  $0  $22,354,535   $37,681,604 
Exercise of stock options  121,647   121   629,626   –   –   629,747 
Stock-based Compensation  –   –   1,286,625   –   –   1,286,625 
Shares issued to Directors for services  7,205   7   289,893   –   –   289,900 
Declaration of Dividend  –   –   –   –   (4,250,470)  (4,250,470)
Shares issued - Lixoft  111,682   112   3,260,562   –   –   3,260,674 
Common stock issued for cash, net  2,090,909   2,091   107,745,247   –   –   107,747,338 
Foreign Currency Translation Adjustments  –   –   –   58,467   –   58,467 
Net income  –   –   –   –   9,332,060   9,332,060 
Balance, August 31, 2020  19,923,277  $9,926  $128,531,427  $58,467  $27,436,125   $156,035,945 

Years ended August 31,
(in thousands, except per common share amounts)202320222021
Common stock and additional paid in capital
Balance, beginning of period$138,512 $133,418 $128,541 
Exercise of stock options1,543 891 1,461 
Stock-based compensation4,319 2,686 2,405 
Shares issued to Directors for services600 351 345 
Shares issued - Lixoft— 1,166 666 
Balance, end of period144,974 138,512 133,418 
Retained earnings
Balance, beginning of period40,044 32,407 27,436 
Declaration of dividends(4,809)(4,846)(4,811)
Repurchase and retirement of common shares(20,000)— — 
Net income9,961 12,483 9,782 
Balance, end of period25,196 40,044 32,407 
Accumulated other comprehensive loss
Balance, beginning of period(308)(43)58 
Other comprehensive income (loss)167 (265)(101)
Balance, end of period(141)(308)(43)
Total shareholders’ equity$170,029 $178,248 $165,782 
Cash dividends declared per common share$0.24 $0.24 $0.24 
The accompanying notes are an integral part of these consolidated financial statements.

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Consolidated Financial Statements.

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Table of Contents
SIMULATIONS PLUS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

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

             
  2020  2019  2018 
Cash flows from operating activities            
Net income $9,332,060  $8,583,329  $8,934,812 
Adjustments to reconcile net income to net cash provided by operating activities            
Depreciation and amortization  2,961,930   2,750,245   2,721,304 
Change in value of contingent consideration  202,500   109,060   152,752 
Stock-based compensation  1,576,525   1,077,837   709,083 
Deferred income taxes  (377,759)  (299,096)  (1,731,821)
(Increase) decrease in            
Accounts receivable  (2,017,792)  487,970   (1,465,803)
Revenues in excess of billings  140,316   (1,248,063)  (504,514)
Prepaid income taxes  (12,380)  (452,517)  149,850 
Prepaid expenses and other assets  (398,213)  (93,877)  (153,682)
Increase (decrease) in            
Accounts payable  220,584   (147,529)  110,713 
Accrued payroll and other expenses  23,030   486,862   168,883 
Billings in excess of revenues  (657,558)  413,946   167,645 
Accrued income taxes  0   0   0 
Deferred revenue  (81,305)  (29,747)  27,966 
Net cash provided by operating activities  10,911,938   11,638,420   9,287,188 
             
Cash flows used in investing activities            
Purchases of property and equipment  (231,380)  (137,745)  (183,291)
Purchases of intellectual property  0   (50,000)  0 
Purchase of short-term investments  (67,248,924)  0   0 
Cash used to acquire subsidiaries  (9,471,352)  0   0 
Cash received in acquisition  3,799,134   0   0 
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            
Payment of dividends  (4,250,470)  (4,197,055)  (4,161,740)
Payments on contracts payable  (1,761,028)  (4,238,973)  (247,328)
Proceeds from the exercise of stock options  629,747   788,147   635,583 
Proceeds from follow-on public offering, net  107,747,338   0   0 
Net cash provided by (used in) financing activities  102,365,587   (7,647,881)  (3,773,485)
             
Net increase in cash and cash equivalents  37,771,815   2,034,798   3,184,983 
Cash and cash equivalents, beginning of year  11,435,499   9,400,701   6,215,718 
Cash and cash equivalents, end of period $49,207,314  $11,435,499  $9,400,701 
             
Supplemental disclosures of cash flow information            
Income taxes paid $2,352,770  $2,673,475  $2,712,988 
             
Non-Cash Investing and Financing Activities            
Stock issued for acquisition of Lixoft $3,260,674  $0  $0 
Creation of contract liabilities for acquisition of subsidiaries $4,528,000  $0  $0 
Right of use assets capitalized $1,498,542  $0  $0 

Years ended August 31,
(in thousands)202320222021
Cash flows from operating activities
Net income$9,961 $12,483 $9,782 
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization3,840 3,574 3,590 
Change in fair value of contingent consideration680 283 486 
Amortization of investment (discounts) premiums(1,134)1,678 2,350 
Stock-based compensation4,828 3,037 2,750 
Deferred income taxes(2,095)(270)(628)
Loss (gain) from disposal of assets6 — — 
Impairment of other intangibles500 — — 
Currency translation adjustments167 (265)(101)
(Increase) decrease in
Accounts receivable4,097 (3,936)(2,429)
Prepaid income taxes587 (379)(42)
Prepaid expenses and other assets(501)1,081 (157)
Increase (decrease) in  
Accounts payable(81)(162)39 
Other liabilities832 (1,437)3,353 
Accrued income taxes(7)— — 
Deferred revenue176 2,213 210 
Net cash provided by operating activities21,856 17,900 19,203 
Cash flows from investing activities  
Purchases of property and equipment(453)(819)(1,627)
Purchase of short-term investments(95,045)(100,846)(122,395)
Proceeds from maturities of short-term investments114,907 109,121 100,229 
Purchased intangibles(601)— — 
Acquisition of Immunetrics, net of cash acquired(8,223)— — 
Capitalized computer software development costs(3,219)(3,151)(2,949)
Net cash provided by (used in) investing activities7,366 4,305 (26,742)
Cash flows from financing activities  
Payment of dividends(4,809)(4,846)(4,811)
Payments on contracts payable— (3,667)(1,334)
Proceeds from the exercise of stock options1,543 891 1,461 
Repurchase and retirement of common shares(20,000)— — 
Net cash used in financing activities(23,266)(7,622)(4,684)
  
Net increase (decrease) in cash and cash equivalents5,956 14,583 (12,223)
Cash and cash equivalents, beginning of year$51,567 $36,984 $49,207 
Cash and cash equivalents, end of period$57,523 $51,567 $36,984 
Supplemental disclosures of cash flow information
Income taxes paid$3,204 $3,233 $1,857 
Non-Cash Investing and Financing Activities  
Stock issued for acquisition of Lixoft$— $1,166 $666 
Creation of contract liabilities from acquisition of subsidiaries$5,900 $— $— 
Right of use assets capitalized$227 $624 $905 

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

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Consolidated Financial Statements.

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Table of Contents
Simulations Plus, Inc.

Notes to Consolidated Financial Statements

For the Year Ended August 31, 2020

2023

NOTE 1 - – ORGANIZATION AND LINES OF BUSINESS
Organization

Organization

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.Plus. In June 2017, Simulations Plus acquired DILIsym Services, Inc. (DILIsym)(“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-ownedwholly owned subsidiary pursuant to a stock purchase and contribution agreement. (Collectively, “Company”, “we”, “us”,In June 2023, Simulations Plus acquired Immunetrics, Inc. (“Immunetrics”) as a wholly owned subsidiary through a reverse triangular merger. (Simulations Plus together with its subsidiaries, collectively, the “Company,” “we,” “us,” “our”).


Effective September 1, 2021, the Company merged both Cognigen and DILIsym with and into Simulations Plus through short-form mergers (the “Mergers”). To effectuate the Mergers, the Company filed Certificates of Ownership with the Secretaries of State of the states of Delaware (Cognigen’s and DILIsym’s state of incorporation) and California (Simulation Plus’ state of incorporation). Consummation of the Mergers was not subject to approval of the Company’s stockholders and did not impact the rights of the Company’s stockholders.

On December 20, 2022, Simulations Plus International, Inc. (“SLPI”), a Delaware corporation, was created as a wholly owned subsidiary of Simulations Plus in order to facilitate future international acquisitions, if any, and global integrations. In furtherance of this objective, the Company added the trade name “SLP France” to Lixoft, and on April 25, 2023, Simulations Plus transferred its ownership of Lixoft to SLPI pursuant to a contribution and acceptance agreement, resulting in Lixoft becoming a wholly owned subsidiary of SLPI. The transfer did not impact the rights of the Company’s stockholders.

Lines of Business

The Company designs

We are a premier developer of drug discovery and developsdevelopment software for modeling and simulation, and for the prediction of molecular properties utilizing both artificial-intelligence-based and machine-learning-based technologies. We also provide consulting services ranging from early drug discovery through preclinical and clinical development analysis and for submissions to regulatory agencies. Our software and consulting services are provided to major pharmaceutical, simulation software to promote cost-effective solutions to a number of problems in pharmaceutical researchbiotechnology, agrochemical, cosmetics, and food industry companies and academic and regulatory agencies worldwide for use in the educationconduct of pharmacy and medical students, and it provides consulting services to the pharmaceutical and chemical industries. Recently, the Company has begun to explore developing software applications for defense and for health care outside of the pharmaceutical industry.

industry-based research.

NOTE 2 - SUMMARY OF– SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

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.,operating subsidiaries, Lixoft and as of April 1, 2020, Lixoft accounts.Immunetrics. 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. 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.

Reclassifications
Reclassifications

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


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Table of Contents
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.

F-7

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

The Company determines


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


i.Identification of the contract, or contracts, with a customer
ii.Identification of the performance obligations in the contract
iii.Determination of the transaction price
iv.Allocation of the transaction price to the performance obligations in the contract
v.Recognition of revenue when, or as, we satisfy a performance obligation

Components of Revenue
The following is a description of principal activities from which the Company generates revenue. As part of the accounting for these arrangements, the Company must develop assumptions that require judgment to determine the standalone selling price for each performance obligation identified in the contract. Standalone selling prices are determined based on the prices at which the Company separately sells its services or goods.
i.Revenue ComponentsIdentificationTypical Payment Terms
Software Revenues:
Software revenues are generated primarily from sales of software licenses at the time the software is unlocked, and the term commences. The license period typically is one year or less. Along with the license, a di minimis amount of customer support is provided to assist the customer with the software. Should the customer need more than a di minimis amount of support, they can choose to enter into a separate contract for additional training. Most software is installed on our customers’ servers and the Company has no control of the software once the sale is made.
Payments are generally due upon invoicing on a net 30 basis, unless other payment terms are negotiated with the customer based on customer history. Typical industry standards apply.
For certain software arrangements the Company hosts the licenses on servers maintained by the Company. Revenue for those arrangements is accounted as Software as a Service over the life of the contract. These arrangements account for a small portion of software revenues of the Company.
Consulting Contracts:
Consulting services provided to our customers are generally recognized over time as the contracts are performed and the services are rendered. The Company measures its consulting revenue based on time expended compared to total estimated hours to complete a project. The Company believes the method chosen for its contract revenue best depicts the transfer of benefits to the customer under the contracts.Payment terms vary, depending on the size of the contract, or contracts,credit history and history with a customerthe client, and deliverables within the contract.
ii.Identification of the performance obligations in the contract
iii.Consortium Member Based Services:Determination of the transaction price
iv.Allocation ofThe performance obligation is recognized on a time-elapsed basis, by month for which the transaction price to the performance obligations in the contract
v.Recognition of revenue when, orservices are provided, as the Company satisfiestransfers control evenly over the contractual period.Payment is due at the beginning of the period, generally on a performance obligationnet-30 or -60 basis.



