Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | ||
Aug. 31, 2014 | Nov. 26, 2014 | Feb. 28, 2014 | |
Document And Entity Information | ' | ' | ' |
Entity Registrant Name | 'SIMULATIONS PLUS INC | ' | ' |
Entity Central Index Key | '0001023459 | ' | ' |
Document Type | '10-K | ' | ' |
Document Period End Date | 31-Aug-14 | ' | ' |
Amendment Flag | 'false | ' | ' |
Current Fiscal Year End Date | '--08-31 | ' | ' |
Is Entity a Well-known Seasoned Issuer? | 'No | ' | ' |
Is Entity a Voluntary Filer? | 'No | ' | ' |
Is Entity's Reporting Status Current? | 'Yes | ' | ' |
Entity Filer Category | 'Smaller Reporting Company | ' | ' |
Entity Public Float | ' | ' | $57,581,229 |
Entity Common Stock, Shares Outstanding | ' | 16,841,114 | ' |
Document Fiscal Period Focus | 'FY | ' | ' |
Document Fiscal Year Focus | '2014 | ' | ' |
BALANCE_SHEETS
BALANCE SHEETS (USD $) | Aug. 31, 2014 | Aug. 31, 2013 |
Current assets | ' | ' |
Cash and cash equivalents | $8,614,929 | $10,179,298 |
Prepaid income taxes | 748,359 | 301,573 |
Accounts receivable, net of allowance for doubtful accounts of $0 | 1,708,158 | 1,910,615 |
Contracts receivable | 158,914 | 203,913 |
Prepaid expenses and other current assets | 188,160 | 192,173 |
Deferred income taxes | 114,846 | 184,258 |
Total current assets | 11,533,366 | 12,971,830 |
Long-term assets | ' | ' |
Capitalized computer software development costs, net of accumulated amortization of $6,609,283 and $5,801,578 | 3,452,541 | 2,891,169 |
Property and equipment, net (note 3) | 95,242 | 117,987 |
Intellectual property, net of accumulated amortization of $193,750 and $11,250 | 5,881,250 | 63,750 |
Other assets | 18,445 | 18,445 |
Total assets | 20,980,844 | 16,063,181 |
Current liabilities | ' | ' |
Accounts payable | 130,547 | 146,011 |
Accrued payroll and other expenses | 340,709 | 311,209 |
Accrued bonuses to officer | 120,000 | 60,000 |
Other current liabilities | 19,859 | 19,859 |
Current portion - Contract payable (note 4) | 750,000 | 0 |
Deferred revenue | 30,370 | 89,227 |
Total current liabilities | 1,391,485 | 626,306 |
Long-term liabilities | ' | ' |
Deferred income taxes | 2,375,874 | 1,146,389 |
Payments due under Contract payable (note 4) | 1,750,000 | 0 |
Other long-term liabilities | 28,134 | 47,993 |
Total liabilities | 5,545,493 | 1,820,688 |
Commitments and contingencies (note 5) | ' | ' |
Shareholders' equity (note 6) | ' | ' |
Preferred stock, $0.001 par value 10,000,000 shares authorized no shares issued and outstanding | 0 | 0 |
Common stock, $0.001 par value 50,000,000 shares authorized 16,349,955 and 16,030,894 shares issued and outstanding | 4,821 | 4,502 |
Additional paid-in capital | 6,085,427 | 4,842,794 |
Retained earnings | 9,345,103 | 9,395,197 |
Total shareholders' equity | 15,435,351 | 14,242,493 |
Total liabilities and shareholders' equity | $20,980,844 | $16,063,181 |
BALANCE_SHEETS_Parenthetical
BALANCE SHEETS (Parenthetical) (USD $) | Aug. 31, 2014 | Aug. 31, 2013 |
Statement of Financial Position [Abstract] | ' | ' |
Allowance for doubtful accounts (in Dollars) | $0 | $0 |
Accumulated amortization of computer software development costs (in Dollars) | 6,609,283 | 5,801,578 |
Accumulated amortization on intellectual property (in Dollars) | $193,750 | $11,250 |
Preferred stock par value (in Dollars per share) | $0.00 | $0.00 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock par value (in Dollars per share) | $0.00 | $0.00 |
Common stock shares authorized | 50,000,000 | 50,000,000 |
Common stock shares issued | 16,349,955 | 16,030,894 |
Common stock shares outstanding | 16,349,955 | 16,030,894 |
STATEMENTS_OF_OPERATIONS
STATEMENTS OF OPERATIONS (USD $) | 12 Months Ended | |
Aug. 31, 2014 | Aug. 31, 2013 | |
Income Statement [Abstract] | ' | ' |
Net sales | $11,460,880 | $10,070,770 |
Cost of sales | 1,629,069 | 1,646,530 |
Gross profit | 9,831,811 | 8,424,240 |
Operating expenses | ' | ' |
Selling, general, and administrative | 4,439,665 | 3,549,495 |
Research and development | 952,774 | 802,374 |
Total operating expenses | 5,392,439 | 4,351,869 |
Income from operations | 4,439,372 | 4,072,371 |
Other income (expense) | ' | ' |
Interest income | 31,437 | 49,492 |
Miscellaneous income | 0 | 35,488 |
Gain on currency exchange | 42,488 | 99,429 |
Total other income (expense) | 73,925 | 184,409 |
Income before provision for income taxes | 4,513,297 | 4,256,780 |
Provision for income taxes (note 7) | -1,487,806 | -1,370,182 |
Net Income | $3,025,491 | $2,886,598 |
Earnings per share | ' | ' |
Basic | $0.19 | $0.18 |
Diluted | $0.18 | $0.18 |
Weighted-average common shares outstanding | ' | ' |
Basic | 16,173,674 | 15,996,432 |
Diluted | 16,407,751 | 16,319,983 |
STATEMENTS_OF_SHAREHOLDERS_EQU
STATEMENTS OF SHAREHOLDERS EQUITY (USD $) | Common Stock [Member] | Additional Paid-In Capital [Member] | Retained Earnings / Accumulated Deficit [Member] | Total |
Beginning balance, value at Aug. 31, 2012 | $4,399 | $4,628,366 | $10,509,811 | $15,142,576 |
Beginning balance, shares at Aug. 31, 2012 | 15,927,806 | ' | ' | ' |
Exercise of stock options, shares | 103,088 | ' | ' | ' |
Exercise of stock options, amount | 103 | 27,882 | ' | 27,985 |
Stock-based compensation | ' | 115,740 | ' | 115,740 |
Excess tax benefits from share-based arrangement | ' | 70,806 | ' | 70,806 |
Declaration of dividends | ' | ' | -4,001,212 | -4,001,212 |
Net income | ' | ' | 2,886,598 | 2,886,598 |
Ending balance, value at Aug. 31, 2013 | 4,502 | 4,842,794 | 9,395,197 | 14,242,493 |
Ending balance, shares at Aug. 31, 2013 | 16,030,894 | ' | ' | ' |
Exercise of stock options, shares | 154,316 | ' | ' | ' |
Exercise of stock options, amount | 154 | 98,471 | ' | 98,625 |
Stock-based compensation | ' | 144,327 | ' | 144,327 |
Issuance of stock-TSRL agreement, shares | 164,745 | ' | ' | ' |
Issuance of stock-TSRL agreement, value | 165 | 999,835 | ' | 1,000,000 |
Declaration of dividends | ' | ' | -3,075,585 | -3,075,585 |
Net income | ' | ' | 3,025,491 | 3,025,491 |
Ending balance, value at Aug. 31, 2014 | $4,821 | $6,085,427 | $9,395,197 | $15,435,351 |
Ending balance, shares at Aug. 31, 2014 | 16,349,955 | ' | ' | ' |
STATEMENTS_OF_CASH_FLOWS
STATEMENTS OF CASH FLOWS (USD $) | 12 Months Ended | |
Aug. 31, 2014 | Aug. 31, 2013 | |
Cash flows from operating activities | ' | ' |
Net income | $3,025,491 | $2,886,598 |
Adjustments to reconcile net income to net cash provided by operating activities | ' | ' |
Depreciation and amortization of property and equipment | 47,231 | 42,573 |
Amortization of capitalized computer software development costs | 807,705 | 716,887 |
Amortization of Intellectual property | 182,500 | 7,500 |
Excess tax benefits from share-based arrangements | 0 | -70,806 |
Stock-based compensation | 144,327 | 115,740 |
Deferred income taxes | 1,298,896 | 366,986 |
(Increase) decrease in | ' | ' |
Accounts receivable and Contracts receivable | 247,456 | -643,771 |
Prepaid income taxes | -446,786 | -147,677 |
Prepaid expenses and other assets | 4,014 | -41,317 |
Accounts payable | -15,464 | -31,498 |
Accrued payroll and other expenses | 29,500 | -1,703 |
Accrued Bonus | 60,000 | 0 |
Accrued income taxes | 0 | -662,427 |
Other liabilities | -19,859 | 67,852 |
Deferred revenue | -58,857 | -42,555 |
Net cash provided by operating activities | 5,306,154 | 2,562,382 |
Cash flows from investing activities | ' | ' |
Purchase of intellectual property rights | -2,500,000 | 0 |
Purchases of property and equipment | -24,486 | -53,150 |
Capitalized computer software development costs | -1,369,077 | -1,128,588 |
Net cash used in investing activities | -3,893,563 | -1,181,738 |
Cash flows from financing activities | ' | ' |
Excess tax benefits from share-based arrangements | 0 | 70,806 |
Dividends | -3,075,585 | -4,001,212 |
Proceeds from the exercise of stock options | 98,625 | 27,985 |
Net cash (used in) financing activities of continuing operations | -2,976,960 | -3,902,421 |
Net increase (decrease) in cash and cash equivalents | -1,564,369 | -2,521,777 |
Cash and cash equivalents, beginning of year | 10,179,298 | 12,701,075 |
Cash and cash equivalents, end of period | 8,614,929 | 10,179,298 |
Supplemental disclosures of cash flow information | ' | ' |
Interest paid | 0 | 0 |
Income taxes paid | 692,562 | 1,964,545 |
Non-Cash Investing and Financing | ' | ' |
Purchase of intellectual property rights with shares and notes payable | $3,500,000 | $0 |
1_ORGANIZATION_AND_LINES_OF_BU
1. ORGANIZATION AND LINES OF BUSINESS | 12 Months Ended |
Aug. 31, 2014 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' |
ORGANIZATION AND LINES OF BUSINESS | ' |
Organization | |
Simulations Plus, Inc. (the “Company”, “we”, “us”, “our”) was incorporated on July 17, 1996. Subsequent to August 31, 2014, on September 2, 2014, the Company acquired 100% of the stock of Cognigen Corporation. | |
Lines of Business | |
The Company designs and develops pharmaceutical simulation software to promote cost-effective solutions to a number of problems in pharmaceutical research and in the education of pharmacy and medical students, and it provides consulting services to the pharmaceutical and chemical industries. Recently, the Company has begun to explore developing software applications for defense and for health care outside of the pharmaceutical industry. |
2_SUMMARY_OF_SIGNIFICANT_ACCOU
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended | ||||||||
Aug. 31, 2014 | |||||||||
Accounting Policies [Abstract] | ' | ||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' | ||||||||
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. | |||||||||
Revenue Recognition | |||||||||
We recognize revenues related to software licenses and software maintenance in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 985-605, “Software - Revenue Recognition”. Software products revenue is recorded when the following conditions are met: 1) evidence of arrangement exists, 2) delivery has been made, 3) the amount is fixed, and 4) collectability is probable. Post-contract customer support ("PCS") obligations are insignificant; therefore, revenue for PCS is recognized at the same time as the licensing fee, and the costs of providing such support services are accrued and amortized over the obligation period. | |||||||||
As a byproduct of ongoing improvements and upgrades for the new programs and new modules of software, some modifications are provided to customers who have already purchased software at no additional charge. Other software modifications result in new, additional cost modules that expand the functionality of the software. These are licensed separately. We consider the modifications that are provided without charge to be minimal, as they do not significantly change the basic functionality or utility of the software, but rather add convenience, such as being able to plot some additional variable on a graph in addition to the numerous variables that had been available before, or adding some additional calculations to supplement the information provided from running the software. Such software modifications for any single product have typically occurred once or twice per year, sometimes more, sometimes less. Thus, they are infrequent. The Company provides, for a fee, additional training and service calls to its customers and recognizes revenue at the time the training or service call is provided. | |||||||||
Generally, we enter into one-year license agreements with customers for the use of our pharmaceutical software products. We recognize revenue on these contracts when all the criteria are met. | |||||||||
