Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Feb. 28, 2017 | Apr. 10, 2017 | |
Document And Entity Information | ||
Entity Registrant Name | SIMULATIONS PLUS INC | |
Entity Central Index Key | 1,023,459 | |
Document Type | 10-Q | |
Document Period End Date | Feb. 28, 2017 | |
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 | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 17,240,626 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2,017 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) | Feb. 28, 2017 | Aug. 31, 2016 |
Current assets | ||
Cash and cash equivalents | $ 7,426,811 | $ 8,030,284 |
Accounts receivable, net of allowance for doubtful accounts of $0 | 4,668,219 | 3,009,517 |
Revenues in excess of billings | 1,223,520 | 694,131 |
Prepaid income taxes | 374,405 | 555,486 |
Prepaid expenses and other current assets | 296,394 | 410,811 |
Total current assets | 13,989,349 | 12,700,229 |
Long-term assets | ||
Capitalized computer software development costs,net of accumulated amortization of $9,187,363 and $8,613,487 | 4,023,627 | 4,013,127 |
Property and equipment, net (note 3) | 280,631 | 256,381 |
Intellectual property, net of accumulated amortization of $1,712,500 and $1,408,750 | 4,362,500 | 4,666,250 |
Other intangible assets net of accumulated amortization of $368,750 and $295,000 | 1,281,250 | 1,355,000 |
Goodwill | 4,789,248 | 4,789,248 |
Other assets | 34,082 | 34,082 |
Total assets | 28,760,687 | 27,814,317 |
Current liabilities | ||
Accounts payable | 221,355 | 108,111 |
Accrued payroll and other expenses | 538,575 | 481,610 |
Accrued bonuses to officer | 30,500 | 121,000 |
Other current liabilities | 0 | 8,274 |
Current portion - Contracts payable (note 4) | 1,000,000 | 1,000,000 |
Billings in excess of revenues | 155,073 | 230,100 |
Deferred revenue | 194,938 | 176,422 |
Total current liabilities | 2,140,441 | 2,125,517 |
Long-term liabilities | ||
Deferred income taxes | 2,755,636 | 2,956,206 |
Total liabilities | 4,896,077 | 5,081,723 |
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 17,230,478 and 17,225,478 shares issued and outstanding | 7,241 | 7,227 |
Additional paid-in capital | 11,673,696 | 11,376,007 |
Retained earnings | 12,183,673 | 11,349,360 |
Total shareholders' equity | 23,864,610 | 22,732,594 |
Total liabilities and shareholders' equity | $ 28,760,687 | $ 27,814,317 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) | Feb. 28, 2017 | Aug. 31, 2016 |
Allowance for doubtful accounts | $ 0 | $ 0 |
Accumulated amortization of computer software development costs | $ 9,187,363 | $ 8,613,487 |
Preferred stock par value | $ 0.001 | $ .001 |
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 | $ 0.001 | $ .001 |
Common stock shares authorized | 50,000,000 | 50,000,000 |
Common stock shares issued | 17,230,478 | 17,225,478 |
Common stock shares outstanding | 17,230,478 | 17,225,478 |
Intellectual Property [Member] | ||
Accumulated amortization on intangible assets | $ 1,712,500 | $ 1,408,750 |
Other Intangible Assets | ||
Accumulated amortization on intangible assets | $ 368,750 | $ 295,000 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Feb. 28, 2017 | Feb. 29, 2016 | Feb. 28, 2017 | Feb. 29, 2016 | |
Income Statement [Abstract] | ||||
Net revenues | $ 5,705,590 | $ 5,163,726 | $ 11,123,525 | $ 10,002,346 |
Cost of revenues | 1,553,952 | 1,263,741 | 2,889,935 | 2,347,088 |
Gross margin | 4,151,638 | 3,899,985 | 8,233,590 | 7,655,258 |
Operating expenses | ||||
Selling, general, and administrative | 1,948,136 | 1,722,844 | 3,811,692 | 3,399,278 |
Research and development | 408,536 | 461,389 | 698,836 | 812,696 |
Total operating expenses | 2,356,672 | 2,184,233 | 4,510,528 | 4,211,974 |
Income from operations | 1,794,966 | 1,715,752 | 3,723,062 | 3,443,284 |
Other income (expense) | ||||
Interest income | 4,429 | 4,486 | 8,886 | 8,953 |
Gain (loss) on currency exchange | (14,441) | (28,330) | 20,486 | (43,224) |
Total other income (expense) | (10,012) | (23,844) | 29,372 | (34,271) |
Income before provision for income taxes | 1,784,954 | 1,691,908 | 3,752,434 | 3,409,013 |
Provision for income taxes | (589,194) | (546,559) | (1,195,109) | (1,157,191) |
Net Income | $ 1,195,760 | $ 1,145,349 | $ 2,557,325 | $ 2,251,822 |
Earnings per share | ||||
Basic | $ .07 | $ .07 | $ .15 | $ .13 |
Diluted | $ .07 | $ .07 | $ .15 | $ .13 |
Weighted-average common shares outstanding | ||||
Basic | 17,233,017 | 17,005,649 | 17,229,586 | 16,985,869 |
Diluted | 17,438,508 | 17,268,144 | 17,421,457 | 17,230,099 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 6 Months Ended | |
Feb. 28, 2017 | Feb. 29, 2016 | |
Cash flows from operating activities | ||
Net income | $ 2,557,325 | $ 2,251,822 |
Adjustments to reconcile net income to net cash provided by operating activities | ||
Depreciation and amortization of property and equipment | 81,573 | 98,992 |
Amortization of capitalized computer software development costs | 573,876 | 494,537 |
Amortization of Intellectual property | 377,500 | 377,500 |
Stock-based compensation | 212,486 | 120,249 |
Deferred income taxes | (200,570) | (162,928) |
(Increase) decrease in | ||
Accounts receivable | (1,658,702) | (2,214,374) |
Revenues in excess of billings | (529,389) | (61,433) |
Prepaid income taxes | 181,081 | (240,116) |
Prepaid expenses and other assets | 114,417 | 72,566 |
Increase (decrease) in | ||
Accounts payable | 113,244 | (83,329) |
Accrued payroll and other expenses | 56,965 | 11,508 |
Accrued bonus | (90,500) | (60,500) |
Billings in excess of revenues | (75,027) | 65,763 |
Accrued income taxes | 0 | (43,602) |
Other liabilities | (8,274) | (9,929) |
Deferred revenue | 18,516 | 35,686 |
Net cash provided by operating activities | 1,724,521 | 652,412 |
Cash flows used in investing activities | ||
Purchases of property and equipment | (105,823) | (2,501) |
Capitalized computer software development costs | (584,376) | (545,223) |
Net cash used in investing activities | (690,199) | (547,724) |
Cash flows used in financing activities | ||
Payment of dividends | (1,723,012) | (1,700,700) |
Proceeds from the exercise of stock options | 85,217 | 107,730 |
Net cash used in financing activities | (1,637,795) | (1,592,970) |
Net increase (decrease) in cash and cash equivalents | (603,473) | (1,488,282) |
Cash and cash equivalents, beginning of year | 8,030,284 | 8,551,275 |
Cash and cash equivalents, end of period | 7,426,811 | 7,062,993 |
Supplemental disclosures of cash flow information | ||
Income taxes paid | $ 1,204,500 | $ 1,596,000 |
1. GENERAL
1. GENERAL | 6 Months Ended |
Feb. 28, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
GENERAL | This report on Form 10-Q for the quarter ended February 28, 2017, should be read in conjunction with the Company's annual report on Form 10-K for the year ended August 31, 2016, filed with the Securities and Exchange Commission (“SEC”) on November 14, 2016. As contemplated by the SEC under Article 8 of Regulation S-X, the accompanying consolidated financial statements and footnotes have been condensed and therefore do not contain all disclosures required by generally accepted accounting principles. The interim financial data are unaudited; however, in the opinion of Simulations Plus, Inc. ("we", "our", "us"), the interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim periods. Results for interim periods are not necessarily indicative of those to be expected for the full year. Organization Simulations Plus, Inc. (“Simulations Plus”, “Lancaster”) was incorporated on July 17, 1996. On September 2, 2014, Simulations Plus, Inc. acquired all of the outstanding equity interests of Cognigen Corporation (“Cognigen”, “Buffalo”) and Cognigen became a wholly owned subsidiary of Simulations Plus, Inc. (collectively, “Company”, “we”, “us”, “our”), pursuant to the terms of that certain Agreement and Plan of Merger, dated as of July 23, 2014, by and between Simulations Plus and Cognigen (the “Merger Agreement”). 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. SIGNIFICANT ACCOUNTING POLIC
2. SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Feb. 28, 2017 | |
Accounting Policies [Abstract] | |