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Table of Contents
Remaining Performance Obligations
Transaction price allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes deferred revenue and unbilled amounts that will be recognized as revenue in future periods. As of August 31, 2023, remaining performance obligations were $11.8 million. Ninety-five percent of the remaining performance obligations are expected to be recognized over the next 12 months, with the remainder expected to be recognized thereafter. Remaining performance obligations estimates are subject to change and are affected by several factors, including contract terminations and changes in the scope of contracts.
Disaggregation of Revenues

The components of disaggregation of revenue for the years ended August 31, 2023, 2022, and 2021 were as follows:
Years ended August 31,
(in thousands)202320222021
Software licenses
Point in time$35,369 $31,587 $26,725 
Over time1,148 1,055 945 
Services 
Over time23,060 21,264 18,796 
Total revenue$59,577 $53,906 $46,466 
In addition, the Company allocates revenues to geographic areas based on the locations of its customers. Geographical revenues for the years ended August 31, 2023, 2022, and 2021 were as follows:
Years ended August 31,
(in thousands)202320222021
$% of total$% of total$% of total
Americas$40,817 69 %$37,681 70 %$32,549 70 %
EMEA11,713 20 %10,388 19 %7,906 17 %
Asia Pacific7,047 12 %5,837 11 %6,011 13 %
Total$59,577 100 %$53,906 100 %$46,466 100 %
Contract Balances
We receive payments from customers based upon contractual billing schedules, while we recognize revenue when, or as, we satisfy our performance obligations. This timing difference results in accounts receivable, contract assets, and contract liabilities. We record accounts receivable when the right to consideration becomes unconditional. We record a contract asset if the right to consideration is conditioned on something other than the passage of time, such as our future performance. Contract assets are included in prepaid expenses and other current assets on our consolidated balance sheets. We record a contract liability when we have an obligation to transfer goods or services to a customer for which we have either received consideration or a payment is due from a customer. We refer to contract liabilities as deferred revenue on our consolidated balance sheets.
Contract asset balances as of August 31, 2023, 2022, and 2021, were $2.7 million, $1.7 million, and $3.2 million, respectively.
During the year ended August 31, 2023, the Company recognized $2.6 million of revenue that was included in contract liabilities as of August 31, 2022, and during the year ended August 31, 2022, the Company recognized $0.6 million of revenue that was included in contract liabilities as of August 31, 2021.


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

We apply the practical expedient as described in ASC Topic 606340-40-25-4 to expense costs as incurred for sales commissions, whensince the amortization period of benefitthe asset that we otherwise would have beenrecognized is one year or less. MostThis expense is included in the consolidated statements 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.

Practical Expedientsoperations and Exemptions

The Company has elected the following additional practical expedients in applying Topic 606:

·Commission Expense: We apply the practical expedient in ASC Topic 606 to expense costs as incurred for sales commissions when the period of benefit is one year or less. Most of our contracts are of a duration of one year or less, few, if any of the longer-term contracts have commissions associated with them.

·

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 31, 2020. 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.

comprehensive income as selling, general, and administrative expense.

Cash and Cash Equivalents

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

Accounts Receivable

We analyze and Allowance for Credit Losses

The Company extends credit to its customers in the agenormal course of customerbusiness. The Company evaluates its allowance for credit losses based on its estimate of the collectability of its trade accounts receivable. As part of this assessment, the Company considers various factors including the financial condition of the individual companies with which it does business, the aging of receivable balances, historical bad debt experience, customer creditworthiness, and changes in customer payment terms, when makingcurrent market conditions, and reasonable and supportable forecasts of future economic conditions. In times of economic turmoil, the Company’s estimates ofand judgments with respect to the collectability of its receivables is subject to greater uncertainty than in more stable periods. Accounts receivable balances will be charged off against the Company’s trade accounts receivable balances. If we determine thatallowance for credit losses after all means of collection have been exhausted and the financial conditions of any of our customers have deteriorated, whether due to customer-specific or general economic issues, an increasepotential for recovery is considered remote.
The activity in the allowance may be made. Accounts receivable are written off when all collection attempts have failed.

F-8
for credit losses related to our trade receivables is summarized as follows:

Years ended August 31,
(in thousands)202320222021
Balance, beginning of period$12 $78 $50 
Provision for expected credit losses77 (66)28 
Write-offs(43)— — 
Balance, end of period$46 $12 $78 

Investments

We

The Company may invest excess cash balances in short-term and long-term marketable debt securities. Investments may consist of certificates of deposit, money market accounts, government-sponsored enterprise securities, corporate bonds, and/or commercial paper.paper within the parameters of our Investment Policy and Guidelines. The Company accounts for its investmentinvestments 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 reportedmeasured at amortized cost.

cost and are presented at the net amount expected to be collected. Any change in the allowance for credit losses during the period is reflected in earnings. Discounts and premiums to par value of the debt securities are amortized to interest income/expense over the term of the security.


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


Available-for-Sale—Debt securities not classified as either securities held-to-maturity or trading securities are reported at fair value withvalue. For available-for-sale debt securities in an unrealized-loss position, we evaluate as of the balance sheet date whether the unrealized gainslosses are attributable to a credit loss or other factors. The portion of unrealized losses excluded fromrelated to a credit loss is recognized in earnings, and reported asthe portion of unrealized loss not related to a separate componentcredit loss is recognized in other comprehensive income (loss).

F-12
Table of shareholders’ equity.

The Company classifies itsContents

We classify our investments in marketable debt securities based on the facts and circumstances present at the time of purchase of the securities. We subsequently reassess the appropriateness of that classification at each reporting date. During the years ended August 31, 2020,2023 and 2022, all of the Company’sour 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. 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”.985-20. Capitalization of software development costs begins upon the establishment of technological feasibility and is discontinued when the product is available for sale.


The establishment of technological feasibility and the ongoing assessment for recoverability of capitalized software development costs require considerable judgment by management with respect to certain external factors including, but not limited to, technological feasibility, anticipated future gross revenues,revenue, 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'sour software products.

Amortization of capitalized computer software development costs is providedcalculated on a product-by-product basis on the straight-line method over the estimated economic life of the products not(not to exceed five years.years). Amortization of software development costs amounted to $1,225,544, $1,331,753, and $1,300,434$1.5 million, $1.2 million, $1.4 million for the years ended August 31, 2020, 2019,2023, 2022, and 2018,2021, respectively. We expect future amortization expense to vary due to increases in capitalized computer software development costs.

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

Property and Equipment

Property and equipment are recorded at cost, or fair market value for property and equipment acquired in business combinations, less accumulated depreciation and amortization. Depreciation and amortization are providedcalculated using the straight-line method over the estimated useful lives as follows:

Property and Equipment estimated useful lives
Equipment5 years
Computer equipment3 to 7 years
Furniture and fixtures5 to 7 years
Leasehold improvementsShorter of the asset life of asset or lease term

Maintenance and minor replacements are charged to expense as incurred. Gains and losses on disposals are included in the results of operations.

F-9

Internal-use Software

Leases

In February 2016, the FASB issued ASU No. 2016-02—Leases, to increase transparency

We have capitalized certain internal-use software costs in accordance with ASC 350-40, which are included in intangible assets. The amortization of such costs is classified as selling, general, and comparability among organizations by recognizing lease assets and lease liabilitiesadministrative expenses on the balance sheetconsolidated statements of operations. Maintenance of and disclosing key information about leasing arrangements. A lessee should recognize in the statement of financial position a liabilityminor upgrades to make lease payments (the lease liability)internal-use software are also classified as selling, general, and a right-of-use asset representing its right to use the underlying asset for the lease term. The recognition, measurement and presentation ofadministrative expenses and cash flows arising from a lease by a lessor have not significantly changed from previous U.S. GAAP. This ASU was effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2018. as incurred.
Leases
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 ourinception. Operating leases are classified asincluded in operating leases. Leasedlease right-of-use (“ROU”) assets and correspondingoperating lease liabilities (current and long-term) in our consolidated balance sheets.

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ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of the lease payments over the lease term. As most of our leases do not provide an implicit rate, we generally use our incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at the commencement date. The operating lease ROU asset also includes any lease payments made at or before the commencement date and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Costs associated with operating leases areLease expense is 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 $902,553 
Lease Liabilities, Current $537,017 
Lease Liabilities, Long-term $365,536 

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.

term.

Supplemental balance sheet information related to operating leases was as follows as of August 31, 2020:

Schedule of lease cost    
Right of use assets $926,600 
Lease Liabilities, Current $463,465 
Lease Liabilities, Long-term $463,312 
Operating lease costs $600,717 
Weighted Average remaining lease term  2.27 years 
Weighted Average Discount rate  4.25% 

2023:
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(in thousands)
Right of use assets$1,247 
Lease liabilities, current$442 
Lease liabilities, long-term$755 
Operating lease costs$463 
Weighted-average remaining lease term3.29 years
Weighted-average discount rate4.91 %

Intangible Assets and Goodwill

The Company performs

We perform valuations of assets acquired and liabilities assumed on each acquisition accounted for as a business combination and recognizesrecognize the assets acquired and liabilities assumed at their acquisition dateacquisition-date fair value. Acquired intangible assets include customer relationships, software, trade name,names, and non-competenoncompete agreements. The Company determinesWe determine the appropriate useful life by performing an analysis of expected cash flows based on historical experience of the acquired businesses. IntangibleFinite-lived intangible assets are amortized over their estimated useful lives using the straight-line method, which approximates the pattern in which the majority of the economic benefits are expected to be consumed.

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

Goodwill represents the excess of the cost of an acquired entity over the fair value of the acquired net assets. Goodwill is not amortized, instead it isand indefinite-lived intangible assets are tested for impairment annually or when events or circumstances change that would indicate that goodwillthey 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'sour use of the acquired assets or the strategy for the Company'sour overall business, significant negative industry or economic trends, or significant under-performanceunderperformance relative to expected historical or projected future results of operations.

Goodwill isand the other assets and liabilities acquired as part of the Immunetrics acquisition have been assigned to a separate reporting unit. The goodwill recorded in the Immunetrics reporting unit as of August 31, 2023, was $6.2 million.
Goodwill and intangible assets are tested for impairment at the reporting unit level, which is either one level below or the same level as an operating segment. As of August 31, 2020, the Company2023, we determined that it has fourwe have five reporting units,units: Simulations Plus, Cognigen, Corporation, DILIsym, Services, Inc.Lixoft, and Lixoft. When testing goodwillImmunetrics. We recognized an impairment charge $0.5 million 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 processCognigen trade name, as management's strategy is to identify whether a potential impairment exists by comparingno longer use the estimated fair valuesCognigen trade name.





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Table of the Company's reporting units with their respective book values, including goodwill. If the estimated fair valueContents
Reconciliation 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. 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 suchGoodwill 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 Services2023, 2022, and Lixoft. 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 0t recognized any impairment charges during the periods ended August 31, 2020, 2019 and 2018.