Most license agreements have a term of one year; however, from time to time, we enter into multi-year license agreements. We generally unlock and invoice software one year at a time for multi-year licenses. Therefore, revenue is recognized one year at a time. | |||||||||
We recognize the revenue from collaboration research and the revenue from grants equally over their terms. However, we recognize the contract study revenue using the percentage of completion method, depending upon how the contract studies are engaged, in accordance with ASC 605-35, “Revenue Recognition – Construction-Type and Production-Type Contracts”. To recognize revenue using the percentage of completion method, we must determine whether we meet the following criteria: 1) there is a long-term, legally enforceable contract, 2) it is possible to reasonably estimate the total project costs, and 3) it is possible to reasonably estimate the extent of progress toward completion. | |||||||||
Cash and Cash Equivalents | |||||||||
For purposes of the statements of cash flows, the Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. | |||||||||
Accounts Receivable | |||||||||
We analyze the age of customer balances, historical bad debt experience, customer creditworthiness, and changes in customer payment terms when making estimates of the collectability of the Company’s trade accounts receivable balances. If we determine that the financial conditions of any of our customers have deteriorated, whether due to customer-specific or general economic issues, an increase in the allowance may be made. Accounts receivable are written off when all collection attempts have failed. | |||||||||
Capitalized Computer Software Development Costs | |||||||||
Software development costs are capitalized in accordance with ASC 985-20, “Costs of Software to Be Sold, Leased, or Marketed”. Capitalization of software development costs begins upon the establishment of technological feasibility and is discontinued when the product is available for sale. | |||||||||
The establishment of technological feasibility and the ongoing assessment for recoverability of capitalized software development costs require considerable judgment by management with respect to certain external factors including, but not limited to, technological feasibility, anticipated future gross revenues, estimated economic life, and changes in software and hardware technologies. Capitalized computer software development costs are comprised primarily of salaries and direct payroll-related costs and the purchase of existing software to be used in the Company's software products. | |||||||||
Amortization of capitalized computer software development costs is provided on a product-by-product basis on the straight-line method over the estimated economic life of the products not to exceed five years, although all of our current software products have already been on the market for 7-15 years except for our newest MedChem Designer™ and MembranePlus™ programs (MembranePlus™ was released following the close of the reporting period covered by this report), and we do not foresee an end-of-life for any of them at this point. Amortization of software development costs amounted to $807,705 and $716,887 for the years ended August 31, 2014 and 2013, 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: | |||||||||
Equipment | 5 years | ||||||||
Computer equipment | 3 to 7 years | ||||||||
Furniture and fixtures | 5 to 7 years | ||||||||
Leasehold improvements | Shorter of life of asset or lease | ||||||||
Maintenance and minor replacements are charged to expense as incurred. Gains and losses on disposals are included in the results of operations. | |||||||||
Fair Value of Financial Instruments | |||||||||
Financial assets and liabilities recorded at fair value in the Company’s Balance Sheet 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 I | Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date. | ||||||||
Level II | Inputs, other than quoted prices included in Level I, that are observable for the asset or liability through corroboration with market data at the measurement date. | ||||||||
Level III | Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. | ||||||||
For certain of our financial instruments, including accounts receivable, accounts payable, accrued payroll and other expenses, and accrued bonuses to officers the carrying amounts are approximate fair value due to their short-term nature. | |||||||||
Advertising | |||||||||
The Company expenses advertising costs as incurred. Advertising costs for the years ended August 31, 2014 and 2013 were $38,000 and $38,000, respectively. | |||||||||
Research and Development Costs | |||||||||
Research and development costs are charged to expense as incurred until technological feasibility has been established. These costs include salaries, laboratory experiment, and purchased software which was developed by other companies and incorporated into, or used in the development of, our final products. | |||||||||
Income Taxes | |||||||||
The Company accounts for income taxes in accordance with ASC 740-10, “Income Taxes” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. | |||||||||
Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities. | |||||||||
Intellectual property | |||||||||
On February 28, 2012, we bought out the royalty agreement with Enslein Research. The cost of $75,000 is being amortized over 10 years under the straight-line method. Amortization expense for each of the fiscal years ended August 31, 2014 and 2013 was $7,500. Accumulated amortization as of August 31, 2014 and 2013 was $18,750 and $11,250, respectively. | |||||||||
On May 15, 2014, we entered into a termination and non-assertion agreement with TSRL, Inc., pursuant to which the parties agreed to terminate an exclusive software licensing agreement entered into between the parties in 1997. As a result, the company obtained a perpetual right to use certain source code and data, and TSRL relinquished any rights and claims to any GastroPlus products and to any claims to royalties or other payments under that 1997 agreement. We agreed to pay TSRL total consideration of $6,000,000, which is being amortized over 10 years under the straight-line method. Amortization expense for the period of May 15, 2014 to August 31, 2014 was $175,000. Accumulated amortization as of August 31, 2014 was $175,000. (See Note 4) | |||||||||
Total amortization expense for intellectual property agreements for the years ended August 31, 2014 and 2013 was $182,500 and $7,500, respectively. Accumulated amortization as of August 31, 2014 and 2013 was $193,750 and $11,250, respectively. | |||||||||
Earnings per Share | |||||||||
The Company reports earnings per share in accordance with FASB ACS 260-10. Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of common shares available. Diluted earnings per share is computed similarly to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. The components of basic and diluted earnings per share for the years ended August 31, 2014 and 2013 were as follows: | |||||||||
2014 | 2013 | ||||||||
Numerator | |||||||||
Net income attributable to common shareholders | $ | 3,025,491 | $ | 2,886,598 | |||||
Denominator | |||||||||
Weighted-average number of common shares outstanding during the year | 16,173,674 | 15,996,432 | |||||||
Dilutive effect of stock options | 234,077 | 323,551 | |||||||
Common stock and common stock equivalents used for diluted earnings per share | 16,407,751 | 16,319,983 | |||||||
Stock-Based Compensation | |||||||||
The Company accounts for stock options using the modified prospective method in accordance with FASB ASC 718-10, “Compensation-Stock Compensation”. Under this method, compensation costs include estimated grant date fair value of the awards amortized over the options’ vesting period. Stock-based compensation was $144,327 and $115,740 for the fiscal years ended August 31, 2014 and 2013, respectively, and is included in the statements of operations as Consulting, Salaries, and Research and Development expense. | |||||||||
Impairment of Long-lived Assets | |||||||||
The Company accounts for the impairment and disposition of long-lived assets in accordance with ASC 350, “Intangibles – Goodwill and Other” and ASC 360, “Property and Equipment”. Long-lived assets to be held and used are reviewed for events or changes in circumstances that indicate that their carrying value may not be recoverable. We measure recoverability by comparing the carrying amount of an asset to the expected future undiscounted net cash flows generated by the asset. If we determine that the asset may not be recoverable, or if the carrying amount of an asset exceeds its estimated future undiscounted cash flows, we recognize an impairment charge to the extent of the difference between the fair value and the asset's carrying amount. No impairment losses were recorded during the years ended August 31, 2014 and 2013. | |||||||||
Recently Issued Accounting Standards | |||||||||
In July 2012, the FASB issued Accounting Standards Update (“ASU”) 2012-02, “Testing Indefinite-Lived Intangible Assets for Impairment”, which amended the guidance in ASU 2011-08 “Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment”) to simplify the testing of indefinite-lived intangible assets other than goodwill for impairment. ASU 2012-02 became effective for annual and interim impairment tests performed for fiscal years beginning on or after September 15, 2012 and earlier adoption was permitted. We adopted this standard in the first quarter of our 2013 fiscal year. The adoption did not have a material effect on our financial statements. | |||||||||
In July 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, which eliminates diversity in practice for the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss or a tax credit carryforward is available to reduce the taxable income or tax payable that would result from disallowance of a tax position. ASU 2013-11 affects only the presentation of such amounts in an entity’s balance sheet and is effective for fiscal years beginning after December 15, 2013 and interim periods within those years. Early adoption is permitted. We are evaluating the impact, if any, of the adoption of ASU 2013-11 on our balance sheet. | |||||||||
In May 2014, FASB issued ASU 2014-09, Revenue from Contracts with Customers. The standard will eliminate the transaction- and industry-specific revenue recognition guidance under current U.S. GAAP and replace it with a principles-based approach for determining revenue recognition. ASU 2014-09 is effective for annual and interim periods beginning after December 15, 2016. Early adoption is not permitted. The revenue recognition standard is required to be applied retrospectively, including any combination of practical expedients as allowed in the standard. We are evaluating the impact, if any, of the adoption of ASU 2014-09 to our financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting. |
3_PROPERTY_AND_EQUIPMENT
3. PROPERTY AND EQUIPMENT | 12 Months Ended | ||||||||
Aug. 31, 2014 | |||||||||
Property, Plant and Equipment [Abstract] | ' | ||||||||
PROPERTY AND EQUIPMENT | ' | ||||||||
Property and equipment at August 31, 2014 and 2013 consisted of the following: | |||||||||
2014 | 2013 | ||||||||
Equipment | $ | 125,541 | $ | 141,355 | |||||
Computer equipment | 51,466 | 295,174 | |||||||
Furniture and fixtures | 147,541 | 53,096 | |||||||
Leasehold improvements | 23,645 | 61,860 | |||||||
348,193 | 551,485 | ||||||||
Less accumulated depreciation and amortization | 252,951 | 433,498 | |||||||
Total | $ | 95,242 | $ | 117,987 | |||||
Depreciation expense was $47,231 and $42,573 for the years ended August 31, 2014 and 2013, respectively. |
4_CONTRACT_PAYABLE