SIGNIFICANT ACCOUNTING POLICIES | Principles of Consolidation The consolidated financial statements include the accounts of Simulations Plus, Inc. and its wholly owned subsidiary, Cognigen Corporation. All significant intercompany accounts and transactions are eliminated in consolidation. Estimates Our condensed consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. Actual results could differ from those estimates. Significant accounting policies for us include revenue recognition, accounting for capitalized computer software development costs, valuation of stock options, and accounting for income taxes. Reclassifications Certain numbers in the prior year have been reclassified to conform to the current year's presentation. Revenue Recognition We recognize revenues related to software licenses and software maintenance in accordance with Financial Accounting Standard Board (“FASB”) Accounting Standard Codification (“ASC”) 985-605, “ Software - Revenue Recognition” 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 multiyear licenses. Therefore, revenue is recognized one year at a time. We recognize revenue from collaboration research and revenue from grants equally over their terms. For contract revenues based on actual hours incurred we recognize revenues when the work is performed. For fixed price contracts, we recognize contract study and other contract revenues 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” Cash and Cash Equivalents For purposes of the statements of cash flows, we consider all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. Accounts Receivable We analyze the age of customer balances, historical bad-debt experience, customer creditworthiness, and changes in customer payment terms when making estimates of the collectability of the Company’s trade accounts receivable balances. If we determine that the financial conditions of any of its customers deteriorated, whether due to customer-specific or general economic issues, an increase in the allowance may be made. Accounts receivable are written off when all collection attempts have failed. 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” 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 software development costs are comprised primarily of salaries and direct payroll-related costs and the purchase of existing software to be used in our software products. Amortization of capitalized software development costs is calculated on a product-by-product basis on the straight-line method over the estimated economic life of the products (not to exceed five years, although all of our current software products have already been on the market for 7-15 years except for our newest MedChem Designer™ program, and we do not foresee an end-of-life for any of them at this point). Amortization of software development costs amounted to $289,659 and $247,269 for the three months ended February 28, 2017 and February 29, 2016, respectively and $573,876 and $494,537 for the six months ended February 28, 2017 and February 29, 2016, 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. Goodwill and indefinite-lived assets Goodwill and indefinite-lived assets are not amortized, but are evaluated for impairment annually or when indicators of a potential impairment are present. Our impairment testing of goodwill is performed separately from our impairment testing of indefinite-lived intangibles. The annual evaluation for impairment of goodwill and indefinite-lived intangibles is based on valuation models that incorporate assumptions and internal projections of expected future cash flows and operating plans. Fair Value of Financial Instruments Assets and liabilities recorded at fair value in the Condensed Balance Sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair value. The categories, as defined by the standard are as follows: Level Input: Input Definition: Level 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, accrued bonus to officer, and accrued warranty and service costs, the amounts approximate fair value due to their short maturities. Research and Development Costs Research and development costs are charged to expense as incurred until technological feasibility has been established. These costs consist primarily of salaries and direct payroll-related costs. It also includes purchased software and databases that were developed by other companies and incorporated into, or used in the development of, our final products. Income Taxes We utilize FASB ASC 740-10, “Income Taxes” 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 of Rochester, New York. The cost of $75,000 is being amortized over 10 years under the straight-line method. Amortization expense for each of the three-month periods ended February 28, 2017 and 2016 was $1,875, and was $3,750 for each of the six-month periods ended February 28, 2017 and February 29, 2016. Accumulated amortization as of February 28, 2017 and August 31, 2016 was $37,500 and $33,750, 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 each of the three-month periods ended February 28, 2017 and February 29, 2016 was $150,000 and was $300,000 for each of the six-month periods ended February 28, 2017 and February 29, 2016. Accumulated amortization as of February 28, 2017 and August 31, 2016 was $1,675,000 and $1,375,000, respectively. Total amortization expense for intellectual property agreements for the three months ended February 28, 2017 and February 29, 2016 was $151,875, and total amortization expense for the six months ended February 28, 2017 and February 29, 2016 was $303,750. Accumulated amortization as of February 28, 2017 was $1,712,500 and $1,408,750 as of August 31, 2016. Intangible assets The Company acquired certain intangible assets as part of the acquisition of Cognigen Corporation on September 2, 2014. The following table summarizes those intangible assets as of February 28, 2017: Amortization Period Acquisition Value Accumulated Amortization Net book value Customer relationships Straight line 8 years $ 1,100,000 $ 343,750 $ 756,250 Trade Name-Cognigen None 500,000 – 500,000 Covenants not to compete Straight line 5 years 50,000 25,000 25,000 $ 1,650,000 $ 368,750 $ 1,281,250 Amortization expense for each of the three-and six-month periods ended February 28, 2017 and February 29, 2016 was $36,875 and $73,750, respectively. According to policy in addition to normal amortization, these assets are tested for impairment as needed. Earnings per Share We report earnings per share in accordance with FASB ASC 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 similar 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 three and six months ended February 28, 2017 and February 29, 2016 were as follows: Three months ended Six months ended 2/28/2017 2/29/2016 2/28/2017 2/29/2016 Numerator: $ 1,195,760 $ 1,145,349 $ 2,557,325 $ 2,251,822 Denominator: Weighted-average number of common shares outstanding during the period 17,233,017 17,005,649 17,229,586 16,985,869 Dilutive effect of stock options 205,491 262,495 191,871 244,230 Common stock and common stock equivalents used for diluted earnings per share 17,438,508 17,268,144 17,421,457 17,230,099 Stock-Based Compensation Compensation costs related to stock options are determined in accordance with FASB ASC 718-10, “Compensation-Stock Compensation”, Recently Issued Accounting Pronouncements In May 2014, FASB issued Accounting Standards Update (ASU) No. 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, 2017. Early adoption is permitted for years beginning after December 15, 2016. 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. In November 2015, the FASB issued ASU No 2015-17, Income Taxes (Topic 740). The amendments in ASU 2015-17 change the requirements for the classification of deferred taxes on the balance sheet. Currently, GAAP requires an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts in a classified statement of financial position. To simplify the presentation of deferred income taxes, the amendments in this ASU require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The pronouncement is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2016. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. The Company early adopted ASU No. 2015-17 because it reduced complexity while maintaining the usefulness of the information. The retrospective application resulted in a reclassification of the current deferred tax asset at August 31, 2016 now being presented against the long term deferred tax liability. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes existing guidance on accounting for leases in "Leases (Topic 840)" and generally requires all leases to be recognized in the consolidated balance sheet. ASU 2016-02 is effective for annual and interim reporting periods beginning after December 15, 2018; early adoption is permitted. The provisions of ASU 2016-02 are to be applied using a modified retrospective approach. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. This ASU affects entities that issue share-based payment awards to their employees. The ASU is designed to simplify several aspects of accounting for share-based payment award transactions that include - the income tax consequences, classification of awards as either equity or liabilities, classification on the statement of cash flows, and forfeiture rate calculations. ASU 2016-09 will become effective for the Company in the first quarter of fiscal 2019. Early adoption is permitted in any interim or annual period. The Company early adopted ASU No. 2016-09. The adoption had no material impact on the Company’s financial statements. |
3. PROPERTY AND EQUIPMENT
3. PROPERTY AND EQUIPMENT | 6 Months Ended |
Feb. 28, 2017 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | Property and equipment as of February 28, 2017 consisted of the following: Equipment $ 567,856 Computer equipment 226,020 Furniture and fixtures 125,385 Leasehold improvements 103,599 Sub total 1,022,860 Less: Accumulated depreciation and amortization (742,229 ) Net Book Value $ 280,631 |
4. CONTRACTS PAYABLE
4. CONTRACTS PAYABLE | 6 Months Ended |
Feb. 28, 2017 | |
Other Liabilities Disclosure [Abstract] | |
CONTRACTS PAYABLE | TSRL Pursuant to the termination and nonassertion agreement with TSRL (See note 2), the Company will pay TSRL $2,500,000 over a three-year period. The remaining payment of $1,000,000 will be made in April 2017. |
5. COMMITMENTS AND CONTINGENCIE
5. COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Feb. 28, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | Employment Agreements CEO Employment Agreement In August 2014, we entered into an employment agreement with Mr. Woltosz for his services as our Chief Executive Officer, which was effective September 1, 2014 and continued until August 31, 2015 (the “September 2014 Agreement”). Under the terms of this employment agreement, Mr. Woltosz was required to devote a minimum of 60% of his productive time to performing the duties as our Chief Executive Officer. The agreement provided for an annual base salary of $180,000, an annual performance bonus of up to 5% of the Company’s net income before taxes of the previous fiscal year, not to exceed $36,000, and the grant of an option to purchase six shares of the Company’s common stock for each $1,000 of net income before taxes that the Company earns at the end of each fiscal year (up to a maximum of 12,000 shares over the term of the agreement) with an exercise price equal to 10% over the market value per share as of the date of grant. In August 2015 this agreement was renewed for another year on the same terms. Under his current employment agreement, we agreed to provide Mr. Woltosz, at 60% of our actual costs, with such health insurance and other benefits which are appropriate to his office and position, adequate to the performance of his duties and not inconsistent with that which we customarily provide to our other management employees. We also agreed to reimburse him for customary, ordinary, and necessary business expenses incurred in connection with the rendering of services. The agreement also provides that we may terminate the agreement without cause upon thirty (30) days written notice, and that upon any such termination our only obligation to Mr. Woltosz would be for a payment equal to the greater of (i) 12 months of salary or (ii) the amount of salary for the remainder of the term of the agreement from the date of notice of termination. Further, the agreement provides that we may terminate the agreement for “cause” (as defined in the agreement) and that our only obligation to Mr. Woltosz upon any such termination would be limited to the payment of Mr. Woltosz’ salary and benefits through and until the effective date of any such termination. On July 9, 2015, the Company entered into a new employment agreement with Mr. Woltosz for another year on the same terms as the September 2014 agreement. A copy of this agreement was filed as an exhibit to the Current Form on Form 8-K filed with the Securities and Exchange Commission on July 15, 2015. On August 8, 2016 the Company entered into a new employment agreement for another year on the same terms as the September 2014 agreement. A copy of this agreement was filed as an exhibit to the Current Form on Form 8-K filed with the Securities and Exchange Commission on August 11, 2016. President’s employment agreement On September 2, 2014, Thaddeus H. Grasela, Jr., Ph.D., was appointed President of the Company and its wholly owned subsidiary Cognigen (also known as the Buffalo Division of the Company). The Company and Cognigen have entered into an Employment Agreement with Dr. Grasela (the “Grasela Employment Agreement”) that has a three-year term. Pursuant to the Grasela Employment Agreement, Dr. Grasela receives an annual base salary of $250,000, is eligible to receive Company stock options under the 2007 Simulations Plus, Inc. Stock Option Plan, as determined by the Board, and is eligible to receive an annual performance bonus in an amount not to exceed 10% of salary to be determined by the Compensation Committee of the Board. The Compensation Committee awarded Dr. Grasela a $25,000 performance bonus in each of September 2015 and September 2016 for the 2015 and 2016 fiscal years, respectively. License Agreement The Company executed a royalty agreement with Accelrys, Inc. (“Accelrys”) (the original agreement was entered into with Symyx Technologies in March 2010; Symyx Technologies later merged with Accelrys, Inc.) for access to their Metabolite Database for developing our Metabolite Module within ADMET Predictor™. The module was renamed the Metabolism Module when we released ADMET Predictor version 6 on April 19, 2012. Under this agreement, we pay a royalty of 25% of revenue derived from the sale of the Metabolism/Metabolite module to Accelrys. In 2014, Dassault Systemes of France acquired Accelrys and the Company now operates under the name BIOVIA. We incurred royalty expense of $42,024 and $35,288, respectively, and for the three months ended February 28, 2017 and February 29, 2016 respectively and $73,092 and $50,838 for the six months ended February 28, 2017 and February 29, 2016, respectively. Income taxes We follow guidance issued by the FASB with regard to our accounting for uncertainty in income taxes recognized in the financial statements. Such guidance prescribes a 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 $-0- for fiscal year 2016 and 2015, respectively. We file income tax returns with the IRS and various state jurisdictions and India. Our federal income tax returns for fiscal year 2012 thru 2015 are open for audit, and our state tax returns for fiscal year 2011 through 2015 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. In 2015 the Company was informed that the IRS was auditing the Company’s tax return for 2014. This audit was completed during FY2016; there were no changes as a result of the audit. 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 owned the subject aircraft and is also a named defendant. The complaint alleged that the Company was the owner of the subject aircraft. The Company denied 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. The Company planned to prepare a dismissal with prejudice to be signed on behalf of the plaintiff in the event the plaintiff did not discover evidence during a nine-month period to and including August 31, 2015, that justified bringing the Company back into the litigation. The Company did not receive notification of any such discovery and is in the process of preparing documents for the plaintiff’s final dismissal with prejudice. |