Reconciliation of Goodwill for the period ended August 31, 2020:

Schedule of reconciliation of goodwill                
  Cognigen  DILIsym  Lixoft  Total 
Balance, August 31, 2017 $4,789,248  $5,597,950  $0  $10,387,198 
Addition  0   0   0   0 
Impairments  0   0   0   0 
Balance, August 31, 2018  4,789,248   5,597,950   0   10,387,198 
Addition  0   0   0   0 
Impairments  0   0   0   0 
Balance, August 31, 2019  4,789,248   5,597,950   0   10,387,198 
Addition  0   0   2,533,987   2,533,987 
Impairments  0   0   0   0 
Balance, August 31, 2020 $4,789,248  $5,597,950  $2,533,987  $12,921,185 

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2021:

(in thousands)CognigenDILIsymLixoftImmunetricsTotal
Balance, August 31, 2021$4,789 $5,598 $2,534 $— $12,921 
Addition— — — — — 
Impairments— — — — — 
Balance, August 31, 20224,789 5,598 2,534 — 12,921 
Addition— — — 6,178 6,178 
Impairments— — — — — 
Balance, August 31, 2023$4,789 $5,598 $2,534 $6,178 $19,099 

Other Intangible Assets

The following table summarizes other intangible assets as of August 31, 2020:

Schedule of other intangible assets              
  Amortization
Period		 Acquisition
Value		  Accumulated
Amortization		  Net book
value		 
Customer relationships-Cognigen Straight line 8 years $1,100,000  $825,000  $275,000 
Trade Name-Cognigen None  500,000   0   500,000 
Covenants not to compete-Cognigen Straight line 5 years  50,000   50,000   0 
Covenants not to compete-DILIsym Straight line 4 years  80,000   65,000   15,000 
Trade Name-DILIsym None  860,000   0   860,000 
Customer relationships-DILIsym Straight line 10 years  1,900,000   617,500   1,282,500 
Customer relationships-Lixoft Straight line 14 years  2,550,000   75,892   2,474,108 
Trade Name-Lixoft None  1,550,000   0   1,550,000 
Covenants not to compete-Lixoft Straight line 3 years  60,000   8,333   51,667 
    $8,650,000  $1,641,725  $7,008,275 

Amortization2023:

(in thousands)Amortization
Period		Acquisition
Value		Accumulated
Amortization		Net Book Value
Trade namesNone$4,210 $— $4,210 
Covenants not to competeStraight line 2 to 3 years30 3 27 
Other internal use softwareStraight line 3 to 5 years350 10 340 
Customer relationshipsStraight line 8 to 14 years8,230 1,887 6,343 
ERPStraight line 15 years2,112 207 1,905 
$14,932 $2,107 $12,825 
The following table summarizes other intangible assets as of August 31, 2022:
(in thousands)Amortization
Period		Acquisition
Value		Accumulated
Amortization		Net Book Value
Trade namesNone$2,910 $— $2,910 
Covenants not to competeStraight line 3 years60 48 12 
Customer relationshipsStraight line 8 to 14 years5,550 2,534 3,016 
ERPStraight line 15 years1,702 80 1,622 
$10,222 $2,662 $7,560 
Total amortization expense for the yearyears ended August 31, 2020, 20192023, 2022, and 20182021 was $431,725, $357,500,$0.6 million, $0.6 million, and $357,500.

Future$0.5 million, respectively.

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

Schedule of future amortization   

Year ending

August 31,

 Amount 
2021 $545,000 
2022 $530,000 
2023 $384,000 
2024 $372,000 
2025 $372,000 

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.

(in thousands)
Years ending August 31,Amount
2024$960 
2025$957 
2026$945 
2027$898 
2028$755 
Fair Value of Financial Instruments

Assets and liabilities recorded at fair value in the Consolidated Balance Sheetsconsolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair value. The categories as defined by the standard are as follows:

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Level Input:Input Definition:
Level IInputs that are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.
Level IIInputs, other than quoted prices included in Level I, that are observable for the asset or liability through corroboration with market data at the measurement date.
Level IIIUnobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.

For certain of our financial instruments, including accounts receivable, accounts payable, and accrued payrollcompensation and other expenses, and accrued bonuses to officersexpenses, the carrying amounts approximateare representative of their fair value due to their short maturities.

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

The following table summarizes fair value measurementsdebt securities. Investments at August 31, 20202023, consisted of corporate bonds and August 31, 2019term deposits with maturities remaining of less than 12 months. Under the fair-value hierarchy, the fair market values of the Company’s cash equivalents and investments are Level I. We may also invest excess cash balances in certificates of deposit, money market accounts, government-sponsored enterprise securities, and/or commercial paper. We account for assetsour investments in accordance with ASC 320, Investments – Debt and liabilities measured at fair value on a recurring basis:

August 31, 2020:

Summarizes fair value measurements                
  Level 1  Level 2  Level 3  Total 
Cash and cash equivalents $49,207,314  $0  $0  $49,207,314 
Short-term investments $66,803,595  $0  $0  $66,803,595 
Acquisition-related contingent consideration obligations $0  $0  $4,730,500  $4,730,500 

August 31, 2019:

  Level 1  Level 2  Level 3  Total 
Cash and cash equivalents $11,435,499  $0  $0  $11,435,499 
Short-term investments $0  $0  $0  $0 
Acquisition-related contingent consideration obligations $0  $0  $1,761,028  $1,761,028 

Equity Securities. As of August 31, 20202023 and 2019,2022, all investments were classified as held-to-maturity securities, as we have the positive intent and ability to hold these securities until maturity. We believe unrealized losses on investments were primarily caused by rising interest rates rather than changes in credit quality, and, accordingly, we have not recorded an allowance for credit losses on our debt securities as of August 31, 2023, and 2022.

The following tables summarize our short-term investments as of August 31, 2023, and August 31, 2022:
August 31, 2023
(in thousands)Amortized CostGross
Unrealized
Gains		Gross
Unrealized
Losses		Fair Value
Commercial notes (due within one year)$53,940 $— $(115)$53,825 
Term deposits (due within one year)4,000 — — 4,000 
Total$57,940 $— $(115)$57,825 
August 31, 2022
(in thousands)Amortized CostGross
Unrealized
Gains		Gross
Unrealized
Losses		Fair Value
Commercial notes (due within one year)$72,168 $— $(839)$71,329 
Term deposits (due within one year)4,500 — — 4,500 
Total$76,668 $— $(839)$75,829 
As of August 31, 2023, the Company hashad a liability for contingent consideration related to its acquisition of Lixoft and DILIsym Services, Inc.Immunetrics. The fair value measurement of the contingent consideration obligations isare determined using Level 3 inputs. The fair value of contingent consideration obligations isare 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.markets. 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 fair value of the contingent consideration obligations are recorded in the Company’s Consolidated Statement of Operations.





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The following is a reconciliation of contingent consideration value.

Reconciliation of contingent consideration value    
Value at August 31, 2019 $1,761,028 
Purchase price contingent consideration  4,528,000 
Contingent consideration payments  (1,761,028)
Change in value of contingent consideration  202,500 
Value at August 31, 2020 $4,730,500 

at fair value:
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(in thousands)Amount
Contingent consideration at acquisition date4,100 
Change in fair value of contingent consideration680 
 Contingent consideration as of August 31, 2023$4,780 


Business Combination
Advertising

The Company expenses advertisingacquisition method of accounting for business combinations requires us to use significant estimates and assumptions, including fair value estimates, as of the business combination date and to refine those estimates as necessary during the measurement period (defined as the period, not to exceed one year, in which we may adjust the provisional amounts recognized for a business combination).

Under the acquisition method of accounting, we recognize separately from goodwill the identifiable assets acquired, the liabilities assumed, and any noncontrolling interests in an acquiree, generally at the acquisition date fair value. We measure goodwill as of the acquisition date as the excess of consideration transferred, which we also measure at fair value, over the net of the acquisition date amounts of the identifiable assets acquired and liabilities assumed. Costs that we incur to complete the business combination, such as investment banking, legal, and other professional fees, are not considered part of consideration, and we recognize such costs as general and administrative expenses as they are incurred. Advertising costsUnder the acquisition method, we also account for acquired company restructuring activities that we initiate separately from the years ended August 31, 2020, 2019business combination.

Should the initial accounting for a business combination be incomplete by the end of a reporting period that falls within the measurement period, we report provisional amounts in our financial statements. During the measurement period, we adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and 2018 were approximately $63,944, $83,213circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date, and $we record those adjustments to our financial statements. We apply those measurement period adjustments that we determine to be material retrospectively to comparative information in our financial statements, including adjustments to depreciation and amortization expense.
67,848
, respectively.

Under the acquisition method of accounting for business combinations, if we identify changes to acquired deferred tax asset valuation allowances or liabilities related to uncertain tax positions during the measurement period, and they relate to new information obtained about facts and circumstances that existed as of the acquisition date, those changes are considered a measurement period adjustment and we record the offset to goodwill. We record all other changes to deferred tax asset valuation allowances and liabilities related to uncertain tax positions in current period income tax expense. This accounting applies to all of our acquisitions regardless of acquisition date.
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,experiments, and purchased software whichthat was developed by other companies and incorporated into, or used in the development of, our final products.

Income Taxes

The Company accounts

We account for income taxes in accordance with ASC 740-10, “Income Taxes”740, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.


Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities.



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Intellectual property

On

In February 28, 2012, we bought out the royalty agreement with Enslein Research. The cost of $75,000$0.1 million is being amortized over 10 years under the straight-line method. Amortization 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.

Onmethod.

In 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,$6.0 million, which is being amortized over 10 years under the straight-line methodmethod.

. 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

In June 1, 2017, as part of the acquisition of DILIsym, Services, Inc. the Company acquired certain developed technologies associated with the drug induceddrug-induced liver disease (DILI). These technologies were valued at $2,850,000$2.9 million and are being amortized over 9 years under the straight-line methodmethod.

. Amortization expense for the fiscal years ended August 31, 2020 and 2019 was $316,667 and $316,667, respectively, and is included in cost of revenues. 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.Company. The cost of $50,000$0.1 million is being amortized over 10 years under the straight-line methodmethod.

. Amortization expense for the year ended August 31, 2020 and 2019 was $5,000 and $5,000. Accumulated amortization as of August 31, 2020 and 2019 was $10,000 and $5,000, respectively.

On

In April 1, 2020, as part of the acquisition of Lixoft, the Company acquired certain developed technologies associated with the Lixoft scientific software. These technologies were valued at $8,010,000$8.0 million and are being amortized over 16 years under the straight-line methodmethod.

. Amortization expense for the fiscal years ended August 31, 2020 was $208,594 and is included in
In June 2023, we purchased certain developed technology of Immunetrics. The cost of revenues. Total accumulated amortization$1.1 million is being amortized over 5 years under the straight-line method.

The following table summarizes intellectual property as of August 31, 2020 was $208,594.