4. CONTRACT PAYABLE | 12 Months Ended | ||||
Aug. 31, 2014 | |||||
Other Liabilities Disclosure [Abstract] | ' | ||||
CONTRACT PAYABLE | ' | ||||
On May 15, 2014, the Company 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. The Company agreed to pay TSRL total consideration of $6.0 million. The Company paid $3.5 million on May 20, 2014, comprised of cash in the amount of $2.5 million and the issuance of $1 million worth of the Company’s common stock -- 164,745 shares of the Company’s common stock based upon the April 25, 2014 closing price per share of $6.07. Future payments under the termination and non-assertion agreement, which are non-interest- bearing, are due as follows: | |||||
25-Apr-15 | $ | 750,000 | |||
25-Apr-16 | 750,000 | ||||
25-Apr-17 | 1,000,000 | ||||
Total | $ | 2,500,000 | |||
Less Current portion | (750,000 | ) | |||
Contract payable, net of current portion | $ | 1,750,000 | |||
5_COMMITMENTS_AND_CONTINGENCIE
5. COMMITMENTS AND CONTINGENCIES | 12 Months Ended | ||
Aug. 31, 2014 | |||
Commitments and Contingencies Disclosure [Abstract] | ' | ||
COMMITMENTS AND CONTINGENCIES | ' | ||
Leases | |||
We lease approximately 13,500 square feet of space in Lancaster, California. The original lease had a five-year term with two, three-year options to extend. The initial five-year term expired in February 2011, and we extended the lease to February 2, 2014. In June 2013, the lease was amended to extend the term to February 2, 2017. The amended lease also provides for an annual base rent increase of 3% per year and two, two-year options to extend. The current base rent is $24,272 per month; however, we had three months’ free base rent during the months of June, July and August of 2013. We record these three months as a discount divided equally through the first term of the amended lease from June 2013 through January 2017. | |||
Rent expense, including common area maintenance fees for the years ended August 31, 2014 and 2013 was $295,410 and $305,636, respectively. | |||
During our fiscal year ended August 31, 2012, we sold our former Words+ subsidiary, at which time we entered into a month-to-month sublease agreement commencing January 1, 2012 under which Words+ paid 20% of the monthly rent we paid to our landlord, plus 20% of facility-related operating expenses. We report our gross lease expense under Selling, General and Administrative expense; however, the sublease payments received from Words+ were reported under Other Income. The sublease to Words+ ended on February 28, 2013. Sublease payments totaled $35,500 for the fiscal year ended August 31, 2013. | |||
Future minimum lease payments under non-cancelable operating leases with remaining terms of one year or more at August 31, 2014 were as follows: | |||
Years Ending August 31, | |||
2015 | $ | 297,094 | |
2016 | 306,007 | ||
2017 | 129,526 | ||
$ | 732,627 | ||
The Company leases a copier/printer under an operating lease that expires in April 2015. The terms of the lease call for payments based on usage, and allow for earlier termination upon a 30-day written notice. | |||
Employment Agreement | |||
On August 22, 2013, the Company entered into an employment agreement with its President/Chief Executive Officer, Walter S. Woltosz, that expired in August 2014. The employment agreement provided for an annual base salary of $300,000 per year, and a performance bonus in an amount equal to 5% of the Company’s net income before taxes of the previous fiscal year, not to exceed $60,000. The employment agreement also provided stock options, exercisable for five years, to purchase 10 shares of the Company’s common stock for each $1,000 of net income before taxes at the end of each fiscal year up to a maximum of 20,000 shares over the term of the agreement. The Company may terminate the employment agreement upon 30 days written notice without cause. The Company's obligation under that circumstance would be to pay its President/Chief Executive Officer the greater of a) 12 months’ salary or b) the salary payable to him for the remainder of the term of the employment agreement from the date of notice of termination. | |||
For fiscal year 2013, the Compensation Committee awarded a $30,000 performance bonus under that employment agreement, which was paid in September 2013. | |||
Effective September 1, 2014, the Company entered into a new employment agreement with Mr. Woltosz to serve as Chief Executive Officer of the Company. Under the terms of this employment agreement, which has a one-year term, Mr. Woltosz is required to devote a minimum of 60% of his productive time to the position of Chief Executive Officer of the Company. He will receive annual compensation of $180,000, be eligible to receive stock options to purchase up to 12,000 shares of the Company’s common stock as determined by the Company’s Board of Directors, and will be paid an annual performance bonus of up to 5% of the Company’s net income before taxes not to exceed $36,000. | |||
License Agreement | |||
In 1997, the Company entered into an exclusive software licensing agreement with TSRL, Inc. (fka Therapeutic Systems Research Laboratories), to develop a computer simulation software program of the absorption of drug compounds in the gastrointestinal tract. Upon execution of that agreement the Company was obligated to pay a royalty of 20% of the net sales of the basic GastroPlus software without additional modules. On May 15, 2014, the parties entered into a termination and non-assertion agreement pursuant to which the parties agreed to terminate the 1997 exclusive software licensing agreement, 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 agreement. The Company agreed to pay TSRL total consideration of $6,000,000. The Company has no further obligation to pay royalties to TSRL. (See Note 4) | |||
In September 2007, we entered into an agreement with Enslein Research, Inc. (“Enslein”) to jointly create a new metabolism module as part of ADMET Predictor. The fee for the exclusive license to the Enslein Data, in the form of a royalty, is 50% of the gross sales revenues of the ADMET Predictor Enslein Metabolism Module, and a $50,000 bonus at the time the cumulative revenue from ADMET Predictor Enslein Metabolism Module sales reaches $250,000. On February 28, 2012, we signed a buyout agreement with Enslein for $75,000, and are amortizing its cost over 10 years after this date. | |||
We also have a royalty agreement with Accelrys, Inc. (the original agreement was entered into with Symyx Technologies in March 2010; Symyx Technologies later merged with Accelrys, Inc.) for Metabolite Database access for developing our Metabolite module which was renamed as Metabolism module when we released ADMET Predictor version 6 on April 19, 2012. Under this agreement, we pay 25% of revenue derived from the sale of Metabolism/Metabolite module. | |||
For the years ended August 31, 2014 and 2013, we incurred total royalty expense of approximately $222,000 and $646,000, respectively. | |||
Litigation | |||
Except as described below, we are not a party to any legal proceedings and are not aware of any pending legal proceedings of any kind. | |||
In June 2014, the Company was served with a complaint in a civil action entitled Sherri Winslow v. Incredible Adventures, Inc., et al. (Los Angeles Superior Court Case No. BC545789) alleging wrongful death and seeking unspecified damages arising out of a May 18, 2012 plane crash in the State of Nevada. The Company’s Chief Executive Officer owns the subject aircraft and is also a named defendant. The complaint alleged that the Company was the owner of the subject aircraft. The Company denies all material allegations against it, including that it owns or has ever owned any interest in the subject aircraft. On November 25, 2014, the plaintiff and the Company signed a stipulation of dismissal pursuant to which the plaintiff agreed to dismiss the Company without prejudice. If the plaintiff does not discover evidence during a nine month period to and including August 31, 2015 that justifies bringing the Company back into the litigation, the Company will prepare a dismissal with prejudice to be signed on behalf of the plaintiff. |
6_SHAREHOLDERS_EQUITY
6. SHAREHOLDERS' EQUITY | 12 Months Ended | ||||||||||||||||||
Aug. 31, 2014 | |||||||||||||||||||
Equity [Abstract] | ' | ||||||||||||||||||
SHAREHOLDERS' EQUITY | ' | ||||||||||||||||||
Dividend | |||||||||||||||||||
The Company’s Board of Directors declared cash dividends during fiscal year 2014 and 2013. The details of dividend paid are in the following tables: | |||||||||||||||||||
FY2014 | |||||||||||||||||||
Record Date | Distribution Date | Number of Shares | Dividend per Share | Total Amount | |||||||||||||||
Outstanding on | |||||||||||||||||||
Record Date | |||||||||||||||||||
11/8/13 | 11/15/13 | 16,073,894 | $ | 0.04 | ** | $ | 642,956 | ||||||||||||
2/17/14 | 2/24/14 | 16,149,460 | $ | 0.05 | $ | 807,473 | |||||||||||||
5/9/14 | 5/16/14 | 16,165,171 | $ | 0.05 | $ | 808,259 | |||||||||||||
8/4/14 | 8/11/14 | 16,337,955 | $ | 0.05 | $ | 816,897 | |||||||||||||
Total | $ | 3,075,585 | |||||||||||||||||
FY2013 | |||||||||||||||||||
Record Date | Distribution Date | Number of Shares | Dividend per Share | Total Amount | |||||||||||||||
Outstanding on | |||||||||||||||||||
Record Date | |||||||||||||||||||
11/8/12 | 11/13/12 | 15,927,806 | $ | 0.05 | $ | 796,390 | |||||||||||||
12/24/12 | 12/28/12 | 16,021,309 | $ | 0.14 | * | $ | 2,242,983 | ||||||||||||
5/7/13 | 5/10/13 | 16,030,433 | $ | 0.03 | ** | $ | 480,913 | ||||||||||||
8/12/13 | 8/15/13 | 16,030,894 | $ | 0.03 | ** | $ | 480,926 | ||||||||||||
Total | $ | 4,001,212 | |||||||||||||||||
*As a tax benefit to our shareholders considering the increase in federal income tax for capital gains in 2013, the Company’s Board of Directors declared an accelerated cash dividend, $0.14 per share, on December 14, 2012, consisting of all of the planned February 2013 distribution of $0.05 per share, plus $0.03 per share of the planned $0.05 per quarter per share for the remaining three fiscal quarters ending in calendar year 2013. | |||||||||||||||||||
** The Company’s Board of Directors decided to increase the May, August, and November 2013 dividend distribution from the planned $0.02 per share to $0.03 per share, and in November 2013 they increased the amount to $0.04 per share. | |||||||||||||||||||
Although dividend distributions are currently expected to continue on a quarterly basis, the Company’s Board of Directors reserves the right to discontinue the dividend distribution any time. | |||||||||||||||||||
Stock Option Plan | |||||||||||||||||||
In September 1996, the Company’s Board of Directors adopted, and the Company’s shareholders approved, the 1996 Stock Option Plan (the "1996 Plan") under which a total of 1,000,000 shares of common stock had been reserved for issuance. The total number of shares that may be granted under the 1996 Plan was increased to 2,000,000 in March 1999, to 4,000,000 in February 2000, to 5,000,000 in December 2000 and to 6,000,000 in February 2005. All such increases were approved by the Company’s Board of Directors and the Company’s shareholders. The 1996 Plan terminated in September 2006 in accordance with its terms. | |||||||||||||||||||
On February 23, 2007, the Company’s Board of Directors adopted and the Company’s shareholders approved the 2007 Stock Option Plan (the “2007 Plan”) under which a total of 1,000,000 shares of common stock had been reserved for issuance. On February 25, 2014, the Company’s Board of Directors and the Company’s shareholders approved an increase of the total number of shares that may be granted under the 2007 Plan to 2,000,000. | |||||||||||||||||||