6. SHAREHOLDERS' EQUITY
6. SHAREHOLDERS' EQUITY | 6 Months Ended |
Feb. 28, 2017 | |
Equity [Abstract] | |
SHAREHOLDERS' EQUITY | Dividend The Company’s Board of Directors declared cash dividends during fiscal years 2017 and 2016. The details of the dividends paid are in the following tables: FY2017 Record Date Distribution Date Number of Shares Outstanding on Record Date Dividend per Share Total Amount 11/10/2016 11/17/2016 17,226,478 $ 0.05 $ 861,324 1/30/2017 2/6/2017 17,233,758 $ 0.05 861,688 Total $ 1,723,012 FY2016 Record Date Distribution Date Number of Shares Outstanding on Record Date Dividend per Share Total Amount 11/09/2015 11/16/2015 16,996,001 $ 0.05 $ 849,800 1/29/2016 02/05/2016 17,018,001 $ 0.05 $ 850,900 5/02/2016 5/09/2016 17,029,051 $ 0.05 $ 851,475 8/11/2016 8/18/2016 17,221,978 $ 0.05 $ 861,099 Total $ 3,413,274 Stock Option Plan In September 1996, the Board of Directors adopted, and the shareholders approved, the 1996 Stock Option Plan (the "Option Plan") under which a total of 1,000,000 shares of common stock had been reserved for issuance. In March 1999, the shareholders approved an increase in the number of shares that may be granted under the Option Plan to 2,000,000. In February 2000, the shareholders approved an increase in the number of shares that may be granted under the Option Plan to 4,000,000. In December 2000, the shareholders approved an increase in the number of shares that may be granted under the Option Plan to 5,000,000. Furthermore, in February 2005, the shareholders approved an additional 1,000,000 shares, resulting in the total number of shares that may be granted under the Option Plan to 6,000,000. The 1996 Stock Option Plan terminated in September 2006 by its term. On February 23, 2007, the Board of Directors adopted, and the shareholders approved, the 2007 Stock Option Plan under which a total of 1,000,000 shares of common stock had been reserved for issuance. On February 25, 2014 the shareholders approved an additional 1,000,000 shares increasing the total number of shares that may be granted under the Option Plan to 2,000,000. This plan terminated in February 2017 by its term. On December 23, 2016 the Board of Directors adopted, and on February 23, 2017 the shareholders approved, the 2017 Equity Incentive Plan under which a total of 1,000,000 shares of common stock has been reserved for issuance. This plan will terminate in December 2026. A copy of the 2017 Equity Incentive Plan is attached to this filing. Qualified Incentive Stock Options (Qualified ISO) As of February 28, 2017 employees hold Qualified ISO to purchase 1,286,272 shares of common stock at exercise prices ranging from $1.00 to $10.06. Transactions in FY17 Number of Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Life Outstanding, August 31, 2016 894,750 $ 7.54 7.72 Granted 404,582 $ 10.05 Exercised (7,760 ) $ 6.85 Cancelled/Forfeited (5,300 ) $ 9.44 Outstanding, February 28, 2017 1,286,272 $ 8.32 8.08 Exercisable, February 28, 2017 366,520 $ 6.01 5.49 Non-Qualified Stock Options (Non-Qualified ISO) As of February 28, 2017 the outside members of the Board of Directors and certain employees hold non-qualified options to purchase 47,168 shares of common stock at exercise prices ranging from $4.46 to $10.06. Transactions in FY17 Number of Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Life Outstanding, August 31, 2016 52,750 $ 6.88 8.07 Granted 17,418 $ 10.05 Exercised (9,500 ) $ 5.88 Cancelled/Forfeited (13,500 ) $ 7.43 Outstanding, February 28, 2017 47,168 $ 8.10 8.86 Exercisable, February 28, 2017 13,000 $ 5.78 7.16 The weighted-average remaining contractual life of options outstanding issued under the Plan, both Qualified ISO and Non-Qualified SO, was 8.11 years at February 28, 2017. The exercise prices for the options outstanding at February 28, 2017 ranged from $1.00 to $10.06, 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 67,000 2.10 years $ 1.00 67,000 2.10 years $ 1.00 $ 3.01 $ 4.50 20,000 1.36 years $ 3.16 20,000 1.36 years $ 3.16 $ 4.51 $ 6.00 70,000 1.91 years $ 5.52 70,000 1.91 years $ 5.52 $ 6.01 $ 7.50 344,940 7.54 years $ 6.86 140,220 7.55 years $ 6.86 $ 7.51 $ 9.00 10,000 9.50 years $ 8.62 0 – $ – $ 9.01 $ 10.06 821,500 9.51 years $ 9.89 82,300 9.04 years $ 9.72 1,333,440 8.11 years $ 8.32 379,520 5.54 years $ 6.01 |
7. RELATED PARTY TRANSACTIONS
7. RELATED PARTY TRANSACTIONS | 6 Months Ended |
Feb. 28, 2017 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | As of February 28, 2017, included in bonus expenses to officers was $30,500, of which $18,000 was an accrued bonus representing an estimated amount of bonus payable to our Chief Executive Officer, Walter Woltosz as part of his current employment agreement, and $12,500 accrued bonus representing as estimated amount of bonus payable to our President, Thaddeus Grasela as part of his current employment agreement. |
8. CONCENTRATIONS AND UNCERTAIN
8. CONCENTRATIONS AND UNCERTAINTIES | 6 Months Ended |
Feb. 28, 2017 | |
Risks and Uncertainties [Abstract] | |
CONCENTRATIONS AND UNCERTAINTIES | Revenue concentration shows that international sales accounted for 36% and 42.6% of net sales for the six months ended February 28, 2017, and February 29, 2016, respectively. Four customers accounted for 7% (a dealer account in Japan representing various customers), 6%, 6%, and 6% of sales for the six months ended February 29, 2017. Three customers accounted for 10% (a dealer account in Japan representing various customers), 6%, and 6% of sales for the six months ended February 29, 2016. Accounts receivable concentrations shows that two customers comprised 9.1% and 8.6% (a dealer account in Japan representing various customers) of accounts receivable at February 28, 2017, compared to two customers comprising 12% (a dealer account in Japan representing various customers) and 11% of accounts receivable at February 29, 2016. 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. Consolidation and downsizing in the pharmaceutical industry could have an impact on our revenues and earnings going forward. |
9. SEGMENT AND GEOGRAPHIC REPOR
9. SEGMENT AND GEOGRAPHIC REPORTING | 6 Months Ended |
Feb. 28, 2017 | |
Segments, Geographical Areas [Abstract] | |
SEGMENT AND GEOGRAPHIC REPORTING | We account for segments and geographic revenues in accordance with guidance issued by the FASB. Our reportable segments are strategic business units that offer different products and services. Results for each segment and consolidated results are as follows for the three and six months ended February 28, 2017 and February 29, 2016 (in thousands): Three months ended February 28, 2017 Lancaster Buffalo Eliminations Total Net revenues $ 4,042 $ 1,663 $ 5,705 Income (loss) from operations 1,569 226 1,795 Identifiable assets 26,630 9,369 $ (7,238 ) 28,761 Capital expenditures 4 43 47 Capitalized software costs 319 30 349 Depreciation and amortization 421 96 517 Three months ended February 29, 2016 Lancaster Buffalo Eliminations Total Net Revenues $ 3,648 $ 1,516 $ 5,164 Income (loss) from operations 1,470 246 1,716 Total assets 25,854 9,267 $ (7,238 ) 27,903 Capital expenditures 0 1 1 Capitalized software costs 233 45 278 Depreciation and Amortization 394 90 484 Six months ended February 28, 2017 Lancaster Buffalo Eliminations Total Net Revenues $ 7,738 $ 3,386 $ 11,124 Income (loss) from operations 3,058 665 3,723 Total assets 26,630 9,369 $ (7,238 ) 28,761 Capital expenditures 25 80 105 Capitalized software costs 531 53 584 Depreciation and Amortization 838 195 1,033 Six months ended February 29, 2016 Lancaster Buffalo Eliminations Total Net Revenues $ 7,058 $ 2,944 $ 10,002 Income (loss) from operations 2,894 549 3,443 Total assets 25,854 9,267 $ (7,238 ) 27,903 Capital expenditures 1 1 2 Capitalized software costs 455 90 545 Depreciation and Amortization 789 182 971 In addition, the Company allocates revenues to geographic areas based on the locations of its customers. Geographical revenues for the three months and six months ended February 28, 2017 and February 29, 2016 were as follows (in thousands): Three months ended February 28, 2017 North America Europe Asia South America Total Lancaster $ 1,755 $ 1,337 $ 950 $ 1 $ 4,042 Buffalo 1,663 0 0 0 1,663 Total $ 3,418 $ 1,337 $ 950 $ 1 $ 5,705 Three months ended February 29, 2016 North America Europe Asia South America Total Lancaster $ 1,331 $ 1,490 $ 827 $ 0 $ 3,648 Buffalo 1,516 0 0 0 1,516 Total $ 2,847 $ 1,490 $ 827 $ 0 $ 5,164 Six months ended February 28, 2017 North America Europe Asia South America Total Lancaster $ 3,728 $ 2,058 $ 1,951 $ 1 $ 7,738 Buffalo 3,386 – – – 3,386 Total $ 7,114 $ 2,058 $ 1,951 $ 1 $ 11,124 Six months ended February 29, 2016 North America Europe Asia South America Total Lancaster $ 2,793 $ 2,404 $ 1,860 $ 1 $ 7,058 Buffalo 2,944 – – – 2,944 Total $ 5,737 $ 2,404 $ 1,860 $ 1 $ 10,002 |