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2023:

(in thousands)Amortization
Period		Acquisition
Value		Accumulated
Amortization		Net Book
Value
Termination/nonassertion agreement-TSRL Inc.Straight line 10 years$6,000 $5,575 $425 
Developed technologies–DILIsym acquisitionStraight line 9 years2,850 1,978 872 
Intellectual rights of Entelos Holding CompanyStraight line 10 years50 25 25 
Developed technologies–Immunetrics acquisitionStraight line 5 years1,080 45 1,035 
Developed technologies–Lixoft acquisitionStraight line 16 years8,010 1,678 6,332 
$17,990 $9,301 $8,689 

The following table summarizes intellectual property as of August 31, 2022:
(in thousands)Amortization
Period		Acquisition
Value		Accumulated
Amortization		Net Book
Value
Royalty Agreement buy out-Enslein ResearchStraight line 10 years$75 $75 $— 
Termination/nonassertion agreement-TSRL Inc.Straight line 10 years6,000 4,975 1,025 
Developed technologies–DILIsym acquisitionStraight line 9 years2,850 1,662 1,188 
Intellectual rights of Entelos Holding CompanyStraight line 10 years50 20 30 
Developed technologies–Lixoft acquisitionStraight line 16 years8,010 1,196 6,814 
$16,985 $7,928 $9,057 
Total amortization expense for intellectual property agreements for the years ended August 31, 2020, 20192023, 2022, and 20182021 was $1,138,280, $929,167,$1.4 million, $1.4 million, and $$1.4 million, respectively.
924,167
. Accumulated

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

Future amortizationintellectual property for the next five years is as follows:

Schedule of future amortization expenses                        
Years ending
August 31,		 TSRL  Enslein  DILI-Acquired
Developed
Technologies		  Lixoft-Acquired
Developed
Technologies		  Entelos  Total 
2021 $600,000  $7,500  $316,667  $500,625  $5,000  $1,429,792 
2022 $600,000  $3,750  $316,667  $500,625  $5,000  $1,426,042 
2023 $600,000  $0  $316,667  $500,625  $5,000  $1,422,292 
2024 $425,000  $0  $316,667  $500,625  $5,000  $1,247,292 
2025 $0  $0  $316,667  $500,625  $5,000  $822,292 

(in thousands)
Years ending August 31,Amount
2024$1,434 
2025$1,009 
2026$933 
2027$693 
2028$648 
Earnings per Share

The Company reports

We report earnings per share in accordance with FASB ACS 260-10.ASC 260. Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of common shares available.outstanding. Diluted earnings per share is computed similarly to basic earnings per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. The components of basic and diluted earnings per share for the years ended August 31, 2020, 20192023, 2022, and 20182021 were as follows:

Schedule of earnings per share            
  2020  2019  2018 
Numerator            
Net income attributable to common shareholders $9,332,060  $8,583,329  $8,934,812 
             
Denominator            
Weighted-average number of common shares outstanding during the year  17,819,064   17,492,258   17,328,707 
Dilutive effect of stock options  719,309   565,173   531,685 
             
Common stock and common stock equivalents used for diluted earnings per share  18,538,373   18,057,431   17,860,392 

Years ended August 31,
(in thousands)202320222021
Numerator
Net income attributable to common shareholders$9,961 $12,483 $9,782 
Denominator
Weighted-average number of common shares outstanding during the year20,075 20,196 20,045 
Dilutive effect of stock options390 553 698 
Common stock and common stock equivalents used for diluted earnings per share20,465 20,749 20,743 
Stock-Based Compensation

The Company accounts for

Compensation costs related to stock options using the modified prospective methodare determined in accordance with FASB ASC 718-10, “Compensation-Stock Compensation”. Under this method, compensation costs include estimated grant date718. Compensation cost is calculated based on the grant-date fair value ofestimated using the awardsBlack-Scholes pricing model and then amortized on a straight-line basis over the options’ vestingrequisite service period. Stock-based compensation expense related to stock options, not including shares issued to directors for services, was $1,286,625, $865,848$4.3 million, $2.7 million, and $562,078$2.4 million for the fiscal years ended August 31, 2020, 20192023, 2022, and 2018, respectively, and is included in the statements of operations as Consulting, Salaries, and Research and Development expense.

2021, respectively.

Impairment of Long-lived Assets

The Company accounts

We account for the impairment and disposition of long-lived assets in accordance with ASC 350, “Intangibles – Goodwill and Other” and ASC 360, “Property and Equipment”.360. Long-lived assets to be held and used are reviewed for events or changes in circumstances that indicate that their carrying value may not be recoverable. We measure recoverability by comparing the carrying amount of an asset to the expected future undiscounted net cash flows generated by the asset. If we determine that the asset may not be recoverable, or if the carrying amount of an asset exceeds its estimated future undiscounted cash flows, we recognize an impairment charge to the extent of the difference between the fair value and the asset's carrying amount. NaNAs of August 31, 2023, we recognized a $0.5 million impairment charge related to the Cognigen trade name, and it is included in SG&A expenses. The Cognigen trade name fair valuation was measured during the acquisition of Cognigen. Management determined to no longer use the Cognigen trade name and to instead focus our marketing strategy on promoting the Simulations Plus brand and our portfolio of products and services. As the Company's other acquired trade names relate to marketed products actively sold to customers, and following management's assessment of other possible triggering events that could indicate a risk of impairment, management concluded that no impairment of other intangible assets or goodwill was necessary. No impairment losses were recorded during the years ended August 31, 2020, 20192022 and 2018.

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2021.

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Recently Issued Accounting Standards

In May 2014, the Financial

None.
Recently Adopted Accounting Standards Board (FASB)
In October 2021, the FASB issued ASU 2021-08, Business Combinations - Accounting Standards Update (ASU) 2014-09for contract assets and its related amendments regarding Accounting Standards Codification Topic 606 (ASC Topic 606)contract liabilities from contracts with customers (Topic 805), 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 expectsrequires contract assets and contract liabilities acquired in a business combination to be entitled in exchange for those goods or services. The standard also provides guidancerecognized and measured by the acquirer on the recognition of incremental costs related to obtaining customer contracts. Weacquisition date in accordance with Revenues from contracts with customers (Topic 606). For public companies, the guidance is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The Company adopted 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.guidance during fiscal year 2023. The adoption of this ASU primarily impactsguidance did not have a material impact on 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.

Company’s consolidated financial statements.

In February 2016,November 2021, the FASB issued ASU 2016-02, Leases2021-10, Government Assistance (Topic 842)832), which supersedes existingrequires business entities to disclose information about transactions with a government that are accounted for by applying a grant or contribution model by analogy (for example, IFRS guidance in IAS 20 or guidance on accountingcontributions for leasesnot-for-profit entities in "Leases (Topic 840)"ASC 958-605). For transactions within scope, the new standard requires the disclosure of information about the nature of the transaction, including significant terms and generally requires all leases to be recognized inconditions, as well as the consolidated balance sheet. ASU 2016-02amounts and specific financial statement line items affected by the transaction. The new guidance is effective for annual and interim reporting periods beginning after December 15, 2018.2021. 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.guidance during fiscal year 2023. 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.

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

NOTE 3 – REVENUE RECOGNITION

OTHER INCOME (EXPENSE), NET

The Company adopted Topic 606 effective September 1, 2018 using the modified retrospective method applying this guidance to all open contracts at the datecomponents of initial application, which resulted in an adjustment to retained earningsother income (expense), net for the cumulative effect of applying this guidance. The most 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. Under 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:

i.Identification of the contract, or contracts, with a customer
ii.Identification of the performance obligations in the contract
iii.Determination of the transaction price
iv.Allocation of the transaction price to the performance obligations in the contract
v.Recognition of revenue when, or as, the Company satisfies a performance obligation

Components of revenue

The following is a description of principal activities from which the Company generates revenue. As part of the accounting for these arrangements, the Company must develop assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the contract. Stand-alone selling prices are determined based on the prices at which the Company separately sells its services or goods.

F-16

Revenue ComponentsTypical payment terms
Software Revenues:

Software revenues are generated primarily from sales of software licenses at the time the software is unlocked and the term commences. The license period typically is one year or less. Along with the license a di minimis amount of customer support is provided to assist the customer with the software. Should the customer need more than a di minimis amount of support they can choose to enter into a separate contract for additional training. Most software is installed on our customers’ servers and the Company has no control of the software once the sale is made.

For certain software arrangements the Company hosts the licenses on servers maintained by the Company, revenue for those arrangements are accounted as Software as a Service over the life of the contract. These arrangements are a small portion of software revenues of the Company.

Payments are generally due upon invoicing on a net 30 basis unless other payment terms are negotiated with the customer based on customer history. Typical industry standards apply.
Consulting Contracts:
Consulting services provided to our customers are generally recognized over time as the contracts are performed and the services are rendered. The company measures its consulting revenue based on time expended compared to total estimated hours to complete a project. The Company believes the methods chosen for its contract revenue best depicts the transfer of benefits to the customer under the contracts.Payment terms vary, depending on the size of the contract, credit history and history with the client and deliverables within the contract.

Consortium Member Based Services:
The performance obligation is recognized on a time elapsed basis, by month, for which the services are provided, as the Company transfers control evenly over the contractual period.Payment is due at the beginning of the period, generally on a net 30 or 60 basis.

Remaining performance obligations that do not fall under the expedients require the Company to perform various consulting and software development services and consortium memberships of approximately $3,303,461. It is anticipated these revenues will be recognized within the next year.

Contract liabilities

During the yearyears ended August 31, 2020 the Company recognized $1,146,000 of revenue that was included in contract liabilities2023, 2022, and 2021, were as of August 31, 2019.

F-17
follows:

Years ended August 31,
(in thousands)202320222021
Interest income$4,131 $717 $201 
Interest expense— — (22)
Change in fair valuation of contingent consideration(680)(283)(486)
(Loss) gain on disposal of assets(6)1 — 
(Loss) gain on currency exchange(475)(231)139 
Total other income (expense), net$2,970 $204 $(168)

Disaggregation of Revenues

Schedule of disaggregation of revenues        
Disaggregation of Revenues: Year Ended
August 31, 2020		  Year Ended
August 31, 2019		 
Software licenses        
Point in time $20,668,195  $17,425,353 
Over time  919,344   1,053,562 
Consulting services        
Over time  20,001,545   15,491,525 
Total Revenue $41,589,084  $33,970,440 

Contracts in Progress

Contracts in progress are included in the accompanying balance sheets under the following captions:

Schedule of contract in progress        
  2020  2019 
Revenues in excess of billings $3,093,343  $3,233,659 
Billings in excess of revenues  (140,991)  (798,549)
Revenues over billings on uncompleted contracts $2,952,352  $2,435,110 

Cost, estimated earnings, and billings on uncompleted contracts are summarized as follows as of August 31, 2020 and 2019:

  2020  2019 
Revenues earned to date on uncompleted contracts $20,235,573  $19,254,928 
Billings to date on uncompleted contracts  (17,283,221)  (16,819,818)
Revenues over billings on uncompleted contracts $2,952,352  $2,435,110 

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        
  2020  2019 
Equipment $864,560  $741,486 
Computer equipment  547,738   411,632 
Furniture and fixtures  160,991   160,990 
Leasehold improvements  114,005   110,165 
  1,687,294   1,424,273 
Less accumulated depreciation and amortization  1,249,507   1,083,128 
Total $437,787  $341,145 

(in thousands)August 31, 2023August 31, 2022
Equipment$316 $346 
Computer equipment809 860 
Furniture and fixtures48 61 
Leasehold improvements24 13 
Construction in progress134 — 
Subtotal1,331 1,280 
Less accumulated depreciation(660)(648)
Total$671 $632 
Depreciation expense was $166,379, $131,827,$0.2 million, $0.3 million, and $139,202$0.2 million for the years ended August 31, 2020, 2019,2023, 2022, and 2018,2021, respectively.