Incentive Stock Options (“ISOs”) | |||||||||||||||||||
As of August 31, 2014, employees hold ISOs to purchase in the aggregate 532,000 shares of the Company’s common stock at exercise prices ranging from $1.00 to $6.85 per share. | |||||||||||||||||||
Transactions in FY13 | Number of Options | Weighted-Average | Weighted-Average Remaining Contractual Life(Years) | ||||||||||||||||
(ISOs) | Exercise Price | ||||||||||||||||||
Per Share | |||||||||||||||||||
Outstanding, August 31, 2012 | 689,800 | $ | 1.74 | 4.52 | |||||||||||||||
Granted | 20,000 | $ | 5.06 | ||||||||||||||||
Exercised | (175,800 | ) | $ | 1.9 | |||||||||||||||
Canceled/Forfeited | (2,000 | ) | $ | 1 | |||||||||||||||
Outstanding, August 31, 2013 | 532,000 | $ | 1.82 | 3.95 | |||||||||||||||
Vested and Exercisable, August 31, 2013 | 392,600 | $ | 1.45 | 3.79 | |||||||||||||||
Vested and Expected to Vest, August 31, 2013 | 519,600 | $ | 1.79 | 3.91 | |||||||||||||||
Transactions in FY14 | Number of Options | Weighted-Average | Weighted-Average Remaining Contractual Life | ||||||||||||||||
(ISOs) | Exercise Price | ||||||||||||||||||
Per Share | |||||||||||||||||||
Outstanding, August 31, 2013 | 532,000 | $ | 1.82 | 3.95 | |||||||||||||||
Granted | 447,500 | $ | 6.57 | ||||||||||||||||
Exercised | (175,000 | ) | $ | 1.34 | |||||||||||||||
Canceled/Forfeited | (6,000 | ) | $ | 1 | |||||||||||||||
Outstanding, August 31, 2014 | 798,500 | $ | 4.59 | 6.27 | |||||||||||||||
Vested and Exercisable, August 31, 2014 | 299,000 | $ | 1.82 | 3.16 | |||||||||||||||
Vested and Expected to Vest, August 31, 2014 | 728,079 | $ | 4.41 | 5.99 | |||||||||||||||
Non-Qualified Stock Options (“NQSOs”) | |||||||||||||||||||
As of August 31, 2014, the outside members of the Company’s Board of Directors hold NQSOs to purchase in the aggregate 48,600 shares of the Company’s common stock at exercise prices ranging from $1.67 to $6.68 per share. | |||||||||||||||||||
Transactions in FY13 | Number of Options | Weighted-Average | Weighted-Average Remaining Contractual Life | ||||||||||||||||
(NQSOs) | Exercise Price | ||||||||||||||||||
Per Share | |||||||||||||||||||
Outstanding, August 31, 2012 | 36,600 | $ | 3.47 | 8.14 | |||||||||||||||
Granted | 12,000 | $ | 4.78 | ||||||||||||||||
Outstanding, August 31, 2013 | 48,600 | $ | 3.79 | 7.85 | |||||||||||||||
Exercisable, August 31, 2013 | 28,200 | $ | 3.28 | 6.67 | |||||||||||||||
Transactions in FY14 | Number of Options | Weighted-Average | Weighted-Average Remaining Contractual Life | ||||||||||||||||
(NQSOs) | Exercise Price | ||||||||||||||||||
Per Share | |||||||||||||||||||
Outstanding, August 31, 2013 | 48,600 | $ | 3.79 | 7.85 | |||||||||||||||
Granted | 15,000 | $ | 6.72 | ||||||||||||||||
Exercised | (7,000 | ) | $ | 1.3 | |||||||||||||||
Outstanding, August 31, 2014 | 56,600 | $ | 4.82 | 7.96 | |||||||||||||||
Exercisable, August 31, 2014 | 31,400 | $ | 3.96 | 6.74 | |||||||||||||||
The fair value of the options, including both ISOs and NQSOs, granted during fiscal year 2014 is estimated at $1,103,600. The fair value of these options was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions: dividend yield of 3.01%, pre-vest forfeiture rate of 6.25%, expected volatility of 46.18%, risk-free interest rate of 1.80%, and expected life of 6.27 years. The total fair value of non-vested stock options as of August 31, 2014 was $1,133,865 and is amortizable over a weighted average period of 4.58 years. | |||||||||||||||||||
During the fiscal year ended August 31, 2013, the fair value of these options was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions: dividend yield of 4.35%, pre-vest forfeiture rate of 6.13%, expected volatility of 57.65%, risk-free interest rate of 0.66%, and expected life of 5 years. | |||||||||||||||||||
The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which do not have vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Because our stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its stock options. | |||||||||||||||||||
Intrinsic Value of options outstanding and options exercisable | |||||||||||||||||||
Intrinsic Value of Options Outstanding | Intrinsic Value of Options Exercisable | Intrinsic Value of Options Exercised | |||||||||||||||||
FY13 | $ | 1,636,422 | $ | 1,357,870 | $ | 402,406 | |||||||||||||
FY14 | $ | 1,850,239 | $ | 1,552,171 | $ | 737,266 | |||||||||||||
The weighted-average remaining contractual life of options outstanding issued under the 1996 and 2007 Plan was 6.38 years at August 31, 2014. The exercise prices for the options outstanding at August 31, 2014 ranged from $1.00 to $6.85 per share, and the information relating to these options is as follows: | |||||||||||||||||||
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 | ||||||||||||
$1.00 | $1.50 | 197,500 | 3.5 years | $1.05 | 197,500 | 3.5 years | $1.05 | ||||||||||||
$1.51 | $3.00 | 17,600 | 5.7 years | $2.42 | 7,600 | 5.9 years | $2.34 | ||||||||||||
$3.01 | $4.50 | 141,500 | 3.1 years | $3.28 | 108,500 | 3.2 years | $3.26 | ||||||||||||
$4.51 | $6.85 | 498,500 | 8.5 years | $6.47 | 16,800 | 4.7 years | $5.36 | ||||||||||||
855,100 | 330,400 | ||||||||||||||||||
7_INCOME_TAXES
7. INCOME TAXES | 12 Months Ended | ||||||||
Aug. 31, 2014 | |||||||||
Income Tax Disclosure [Abstract] | ' | ||||||||
INCOME TAXES | ' | ||||||||
We utilize FASB ASC 740-10, “Income Taxes” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. | |||||||||
Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities. | |||||||||
The components of the income tax provision for fiscal year 2014 and 2013 were as follows: | |||||||||
2014 | 2013 | ||||||||
Current | |||||||||
Federal | $ | 186,052 | $ | 891,153 | |||||
State | 2,858 | 112,042 | |||||||
188,910 | 1,003,195 | ||||||||
Deferred | |||||||||
Federal | 1,180,655 | 57,805 | |||||||
State | 118,241 | 309,182 | |||||||
1,298,896 | 366,987 | ||||||||
Total | $ | 1,487,806 | $ | 1,370,182 | |||||
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 2014 and 2013: | |||||||||
2014 | 2013 | ||||||||
Income tax computed at federal statutory tax rate | 34.00% | 34.00% | |||||||
State taxes, net of federal benefit | 5.1 | 5.2 | |||||||
Meals & Entertainment | 0.1 | 0.1 | |||||||
Other permanent differences | 2.6 | (0.5 | ) | ||||||
Research and development credit | (9.6 | ) | (11.3 | ) | |||||
Change in prior year estimated taxes | 0.8 | 4.7 | |||||||
Total | 33.00% | 32.20% | |||||||
Significant components of the Company's deferred tax assets and liabilities for income taxes for the fiscal years ended August 31, 2014 and 2013 are as follows: | |||||||||
2014 | 2013 | ||||||||
Deferred tax assets | |||||||||
Accrued payroll and other expenses | $ | 88,574 | $ | 82,104 | |||||
Deferred revenue | 12,473 | 38,225 | |||||||
Deferred rent | – | 29,068 | |||||||
Capitalized merger costs | 93,306 | – | |||||||
Intellectual property | 19,442 | 30,326 | |||||||
Research and development credit | 216,917 | – | |||||||
State taxes | 272 | 45,343 | |||||||
State Tax Deferred | 120,575 | 74,458 | |||||||
Total deferred tax assets | 551,558 | 299,524 | |||||||
Less: Valuation allowance | – | – | |||||||
551,558 | 299,524 | ||||||||
Deferred tax liabilities | |||||||||
Property and equipment | (27,178 | ) | (23,077 | ) | |||||
State Tax Deferred | (5,914 | ) | – | ||||||
Intellectual Property | (1,361,535 | ) | – | ||||||
Capitalized computer software development costs | (1,417,959 | ) | (1,238,578 | ) | |||||
Total deferred tax liabilities | (2,812,586 | ) | (1,261,655 | ) | |||||
Net deferred tax liabilities | $ | (2,261,028 | ) | $ | (962,131 | ) | |||
We follow guidance issued by the FASB with regard to our accounting for uncertainty in income taxes recognized in the financial statements. Such guidance prescribes a recognition threshold of more likely than not and a measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In making this assessment, a company must determine whether it is more likely than not that a tax position will be sustained upon examination, based solely on the technical merits of the position and must assume that the tax position will be examined by taxing authorities. Our policy is to include interest and penalties related to unrecognized tax benefits in income tax expense. Interest and penalties totaled $ -0- and $6,347 for fiscal year 2014 and 2013, respectively. We file income tax returns with the IRS and various state jurisdictions and India. Our federal income tax returns for fiscal year 2010 thru 2013 are open for audit, and our state tax returns for fiscal year 2009 through 2013 remain open for audit. In addition our California tax return for the fiscal year 2007 and fiscal year 2008 remains open with regard to R&D tax credits as a result of a previous audit for which we received a letter from the California Franchise Tax Board stating that an audit will not be conducted for those years at this time; however it may be subject to future audit. | |||||||||
Our review of prior year tax positions using the criteria and provisions presented in guidance issued by FASB did not result in a material impact on our financial position or results of operations. |
8_CONCENTRATIONS_AND_UNCERTAIN
8. CONCENTRATIONS AND UNCERTAINTIES | 12 Months Ended |
Aug. 31, 2014 | |
Risks and Uncertainties [Abstract] | ' |
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. The Company holds cash and cash equivalents at banks located in California, with balances that often exceed FDIC insured limits. Historically, the Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents. However, considering the current banking environment, the Company is investigating alternative ways to minimize its exposure to such risks. While the Company may be exposed to credit losses due to the nonperformance of its counterparties, the Company does not expect the settlement of these transactions to have a material effect on its results of operations, cash flows or financial condition. | |
Revenue concentration shows that international sales accounted for 51% and 48% of net sales for fiscal year 2014 and 2013, respectively. Two customers accounted for 14% (a dealer account in Japan representing various customers), and 8% of net sales for fiscal year 2014. Two customers accounted for 9% and 6% of net sales for fiscal year 2013. | |
Accounts receivable concentration shows that two customers comprised 30% (a dealer account in Japan representing various customers), and 17% of accounts receivable at August 31, 2014, and two customers comprised 27% and 22% of accounts receivable at August 31, 2013. | |
We operate in the computer software industry, which is highly competitive and changes rapidly. Our operating results could be significantly affected by our ability to develop new products and find new distribution channels for new and existing products. | |
The majority of our customers are in the pharmaceutical industry. During the current economic downturn, we have seen consolidations in the pharmaceutical industry, especially in this first fiscal quarter of 2013. Although we have not seen any significant reduction in total revenues to date, our growth rate has been affected. Continued consolidation and downsizing in the pharmaceutical industry could have an impact on our revenues and earnings going forward. |
9_GEOGRAPHIC_REPORTING
9. GEOGRAPHIC REPORTING | 12 Months Ended | ||||||||||||||||||||
Aug. 31, 2014 | |||||||||||||||||||||
Segments, Geographical Areas [Abstract] | ' | ||||||||||||||||||||
GEOGRAPHIC REPORTING | ' | ||||||||||||||||||||
The Company allocates revenues to geographic areas based on the locations of its customers. Geographical revenues were as follows for fiscal year 2014 and 2013: | |||||||||||||||||||||