10. EMPLOYEE BENEFIT PLAN
10. EMPLOYEE BENEFIT PLAN | 6 Months Ended |
Feb. 28, 2017 | |
Retirement Benefits [Abstract] | |
EMPLOYEE BENEFIT PLAN | We maintain a 401(K) Plan for all eligible employees, and we make matching contributions equal to 100% of the employee’s elective deferral, not to exceed 4% of total employee compensation. We can also elect to make a profit-sharing contribution. Our contributions to this Plan amounted to $60,931 and $51,737 for the three months ended February 28, 2017 and February 29, 2016 respectively and $114,890 and $107,075 for the six months ended February 28, 2017 and February 29, 2016 respectively. |
2. SIGNIFICANT ACCOUNTING POL16
2. SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Feb. 28, 2017 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of Simulations Plus, Inc. and its wholly owned subsidiary, Cognigen Corporation. All significant intercompany accounts and transactions are eliminated in consolidation. |
Estimates | Estimates Our condensed consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. Actual results could differ from those estimates. Significant accounting policies for us include revenue recognition, accounting for capitalized computer software development costs, valuation of stock options, and accounting for income taxes. |
Reclassifications | Reclassifications Certain numbers in the prior year have been reclassified to conform to the current year's presentation. |
Revenue Recognition | Revenue Recognition We recognize revenues related to software licenses and software maintenance in accordance with Financial Accounting Standard Board (“FASB”) Accounting Standard Codification (“ASC”) 985-605, “ Software - Revenue Recognition” 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 multiyear licenses. Therefore, revenue is recognized one year at a time. We recognize revenue from collaboration research and revenue from grants equally over their terms. For contract revenues based on actual hours incurred we recognize revenues when the work is performed. For fixed price contracts, we recognize contract study and other contract revenues 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” |
Cash and Cash Equivalents | Cash and Cash Equivalents For purposes of the statements of cash flows, we consider all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. |
Accounts Receivable | 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 its customers deteriorated, whether due to customer-specific or general economic issues, an increase in the allowance may be made. Accounts receivable are written off when all collection attempts have failed. |
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” 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 software development costs are comprised primarily of salaries and direct payroll-related costs and the purchase of existing software to be used in our software products. Amortization of capitalized software development costs is calculated on a product-by-product basis on the straight-line method over the estimated economic life of the products (not to exceed five years, although all of our current software products have already been on the market for 7-15 years except for our newest MedChem Designer™ program, and we do not foresee an end-of-life for any of them at this point). Amortization of software development costs amounted to $289,659 and $247,269 for the three months ended February 28, 2017 and February 29, 2016, respectively and $573,876 and $494,537 for the six months ended February 28, 2017 and February 29, 2016, 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. |
Goodwill and indefinite-lived assets | Goodwill and indefinite-lived assets Goodwill and indefinite-lived assets are not amortized, but are evaluated for impairment annually or when indicators of a potential impairment are present. Our impairment testing of goodwill is performed separately from our impairment testing of indefinite-lived intangibles. The annual evaluation for impairment of goodwill and indefinite-lived intangibles is based on valuation models that incorporate assumptions and internal projections of expected future cash flows and operating plans. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments Assets and liabilities recorded at fair value in the Condensed Balance Sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair value. The categories, as defined by the standard are as follows: Level Input: Input Definition: Level 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, accrued bonus to officer, and accrued warranty and service costs, the amounts approximate fair value due to their short maturities. |
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 consist primarily of salaries and direct payroll-related costs. It also includes purchased software and databases that were developed by other companies and incorporated into, or used in the development of, our final products. |
Income Taxes | Income Taxes We utilize FASB ASC 740-10, “Income Taxes” 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 of Rochester, New York. The cost of $75,000 is being amortized over 10 years under the straight-line method. Amortization expense for each of the three-month periods ended February 28, 2017 and 2016 was $1,875, and was $3,750 for each of the six-month periods ended February 28, 2017 and February 29, 2016. Accumulated amortization as of February 28, 2017 and August 31, 2016 was $37,500 and $33,750, 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 each of the three-month periods ended February 28, 2017 and February 29, 2016 was $150,000 and was $300,000 for each of the six-month periods ended February 28, 2017 and February 29, 2016. Accumulated amortization as of February 28, 2017 and August 31, 2016 was $1,675,000 and $1,375,000, respectively. Total amortization expense for intellectual property agreements for the three months ended February 28, 2017 and February 29, 2016 was $151,875, and total amortization expense for the six months ended February 28, 2017 and February 29, 2016 was $303,750. Accumulated amortization as of February 28, 2017 was $1,712,500 and $1,408,750 as of August 31, 2016. |
Intangible Assets | Intangible assets The Company acquired certain intangible assets as part of the acquisition of Cognigen Corporation on September 2, 2014. The following table summarizes those intangible assets as of February 28, 2017: Amortization Period Acquisition Value Accumulated Amortization Net book value Customer relationships Straight line 8 years $ 1,100,000 $ 343,750 $ 756,250 Trade Name-Cognigen None 500,000 – 500,000 Covenants not to compete Straight line 5 years 50,000 25,000 25,000 $ 1,650,000 $ 368,750 $ 1,281,250 Amortization expense for each of the three-and six-month periods ended February 28, 2017 and February 29, 2016 was $36,875 and $73,750, respectively. According to policy in addition to normal amortization, these assets are tested for impairment as needed. |