F-18

F-20

NOTE 5 –

INVESTMENTS

The Company invests a portionTable 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. The Company 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 0Contents short-term investments for the year ended August 31, 2019.

FY 2020

Schedule of short term investment            
  Amortized Cost  

Gross

Unrealized

Gains

  

Gross

Unrealized

Losses

  Fair Value 
             
Commercial notes (due within one year) $66,803,595  $–  $(60,977) $66,742,618 
Total $66,803,595  $–  $(60,977) $66,742,618 

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. Payments 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.

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.

As of August 31, 2020 and 2019 the following liabilities have been recorded:

Schedule of Liabilities        
  2020  2019 
Holdback Liability - Lixoft $1,333,333  $0 
Earn-out Liability - Lixoft  4,730,500   0 
Earn-out Liability - Dilisym  0   1,761,028 
Sub Total $6,063,833  $1,761,028 
Less: Current Portion  2,000,000   1,761,028 
Long-Term $4,063,833  $0 

F-19

NOTE 7 - 5 – COMMITMENTS AND CONTINGENCIES

Leases

We

On May 25, 2023, we entered into an amendment, effective October 1, 2023, to the lease agreement for our office space in Durham, North Carolina. Prior to entering into the amendment, this lease was scheduled to terminate pursuant to its terms effective on September 30, 2023. The amendment extends the lease through September 30, 2026, and effective October 1, 2023, reduces the leased square footage from 3,386 to approximately 13,500 square feet1,510, and reduces the monthly base rent from $8 thousand per month to $4 thousand per month with an annual increase of 3%. The amended lease agreement gives the Company the right, upon 9 months prior notice, to extend the lease for 60 months.
On February 17, 2023, we entered into an amendment, effective May 1, 2023, to the lease agreement for our office space in Lancaster, California.California, where our corporate headquarters are located. Prior to entering into the amendment, this lease was scheduled to terminate pursuant to its terms effective on January 31, 2026. The original lease had a five-year term with two, three-year options to extend. The initial five-year term expired in February 2011, and we extendedamendment extends the lease term through April 30, 2028, reduces the leased square footage from 9,255 to February 2, 2014. In June 2013,approximately 4,200, and reduces the lease was amendedmonthly base rent from $18 thousand per month to extend the term to February 2, 2017.$8 thousand per month with an annual increase of 3%. The amended lease also provides for an annual base rent increase of 3% per year and two, two-year options to extend. In May 2016agreement gives 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 90right, upon 180 days’ prior notice, to opt out of the remaining lease inall or part of the last twothree years of the lease 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 12,623with no penalty.

We lease 4,317 square feet of office space in Buffalo, New York. The initial five-yearlease term expired in October 2018; and was renewed for a three-year option to extending itextends to November 2021. The new30, 2026, and the 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. An amendment 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$7 thousand per month with an annual 3% adjustment.

In Paris, France Lixoft leases approximately2% increase. The lease agreement provides the Company with two five-year renewal options and the right to terminate the lease with one year’s prior written notice with certain penalties.

We lease 2,300 square feet of office space which as of April 1, 2020, had minimum payments equaling $288,000.in Paris, France. The lease is for a 9-year term with an optionextends to terminate every 3 years,November 30, 2024, and expires in November of 2024. Thethe rent is $16,555$5 thousand per quarter and can be adjustedmonth, which amount is subject to adjustment each December based on a consumer price index.

We lease 7,141 square feet of office space in Pittsburgh, Pennsylvania. The lease term extends to May 31, 2025, and the base rent is $10 thousand per month. The lease agreement provides the Company with one five-year renewal option.
We have a data center colocation space in Buffalo, New York, with a lease term through November 30, 2026, and rent of $4 thousand per month with an annual 3% increase.

Rent expense, including common area maintenance fees for the years ended August 31, 2020, 20192023, 2022, and 20182021 was $644,000, $584,000$0.5 million, $0.6 million, and $567,000,$0.7 million, respectively.

Future minimum lease payments under non-cancelable operating leases with remaining terms of one year or more at August 31, 2020 were

Lease liability maturities as follows:

Future minimum lease payments    
Years Ending August 31,   
2021 $486,000 
2022  217,000 
2023  172,000 
2024  75,000 
2025  11,000 
Future minimum lease payments $961,000 

Line of Credit

On March 31, 2020, Simulations Plus, Inc. 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 15, 2022. As of August 31, 2020, there2023, 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 NaN balance under this line of credit for a period of thirty consecutive days during each 12-month period commencing March 31, 2020. The Credit Agreement is collateralized by the assets of Simulations Plus Lancaster Division and is subject to certain financial covenants.

as follows:

(in thousands)Years ending August 31,Amount
2024$473 
2025390 
2026293 
2027140 
202868 
Total undiscounted liabilities1,364 
Less: imputed interest(167)
Total operating lease liabilities (including current portion)$1,197 
Employment Agreements

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

F-20


License Agreement

The Company had

F-21
Table of Contents

Income Taxes

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 royalty agreement with Dassault Systèmes Americas Corp.recognition threshold of more likely than not and a measurement process for accessfinancial statement recognition and measurement of a tax position taken or expected to their Metabolite Database for developing our Metabolite Module within ADMET Predictor™. The module was renamedbe 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 Metabolism Module when we released ADMET Predictor version 6 on April 19, 2012. Under this agreement, we pay a royalty of 25% of revenue derived from the saletechnical merits of the Metabolism/Metabolite module. This agreement was recently renegotiated,position, and must assume that the Company doestax position will be examined by taxing authorities. Our policy is to include interest and penalties related to income tax expense. 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 years 2019 through 2022 are open for audit, and our state tax returns for fiscal years 2018 through 2022 remain open for audit.

Our review of prior year tax positions using the criteria and provisions presented in guidance issued by FASB did not bear any royalty obligations towards Dassault Systèmes Americas Corp. effective asresult in a material impact on our financial position or results 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 $operations.
Litigation
(26,055)
, $195,828 and $175,740, respectively. The Company is in the process of replacing the database.

Litigation

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

NOTE 8 - 6 – SHAREHOLDERS' EQUITY
Shares Outstanding

Shares of Company common stock outstanding for the years ended August 31, 2023, 2022, and 2021 were as follows:
(in thousands)Years ended August 31,
202320222021
Common stock outstanding, beginning of period20,260 20,142 19,923 
Common stock repurchased during the period *(492)— — 
Common stock issued during the period170 119 218 
Common stock outstanding, end of period19,938 20,260 20,142 
*Common stock repurchased per the ASR Agreement, as discussed in further detail, below.
Dividends
Dividend

The Company’s Board of Directors declared cash dividends during the fiscal year 2020, 2019 years 2023and 2018.2022. The details of dividenddividends paid are in the following tables:

Schedule of dividends declared and paid              
FY2018
            
Record Date Distribution Date Number of Shares
Outstanding on
Record Date		  Dividend per
Share		  Total Amount 
11/13/2017 11/20/2017  17,284,792  $0.06  $1,037,088 
1/26/2018 2/02/2018  17,317,752  $0.06   1,039,065 
4/25/2018 5/02/2018  17,354,005  $0.06   1,041,240 
7/26/2018 8/02/2018  17,405,775  $0.06   1,044,347 
Total           $4,161,740 

FY2019

Record Date Distribution Date Number of Shares
Outstanding on
Record Date		  Dividend per
Share		  Total Amount 
11/01/2018 11/08/2018  17,417,875  $0.06  $1,045,073 
1/25/2019 2/01/2019  17,481,450  $0.06   1,048,887 
4/24/2019 5/01/2019  17,515,228  $0.06   1,050,914 
7/25/2019 8/01/2019  17,536,454  $0.06   1,052,181 
Total           $4,197,055 

F-21

(in thousands, except dividend per share)For the year ended August 31, 2023
Record DateDistribution DateNumber of Shares
Outstanding on
Record Date		Dividend per
Share		Total Amount
10/31/202211/07/202220,299 $0.06 $1,218 
1/30/20232/06/202319,924 $0.06 1,195 
4/24/20235/01/202319,999 $0.06 1,200 
7/31/20238/07/202319,931 $0.06 1,196 
Total$4,809 

FY2020

Record Date Distribution Date Number of Shares
Outstanding on
Record Date		  Dividend per
Share		  Total Amount 
10/25/2019 11/01/2019  17,606,314  $0.06  $1,056,379 
1/27/2020 2/03/2020  17,645,639  $0.06   1,058,740 
4/24/2020 5/01/2020  17,769,134  $0.06   1,066,148 
7/27/2020 8/03/2020  17,820,057  $0.06   1,069,203 
Total           $4,250,470 

Although dividend distributions are currently expected to continue on a quarterly basis, the Company’s Board

F-22
Table of Directors reserves the right to discontinue the dividend distribution any time.

Contents

(in thousands, except dividend per share)For the year ended August 31, 2022
Record DateDistribution DateNumber of Shares
Outstanding on
Record Date		Dividend per
Share		Total Amount
10/25/202111/01/202120,148 $0.06 $1,209 
1/31/20222/07/202220,178 $0.06 1,211 
4/25/20225/02/202220,207 $0.06 1,212 
7/25/20228/01/202220,239 $0.06 1,214 
Total  $4,846 
Stock Option PlanPlans

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. This plan terminated in February 2017 by its term.

On December 23, 2016, the Company’s Board of Directors adopted, and on February 23, 2017, theits shareholders approved, the Company’s 2017 Equity Incentive Plan (the “2017 Plan”), under which a total of 1,000,0001.0 million shares of common stock has beenwere initially reserved for issuance. ThisThe 2017 plan would have terminated pursuant to its terms in December 2026; however, the 2017 Plan was replaced by the Company’s 2021 Plan (as defined below), and as a result, no further issuances of shares may be made under the 2017 Plan.
On April 9, 2021, the Company’s Board of Directors adopted, and on June 23, 2021, its shareholders approved, the Company’s 2021 Equity Incentive Plan (the “2021 Plan,” and together with the 2017 Plan, the “Plans”), under which a total of 1.3 million shares of common stock were initially reserved for issuance. On October 20, 2022, the Company’s Board of Directors approved, and on February 9, 2023, its shareholders approved, an amendment to the 2021 Plan to increase the number of shares of common stock authorized for issuance thereunder from 1.3 million shares to 1.55 million shares of common stock of the Company. The 2021 Plan will terminate in December 2026.

2031.

As of August 31, 2020,2023, employees and directors hold stock optionsof the Company held Qualified Incentive Stock Options (“ISOs”) and Non-Qualified Stock Options (“NQSOs”) to purchase 1,223,661an aggregate of 1.5 million shares of common stock at exercise prices ranging from $6.75$6.85 to $61.84$66.14 per share.