(in ‘000) | North America | Europe | Asia | South America | Total | ||||||||||||||||
31-Aug-14 | $ | 5,633 | $ | 2,983 | $ | 2,819 | $ | 26 | $ | 11,461 | |||||||||||
31-Aug-13 | $ | 5,203 | $ | 2,980 | $ | 1,882 | $ | 6 | $ | 10,071 | |||||||||||
10_RELATED_PARTY_TRANSACTIONS
10. RELATED PARTY TRANSACTIONS | 12 Months Ended |
Aug. 31, 2014 | |
Related Party Transactions [Abstract] | ' |
RELATED PARTY TRANSACTIONS | ' |
During fiscal year 2014, included in bonus expenses to officers was $150,000, of which $60,000 was accrued bonus representing 5% of the Company’s net income before bonuses and taxes, not exceeding $60,000, paid to the Corporate Secretary, Virginia Woltosz, as an annual bonus as part of the terms of the original sale of Words+ to the Company in 1996. In addition, $60,000 was accrued under the employment agreement with Walter Woltosz, the Company’s Chief Executive Officer. The other $30,000, paid in September 2013, was a fiscal year 2013 performance bonus to Walter Woltosz. As of August 31, 2014, $120,000 was accrued. These amounts were paid in September 2014. | |
During fiscal year 2013, included in bonus expenses to officers was $90,000, of which $60,000 was accrued bonus representing 5% of the Company’s net income before bonuses and taxes, not exceeding $60,000, paid to the Corporate Secretary, Virginia Woltosz, as an annual bonus as part of the terms of the sale of Words+ to the Company in 1996. The other $30,000, paid in September 2012, was fiscal year 2012 performance bonus to Walter Woltosz, the Company’s Chief Executive Officer. As of August 31, 2013, $60,000 was accrued and was paid in September 2013. |
11_EMPLOYEE_BENEFIT_PLAN
11. EMPLOYEE BENEFIT PLAN | 12 Months Ended |
Aug. 31, 2014 | |
Compensation and Retirement Disclosure [Abstract] | ' |
EMPLOYEE BENEFIT PLAN | ' |
We maintain a 401(k) Plan for eligible employees. We make matching contributions equal to 100% of the employee’s elective deferral, not to exceed 4% of the total employee compensation. We can also elect to make a profit-sharing contribution. We contributed $117,200 and $104,162 for fiscal year 2014 and 2013, respectively. |
12_SUBSEQUENT_EVENTS
12. SUBSEQUENT EVENTS | 12 Months Ended | ||||
Aug. 31, 2014 | |||||
Subsequent Events [Abstract] | ' | ||||
SUBSEQUENT EVENTS | ' | ||||
Dividend Declared | |||||
On October 28, 2014, our Board of Directors declared a quarterly cash dividend of $0.05 per share to our shareholders. The dividend was distributed on Friday, November 14, 2014, for shareholders of record as of Friday, November 7, 2014. | |||||
Acquisition/Merger with Cognigen Corporation | |||||
On July 23, 2014, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Cognigen Corporation (“Cognigen”). On September 2, 2014, the Company consummated the acquisition of all outstanding equity interests of Cognigen pursuant to the terms of the Merger Agreement, with Cognigen merging with and into a newly-formed, wholly-owned subsidiary of the Company. We believe the combination of Simulations Plus and Cognigen provides substantial future potential based on the complementary strengths of each of the companies. | |||||
Under the terms of the Merger Agreement, as described below, the Company will pay the former shareholders of Cognigen total consideration of $7,000,000, consisting of $2,800,000 of cash and $4,200,000 worth of newly issued, unregistered shares of the Company’s common stock. | |||||
On September 2, 2014, the Company paid the former shareholders of Cognigen a total of $5,200,000, comprised of cash in the amount of $2,080,000 and the issuance of 491,159 shares of the Company’s common stock valued at $3,120,000 (under the terms of the Merger Agreement a price of approximately $6.35 dollars per share was used based upon the volume-weighted average closing price of the Company’s shares of common stock for the 30-consecutive-trading-day period ending two trading days prior to September 2, 2014). The actual stock price at September 2, 2014 was $6.67, so the total value of the stock issued was approximately $3,276,000. The Merger Agreement provides for a two-year market standoff period in which the newly issued shares may not be sold by the recipients thereof. | |||||
Within three business days following the two year anniversary of July 23, 2014 (the date of the Merger Agreement) and subject to any offsets, the Company will pay the former shareholders of Cognigen a total of $1,800,000, comprised of $720,000 of cash and the issuance of 170,014 shares of stock valued at $1,080,000 under the formula described above. | |||||
The Merger Agreement provides for a targeted working capital adjustment to be made 120 days after the closing date. Currently the amount of this adjustment has been preliminarily estimated to be $307,086 and is included in the following table showing estimated assets, liabilities, and total consideration. | |||||
Under the acquisition method of accounting, the total estimated purchase price is allocated to Cognigen’s tangible and intangible assets and liabilities based on their estimated fair values at the date of the completion of the acquisition (September 2, 2014). The following table summarizes the preliminary allocation of the purchase price for Cognigen: | |||||
Assets acquired, including accounts receivable of $934,000 and estimated Contracts receivable of $530,000 | $ | 1,719,579 | |||
Fixed assets acquired | 480,000 | ||||
Estimated value of software acquired | 200,000 | ||||
Estimated value of Intangibles acquired (Customer Lists, trade name etc.) | 1,600,000 | ||||
Estimated amount due to sellers - Working Capital Adjustment | (307,086 | ) | |||
Current Liabilities assumed | (644,499 | ) | |||
Goodwill | 4,209,571 | ||||
Total Consideration | $ | 7,257,565 | |||
Goodwill has been provided in the transaction based on estimates of future earnings of this subsidiary including anticipated synergies associated with the positioning of the combined company as a leader in model-based drug development. | |||||
The accounting for this acquisition has not been completed, as further valuations and analyses are required to establish beginning fair market values and the implication on deferred taxes. The amounts shown are provisional, and do not include any adjustments for liabilities that will result from integration activities related to the acquisition. Additional assets or liabilities may be recorded that could affect the amounts. During the measurement period, any such adjustments to provisional amounts would increase or decrease goodwill. Adjustments that occur after the end of the measurement period will be recognized in the post-combination current period operations. | |||||
Option Activity | |||||
On September 24, 2014 the Board of Directors granted options to purchase 500 shares of the Company’s common stock to each of the employees of Cognigen. Each option has an exercise price of $6.85 per share, vests at a rate of 20% per year over the first 5 years and expires on September 24, 2024. |
2_SUMMARY_OF_SIGNIFICANT_ACCOU1
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended | ||||||||
Aug. 31, 2014 | |||||||||
Accounting Policies [Abstract] | ' | ||||||||
Use of Estimates | ' | ||||||||
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. | |||||||||
Revenue Recognition | ' | ||||||||
Revenue Recognition | |||||||||
We recognize revenues related to software licenses and software maintenance in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 985-605, “Software - Revenue Recognition”. Software products revenue is recorded when the following conditions are met: 1) evidence of arrangement exists, 2) delivery has been made, 3) the amount is fixed, and 4) collectability is probable. Post-contract customer support ("PCS") obligations are insignificant; therefore, revenue for PCS is recognized at the same time as the licensing fee, and the costs of providing such support services are accrued and amortized over the obligation period. | |||||||||
As a byproduct of ongoing improvements and upgrades for the new programs and new modules of software, some modifications are provided to customers who have already purchased software at no additional charge. Other software modifications result in new, additional cost modules that expand the functionality of the software. These are licensed separately. We consider the modifications that are provided without charge to be minimal, as they do not significantly change the basic functionality or utility of the software, but rather add convenience, such as being able to plot some additional variable on a graph in addition to the numerous variables that had been available before, or adding some additional calculations to supplement the information provided from running the software. Such software modifications for any single product have typically occurred once or twice per year, sometimes more, sometimes less. Thus, they are infrequent. The Company provides, for a fee, additional training and service calls to its customers and recognizes revenue at the time the training or service call is provided. | |||||||||
Generally, we enter into one-year license agreements with customers for the use of our pharmaceutical software products. We recognize revenue on these contracts when all the criteria are met. | |||||||||
Most license agreements have a term of one year; however, from time to time, we enter into multi-year license agreements. We generally unlock and invoice software one year at a time for multi-year licenses. Therefore, revenue is recognized one year at a time. | |||||||||
We recognize the revenue from collaboration research and the revenue from grants equally over their terms. However, we recognize the contract study revenue using the percentage of completion method, depending upon how the contract studies are engaged, in accordance with ASC 605-35, “Revenue Recognition – Construction-Type and Production-Type Contracts”. To recognize revenue using the percentage of completion method, we must determine whether we meet the following criteria: 1) there is a long-term, legally enforceable contract, 2) it is possible to reasonably estimate the total project costs, and 3) it is possible to reasonably estimate the extent of progress toward completion. | |||||||||
Cash and Cash Equivalents | ' | ||||||||
Cash and Cash Equivalents | |||||||||
For purposes of the statements of cash flows, the Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. | |||||||||
Accounts Receivable | ' | ||||||||
Accounts Receivable | |||||||||
We analyze the age of customer balances, historical bad debt experience, customer creditworthiness, and changes in customer payment terms when making estimates of the collectability of the Company’s trade accounts receivable balances. If we determine that the financial conditions of any of our customers have deteriorated, whether due to customer-specific or general economic issues, an increase in the allowance may be made. Accounts receivable are written off when all collection attempts have failed. | |||||||||
Capitalized Computer Software Development Costs | ' | ||||||||
Capitalized Computer Software Development Costs | |||||||||
Software development costs are capitalized in accordance with ASC 985-20, “Costs of Software to Be Sold, Leased, or Marketed”. Capitalization of software development costs begins upon the establishment of technological feasibility and is discontinued when the product is available for sale. | |||||||||