Earnings per Share | Earnings per Share We report earnings per share in accordance with FASB ASC 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 similar 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 three and six months ended February 28, 2017 and February 29, 2016 were as follows: Three months ended Six months ended 2/28/2017 2/29/2016 2/28/2017 2/29/2016 Numerator: $ 1,195,760 $ 1,145,349 $ 2,557,325 $ 2,251,822 Denominator: Weighted-average number of common shares outstanding during the period 17,233,017 17,005,649 17,229,586 16,985,869 Dilutive effect of stock options 205,491 262,495 191,871 244,230 Common stock and common stock equivalents used for diluted earnings per share 17,438,508 17,268,144 17,421,457 17,230,099 |
Stock-Based Compensation | Stock-Based Compensation Compensation costs related to stock options are determined in accordance with FASB ASC 718-10, “Compensation-Stock Compensation”, |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements In May 2014, FASB issued Accounting Standards Update (ASU) No. 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, 2017. Early adoption is permitted for years beginning after December 15, 2016. 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. In November 2015, the FASB issued ASU No 2015-17, Income Taxes (Topic 740). The amendments in ASU 2015-17 change the requirements for the classification of deferred taxes on the balance sheet. Currently, GAAP requires an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts in a classified statement of financial position. To simplify the presentation of deferred income taxes, the amendments in this ASU require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The pronouncement is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2016. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. The Company early adopted ASU No. 2015-17 because it reduced complexity while maintaining the usefulness of the information. The retrospective application resulted in a reclassification of the current deferred tax asset at August 31, 2016 now being presented against the long term deferred tax liability. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes existing guidance on accounting for leases in "Leases (Topic 840)" and generally requires all leases to be recognized in the consolidated balance sheet. ASU 2016-02 is effective for annual and interim reporting periods beginning after December 15, 2018; early adoption is permitted. The provisions of ASU 2016-02 are to be applied using a modified retrospective approach. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. This ASU affects entities that issue share-based payment awards to their employees. The ASU is designed to simplify several aspects of accounting for share-based payment award transactions that include - the income tax consequences, classification of awards as either equity or liabilities, classification on the statement of cash flows, and forfeiture rate calculations. ASU 2016-09 will become effective for the Company in the first quarter of fiscal 2019. Early adoption is permitted in any interim or annual period. The Company early adopted ASU No. 2016-09. The adoption had no material impact on the Company’s financial statements. |
2. SIGNIFICANT ACCOUNTING POL17
2. SIGNIFICANT ACCOUNTING POLICIES (Tables) | 6 Months Ended |
Feb. 28, 2017 | |
Accounting Policies [Abstract] | |
Shedule of 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 |
Schedule of intangible assets | Amortization Period Acquisition Value Accumulated Amortization Net book value Customer relationships Straight line 8 years $ 1,100,000 $ 343,750 $ 756,250 Trade Name-Cognigen None 500,000 – 500,000 Covenants not to compete Straight line 5 years 50,000 25,000 25,000 $ 1,650,000 $ 368,750 $ 1,281,250 |
Earnings per share | Three months ended Six months ended 2/28/2017 2/29/2016 2/28/2017 2/29/2016 Numerator: $ 1,195,760 $ 1,145,349 $ 2,557,325 $ 2,251,822 Denominator: Weighted-average number of common shares outstanding during the period 17,233,017 17,005,649 17,229,586 16,985,869 Dilutive effect of stock options 205,491 262,495 191,871 244,230 Common stock and common stock equivalents used for diluted earnings per share 17,438,508 17,268,144 17,421,457 17,230,099 |
3. PROPERTY AND EQUIPMENT (Tabl
3. PROPERTY AND EQUIPMENT (Tables) | 6 Months Ended |
Feb. 28, 2017 | |
Property, Plant and Equipment [Abstract] | |
Property and equipment | Equipment $ 567,856 Computer equipment 226,020 Furniture and fixtures 125,385 Leasehold improvements 103,599 Sub total 1,022,860 Less: Accumulated depreciation and amortization (742,229 ) Net Book Value $ 280,631 |
6. SHAREHOLDERS' EQUITY (Tables
6. SHAREHOLDERS' EQUITY (Tables) | 6 Months Ended |
Feb. 28, 2017 | |
Schedule of dividends declared and paid | FY2017 Record Date Distribution Date Number of Shares Outstanding on Record Date Dividend per Share Total Amount 11/10/2016 11/17/2016 17,226,478 $ 0.05 $ 861,324 1/30/2017 2/6/2017 17,233,758 $ 0.05 861,688 Total $ 1,723,012 FY2016 Record Date Distribution Date Number of Shares Outstanding on Record Date Dividend per Share Total Amount 11/09/2015 11/16/2015 16,996,001 $ 0.05 $ 849,800 1/29/2016 02/05/2016 17,018,001 $ 0.05 $ 850,900 5/02/2016 5/09/2016 17,029,051 $ 0.05 $ 851,475 8/11/2016 8/18/2016 17,221,978 $ 0.05 $ 861,099 Total $ 3,413,274 |
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 67,000 2.10 years $ 1.00 67,000 2.10 years $ 1.00 $ 3.01 $ 4.50 20,000 1.36 years $ 3.16 20,000 1.36 years $ 3.16 $ 4.51 $ 6.00 70,000 1.91 years $ 5.52 70,000 1.91 years $ 5.52 $ 6.01 $ 7.50 344,940 7.54 years $ 6.86 140,220 7.55 years $ 6.86 $ 7.51 $ 9.00 10,000 9.50 years $ 8.62 0 – $ – $ 9.01 $ 10.06 821,500 9.51 years $ 9.89 82,300 9.04 years $ 9.72 1,333,440 8.11 years $ 8.32 379,520 5.54 years $ 6.01 |
Incentive Stock Options (ISOs) [Member] | |
Schedule of stock option activity | Transactions in FY17 Number of Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Life Outstanding, August 31, 2016 894,750 $ 7.54 7.72 Granted 404,582 $ 10.05 Exercised (7,760 ) $ 6.85 Cancelled/Forfeited (5,300 ) $ 9.44 Outstanding, February 28, 2017 1,286,272 $ 8.32 8.08 Exercisable, February 28, 2017 366,520 $ 6.01 5.49 |
Non-Qualified Stock Options (NQSOs) [Member] | |
Schedule of stock option activity | Transactions in FY17 Number of Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Life Outstanding, August 31, 2016 52,750 $ 6.88 8.07 Granted 17,418 $ 10.05 Exercised (9,500 ) $ 5.88 Cancelled/Forfeited (13,500 ) $ 7.43 Outstanding, February 28, 2017 47,168 $ 8.10 8.86 Exercisable, February 28, 2017 13,000 $ 5.78 7.16 |
9. SEGMENT AND GEOGRAPHIC REP20
9. SEGMENT AND GEOGRAPHIC REPORTING (Tables) | 6 Months Ended |
Feb. 28, 2017 | |
Segments, Geographical Areas [Abstract] | |
Schedule of consolidated results from reportable segments | Three months ended February 28, 2017 Lancaster Buffalo Eliminations Total Net revenues $ 4,042 $ 1,663 $ 5,705 Income (loss) from operations 1,569 226 1,795 Identifiable assets 26,630 9,369 $ (7,238 ) 28,761 Capital expenditures 4 43 47 Capitalized software costs 319 30 349 Depreciation and amortization 421 96 517 Three months ended February 29, 2016 Lancaster Buffalo Eliminations Total Net Revenues $ 3,648 $ 1,516 $ 5,164 Income (loss) from operations 1,470 246 1,716 Total assets 25,854 9,267 $ (7,238 ) 27,903 Capital expenditures 0 1 1 Capitalized software costs 233 45 278 Depreciation and Amortization 394 90 484 Six months ended February 28, 2017 Lancaster Buffalo Eliminations Total Net Revenues $ 7,738 $ 3,386 $ 11,124 Income (loss) from operations 3,058 665 3,723 Total assets 26,630 9,369 $ (7,238 ) 28,761 Capital expenditures 25 80 105 Capitalized software costs 531 53 584 Depreciation and Amortization 838 195 1,033 Six months ended February 29, 2016 Lancaster Buffalo Eliminations Total Net Revenues $ 7,058 $ 2,944 $ 10,002 Income (loss) from operations 2,894 549 3,443 Total assets 25,854 9,267 $ (7,238 ) 27,903 Capital expenditures 1 1 2 Capitalized software costs 455 90 545 Depreciation and Amortization 789 182 971 |