The following tables summarize information about stock options:
(in thousands, except per share and weighted-average amounts)
Activity for the year ended August 31, 2023Number of
Options		Weighted-Average
Exercise Price
Per Share		Weighted-Average
Remaining
Contractual Life
Outstanding, August 31, 20221,245 $28.61 6.14 years
Granted465 43.78 
Exercised(170)12.59 
Canceled/Forfeited(62)43.14 
Outstanding, August 31, 20231,478 $34.62 6.62 years
Vested and Exercisable, August 31, 2023696 $24.26 4.54 years
Vested and Expected to Vest, August 31, 20231,471 $34.56 6.61 years
F-23
Table of Contents
(in thousands, except per share and weighted-average amounts)
Activity for the year ended August 31, 2022Number of
Options		Weighted-Average
Exercise Price
Per Share		Weighted-Average
Remaining
Contractual Life
Outstanding, August 31, 20211,184 $25.63 6.47 years
Granted255 42.13 
Exercised(104)16.15 
Canceled/Forfeited(90)42.30 
Outstanding, August 31, 20221,245 $28.61 6.14 years
Vested and Exercisable, August 31, 2022711 $17.65 4.47 years
Vested and Expected to Vest, August 31, 20221,236 $28.51 6.12 years
(in thousands, except per share and weighted-average amounts)
Activity for the year ended August 31, 2021Number of
Options		Weighted-Average
Exercise Price
Per Share		Weighted-Average
Remaining
Contractual Life
Outstanding, August 31, 20201,224 $17.76 6.79 years
Granted226 57.60 
Exercised(204)12.53 
Canceled/Forfeited(62)29.83 
Outstanding, August 31, 20211,184 $25.63 6.47 years
Vested and Exercisable, August 31, 2021619 $13.36 4.95 years
Vested and Expected to Vest, August 31, 20211,173 $25.69 6.47 years
The following table summarizes information about stock options:

Schedule of stock option activity            
Transactions in FY18 Number of
Options		  Weighted-Average
Exercise Price
Per Share		  Weighted-Average
Remaining
Contractual Life		 
          
Outstanding, August 31, 2017  1,249,126  $8.51   7.74 
Granted  52,000   22.36     
Exercised  (130,006)  5.97     
Canceled/Forfeited  (30,144)  9.10     
Expired  (6,000)  5.06     
Outstanding, August 31, 2018  1,134,976  $9.44   7.31 
Vested and Exercisable, August 31, 2018  483,696  $7.79   6.48 
Vested and Expected to Vest, August 31, 2018  1,069,807  $9.35   7.26 

F-22

Transactions in FY19 Number of
Options		  Weighted-Average
Exercise Price
Per Share		  Weighted-Average
Remaining
Contractual Life		 
          
Outstanding, August 31, 2018  1,134,976  $9.44   7.31 
Granted  263,500   22.78     
Exercised  (166,703)  7.15     
Canceled/Forfeited  (68,514)  12.17     
Expired  –   –     
Outstanding, August 31, 2019  1,163,259  $12.63   7.13 
Vested and Exercisable, August 31, 2019  515,394  $8.57   6.09 
Vested and Expected to Vest, August 31, 2019  1,101,800  $12.39   7.07 

Transactions in FY20 Number of
Options		  Weighted-Average
Exercise Price
Per Share		  Weighted-Average
Remaining
Contractual Life		 
          
Outstanding, August 31, 2019  1,163,259  $12.63   7.13 
Granted  223,000   39.23     
Exercised  (121,647)  9.29     
Canceled/Forfeited  (40,951)  14.19     
Expired  –   –     
Outstanding, August 31, 2020  1,223,661  $17.76   6.79 
Vested and Exercisable, August 31, 2020  596,311  $10.69   5.59 
Vested and Expected to Vest, August 31, 2020  1,194,239  $17.75   6.77 

the Intrinsic Value of options outstanding and options exercisable

Intrinsic Value of options outstanding and options exercisable            
  Intrinsic Value
of Options
Outstanding		  Intrinsic
Value of
Options
Exercisable		  Intrinsic
Value of
Options
Exercised		 
FY18 $13,064,884  $6,315,086  $1,495,313 
FY19 $27,312,742  $14,194,724  $3,224,454 
FY20 $51,272,966  $29,150,912  $4,085,753 

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. exercisable:

(in thousands)Intrinsic Value
of Options
Outstanding		Intrinsic
Value of
Options
Exercisable		Intrinsic
Value of
Options
Exercised
As of August 31, 2023$25,705 $19,373 $11,554 
As of August 31, 2022$39,208 $30,187 $3,572 
As of August 31, 2021$17,875 $15,742 $5,135 
The total grant-date fair value of non-vestednonvested stock options as of August 31, 20202023, was $22,122,054$15.6 million and is amortizable over a weighted averageweighted-average period of 3.393.33 years.

F-23

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





F-24
Table 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.Contents

The following table summarizes the fair value of the options, including both ISOs and NQSOs, granted during the current fiscal year 2020years ended August 31, 2023, 2022, and fiscal year 2019:

Schedule of fair value of options        
  FY 2020  FY 2019 
Estimated fair value of awards granted $2,997,120  $1,928,820 
Unvested Forfeiture Rate  0%   6.20% 
Weighted average grant price $39.23  $22.78 
Weighted average market price $39.23  $22.69 
Weighted average volatility  33.56%   31.61% 
Weighted average risk-free rate  1.39%   2.59% 
Weighted average dividend yield  0.65%   1.10% 
Weighted average expected life  6.67 years   6.64 years 

2021:

(in thousands, except weighted-average amounts)202320222021
Estimated fair value of awards granted$10,067 $4,597 $5,092 
Unvested Forfeiture Rate0.22 %1.04 %0.00 %
Weighted-average grant price$43.78 $42.13 $57.60 
Weighted-average market price$43.78 $42.13 $57.60 
Weighted-average volatility46.14 %42.80 %40.49 %
Weighted-average risk-free rate4.29 %1.74 %0.64 %
Weighted-average dividend yield0.55 %0.58 %0.42 %
Weighted-average expected life6.55 years6.59 years6.63 years
The exercise prices for the options outstanding at August 31, 20202023, ranged from $6.75$6.85 to $61.84,$66.14, and the information relating to these options isare as follows:

 Schedule of options by exercise price range                             
Exercise Price  Awards Outstanding  Awards Exercisable 
Low  High  Quantity  Weighted
Average
Remaining
Contractual
Life		  Weighted
Average
Exercise
Price		  Quantity  Weighted
Average
Remaining
Contractual
Life		  Weighted
Average
Exercise
Price		 
$6.75  $8.00   177,730   4.0 years  $6.85   177,730   4.0 years  $6.85 
$8.01  $16.00   547,901   6.0 years  $9.98   350,721   6.0 years  $9.97 
$16.01  $24.00   230,280   7.8 years  $20.70   50,560   7.2 years  $21.18 
$24.01  $38.00   204,950   9.1 years  $33.45   17,300   8.9 years  $34.23 
$38.01  $52.00   19,800   9.6 years  $38.64   0   –   0 
$52.01  $61.84   43,000   9.9 years  $61.84   0   –   0 
         1,223,661   6.8 years  $17.76   596,311   5.6 years  $10.69 

Follow-on Public Offering

In

(in thousands except prices and weighted-average amounts)
Exercise PriceAwards OutstandingAwards Exercisable
LowHighQuantityWeighted -Average
Remaining
Contractual
Life		Weighted-Average
Exercise
Price		QuantityWeighted-Average
Remaining
Contractual
Life		Weighted-Average
Exercise
Price
$6.85 $9.77 203 1.96 years$8.69 203 1.96 years$8.69 
$9.78 $18.76 148 3.49 years$10.11 148 3.49 years$10.11 
$18.77 $33.40 205 5.64 years$25.30 141 5.54 years$24.51 
$33.41 $47.63 649 8.70 years$42.13 81 7.03 years$37.96 
$47.64 $66.14 273 7.56 years$56.33 123 7.32 years$57.87 
  1,478 6.62 years$34.62 696 4.54 years$24.26 
During the fiscal years ended August 2020, the company closed an underwritten public offering of 2,090,90931, 2023, 2022, and 2021, we issued 13,765, 7,120, and 5,620 shares of itsstock valued at $0.6 million, $0.4 million, and $0.3 million, respectively, to our nonmanagement directors as compensation for board-related duties.
The Company's par-value common stock and additional paid-in capital as of August 31, 2023, were $11 thousand and $145.0 million, respectively.
Share Repurchases
On January 11, 2023, the Company entered into an accelerated share repurchase agreement (the “ASR Agreement”) with Morgan Stanley & Co. LLC (“Morgan Stanley”) to the public at $55.00 per share, which included the full exerciserepurchase an aggregate of $20 million of the underwriters’ option to purchase 272,727 additionalCompany’s outstanding shares of common stock. The aggregate gross proceedsASR Agreement was executed as part of the Company’s existing $50 million share repurchase program.

Pursuant to the companyterms of the ASR Agreement, the Company made an initial payment, using available cash balances, of $20 million to Morgan Stanley and received an initial delivery of 408,685 shares of Company common stock from this offeringMorgan Stanley. These 408,685 shares were approximately $115 million, before deducting underwriting discountsretired and commissions; net proceeds were approximately $107.7 million 107,747,338. The offering was made pursuantare treated as authorized, unissued shares. At final settlement on May 20, 2023, based on the volume-weighted average price of the Company's common stock during the term of the ASR Agreement, Morgan Stanley delivered an additional 83,356 shares of Company common stock to the Company’s automatic shelf registration statement on Form S-3 filed with the SecuritiesCompany, which shares were also retired and Exchange Commission on July 9, 2020.

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treated as authorized, unissued shares.

NOTE 9 - 7 – INCOME TAXES
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Table of Contents

We utilize FASB ASC 740-10, “Income Taxes”740 to account for income taxes which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.

Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities.

The components of the income tax provision for fiscal year 2020, 2019the years ended August 31, 2023, 2022, and 20182021 were as follows:

Components of the income tax provision            
  2020  2019  2018 
Current            
Federal $2,097,725  $1,794,596  $2,370,955 
State  477,744   426,364   460,619 
Foreign  39,038   51,285   104,377 
Total current tax expense (benefit)  2,614,507   2,272,245   2,935,951 
Deferred            
Federal  (427,644)  (140,730)  (1,698,201)
State  (131,874)  (158,368)  (33,620)
Total deferred federal and state  (559,518)  (299,098)  (1,731,821)
             
Total $2,054,989  $1,973,147  $1,204,130 

(in thousands)202320222021
Current
Federal$2,990 $2,518 $1,315 
State696 611 450 
Foreign144 (228)166 
Total current tax expense3,830 2,901 1,931 
Deferred   
Federal(1,818)(4)(379)
State(278)(265)(249)
Total deferred federal and state(2,096)(269)(628)
   
Total$1,734 $2,632 $1,303 
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, 2019the years ended August 31, 2023, 2022, and 2018:

Effective income tax rate            
  2020  2019  2018 
Income tax computed at federal statutory tax rate  21.0%  21.0%  25.4%
State taxes, net of federal benefit  4.2   4.1   4.0 
Meals & entertainment  0.1   0.1   0.0 
Stock based compensation  (1.2)  (2.6)  0.5 
Other permanent differences  (0.3)  (0.7)  1.2 
Research and development credit  (2.7)  (2.3)  (2.6)
Foreign tax related differences  (1.4)  0   0 
Research & credit adjustments to expense  0.3   0   0 
Domestic production activities  0   0   (1.8)
Change in deferred income taxes due to statutory rate changes  0   0   (14.8)
Change in prior year estimated taxes  (1.8)  (0.9)  (0.0)
Total  18.0%  18.7%  11.9%

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2021:

202320222021
Income tax computed at federal statutory tax rate21.0 %21.0 %21.0 %
State taxes, net of federal benefit4.7 3.2 2.0 
Meals & entertainment0.1 — — 
Stock-based compensation2.1 0.6 (6.8)
Other permanent differences3.3 0.4 (0.3)
Research and development credit(2.2)(2.2)(1.6)
Foreign-tax-related differences(8.2)(3.2)(2.6)
Research & credit adjustments to expense— — 0.2 
Change in prior year estimated taxes(6.0)(2.4)(0.1)
Total14.8 %17.4 %11.8 %