The establishment of technological feasibility and the ongoing assessment for recoverability of capitalized software development costs require considerable judgment by management with respect to certain external factors including, but not limited to, technological feasibility, anticipated future gross revenues, estimated economic life, and changes in software and hardware technologies. Capitalized computer software development costs are comprised primarily of salaries and direct payroll-related costs and the purchase of existing software to be used in the Company's software products. | |||||||||
Amortization of capitalized computer software development costs is provided on a product-by-product basis on the straight-line method over the estimated economic life of the products not to exceed five years, although all of our current software products have already been on the market for 7-15 years except for our newest MedChem Designer™ and MembranePlus™ programs (MembranePlus™ was released following the close of the reporting period covered by this report), and we do not foresee an end-of-life for any of them at this point. Amortization of software development costs amounted to $807,705 and $716,887 for the years ended August 31, 2014 and 2013, 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 | |||||||||
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: | |||||||||
Equipment | 5 years | ||||||||
Computer equipment | 3 to 7 years | ||||||||
Furniture and fixtures | 5 to 7 years | ||||||||
Leasehold improvements | Shorter of life of asset or lease | ||||||||
Maintenance and minor replacements are charged to expense as incurred. Gains and losses on disposals are included in the results of operations. | |||||||||
Fair Value of Financial Instruments | ' | ||||||||
Fair Value of Financial Instruments | |||||||||
Financial assets and liabilities recorded at fair value in the Company’s Balance Sheet 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 I | Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date. | ||||||||
Level II | Inputs, other than quoted prices included in Level I, that are observable for the asset or liability through corroboration with market data at the measurement date. | ||||||||
Level III | Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. | ||||||||
For certain of our financial instruments, including accounts receivable, accounts payable, accrued payroll and other expenses, and accrued bonuses to officers the carrying amounts are approximate fair value due to their short-term nature. | |||||||||
Advertising | ' | ||||||||
Advertising | |||||||||
The Company expenses advertising costs as incurred. Advertising costs for the years ended August 31, 2014 and 2013 were $38,000 and $38,000, respectively. | |||||||||
Research and Development Costs | ' | ||||||||
Research and Development Costs | |||||||||
Research and development costs are charged to expense as incurred until technological feasibility has been established. These costs include salaries, laboratory experiment, and purchased software which was developed by other companies and incorporated into, or used in the development of, our final products. | |||||||||
Income Taxes | ' | ||||||||
Income Taxes | |||||||||
The Company accounts for income taxes in accordance with ASC 740-10, “Income Taxes” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. | |||||||||
Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities. | |||||||||
Intellectual property | ' | ||||||||
Intellectual property | |||||||||
On February 28, 2012, we bought out the royalty agreement with Enslein Research. The cost of $75,000 is being amortized over 10 years under the straight-line method. Amortization expense for each of the fiscal years ended August 31, 2014 and 2013 was $7,500. Accumulated amortization as of August 31, 2014 and 2013 was $18,750 and $11,250, respectively. | |||||||||
On May 15, 2014, we entered into a termination and non-assertion agreement with TSRL, Inc., pursuant to which the parties agreed to terminate an exclusive software licensing agreement entered into between the parties in 1997. As a result, the company obtained a perpetual right to use certain source code and data, and TSRL relinquished any rights and claims to any GastroPlus products and to any claims to royalties or other payments under that 1997 agreement. We agreed to pay TSRL total consideration of $6,000,000, which is being amortized over 10 years under the straight-line method. Amortization expense for the period of May 15, 2014 to August 31, 2014 was $175,000. Accumulated amortization as of August 31, 2014 was $175,000. (See Note 4) | |||||||||
Total amortization expense for intellectual property agreements for the years ended August 31, 2014 and 2013 was $182,500 and $7,500, respectively. Accumulated amortization as of August 31, 2014 and 2013 was $193,750 and $11,250, respectively. | |||||||||
Earnings per Share | ' | ||||||||
Earnings per Share | |||||||||
The Company reports earnings per share in accordance with FASB ACS 260-10. Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of common shares available. Diluted earnings per share is computed similarly to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. The components of basic and diluted earnings per share for the years ended August 31, 2014 and 2013 were as follows: | |||||||||
2014 | 2013 | ||||||||
Numerator | |||||||||
Net income attributable to common shareholders | $ | 3,025,491 | $ | 2,886,598 | |||||
Denominator | |||||||||
Weighted-average number of common shares outstanding during the year | 16,173,674 | 15,996,432 | |||||||
Dilutive effect of stock options | 234,077 | 323,551 | |||||||
Common stock and common stock equivalents used for diluted earnings per share | 16,407,751 | 16,319,983 | |||||||
Stock-Based Compensation | ' | ||||||||
Stock-Based Compensation | |||||||||
The Company accounts for stock options using the modified prospective method in accordance with FASB ASC 718-10, “Compensation-Stock Compensation”. Under this method, compensation costs include estimated grant date fair value of the awards amortized over the options’ vesting period. Stock-based compensation was $144,327 and $115,740 for the fiscal years ended August 31, 2014 and 2013, respectively, and is included in the statements of operations as Consulting, Salaries, and Research and Development expense. | |||||||||
Impairment of Long-lived assets | ' | ||||||||
Impairment of Long-lived Assets | |||||||||
The Company accounts for the impairment and disposition of long-lived assets in accordance with ASC 350, “Intangibles – Goodwill and Other” and ASC 360, “Property and Equipment”. Long-lived assets to be held and used are reviewed for events or changes in circumstances that indicate that their carrying value may not be recoverable. We measure recoverability by comparing the carrying amount of an asset to the expected future undiscounted net cash flows generated by the asset. If we determine that the asset may not be recoverable, or if the carrying amount of an asset exceeds its estimated future undiscounted cash flows, we recognize an impairment charge to the extent of the difference between the fair value and the asset's carrying amount. No impairment losses were recorded during the years ended August 31, 2014 and 2013. | |||||||||
Recently Issued Accounting Standards | ' | ||||||||
Recently Issued Accounting Standards | |||||||||
In July 2012, the FASB issued Accounting Standards Update (“ASU”) 2012-02, “Testing Indefinite-Lived Intangible Assets for Impairment”, which amended the guidance in ASU 2011-08 “Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment”) to simplify the testing of indefinite-lived intangible assets other than goodwill for impairment. ASU 2012-02 became effective for annual and interim impairment tests performed for fiscal years beginning on or after September 15, 2012 and earlier adoption was permitted. We adopted this standard in the first quarter of our 2013 fiscal year. The adoption did not have a material effect on our financial statements. | |||||||||
In July 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, which eliminates diversity in practice for the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss or a tax credit carryforward is available to reduce the taxable income or tax payable that would result from disallowance of a tax position. ASU 2013-11 affects only the presentation of such amounts in an entity’s balance sheet and is effective for fiscal years beginning after December 15, 2013 and interim periods within those years. Early adoption is permitted. We are evaluating the impact, if any, of the adoption of ASU 2013-11 on our balance sheet. | |||||||||
In May 2014, FASB issued ASU 2014-09, Revenue from Contracts with Customers. The standard will eliminate the transaction- and industry-specific revenue recognition guidance under current U.S. GAAP and replace it with a principles-based approach for determining revenue recognition. ASU 2014-09 is effective for annual and interim periods beginning after December 15, 2016. Early adoption is not permitted. The revenue recognition standard is required to be applied retrospectively, including any combination of practical expedients as allowed in the standard. We are evaluating the impact, if any, of the adoption of ASU 2014-09 to our financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting. |
2_SUMMARY_OF_SIGNIFICANT_ACCOU2
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended | ||||||||
Aug. 31, 2014 | |||||||||
Accounting Policies [Abstract] | ' | ||||||||
Property and Equipment estimated useful lives | ' | ||||||||
Equipment | 5 years | ||||||||
Computer equipment | 3 to 7 years | ||||||||
Furniture and fixtures | 5 to 7 years | ||||||||
Leasehold improvements | Shorter of life of asset or lease | ||||||||
Components of basic and diluted earnings per share | ' | ||||||||
2014 | 2013 | ||||||||
Numerator | |||||||||
Net income attributable to common shareholders | $ | 3,025,491 | $ | 2,886,598 | |||||
Denominator | |||||||||
Weighted-average number of common shares outstanding during the year | 16,173,674 | 15,996,432 | |||||||
Dilutive effect of stock options | 234,077 | 323,551 | |||||||
Common stock and common stock equivalents used for diluted earnings per share | 16,407,751 | 16,319,983 |
3_PROPERTY_AND_EQUIPMENT_Table
3. PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended | ||||||||
Aug. 31, 2014 | |||||||||
Property, Plant and Equipment [Abstract] | ' | ||||||||
Property and equipment | ' | ||||||||
2014 | 2013 | ||||||||
Equipment | $ | 125,541 | $ | 141,355 | |||||
Computer equipment | 51,466 | 295,174 | |||||||
Furniture and fixtures | 147,541 | 53,096 | |||||||
Leasehold improvements | 23,645 | 61,860 | |||||||
348,193 | 551,485 | ||||||||
Less accumulated depreciation and amortization | 252,951 | 433,498 | |||||||
Total | $ | 95,242 | $ | 117,987 |
4_CONTRACT_PAYABLE_Tables
4. CONTRACT PAYABLE (Tables) | 12 Months Ended | ||||
Aug. 31, 2014 | |||||
Other Liabilities Disclosure [Abstract] | ' | ||||
Future payments under the agreement | ' | ||||
25-Apr-15 | $ | 750,000 | |||
25-Apr-16 | 750,000 | ||||
25-Apr-17 | 1,000,000 | ||||
Total | $ | 2,500,000 | |||
Less Current portion | (750,000 | ) | |||
Contract payable, net of current portion | $ | 1,750,000 |
5_COMMITMENTS_AND_CONTINGENCIE1
5. COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended | ||
Aug. 31, 2014 | |||
Commitments and Contingencies Disclosure [Abstract] | ' | ||
Future minimum lease payments | ' | ||
Years Ending August 31, | |||
2015 | $ | 297,094 | |
2016 | 306,007 | ||
2017 | 129,526 | ||
$ | 732,627 |
6_SHAREHOLDERS_EQUITY_Tables
6. SHAREHOLDERS' EQUITY (Tables) | 12 Months Ended | ||||||||||||||||||
Aug. 31, 2014 | |||||||||||||||||||
Equity [Abstract] | ' | ||||||||||||||||||