Schedule of geographical revenues | Three months ended February 28, 2017 North America Europe Asia South America Total Lancaster $ 1,755 $ 1,337 $ 950 $ 1 $ 4,042 Buffalo 1,663 0 0 0 1,663 Total $ 3,418 $ 1,337 $ 950 $ 1 $ 5,705 Three months ended February 29, 2016 North America Europe Asia South America Total Lancaster $ 1,331 $ 1,490 $ 827 $ 0 $ 3,648 Buffalo 1,516 0 0 0 1,516 Total $ 2,847 $ 1,490 $ 827 $ 0 $ 5,164 Six months ended February 28, 2017 North America Europe Asia South America Total Lancaster $ 3,728 $ 2,058 $ 1,951 $ 1 $ 7,738 Buffalo 3,386 – – – 3,386 Total $ 7,114 $ 2,058 $ 1,951 $ 1 $ 11,124 Six months ended February 29, 2016 North America Europe Asia South America Total Lancaster $ 2,793 $ 2,404 $ 1,860 $ 1 $ 7,058 Buffalo 2,944 – – – 2,944 Total $ 5,737 $ 2,404 $ 1,860 $ 1 $ 10,002 |
2. SIGNIFICANT ACCOUNTING POL21
2. SIGNIFICANT ACCOUNTING POLICIES (Details - Estimated useful lives) | 6 Months Ended |
Feb. 28, 2017 | |
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. SIGNIFICANT ACCOUNTING POL22
2. SIGNIFICANT ACCOUNTING POLICIES (Details - Intangible Assets) - USD ($) | 6 Months Ended | |
Feb. 28, 2017 | Aug. 31, 2016 | |
Net book value | $ 1,281,250 | $ 1,355,000 |
Other Intangible Assets | ||
Acquisition value | 1,650,000 | |
Accumulated amortization | 368,750 | $ 295,000 |
Net book value | $ 1,281,250 | |
Customer Relationships [Member] | ||
Amortization period | Straight line 8 years | |
Acquisition value | $ 1,100,000 | |
Accumulated amortization | 343,750 | |
Net book value | $ 756,250 | |
Trade name | ||
Amortization period | None | |
Acquisition value | $ 500,000 | |
Accumulated amortization | 0 | |
Net book value | $ 500,000 | |
Covenants not to compete | ||
Amortization period | Straight line 5 years | |
Acquisition value | $ 50,000 | |
Accumulated amortization | 25,000 | |
Net book value | $ 25,000 |
2. SIGNIFICANT ACCOUNTING POL23
2. SIGNIFICANT ACCOUNTING POLICIES (Details - Earnings per share) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Feb. 28, 2017 | Feb. 29, 2016 | Feb. 28, 2017 | Feb. 29, 2016 | |
Numerator | ||||
Net income attributable to common shareholders | $ 1,195,760 | $ 1,145,349 | $ 2,557,325 | $ 2,251,822 |
Denominator | ||||
Weighted-average number of common shares outstanding during the period | 17,233,017 | 17,005,649 | 17,229,586 | 16,985,869 |
Dilutive effect of stock options | 205,491 | 262,495 | 191,871 | 244,230 |
Common stock and common stock equivalents used for diluted earnings per share | 17,438,508 | 17,268,144 | 17,421,457 | 17,230,099 |
2. SIGNIFICANT ACCOUNTING POL24
2. SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Feb. 28, 2017 | Feb. 29, 2016 | Feb. 28, 2017 | Feb. 29, 2016 | Aug. 31, 2016 | |
Amortization of software development | $ 289,659 | $ 247,269 | $ 573,876 | $ 494,537 | |
Amortization of intangible assets | 377,500 | 377,500 | |||
Stock-based compensation | 116,626 | 56,287 | 212,486 | 120,249 | |
Intellectual Property [Member] | |||||
Amortization of intangible assets | 151,875 | 151,875 | 303,750 | 303,750 | |
Accumulated amortization of intangible assets | 1,712,500 | 1,712,500 | $ 1,408,750 | ||
Intellectual Property [Member] | Enslein Research | |||||
Amortization of intangible assets | 1,875 | 1,875 | 3,750 | 3,750 | |
Accumulated amortization of intangible assets | 37,500 | 37,500 | 33,750 | ||
Intellectual Property [Member] | TSRL [Member] | |||||
Amortization of intangible assets | 150,000 | 150,000 | 300,000 | 300,000 | |
Accumulated amortization of intangible assets | 1,675,000 | 1,675,000 | $ 1,375,000 | ||
Finite-Lived Intangible Assets [Member] | Cognigen | |||||
Amortization of intangible assets | $ 36,875 | $ 36,875 | $ 73,750 | $ 73,750 |
3. PROPERTY AND EQUIPMENT (Deta
3. PROPERTY AND EQUIPMENT (Details) - USD ($) | Feb. 28, 2017 | Aug. 31, 2016 |
Property and equipment, gross | $ 1,022,860 | |
Less accumulated depreciation and amortization | (742,229) | |
Net Book Value | 280,631 | $ 256,381 |
Equipment [Member] | ||
Property and equipment, gross | 567,856 | |
Computer equipment [Member] | ||
Property and equipment, gross | 226,020 | |
Furniture and fixtures [Member] | ||
Property and equipment, gross | 125,385 | |
Leasehold improvements [Member] | ||
Property and equipment, gross | $ 103,599 |
4. CONTRACT PAYABLE (Details Na
4. CONTRACT PAYABLE (Details Narrative) - USD ($) | Feb. 28, 2017 | Aug. 31, 2016 |
Current portion - Contract payable (note 4) | $ 1,000,000 | $ 1,000,000 |
Termination and Non-Assertion Agreement | TSRL [Member] | ||
Current portion - Contract payable (note 4) | $ 1,000,000 |
5. COMMITMENTS AND CONTINGENC27
5. COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Feb. 28, 2017 | Feb. 29, 2016 | Feb. 28, 2017 | Feb. 29, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | ||||
Royalty expense | $ 73,092 | $ 50,838 | $ 42,024 | $ 35,288 |
Income tax interest and penalty | $ 0 | $ 0 |
6. SHAREHOLDERS EQUITY (Details
6. SHAREHOLDERS EQUITY (Details - Dividends) - USD ($) | 6 Months Ended | 12 Months Ended | |
Feb. 28, 2017 | Feb. 29, 2016 | Aug. 31, 2016 | |
Total Amount | $ 1,723,012 | $ 1,700,700 | $ 3,413,274 |
FY 2017 1st Qtr [Member] | |||
Record Date | Nov. 20, 2016 | ||
Distribution Date | Nov. 17, 2016 | ||
Number of Shares Outstanding on Record Date | 17,226,478 | ||
Dividend per Share | $ .05 | ||
Total Amount | $ 861,324 | ||
FY 2017 2nd Qtr [Member] | |||
Record Date | Jan. 30, 2017 | ||
Distribution Date | Feb. 6, 2017 | ||
Number of Shares Outstanding on Record Date | 17,233,758 | ||
Dividend per Share | $ 0.05 | ||
Total Amount | $ 861,688 | ||
FY 2016 1st Qtr [Member] | |||
Record Date | Nov. 9, 2015 | ||
Distribution Date | Nov. 16, 2015 | ||
Number of Shares Outstanding on Record Date | 16,996,001 | ||
Dividend per Share | $ .05 | ||
Total Amount | $ 849,800 | ||
FY 2016 2nd Qtr [Member] | |||
Record Date | Jan. 29, 2016 | ||
Distribution Date | Feb. 5, 2016 | ||
Number of Shares Outstanding on Record Date | 17,018,001 | ||
Dividend per Share | $ .05 | ||
Total Amount | $ 850,900 | ||
FY 2016 3rd Qtr [Member] | |||
Record Date | May 2, 2016 | ||
Distribution Date | May 9, 2016 | ||
Number of Shares Outstanding on Record Date | 17,029,051 | ||
Dividend per Share | $ .05 | ||
Total Amount | $ 851,475 | ||
FY 2016 4th Qtr [Member] | |||
Record Date | Aug. 11, 2016 | ||
Distribution Date | Aug. 18, 2016 | ||
Number of Shares Outstanding on Record Date | 17,221,978 | ||
Dividend per Share | $ .05 | ||
Total Amount | $ 861,099 |
6. SHAREHOLDERS EQUITY (Detai29
6. SHAREHOLDERS EQUITY (Details - Option activity) | 6 Months Ended |
Feb. 28, 2017$ / sharesshares | |
Number of Options | |
Awards Outstanding, ending balance | shares | 1,333,440 |
Exercisable, end of period | shares | 379,520 |
Weighted-Average Exercise Price Per Share | |
Outstanding | $ / shares | $ 8.32 |
Exercisable, end of period | $ / shares | $ 6.01 |
Incentive Stock Options (ISOs) [Member] | |
Number of Options | |
Awards Outstanding, beginning balance | shares | 894,750 |
Granted | shares | 404,582 |
Exercised | shares | (7,760) |
Canceled/Forfeited | shares | (5,300) |
Awards Outstanding, ending balance | shares | 1,286,272 |
Exercisable, end of period | shares | 366,520 |
Weighted-Average Exercise Price Per Share | |
Outstanding | $ / shares | $ 7.54 |
Granted | $ / shares | 10.05 |
Exercised | $ / shares | 6.85 |
Canceled/Forfeited | $ / shares | 9.44 |
Outstanding | $ / shares | 8.32 |
Exercisable, end of period | $ / shares | $ 6.01 |
Weighted-Average Remaining Contractual Life | |
Outstanding, beginning of period | 7 years 8 months 19 days |
Outstanding, end of period | 8 years 29 days |
Exercisable | 5 years 5 months 27 days |
Non-Qualified Stock Options (NQSOs) [Member] | |
Number of Options | |
Awards Outstanding, beginning balance | shares | 52,750 |
Granted | shares | 17,418 |
Exercised | shares | (9,500) |
Canceled/Forfeited | shares | (13,500) |
Awards Outstanding, ending balance | shares | 47,168 |
Exercisable, end of period | shares | 13,000 |
Weighted-Average Exercise Price Per Share | |
Outstanding | $ / shares | $ 6.88 |
Granted | $ / shares | 10.05 |
Exercised | $ / shares | 5.88 |
Canceled/Forfeited | $ / shares | 7.43 |
Outstanding | $ / shares | 8.10 |
Exercisable, end of period | $ / shares | $ 6.17 |