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Table of Contents

Significant components of the Company's deferred tax assets and liabilities for income taxes for the fiscal years ended August 31, 20202023, and 20192022 are as follows:

Components of the Company deferred tax assets and liabilities        
  2020  2019 
Deferred tax assets        
Accrued payroll and other expenses $402,355  $236,455 
Deferred revenue  6,862   55,038 
Capitalized merger costs  742,056   361,103 
Intellectual property  7,677   9,301 
State taxes  100,326   89,537 
Allowance for doubtful accounts  13,450   0 
State tax deferred  125,417   146,815 
Total deferred tax assets  1,398,143   898,249 
Less: Valuation allowance  0   0 
Deferred tax asset  1,398,143   898,249 
Deferred tax liabilities        
Property and equipment  (81,910)  (61,991)
State tax deferred  (19,468)  (16,471)
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)

(in thousands)20232022
Deferred tax assets:
Accrued compensation$865 $563 
Deferred revenue103 241 
Capitalized merger costs696 703 
Operating lease liability285 — 
Intellectual property— 7 
Research and development credits274 347 
Foreign tax credits— 101 
State taxes(19)128 
Allowance for doubtful accounts11 3 
State tax deferred— 28 
Capitalized Research & Development1,079 — 
Share-Based Compensation1,104 — 
Net Operating Loss Carryforward2,142 — 
Total deferred tax assets6,540 2,121 
Less: Valuation allowance— — 
Deferred tax asset6,540 2,121 
Deferred tax liabilities:
Property and equipment(90)(109)
Operating lease right-of-use assets(295)— 
Unrealized Gain/(Loss)(122)— 
State tax deferred— (30)
Intellectual property(2,353)(1,139)
Capitalized computer software development costs(2,242)(2,299)
Total deferred tax liabilities(5,102)(3,577)
Net deferred tax assets (liabilities)$1,438 $(1,456)
We follow guidance issued by the FASBASC 740 with regard to our accounting for uncertainty in income taxes recognized in the financial statements. Such guidance prescribes a recognition threshold of more likely than not and a measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In making this assessment, a company mustwe 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 totaled $332, $2,531,were immaterial for the years ended August 31, 2023, 2022, and $-0- for fiscal years 2020, 2019, and 2018,2021, respectively. We file income tax returns with the IRS and various state jurisdictions as well as with the countries of India, Belgium and India.France. Our federal income tax returns for fiscal year 2016 thru 2019 through 2022 are open for audit, and our state tax returns for fiscal year 20152018 through 20192022 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




F-27
Table of Contents


Net Operating Loss is summarized 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.

follows:

(in thousands)Amount
Federal NOL as of August 31, 2023$17,775 
Subject to expiration14,440 
Carried forward indefinitely3,335 
Amount to expire before Section 382 limitation lifts9,333 
Pennsylvania NOL as of August 31, 202316,054 
Subject to expiration16,054 
Carried forward indefinitely— 
Amount to expire before Section 382 limitation lifts10,935 
Our review of prior yearprior-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 108 – 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.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. Cash maintained in excess of these limits is on deposit with a large, national bank. Accordingly, the Company does not have depository exposure to regional banks. In addition, the Company holds cash at a bank in France that is not FDIC-insured. Historically, the Company has not experienced any losses in such accounts, and management believes itthat the financial institutions at which its cash 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.held are stable; however, no assurances can be provided. 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. At August 31, 2020, the Company had cash and cash equivalents exceeding insured limits by $10,790,000.

F-26

Revenue concentration shows that international sales accounted for 29%31%, 34%30%, and 39%31% of net salesrevenue for fiscalthe years 2020, 2019ended August 31, 2023, 2022, and 2018,2021, respectively. ThreeOur three largest customers in terms of revenue accounted for 9%6%, 7% (a dealer account in Japan representing various customers)4%, and 7%3% of net salesrevenue, respectively, for fiscalthe year 2020. Threeended August 31, 2023. Our three largest customers in terms of revenue accounted for 8%5%, 8% (a dealer account in Japan representing various customers)3%, and 7%3% of net salesrevenue, respectively, for fiscalthe year 2019. Fourended August 31, 2022. Our three largest customers in terms of revenue accounted for 9% (a dealer account in Japan representing various customers)11%, 7%4%, 6% and 5%3% of net salesrevenue, respectively, for fiscalthe year 2018.

FY20 accountsended August 31, 2021.

Accounts receivable concentrations show that twoour three largest customers in terms of accounts receivable each comprised 13%between 4% and 10%6% of accounts receivable as of August 31, 2020, respectively. FY192023; our three largest customers in terms of accounts receivable concentrations show that one customer comprised 10%between 4% and 8% of accounts receivable as of August 31, 2019.

2022.

We operate in the computer software industry,biosimulation market, which is highly competitive and changes rapidly. Our operating results could be significantly affected by our ability to develop new products and find new distribution channels for new and existing products.

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Table of Contents
NOTE 9 – SEGMENT REPORTING

The majority of our customers areCompany applies ASC 280, Segment Reporting, in determining reportable segments. The Company has two reportable segments: Software and Services. Segment information is presented in the pharmaceutical industry. During economic downturns, we have seen consolidations insame manner that the pharmaceutical industry. Although we have not seen any significant reduction in total revenues to date, our growth rate could be affected by consolidationchief operating decision maker (“CODM”) reviews certain financial information based on these reportable segments. The CODM reviews revenue and downsizing ingross profit for both of the pharmaceutical industry.

NOTE 11 – SEGMENT AND GEOGRAPHIC REPORTING

We account for segments and geographic revenues in accordance with guidance issuedreportable segments. Gross profit is defined as revenue less cost of revenue incurred by the FASB. Oursegment.

No operating segments have been aggregated to form the reportable segmentssegments. The Company does not allocate assets at the reportable segment level, as these are strategic business unitsmanaged on an entity-wide group basis and, accordingly, the Company does not report asset information by segment. The Company does not allocate operating expenses that offer different productsare managed on an entity-wide group basis and, services.

Resultsaccordingly, the Company does not allocate and report operating expenses at a segment level. There are no internal revenue transactions between the Company’s segments.

The following tables summarize the 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  DILIsym  Lixoft*  Eliminations  Total 
Net revenues $21,961  $11,105  $6,948  $1,575  $–  $41,589 
Income from operations before income taxes $7,374  $1,770  $1,744  $717  $–  $11,605 
Total assets $162,807  $11,654  $14,084  $19,972  $(40,095) $168,422 
Goodwill $0  $4,789  $5,598  $2,534  $–  $12,921 
Capital expenditures $111  $87  $31  $2  $–  $231 
Capitalized software costs $2,028  $40  $124  $160  $–  $2,353 
Depreciation and amortization $1,713  $349  $600  $300  $–  $2,962 

F-27

Year ended August 31, 2019 
  Simulations Plus, Inc.  Cognigen Corporation  DILIsym  Lixoft*  Eliminations  Total 
Net revenues $19,585  $9,321  $5,065  $–  $–  $33,970 
Income from operations before income taxes $7,752  $1,481  $1,416  $–  $–  $10,648 
Total assets $38,535  $11,196  $13,168  $–  $(17,702) $45,197 
Goodwill $0  $4,789  $5,598  $–  $–  $10,387 
Capital expenditures $39  $79  $20  $–  $–  $138 
Capitalized software costs $1,482  $114  $172  $–  $–  $1,768 
Depreciation and amortization $1,806  $364  $580  $–  $–  $2,750 

Year ended August 31, 2018 
  Simulations Plus, Inc.  Cognigen Corporation  DILIsym  Lixoft*  Eliminations  Total 
Net revenues $17,553  $7,857  $4,257  $–  $–  $29,667 
Income from operations before income taxes $7,533  $1,902  $863  $–  $–  $10,298 
Total assets $38,000  $8,733  $14,248  $–  $(17,702) $43,279 
Goodwill $0  $4,789  $5,598  $–  $–  $10,387 
Capital expenditures $65  $100  $18  $–  $–  $183 
Capitalized software costs $1,365  $625  $155  $–  $–  $2,145 
Depreciation and amortization $1,748  $401  $572  $–  $–  $2,721 

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, 20192023, 2022, and 2018 were as follows (in thousands, because2021:

(in thousands)Year ended August 31, 2023
SoftwareServicesTotal
Revenues$36,517 $23,060 $59,577 
Cost of revenues3,627 8,003 11,630 
Gross profit$32,890 $15,057 $47,947 
Gross margin90 %65 %80 %
Our software business and services business represented 61% and 39% of rounding, numbers may not foot):

Schedule of geographical revenues                
Year ended August 31, 2020 
  North & South America  Europe  Asia  Total 
             
Simulations Plus, Inc. $11,124  $5,024  $5,812  $21,961 
Cognigen Corporation  11,105   0   0   11,105 
DILIsym Services, Inc.  6,057   646   246   6,948 
Lixoft*  1,388   157   30   1,575 
Total $29,674  $5,827  $6,088  $

41,589,084

41,589		 

F-28

Year ended August 31, 2019 
  North & South America  Europe  Asia  Total 
             
Simulations Plus, Inc. $9,381  $5,144  $5,060  $19,585 
Cognigen Corporation  9,321   0   0   9,321 
DILIsym Services, Inc.  3,875   685   505   5,065 
Lixoft*  0   0   0   0 
Total $22,577  $5,829  $5,565  $

33,970,440

33,971		 

Year ended August 31, 2018 
  North & South America  Europe  Asia  Total 
             
Simulations Plus, Inc. $7,856  $4,964  $4,733  $17,553 
Cognigen Corporation  7,857   0   0   7,857 
DILIsym Services, Inc.  3,163   312   782   4,257 
Lixoft*  0   0   0   0 
Total $18,876  $5,276  $5,515  $

29,666,524

29,667		 

*Lixoft was acquired on April 1, 2020.

NOTE 12 – RELATED PARTY TRANSACTIONS

On June 1, 2017total revenue, respectively, for 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 atyear ended August 31, 2018 to2023.

(in thousands)Year ended August 31, 2022
SoftwareServicesTotal
Revenues$32,642 $21,264 $53,906 
Cost of revenues3,060 7,762 10,822 
Gross profit$29,582 $13,502 $43,084 
Gross margin91 %63 %80 %
Our software business and services business represented 61% and 39% of total revenue, respectively, for 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 of Paris. 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 atended August 31, 2020 to2022.

(in thousands)Year ended August 31, 2021
SoftwareServicesTotal
Revenues$27,670 $18,796 $46,466 
Cost of revenues3,235 7,365 10,600 
Gross profit$24,435 $11,431 $35,866 
Gross margin88 %61 %77 %
Our software business and services business represented 60% and 40% of total revenue, respectively, for the former shareholders who are still employeesyear ended August 31, 2021.
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Table of the Consolidated Company.

NOTE 13 - 10 – EMPLOYEE BENEFIT PLAN

We maintain a 401(k) Plan for eligible employees. We make matching contributions equal to 100% of the employee’s elective deferral, not to exceed 4% of the total employee compensation. We can also elect to make a profit-sharing contribution.employee’s gross salary. We contributed $456,484, $404,684$0.6 million, $0.6 million, and $326,762$0.5 million for fiscalthe years 2020, 2019ended August 31, 2023, 2022, and 2018,2021, respectively.