Schedule of dividends declared and paid | ' | ||||||||||||||||||
FY2014 | |||||||||||||||||||
Record Date | Distribution Date | Number of Shares | Dividend per Share | Total Amount | |||||||||||||||
Outstanding on | |||||||||||||||||||
Record Date | |||||||||||||||||||
11/8/13 | 11/15/13 | 16,073,894 | $ | 0.04 | ** | $ | 642,956 | ||||||||||||
2/17/14 | 2/24/14 | 16,149,460 | $ | 0.05 | $ | 807,473 | |||||||||||||
5/9/14 | 5/16/14 | 16,165,171 | $ | 0.05 | $ | 808,259 | |||||||||||||
8/4/14 | 8/11/14 | 16,337,955 | $ | 0.05 | $ | 816,897 | |||||||||||||
Total | $ | 3,075,585 | |||||||||||||||||
FY2013 | |||||||||||||||||||
Record Date | Distribution Date | Number of Shares | Dividend per Share | Total Amount | |||||||||||||||
Outstanding on | |||||||||||||||||||
Record Date | |||||||||||||||||||
11/8/12 | 11/13/12 | 15,927,806 | $ | 0.05 | $ | 796,390 | |||||||||||||
12/24/12 | 12/28/12 | 16,021,309 | $ | 0.14 | * | $ | 2,242,983 | ||||||||||||
5/7/13 | 5/10/13 | 16,030,433 | $ | 0.03 | ** | $ | 480,913 | ||||||||||||
8/12/13 | 8/15/13 | 16,030,894 | $ | 0.03 | ** | $ | 480,926 | ||||||||||||
Total | $ | 4,001,212 | |||||||||||||||||
Schedule of stock option activity | ' | ||||||||||||||||||
Incentive Stock Options (“ISOs”) | |||||||||||||||||||
As of August 31, 2014, employees hold ISOs to purchase in the aggregate 532,000 shares of the Company’s common stock at exercise prices ranging from $1.00 to $6.85 per share. | |||||||||||||||||||
Transactions in FY13 | Number of Options | Weighted-Average | Weighted-Average Remaining Contractual Life(Years) | ||||||||||||||||
(ISOs) | Exercise Price | ||||||||||||||||||
Per Share | |||||||||||||||||||
Outstanding, August 31, 2012 | 689,800 | $ | 1.74 | 4.52 | |||||||||||||||
Granted | 20,000 | $ | 5.06 | ||||||||||||||||
Exercised | (175,800 | ) | $ | 1.9 | |||||||||||||||
Canceled/Forfeited | (2,000 | ) | $ | 1 | |||||||||||||||
Outstanding, August 31, 2013 | 532,000 | $ | 1.82 | 3.95 | |||||||||||||||
Vested and Exercisable, August 31, 2013 | 392,600 | $ | 1.45 | 3.79 | |||||||||||||||
Vested and Expected to Vest, August 31, 2013 | 519,600 | $ | 1.79 | 3.91 | |||||||||||||||
Transactions in FY14 | Number of Options | Weighted-Average | Weighted-Average Remaining Contractual Life | ||||||||||||||||
(ISOs) | Exercise Price | ||||||||||||||||||
Per Share | |||||||||||||||||||
Outstanding, August 31, 2013 | 532,000 | $ | 1.82 | 3.95 | |||||||||||||||
Granted | 447,500 | $ | 6.57 | ||||||||||||||||
Exercised | (175,000 | ) | $ | 1.34 | |||||||||||||||
Canceled/Forfeited | (6,000 | ) | $ | 1 | |||||||||||||||
Outstanding, August 31, 2014 | 798,500 | $ | 4.59 | 6.27 | |||||||||||||||
Vested and Exercisable, August 31, 2014 | 299,000 | $ | 1.82 | 3.16 | |||||||||||||||
Vested and Expected to Vest, August 31, 2014 | 728,079 | $ | 4.41 | 5.99 | |||||||||||||||
Non-Qualified Stock Options (“NQSOs”) | |||||||||||||||||||
As of August 31, 2014, the outside members of the Company’s Board of Directors hold NQSOs to purchase in the aggregate 48,600 shares of the Company’s common stock at exercise prices ranging from $1.67 to $6.68 per share. | |||||||||||||||||||
Transactions in FY13 | Number of Options | Weighted-Average | Weighted-Average Remaining Contractual Life | ||||||||||||||||
(NQSOs) | Exercise Price | ||||||||||||||||||
Per Share | |||||||||||||||||||
Outstanding, August 31, 2012 | 36,600 | $ | 3.47 | 8.14 | |||||||||||||||
Granted | 12,000 | $ | 4.78 | ||||||||||||||||
Outstanding, August 31, 2013 | 48,600 | $ | 3.79 | 7.85 | |||||||||||||||
Exercisable, August 31, 2013 | 28,200 | $ | 3.28 | 6.67 | |||||||||||||||
Transactions in FY14 | Number of Options | Weighted-Average | Weighted-Average Remaining Contractual Life | ||||||||||||||||
(NQSOs) | Exercise Price | ||||||||||||||||||
Per Share | |||||||||||||||||||
Outstanding, August 31, 2013 | 48,600 | $ | 3.79 | 7.85 | |||||||||||||||
Granted | 15,000 | $ | 6.72 | ||||||||||||||||
Exercised | (7,000 | ) | $ | 1.3 | |||||||||||||||
Outstanding, August 31, 2014 | 56,600 | $ | 4.82 | 7.96 | |||||||||||||||
Exercisable, August 31, 2014 | 31,400 | $ | 3.96 | 6.74 | |||||||||||||||
Intrinsic Value of options outstanding and options exercisable | ' | ||||||||||||||||||
Intrinsic Value of Options Outstanding | Intrinsic Value of Options Exercisable | Intrinsic Value of Options Exercised | |||||||||||||||||
FY13 | $ | 1,636,422 | $ | 1,357,870 | $ | 402,406 | |||||||||||||
FY14 | $ | 1,850,239 | $ | 1,552,171 | $ | 737,266 | |||||||||||||
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 | ||||||||||||
$1.00 | $1.50 | 197,500 | 3.5 years | $1.05 | 197,500 | 3.5 years | $1.05 | ||||||||||||
$1.51 | $3.00 | 17,600 | 5.7 years | $2.42 | 7,600 | 5.9 years | $2.34 | ||||||||||||
$3.01 | $4.50 | 141,500 | 3.1 years | $3.28 | 108,500 | 3.2 years | $3.26 | ||||||||||||
$4.51 | $6.85 | 498,500 | 8.5 years | $6.47 | 16,800 | 4.7 years | $5.36 | ||||||||||||
855,100 | 330,400 |
7_INCOME_TAXES_Tables
7. INCOME TAXES (Tables) | 12 Months Ended | ||||||||
Aug. 31, 2014 | |||||||||
Income Tax Disclosure [Abstract] | ' | ||||||||
Components of the income tax provision | ' | ||||||||
2014 | 2013 | ||||||||
Current | |||||||||
Federal | $ | 186,052 | $ | 891,153 | |||||
State | 2,858 | 112,042 | |||||||
188,910 | 1,003,195 | ||||||||
Deferred | |||||||||
Federal | 1,180,655 | 57,805 | |||||||
State | 118,241 | 309,182 | |||||||
1,298,896 | 366,987 | ||||||||
Total | $ | 1,487,806 | $ | 1,370,182 | |||||
Effective income tax rate | ' | ||||||||
2014 | 2013 | ||||||||
Income tax computed at federal statutory tax rate | 34.00% | 34.00% | |||||||
State taxes, net of federal benefit | 5.1 | 5.2 | |||||||
Meals & Entertainment | 0.1 | 0.1 | |||||||
Other permanent differences | 2.6 | (0.5 | ) | ||||||
Research and development credit | (9.6 | ) | (11.3 | ) | |||||
Change in prior year estimated taxes | 0.8 | 4.7 | |||||||
Total | 33.00% | 32.20% | |||||||
Components of the Company deferred tax assets and liabilities | ' | ||||||||
2014 | 2013 | ||||||||
Deferred tax assets | |||||||||
Accrued payroll and other expenses | $ | 88,574 | $ | 82,104 | |||||
Deferred revenue | 12,473 | 38,225 | |||||||
Deferred rent | – | 29,068 | |||||||
Capitalized merger costs | 93,306 | – | |||||||
Intellectual property | 19,442 | 30,326 | |||||||
Research and development credit | 216,917 | – | |||||||
State taxes | 272 | 45,343 | |||||||
State Tax Deferred | 120,575 | 74,458 | |||||||
Total deferred tax assets | 551,558 | 299,524 | |||||||
Less: Valuation allowance | – | – | |||||||
551,558 | 299,524 | ||||||||
Deferred tax liabilities | |||||||||
Property and equipment | (27,178 | ) | (23,077 | ) | |||||
State Tax Deferred | (5,914 | ) | – | ||||||
Intellectual Property | (1,361,535 | ) | – | ||||||
Capitalized computer software development costs | (1,417,959 | ) | (1,238,578 | ) | |||||
Total deferred tax liabilities | (2,812,586 | ) | (1,261,655 | ) | |||||
Net deferred tax liabilities | $ | (2,261,028 | ) | $ | (962,131 | ) |
9_GEOGRAPHIC_REPORTING_Tables
9. GEOGRAPHIC REPORTING (Tables) | 12 Months Ended | ||||||||||||||||||||
Aug. 31, 2014 | |||||||||||||||||||||
Risks and Uncertainties [Abstract] | ' | ||||||||||||||||||||
Schedule of geographical revenues | ' | ||||||||||||||||||||
(in ‘000) | North America | Europe | Asia | South America | Total | ||||||||||||||||
31-Aug-14 | $ | 5,633 | $ | 2,983 | $ | 2,819 | $ | 26 | $ | 11,461 | |||||||||||
31-Aug-13 | $ | 5,203 | $ | 2,980 | $ | 1,882 | $ | 6 | $ | 10,071 |
12_SUBSEQUENT_EVENTS_Tables
12. SUBSEQUENT EVENTS (Tables) | 12 Months Ended | ||||
Aug. 31, 2014 | |||||
Subsequent Events [Abstract] | ' | ||||
Allocation of purchase price | ' | ||||
Assets acquired, including accounts receivable of $934,000 and estimated Contracts receivable of $530,000 | $ | 1,719,579 | |||
Fixed assets acquired | 480,000 | ||||
Estimated value of software acquired | 200,000 | ||||
Estimated value of Intangibles acquired (Customer Lists, trade name etc.) | 1,600,000 | ||||
Estimated amount due to sellers - Working Capital Adjustment | (307,086 | ) | |||
Current Liabilities assumed | (644,499 | ) | |||
Goodwill | 4,209,571 | ||||
Total Consideration | $ | 7,257,565 |
2_SUMMARY_OF_SIGNIFICANT_ACCOU3
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) | 12 Months Ended |
Aug. 31, 2014 | |
Equipment [Member] | ' |
Estimated useful lives | '5 years |
Computer equipment [Member] | ' |
Estimated useful lives | '3 to 7 years |
Furniture and fixtures [Member] | ' |
Estimated useful lives | '5 to 7 years |
Leasehold improvements [Member] | ' |
Estimated useful lives | 'Shorter of life of asset or lease |
2_SUMMARY_OF_SIGNIFICANT_ACCOU4
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) (USD $) | 12 Months Ended | |
Aug. 31, 2014 | Aug. 31, 2013 | |
Numerator | ' | ' |
Net income attributable to common shareholders | $3,025,491 | $2,886,598 |
Denominator | ' | ' |
Weighted-average number of common shares outstanding during the period | 16,173,674 | 15,996,432 |
Dilutive effect of stock options | 234,077 | 323,551 |
Common stock and common stock equivalents used for diluted earnings per share | 16,407,751 | 16,319,983 |
2_SUMMARY_OF_SIGNIFICANT_ACCOU5
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) (USD $) | 12 Months Ended | |
Aug. 31, 2014 | Aug. 31, 2013 | |
Amortization of software development | $807,705 | $716,887 |
Advertising costs | 38,000 | 38,000 |
Amortization of intellectual property | 182,500 | 7,500 |
Accumulated amortization of intellectual property | 193,750 | 11,250 |
Stock-based compensation | 144,327 | 115,740 |
Impairment of long-lived assets | 0 | 0 |
TSRL [Member] | ' | ' |
Total consideration paid for termination agreement | 6,000,000 | ' |
Intellectual Property [Member] | Royalty Agreements [Member] | ' | ' |
Amortization of intellectual property | 7,500 | 7,500 |
Accumulated amortization of intellectual property | 18,750 | 11,250 |
Intellectual Property [Member] | Termination and Non-Assertion Agreement [Member] | ' | ' |
Amortization of intellectual property | 175,000 | ' |
Accumulated amortization of intellectual property | $175,000 | ' |
3_PROPERTY_AND_EQUIPMENT_Detai
3. PROPERTY AND EQUIPMENT (Details) (USD $) | Aug. 31, 2014 | Aug. 31, 2013 |
Property and equipment, gross | $348,193 | $551,485 |
Less accumulated depreciation and Amortization | 252,951 | 433,498 |
Net Book Value | 95,242 | 117,987 |
Equipment [Member] | ' | ' |
Property and equipment, gross | 125,541 | 141,355 |
Computer equipment [Member] | ' | ' |
Property and equipment, gross | 51,466 | 295,174 |
Furniture and fixtures [Member] | ' | ' |
Property and equipment, gross | 147,541 | 53,096 |
Leasehold improvements [Member] | ' | ' |
Property and equipment, gross | $23,645 | $61,860 |
3_PROPERTY_AND_EQUIPMENT_Detai1
3. PROPERTY AND EQUIPMENT (Details Narrative) (USD $) | 12 Months Ended | |
Aug. 31, 2014 | Aug. 31, 2013 | |
Property, Plant and Equipment [Abstract] | ' | ' |
Depreciation | $47,231 | $42,573 |
4_CONTRACTS_PAYABLE_Details
4. CONTRACTS PAYABLE (Details) (USD $) | Aug. 31, 2014 | Aug. 31, 2013 |
Other Liabilities Disclosure [Abstract] | ' | ' |
Future payments due 2015 | $750,000 | ' |
Future payments due 2016 | 750,000 | ' |
Future payments due 2017 | 1,000,000 | ' |
Total cash consideration | 2,500,000 | ' |
Less: current portion | -750,000 | 0 |
Contract payable, net of current portion | $1,750,000 | $0 |
4_CONTRACT_PAYABLE_Details_Nar
4. CONTRACT PAYABLE (Details Narrative) (USD $) | 12 Months Ended | 9 Months Ended | 12 Months Ended | |
Aug. 31, 2014 | Aug. 31, 2013 | 20-May-14 | Aug. 31, 2014 | |
TSRL [Member] | TSRL [Member] | |||
Total consideration paid for contract termination and non-assertion agreement | ' | ' | ' | $6,000,000 |