Weighted-Average Remaining Contractual Life | |
Outstanding, beginning of period | 8 years 26 days |
Outstanding, end of period | 8 years 10 months 10 days |
Exercisable | 7 years 1 month 28 days |
6. SHAREHOLDERS EQUITY (Detai30
6. SHAREHOLDERS EQUITY (Details - Options outstanding and exercisable) | 6 Months Ended |
Feb. 28, 2017$ / sharesshares | |
Awards outstanding | shares | 1,333,440 |
Awards outstanding weighted average remaining contractual life | 8 years 1 month 10 days |
Awards outstanding weighted average exercise price | $ 8.32 |
Awards exercisable | shares | 379,520 |
Awards exercisable weighted average remaining contractual life | 5 years 6 months 15 days |
Awards exercisable weighted average exercise price | $ 6.01 |
$1.00 to $1.50 [Member] | |
Exercise price low | 1 |
Exercise price high | $ 1.50 |
Awards outstanding | shares | 67,000 |
Awards outstanding weighted average remaining contractual life | 2 years 1 month 6 days |
Awards outstanding weighted average exercise price | $ 1 |
Awards exercisable | shares | 67,000 |
Awards exercisable weighted average remaining contractual life | 2 years 1 month 6 days |
Awards exercisable weighted average exercise price | $ 1 |
$3.01 to $4.50 [Member] | |
Exercise price low | 3.01 |
Exercise price high | $ 4.50 |
Awards outstanding | shares | 20,000 |
Awards outstanding weighted average remaining contractual life | 1 year 4 months 10 days |
Awards outstanding weighted average exercise price | $ 3.16 |
Awards exercisable | shares | 20,000 |
Awards exercisable weighted average remaining contractual life | 1 year 4 months 10 days |
Awards exercisable weighted average exercise price | $ 3.16 |
$4.51 to $6.00 [Member] | |
Exercise price low | 4.51 |
Exercise price high | $ 6 |
Awards outstanding | shares | 70,000 |
Awards outstanding weighted average remaining contractual life | 1 year 10 months 28 days |
Awards outstanding weighted average exercise price | $ 5.52 |
Awards exercisable | shares | 70,000 |
Awards exercisable weighted average remaining contractual life | 1 year 10 months 28 days |
Awards exercisable weighted average exercise price | $ 5.52 |
$6.01 to $7.50 [Member] | |
Exercise price low | 6.01 |
Exercise price high | $ 7.50 |
Awards outstanding | shares | 344,940 |
Awards outstanding weighted average remaining contractual life | 7 years 6 months 15 days |
Awards outstanding weighted average exercise price | $ 6.86 |
Awards exercisable | shares | 140,220 |
Awards exercisable weighted average remaining contractual life | 7 years 6 months 15 days |
Awards exercisable weighted average exercise price | $ 6.86 |
$7.51 to $9.00 [Member] | |
Exercise price low | 7.51 |
Exercise price high | $ 9 |
Awards outstanding | shares | 10,000 |
Awards outstanding weighted average remaining contractual life | 9 years 6 months |
Awards outstanding weighted average exercise price | $ 8.62 |
Awards exercisable | shares | 0 |
$9.01 to $10.06 [Member] | |
Exercise price low | $ 9.01 |
Exercise price high | $ 10.06 |
Awards outstanding | shares | 821,500 |
Awards outstanding weighted average remaining contractual life | 9 years 6 months 4 days |
Awards outstanding weighted average exercise price | $ 9.89 |
Awards exercisable | shares | 82,300 |
Awards exercisable weighted average remaining contractual life | 9 years 15 days |
Awards exercisable weighted average exercise price | $ 9.72 |
6. SHAREHOLDERS' EQUITY (Detail
6. SHAREHOLDERS' EQUITY (Details Narrative) | Feb. 28, 2017shares |
2017 Equity Incentive Plan [Member] | |
Common stock reserved for issuance under the plan | 1,000,000 |
7. RELATED PARTY TRANSACTIONS (
7. RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | Feb. 28, 2017 | Aug. 31, 2016 |
Accrued bonus | $ 30,500 | $ 121,000 |
Walter Woltosz [Member] | ||
Accrued bonus | 18,000 | |
Thaddeis Grasela [Member] | ||
Accrued bonus | $ 12,500 |
8. CONCENTRATIONS AND UNCERTA33
8. CONCENTRATIONS AND UNCERTAINTIES (Details Narrative) | 6 Months Ended | |
Feb. 28, 2017 | Feb. 29, 2016 | |
Net Sales [Member] | International Sales [Member] | ||
Net sales concentration percentage | 36.00% | 42.60% |
Net Sales [Member] | Customer 1 [Member] | ||
Net sales concentration percentage | 7.00% | 10.00% |
Net Sales [Member] | Customer 2 [Member] | ||
Net sales concentration percentage | 6.00% | 6.00% |
Net Sales [Member] | Customer 3 [Member] | ||
Net sales concentration percentage | 6.00% | 6.00% |
Net Sales [Member] | Customer 4 [Member] | ||
Net sales concentration percentage | 6.00% | |
Accounts Receivable [Member] | Customer 1 [Member] | ||
Net sales concentration percentage | 9.10% | 12.00% |
Accounts Receivable [Member] | Customer 2 [Member] | ||
Net sales concentration percentage | 8.60% | 11.00% |
9. SEGMENT AND GEOGRAPHIC REP34
9. SEGMENT AND GEOGRAPHIC REPORTING (Details - Segment reporting) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Feb. 28, 2017 | Feb. 29, 2016 | Feb. 28, 2017 | Feb. 29, 2016 | Aug. 31, 2016 | |
Net Revenues | $ 5,705,590 | $ 5,163,726 | $ 11,123,525 | $ 10,002,346 | |
Income (loss) from operations before income taxes | 1,794,966 | 1,715,752 | 3,723,062 | 3,443,284 | |
Identifiable assets | 28,760,687 | 27,958,000 | 28,760,687 | 27,958,000 | $ 27,814,317 |
Capital expenditures | 47,000 | 1,000 | 105,823 | 2,501 | |
Capitalized software costs | 349,000 | 278,000 | 584,376 | 545,223 | |
Depreciation and Amortization | 517,000 | 484,000 | 1,033,000 | 971,000 | |
Eliminations [Member] | |||||
Identifiable assets | (7,238,000) | (7,238,000) | (7,238,000) | (7,238,000) | |
Lancaster [Member] | |||||
Net Revenues | 4,042,000 | 7,738,000 | 7,058,000 | ||
Income (loss) from operations before income taxes | 1,569,000 | 3,058,000 | 2,894,000 | ||
Identifiable assets | 26,630,000 | 25,854,000 | 26,630,000 | 25,854,000 | |
Capital expenditures | 4,000 | 0 | 25,000 | 1,000 | |
Capitalized software costs | 319,000 | 233,000 | 531,000 | 455,000 | |
Depreciation and Amortization | 421,000 | 394,000 | 838,000 | 789,000 | |
Buffalo [Member] | |||||
Net Revenues | 1,663,000 | 3,386,000 | 2,944,000 | ||
Income (loss) from operations before income taxes | 226,000 | 665,000 | 549,000 | ||
Identifiable assets | 9,369,000 | 9,267,000 | 9,369,000 | 9,267,000 | |
Capital expenditures | 43,000 | 1,000 | 80,000 | 1,000 | |
Capitalized software costs | 30,000 | 45,000 | 53,000 | 90,000 | |
Depreciation and Amortization | $ 96,000 | $ 90,000 | $ 195,000 | $ 182,000 |
9. SEGMENT AND GEOGRAPHIC REP35
9. SEGMENT AND GEOGRAPHIC REPORTING (Details - geographic) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Feb. 28, 2017 | Feb. 29, 2016 | Feb. 28, 2017 | Feb. 29, 2016 | |
Revenues | $ 5,705,590 | $ 5,163,726 | $ 11,123,525 | $ 10,002,346 |
Lancaster [Member] | ||||
Revenues | 4,042,000 | 7,738,000 | 7,058,000 | |
Buffalo [Member] | ||||
Revenues | 1,663,000 | 3,386,000 | 2,944,000 | |
North America [Member] | ||||
Revenues | 3,418,000 | 2,847,000 | 7,114,000 | 5,737,000 |
North America [Member] | Lancaster [Member] | ||||
Revenues | 1,755,000 | 1,331,000 | 3,728,000 | 2,793,000 |
North America [Member] | Buffalo [Member] | ||||
Revenues | 1,663,000 | 1,516,000 | 3,386,000 | 2,944,000 |
Europe [Member] | ||||
Revenues | 1,337,000 | 1,490,000 | 2,058,000 | 2,404,000 |
Europe [Member] | Lancaster [Member] | ||||
Revenues | 1,337,000 | 1,490,000 | 2,058,000 | 2,404,000 |
Europe [Member] | Buffalo [Member] | ||||
Revenues | 0 | 0 | 0 | 0 |
Asia [Member] | ||||
Revenues | 1,951,000 | 1,860,000 | ||
Asia [Member] | Lancaster [Member] | ||||
Revenues | 950,000 | 827,000 | 1,951,000 | 1,860,000 |
Asia [Member] | Buffalo [Member] | ||||
Revenues | 0 | 0 | 0 | 0 |
South America [Member] | ||||
Revenues | 950,000 | 827,000 | 1,000 | 1,000 |
South America [Member] | Lancaster [Member] | ||||
Revenues | 1,000 | 0 | 1,000 | 1,000 |
South America [Member] | Buffalo [Member] | ||||
Revenues | $ 0 | $ 0 | $ 0 | $ 0 |
10. EMPLOYEE BENEFIT PLAN (Deta
10. EMPLOYEE BENEFIT PLAN (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Feb. 28, 2017 | Feb. 29, 2016 | Feb. 28, 2017 | Feb. 29, 2016 | |
Retirement Benefits [Abstract] | ||||
Plan contributions | $ 60,931 | $ 51,737 | $ 114,890 | $ 107,075 |