NOTE 1411 - ACQUISITION
ACQUISITION/MERGER WITH SUBSIDIARIES

On March 31, 2020,June 16, 2023, the Company entered into a Stock Purchasean Agreement and Contribution AgreementPlan of Merger (the “Agreement”“Merger Agreement”) with Lixoft, a French société par actions simplifiée (“Lixoft”). On April 1, 2020,by and among the Company, consummated the acquisition of all outstanding equity interests of Lixoft pursuant to the terms of the Agreement, with Lixoft becomingInsight Merger Sub, Inc., a wholly ownedwholly-owned subsidiary of the Company. We believe the combination of Simulations PlusCompany (“Merger Sub”), Immunetrics, a company specializing in quantitative systems pharmacology modeling, and Lixoft provides substantial future potential based on the complementary strengths of eachLaunchCyte LLC, as representative of the companies.

Under the termsstockholders of Immunetrics (the “Stockholder Representative”). At closing of the Merger, certain key stockholders of Immunetrics delivered executed Joinder Agreements, pursuant to which they became parties to the Merger Agreement. The Merger closed on June 16, 2023 (the “Closing”).


Pursuant to the Merger Agreement, at Closing, Merger Sub merged with and into Immunetrics through a reverse triangular merger, with Immunetrics surviving as described below,a wholly-owned subsidiary of the Company will(the “Surviving Corporation”) (the “Merger”). As consideration for the Merger, the Company agreed to pay the stockholders, former shareholdersholders of Lixoft total considerationstock options and former holders of up to $16,500,000, consisting of two-thirds cash and one-third newly issued, unregisteredphantom shares of Immunetrics (collectively, the Company’s common stock. In addition,“Equityholders”) the Company will pay $3,456,029 of excess working capital based onfollowing cash compensation (collectively, the March 31, 2020 financial statements of Lixoft.

On April 1, 2020, the Company paid the former shareholders of Lixoft“Merger Consideration”):


i.At Closing, a total of $10,789,362, comprised of cash payment in the amount of $9,460,129$13,705,083 (i.e., $12.0 million plus Immunetrics’ Closing cash, net of estimated net working capital adjustments at Closing, minus Immunetrics’ estimated transaction expenses, minus the Closing estimated indebtedness, minus the Holdback Amount (as defined below), minus the Stockholder Representative Expense Fund (as defined below));

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

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

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

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

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

Concurrently with execution of the Merger Agreement, the Company, Merger Sub, Immunetrics and the 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 (underStockholder Representative entered into an Earnout Agreement, which sets forth the terms and conditions applicable to the Earnout Payments. Pursuant to the Earnout Agreement, the Company shall pay the Equityholders an aggregate amount of up to $8.0 million of Earnout Payments if the 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 stockSurviving Corporation achieves certain revenue milestones for the 30-consecutive-trading-day period ending two trading days priorcalendar years 2023 and 2024.

The primary purpose of this acquisition is 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 subjectbe able 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 basedcapitalize on a revenuetremendous growth formula each yearopportunity by providing support for the two years subsequent to April 1, 2020. The former shareholders can earn up to $2,000,000 the first year and $3,500,000quantitative systems pharmacology (“QSP”) in year two. The Earn-out liability has been recorded at fair value.

a greater range of therapeutic areas, including oncology.


Under the acquisition method of accounting, the total purchase price reflects Lixoft’sImmunetrics’ tangible and intangible assets and liabilities based on their estimated fair values at the date of the completion of the acquisition (April 1, 2020)(June 16, 2023). The following table summarizes the preliminary allocation of the preliminary purchase price for Lixoft:

Allocation of purchase price    
Assets acquired, Including cash of $3,799,134 and accounts receivable of $629,481 $5,006,892 
Developed Technologies Acquired  8,010,000 
Estimated value of Intangibles assets acquired (Customer Lists, trade name etc.)  4,160,000 
Estimated Goodwill acquired  2,533,987 
Liabilities Assumed  (1,117,519)
Total Consideration $18,593,360 

Immunetrics:


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(in thousands)
Base merger consideration$12,000 
Fair value of earnout4,100 
Cash on hand1,247 
Adjustment to purchase price for closing indebtedness(122)
Net working capital adjustment(377)
D&O Tail(7)
Bonus compensation to Immunetrics staff(1,586)
Total purchase price15,255
Fair value of identifiable assets acquired:
Cash1,132 
Accounts receivable511 
Security deposit12 
ROU asset227 
Deferred tax assets799 
Trade names1,800 
Customer relationships3,780 
Developed Tech1,080 
Non-competes30 
9,371 
Fair value of liabilities assumed:
Lease liability227 
Selling shareholders' D&O tail responsibility7 
Deferred revenue60 
294 
Fair value of identifiable assets acquired and liabilities assumed9,077 
Goodwill$6,178

The total purchase consideration related to Immunetrics acquisition consisted of cash consideration. The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributed to the developed technologies and other intangibles as customer relationships and trade name. Immunetrics is primarily attributable to the Services segment of the Company. Goodwill acquired as part of Immunetrics acquisition has been providedassigned to a separate reporting unit and the assets and liabilities of Immunetrics are assigned to the same reporting unit, Immunetrics. This goodwill is not expected to be deductible for income tax purposes.

Intangible assets consist of indefinite-lived intangible asset trade names and definite-lived intangibles as customer relationships, developed technologies, and covenants not to compete. We amortize purchased definite-lived intangible assets on a straight-line basis over their respective useful lives. The weighted-average life of the total acquired identifiable definite-lived intangible assets is 7.5 years. The following table presents the details of intangible assets acquired.

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Estimated useful lifeAmount
Indefinite-lived:
Trade namesIndefinite$1,800 
Definite-lived:
Customer relationships9 years3,780 
Developed technologies5 years1,080 
Covenants not to compete2 years30 
Total definite-lived intangible assets4,890 
Total intangible assets$6,690 

The total acquisition-related costs which includes activities for Immunetrics acquisition for the years ended August 31, 2023, 2022, and 2021 were $3.3 million, $0.3 million, and none, respectively. These transactions costs are reflected in the transaction based on estimatesSelling, general, and administrative expense line item within our consolidated statements of operations and comprehensive income as they were incurred.
Estimated future earningsamortization of this subsidiary including anticipated synergies associated withfinite-lived intangible assets for the positioning of the combined companynext five years is as a leader in model-based drug development.

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follows:

(in thousands)
Years ending August 31,Amount
2024$580 
2025$580 
2026$580 
2027$580 
2028$535 

Consolidated supplementalSupplemental Pro Forma information

Information

The following unaudited consolidated supplemental pro forma information assumes that the acquisition of LixoftImmunetrics took place on September 1, 20172021 for the income statement years periods ended August 31, 2020.2023. These amounts have been calculated after applying the Company’s accounting policies and adjusting the results of LixoftImmunetrics to reflect the same expenses in the years ended August 31, 20192023 and 2018.2022. The adjustments include costs of acquisition directly attributable to Immunetrics of $2.9 million consists of $1.6 million of bonus compensation and $1.3 million of other professional fees, and amortization of intangibles and otherincluding developed technologies acquired during the merger, assuming the fair-value adjustments applied on September 1, 2017,2021, together with consequential tax effects.

Schedule of statement of income         
  (Pro forma)  (Pro forma)  (Pro forma) 
  2020*  2019  2018 
  (in thousands)  (in thousands)  (in thousands) 
  (unaudited)  (unaudited)  (unaudited) 
Net Sales $43,970  $36,918  $31,891 
Net Income $10,630  $9,250  $9,132 

*Balances include five months actual results

(Pro forma)
2023 *		(Pro forma)
2022
(in thousands)(unaudited)(unaudited)
Revenue$63,054 $57,010 
Net income$11,422 $11,889 
* Balances include actual results from acquisition date of June 16, 2023 through August 31, 2023.

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NOTE 12 - GOVERNMENT ASSISTANCE

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

NOTE 15 - UNAUDITED QUARTERLY FINANCIAL DATA

The following table presents selected unaudited quarterly financial datathe grant revenue does not fall under ASC 606, Revenue from Contracts with Customers, as the Government will not benefit directly from our offerings. For government assistance in which no specific US GAAP applies, the Company accounts for each full quarterly periodsuch transactions as revenue and by analogy to a grant model. Under such model, the Company recognizes the impact of the yearsgovernment assistance on the Consolidated Statements of Income upon complying with the conditions of the grant. The grant revenue is recognized on a gross basis. The Company's accounting policy is to recognize a benefit to the income statement over the duration of the program when the conditions attached to the grant are achieved. If conditions are not satisfied the grants are often subject to reduction, repayment, or termination. The Company classifies the impact of government assistance on the Consolidated Statements of Income as Services Revenue.


During the fiscal year ended August 31, 20202023, government assistance received primarily consisted of the following:

The Company received assistance from domestic governmental agencies to provide reimbursement for various costs incurred for research and 2019 (in thousands except for per share data), becausedevelopment. These include direct grant awards and subawards. The grants awarded are currently set to expire at various dates through 2025. During the fiscal year ended August 31, 2023, the Company recognized $1.5 million within Services revenues on the Consolidated Statements of rounding, numbers mayOperations and Comprehensive Income related to such assistance. To the extent amounts have been earned but not foot:

Quarterly Financial Information                
  First  Second  Third  Fourth 
Year ended August 31, 2020 Quarter  Quarter  Quarter  Quarter 
Revenues $9,401  $10,350  $12,298  $9,540 
Gross Profit $6,758  $7,683  $9,633  $6,865 
Net Income $2,058  $2,150  $2,936  $2,188 
Earnings per share, Basic $0.12  $0.12  $0.17  $0.12 
Earnings per share, Diluted $0.11  $0.12  $0.16  $0.11 
                 
                 
  First  Second  Third  Fourth 
Year ended August 31, 2019 Quarter  Quarter  Quarter  Quarter 
Revenues $7,536  $8,472  $9,937  $8,026 
Gross Profit $5,336  $6,264  $7,613  $5,735 
Net Income $1,536  $2,099  $2,889  $2,059 
Earnings per share, Basic $0.09  $0.12  $0.16  $0.12 
Earnings per share, Diluted $0.09  $0.12  $0.16  $0.11 
yet funded, the amounts are in Account Receivable. Computer equipment allowable by the grants is classified under Fixed Assets. Subawards due to unrelated entities are classified under Accrued Expenses.

NOTE 1613 - SUBSEQUENT EVENTS

Dividend Declared

On Thursday, October 9, 2020,19, 2023, our Board of Directors declared a quarterly cash dividend of $0.06 per share to our shareholders. The dividend in the amount of $1,195,461 wasapproximately $1.2 million will be distributed on Monday, November 2, 2020,6, 2023, for shareholders of record as of Monday, October 26, 2020.

30, 2023.
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Effective September 1, 2023, the Company merged Immunetrics with and into Simulations Plus, Inc. through a short-form mergers (the “Merger”). To effectuate the Merger, the Company filed Certificates of Ownership with the Secretaries of State of the states of Delaware (Immunetrics’ state of incorporation) and California (Simulation Plus, Inc.’s state of incorporation). Consummation of the Merger was not subject to approval of the Company’s stockholders and did not impact the rights of the Company’s stockholders.
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