Cash paid for contract | 2,500,000 | 0 | 2,500,000 | ' |
Stock issued for acquisition, value | $1,000,000 | ' | $1,000,000 | ' |
Stock issued for acquisition, shares | ' | ' | 164,745 | ' |
5_COMMITMENTS_AND_CONTINGENCIE2
5. COMMITMENTS AND CONTINGENCIES (Details) (USD $) | Aug. 31, 2014 |
Commitments and Contingencies Disclosure [Abstract] | ' |
2015 | $297,094 |
2016 | 306,007 |
2017 | 129,526 |
Future minimum lease payments | $732,627 |
5_COMMITMENTS_AND_CONTINGENCIE3
5. COMMITMENTS AND CONTINGENCIES (Details Narrative) (USD $) | 12 Months Ended | |
Aug. 31, 2014 | Aug. 31, 2013 | |
Commitments and Contingencies Disclosure [Abstract] | ' | ' |
Rent expense | $295,410 | $305,636 |
Sublease income | ' | 35,500 |
Royalties expense | $222,000 | $646,000 |
6_SHAREHOLDERS_EQUITY_Details_
6. SHAREHOLDERS EQUITY (Details - Dividends) (USD $) | 12 Months Ended | |
Aug. 31, 2014 | Aug. 31, 2013 | |
Total Amount | $3,075,585 | $4,001,212 |
FY 2013 1st Qtr [Member] | ' | ' |
Record Date | ' | 8-Nov-12 |
Distribution Date | ' | 13-Nov-12 |
Number of Shares Outstanding on Record Date | ' | 15,927,806 |
Dividend per Share | ' | $0.05 |
Total Amount | ' | 796,390 |
FY 2013 2nd Qtr [Member] | ' | ' |
Record Date | ' | 24-Dec-12 |
Distribution Date | ' | 28-Dec-12 |
Number of Shares Outstanding on Record Date | ' | 16,021,309 |
Dividend per Share | ' | $0.14 |
Total Amount | ' | 2,242,983 |
FY 2013 3rd Qtr [Member] | ' | ' |
Record Date | ' | 7-May-13 |
Distribution Date | ' | 10-May-13 |
Number of Shares Outstanding on Record Date | ' | 16,030,433 |
Dividend per Share | ' | $0.03 |
Total Amount | ' | 480,913 |
FY 2013 4th Qtr [Member] | ' | ' |
Record Date | ' | 12-Aug-13 |
Distribution Date | ' | 15-Aug-13 |
Number of Shares Outstanding on Record Date | ' | 16,030,894 |
Dividend per Share | ' | $0.03 |
Total Amount | ' | 480,926 |
FY 2014 1st Qtr [Member] | ' | ' |
Record Date | 8-Nov-13 | ' |
Distribution Date | 15-Nov-13 | ' |
Number of Shares Outstanding on Record Date | 16,073,894 | ' |
Dividend per Share | $0.04 | ' |
Total Amount | 642,956 | ' |
FY 2014 2nd Qtr [Member] | ' | ' |
Record Date | 17-Feb-14 | ' |
Distribution Date | 24-Feb-14 | ' |
Number of Shares Outstanding on Record Date | 16,149,460 | ' |
Dividend per Share | $0.05 | ' |
Total Amount | 807,473 | ' |
FY 2014 3rd Qtr [Member] | ' | ' |
Record Date | 9-May-14 | ' |
Distribution Date | 16-May-14 | ' |
Number of Shares Outstanding on Record Date | 16,165,171 | ' |
Dividend per Share | $0.05 | ' |
Total Amount | 808,259 | ' |
FY 2014 4th Qtr [Member] | ' | ' |
Record Date | 4-Aug-14 | ' |
Distribution Date | 11-Aug-14 | ' |
Number of Shares Outstanding on Record Date | 16,337,955 | ' |
Dividend per Share | $0.05 | ' |
Total Amount | $816,897 | ' |
6_SHAREHOLDERS_EQUITY_Details_1
6. SHAREHOLDERS EQUITY (Details - Option activity) (USD $) | 12 Months Ended | |
Aug. 31, 2014 | Aug. 31, 2013 | |
Number of Options | ' | ' |
Awards Outstanding, ending balance | 855,100 | ' |
Vested and Exercisable, end of period | 330,400 | ' |
Incentive Stock Options (ISOs) [Member] | ' | ' |
Number of Options | ' | ' |
Awards Outstanding, beginning balance | 532,000 | 689,800 |
Granted | 447,500 | 20,000 |
Exercised | -175,000 | -175,800 |
Canceled/Forfeited | -6,000 | -2,000 |
Awards Outstanding, ending balance | 798,500 | 532,000 |
Vested and Exercisable, end of period | 299,000 | 392,600 |
Vested and Expected to Vest, end of period | 728,079 | 519,600 |
Weighted-Average Exercise Price Per Share | ' | ' |
Outstanding | $1.82 | $1.74 |
Granted | $6.57 | $5.06 |
Exercised | $1.34 | $1.90 |
Canceled/Forfeited | $1 | $1 |
Outstanding | $4.59 | $1.82 |
Vested and Exercisable, end of period | $1.82 | $1.45 |
Vested and Expected to Vest, end of period | $4.41 | $1.79 |
Weighted-Average Remaining Contractual Life | ' | ' |
Outstanding, beginning of period | '3 years 11 months 12 days | '4 years 6 months 7 days |
Outstanding, end of period | '6 years 3 months 7 days | '3 years 11 months 12 days |
Vested and Exercisable | '3 years 1 month 28 days | '3 years 9 months 14 days |
Vested and Expected to Vest | '5 years 11 months 26 days | '3 years 10 months 28 days |
Non-Qualified Stock Options (NQSOs) [Member] | ' | ' |
Number of Options | ' | ' |
Awards Outstanding, beginning balance | 48,600 | 36,600 |
Granted | 15,000 | 12,000 |
Exercised | -7,000 | ' |
Canceled/Forfeited | 56,600 | ' |
Awards Outstanding, ending balance | 31,400 | 48,600 |
Vested and Exercisable, end of period | ' | 28,200 |
Weighted-Average Exercise Price Per Share | ' | ' |
Outstanding | $3.79 | $3.47 |
Granted | $6.72 | $4.78 |
Exercised | $1.30 | ' |
Canceled/Forfeited | $4.82 | ' |
Outstanding | $3.96 | $3.79 |
Vested and Exercisable, end of period | ' | $3.28 |
Weighted-Average Remaining Contractual Life | ' | ' |
Outstanding, beginning of period | '7 years 10 months 6 days | '8 years 1 month 20 days |
Outstanding, end of period | '7 years 11 months 16 days | '7 years 9 months 14 days |
Vested and Exercisable | '6 years 8 months 26 days | '6 years 8 months 1 day |
6_SHAREHOLDERS_EQUITY_Details_2
6. SHAREHOLDERS EQUITY (Details - Intrinsic Value) (USD $) | 12 Months Ended | |
Aug. 31, 2014 | Aug. 31, 2013 | |
Equity [Abstract] | ' | ' |
Intrinsic Value of Options Outstanding | $1,850,239 | $1,636,422 |
Intrinsic Value of Options Exercisable | 1,552,171 | 1,357,870 |
Intrinsic Value of Options Exercised | $737,266 | $402,406 |
6_SHAREHOLDERS_EQUITY_Details_3
6. SHAREHOLDERS EQUITY (Details - Options outstanding and exercisable) (USD $) | 12 Months Ended |
Aug. 31, 2014 | |
Awards outstanding | 855,100 |
Awards exercisable | 330,400 |
$1.00 to $1.50 [Member] | ' |
Exercise price low | $1 |
Exercise price high | $1.50 |
Awards outstanding | 197,500 |
Awards outstanding weighted average remaining contractual life | '3 years 6 months |
Awards outstanding weighted average exercise price | $1.05 |
Awards exercisable | 197,500 |
Awards exercisable weighted average remaining contractual life | '3 years 6 months |
Awards exercisable weighted average exercise price | $1.05 |
$1.51 to $3.00 [Member] | ' |
Exercise price low | $1.51 |
Exercise price high | $3 |
Awards outstanding | 17,600 |
Awards outstanding weighted average remaining contractual life | '5 years 8 months 12 days |
Awards outstanding weighted average exercise price | $2.42 |
Awards exercisable | 7,600 |
Awards exercisable weighted average remaining contractual life | '5 years 10 months 24 days |
Awards exercisable weighted average exercise price | $2.34 |
$3.01 to $4.50 [Member] | ' |
Exercise price low | $3.01 |
Exercise price high | $4.50 |
Awards outstanding | 141,500 |
Awards outstanding weighted average remaining contractual life | '3 years 1 month 6 days |
Awards outstanding weighted average exercise price | $3.28 |
Awards exercisable | 108,500 |
Awards exercisable weighted average remaining contractual life | '3 years 2 months 12 days |
Awards exercisable weighted average exercise price | $3.26 |
$4.51 to $6.85 [Member] | ' |
Exercise price low | $4.51 |
Exercise price high | $6.85 |
Awards outstanding | 498,500 |
Awards outstanding weighted average remaining contractual life | '8 years 6 months |
Awards outstanding weighted average exercise price | $6.47 |
Awards exercisable | 16,800 |
Awards exercisable weighted average remaining contractual life | '4 years 8 months 12 days |
Awards exercisable weighted average exercise price | $5.36 |
6_SHAREHOLDERS_EQUITY_Details_4
6. SHAREHOLDERS' EQUITY (Details Narrative) (USD $) | 12 Months Ended | |
Aug. 31, 2014 | Aug. 31, 2013 | |
Options both ISO and NQSO [Member] | ' | ' |
Fair value of the options granted | $1,103,600 | ' |
Dividend yield | 3.01% | 4.35% |
Pre-vest forfeiture rate | 6.25% | 6.13% |
Expected volatility | 46.18% | 57.65% |
Risk-free interest rate | 1.80% | 0.66% |
Expected life | '6 years 3 months 7 days | '5 years |
Fair value of non-vested stock options | $1,133,865 | ' |
Weighted average amortizable period | '4 years 6 months 29 days | ' |
2007 Plan [Member] | ' | ' |
Common stock reserved for issuance under the plan | 1,000,000 | ' |
Total shares available for grant | 2,000,000 | ' |
7_INCOME_TAXES_Details_Income_
7. INCOME TAXES (Details - Income tax provision) (USD $) | 12 Months Ended | |
Aug. 31, 2014 | Aug. 31, 2013 | |
Current | ' | ' |
Federal | $186,052 | $891,153 |
State | 2,858 | 112,042 |
Total State | 188,910 | 1,003,195 |
Deferred | ' | ' |
Federal | 1,180,655 | 57,805 |
State | 118,241 | 309,182 |
Total deferred total | 1,298,896 | 366,987 |
Total Federal and State | $1,487,806 | $1,370,182 |
7_INCOME_TAXES_Details_Reconci
7. INCOME TAXES (Details - Reconciliation) | 12 Months Ended | |
Aug. 31, 2014 | Aug. 31, 2013 | |
Income Tax Disclosure [Abstract] | ' | ' |
Income tax computed at federal statutory tax rate | 34.00% | 34.00% |
State taxes, net of federal benefit | 5.10% | 5.20% |
Meals & Entertainment | 0.10% | 0.10% |
Other permanent differences | 2.60% | -0.50% |
Research and development credit | -9.60% | -11.30% |
Change in prior year estimated taxes | 0.80% | 4.70% |
Total | 33.00% | 32.20% |
7_INCOME_TAXES_Details_Deferre
7. INCOME TAXES (Details - Deferred taxes) (USD $) | Aug. 31, 2014 | Aug. 31, 2013 |
Deferred tax assets | ' | ' |
Accrued payroll and other expenses | $88,574 | $82,104 |
Deferred revenue | 12,473 | 38,225 |
Deferred rent | 0 | 29,068 |
Capitalized merger costs | 93,306 | 0 |
Intellectual property | 19,442 | 30,326 |
Research and development credit | 216,917 | 0 |
State taxes | 272 | 45,343 |
State Tax Deferred | 120,575 | 74,458 |
Total deferred tax assets | 551,558 | 299,524 |
Less Valuation allowance | 0 | 0 |
Deferred tax asset | 551,558 | 299,524 |
Deferred tax liabilities | ' | ' |
Property and equipment | -27,178 | -23,077 |
State Tax Deferred | -5,914 | 0 |
Intellectual Property | -1,361,535 | 0 |
Capitalized computer software development costs | -1,417,959 | -1,238,578 |
Total deferred tax liabilities | -2,812,586 | -1,261,655 |
Net deferred tax liabilities | ($2,261,028) | ($962,131) |
8_CONCENTRATIONS_AND_UNCERTAIN1
8. CONCENTRATIONS AND UNCERTAINTIES (Details Narrative | 12 Months Ended | |
Aug. 31, 2014 | Aug. 31, 2013 | |
Net Sales [Member] | Customer 1 [Member] | ' | ' |
Net sales concentration percentage | 14.00% | 9.00% |
Net Sales [Member] | Customer 2 [Member] | ' | ' |
Net sales concentration percentage | 8.00% | 6.00% |
Net Sales [Member] | International Sales [Member] | ' | ' |
Net sales concentration percentage | 51.00% | 48.00% |
Accounts Receivable [Member] | Customer 1 [Member] | ' | ' |
Net sales concentration percentage | 30.00% | 27.00% |
Accounts Receivable [Member] | Customer 2 [Member] | ' | ' |
Net sales concentration percentage | 17.00% | 22.00% |
9_GEOGRAPHIC_REPORTING_Details
9. GEOGRAPHIC REPORTING (Details) (USD $) | 12 Months Ended | |
Aug. 31, 2014 | Aug. 31, 2013 | |
Revenues | $11,461,000 | $10,071,000 |
North America [Member] | ' | ' |
Revenues | 5,633,000 | 5,203,000 |
Europe [Member] | ' | ' |
Revenues | 2,983,000 | 2,980,000 |
Asia [Member] | ' | ' |
Revenues | 2,819,000 | 1,882,000 |
South America [Member] | ' | ' |
Revenues | $26,000 | $6,000 |
10_RELATED_PARTY_TRANSACTIONS_
10. RELATED PARTY TRANSACTIONS (Details Narrative) (USD $) | Aug. 31, 2014 | Aug. 31, 2013 |
Accrued bonus | $120,000 | $60,000 |
Corporate Secretary [Member] | ' | ' |
Accrued bonus | 60,000 | 60,000 |
Chief Executive Officer [Member] | ' | ' |
Accrued bonus | $60,000 | $30,000 |
11_EMPLOYEE_BENEFIT_PLAN_Detai
11. EMPLOYEE BENEFIT PLAN (Details Narrative) (USD $) | 12 Months Ended | |
Aug. 31, 2014 | Aug. 31, 2013 | |
Compensation and Retirement Disclosure [Abstract] | ' | ' |
Contribution by employer in benefit plan | $117,200 | $104,162 |