Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Aug. 31, 2017 | Nov. 14, 2017 | Feb. 28, 2017 | |
Document And Entity Information | |||
Entity Registrant Name | SIMULATIONS PLUS INC | ||
Entity Central Index Key | 1,023,459 | ||
Document Type | 10-K | ||
Document Period End Date | Aug. 31, 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 Public Float | $ 106,370,782 | ||
Entity Common Stock, Shares Outstanding | 17,284,792 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,017 |
BALANCE SHEETS
BALANCE SHEETS - USD ($) | Aug. 31, 2017 | Aug. 31, 2016 |
Current assets | ||
Cash and cash equivalents | $ 6,215,718 | $ 8,030,284 |
Accounts receivable, net of allowance for doubtful accounts of $0 | 4,048,725 | 3,009,517 |
Revenues in excess of billings | 1,481,082 | 694,131 |
Prepaid income taxes | 462,443 | 555,486 |
Prepaid expenses and other current assets | 459,902 | 410,811 |
Total current assets | 12,667,870 | 12,700,229 |
Long-term assets | ||
Capitalized computer software development costs, net of accumulated amortization of $9,795,469 and $8,613,487 | 4,307,600 | 4,013,127 |
Property and equipment, net (note 4) | 291,135 | 256,381 |
Intellectual property, net of accumulated amortization of $2,095,417 and $1,408,750 | 6,829,583 | 4,666,250 |
Other intangible assets net of accumulated amortization of $495,000 and $295,000 | 3,995,000 | 1,355,000 |
Goodwill | 10,387,198 | 4,789,248 |
Other assets | 34,082 | 34,082 |
Total assets | 38,512,468 | 27,814,317 |
Current liabilities | ||
Accounts payable | 240,892 | 108,111 |
Accrued payroll and other expenses | 983,293 | 602,610 |
Other current liabilities | 0 | 8,274 |
Current portion - Contract payable (note 5) | 247,328 | 1,000,000 |
Billings in excess of revenues | 216,958 | 230,100 |
Deferred revenue | 353,962 | 176,422 |
Total current liabilities | 2,042,433 | 2,125,517 |
Long-term liabilities | ||
Deferred income taxes, net | 4,926,960 | 2,956,206 |
Payments due under Contracts payable (note 5) | 5,738,188 | 0 |
Total liabilities | 12,707,581 | 5,081,723 |
Shareholders' equity (note 7) | ||
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 17,277,604 and 17,225,478 shares issued and outstanding | 7,278 | 7,227 |
Additional paid-in capital | 12,109,141 | 11,376,007 |
Retained earnings | 13,688,468 | 11,349,360 |
Total shareholders' equity | 25,804,887 | 22,732,594 |
Total liabilities and shareholders' equity | $ 38,512,468 | $ 27,814,317 |
BALANCE SHEETS (Parenthetical)
BALANCE SHEETS (Parenthetical) - USD ($) | Aug. 31, 2017 | Aug. 31, 2016 |
Allowance for doubtful accounts | $ 0 | $ 0 |
Accumulated amortization of computer software development costs | 9,795,469 | 8,613,487 |
Accumulated amortization on intangible assets | $ 495,000 | $ 801,250 |
Preferred stock par value | $ 0.001 | $ 0.001 |
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 | $ 0.001 |
Common stock shares authorized | 50,000,000 | 50,000,000 |
Common stock shares issued | 17,277,604 | 17,225,478 |
Common stock shares outstanding | 17,277,604 | 17,225,478 |
Intellectual Property [Member] | ||
Accumulated amortization on intangible assets | $ 2,095,417 | $ 1,408,750 |
Other Intangible Assets | ||
Accumulated amortization on intangible assets | $ 495,000 | $ 295,000 |
STATEMENTS OF OPERATIONS
STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | ||
Aug. 31, 2017 | Aug. 31, 2016 | Aug. 31, 2015 | |
Income Statement [Abstract] | |||
Net revenues | $ 24,137,913 | $ 19,972,079 | $ 18,314,248 |
Cost of revenues | 6,307,800 | 4,601,513 | 4,392,477 |
Gross margin | 17,830,113 | 15,370,566 | 13,921,771 |
Operating expenses | |||
Selling, general, and administrative | 8,198,184 | 6,693,691 | 6,736,767 |
Research and development | 1,367,645 | 1,445,069 | 1,328,476 |
Total operating expenses | 9,565,829 | 8,138,760 | 8,065,243 |
Income from operations | 8,264,284 | 7,231,806 | 5,856,528 |
Other income (expense) | |||
Interest income | 15,857 | 18,014 | 17,935 |
Interest expense | (38,188) | 0 | 0 |
Gain (loss) on currency exchange | (1,686) | (13,428) | (181,534) |
Total other income (expense) | (24,017) | 4,586 | (163,599) |
Income before provision for income taxes | 8,240,267 | 7,236,392 | 5,692,929 |
Provision for income taxes | (2,452,670) | (2,286,256) | (1,849,968) |
Net Income | $ 5,787,597 | $ 4,950,136 | $ 3,842,961 |
Earnings per share | |||
Basic | $ 0.34 | $ 0.29 | $ 0.23 |
Diluted | $ 0.33 | $ 0.29 | $ 0.23 |
Weighted-average common shares outstanding | |||
Basic | 17,239,490 | 17,028,566 | 16,864,670 |
Diluted | 17,515,917 | 17,209,506 | 17,032,158 |
STATEMENTS OF SHAREHOLDERS' EQU
STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) | Common Stock | Additional Paid-In Capital | Retained Earnings | Total |
Beginning balance, shares at Aug. 31, 2014 | 16,349,955 | |||
Beginning balance, value at Aug. 31, 2014 | $ 4,821 | $ 6,085,427 | $ 9,345,103 | $ 15,435,351 |
Exercise of stock options, shares | 101,887 | |||
Exercise of stock options, amount | $ 102 | 56,941 | 57,043 | |
Stock-based compensation | 295,243 | 295,243 | ||
Issuance of stock - acquisition, shares | 491,159 | |||
Issuance of stock - acquisition, value | $ 491 | 3,276,679 | 3,277,170 | |
Declaration of dividends | (3,375,566) | (3,375,566) | ||
Net income | 3,842,961 | 3,842,961 | ||
Ending balance, shares at Aug. 31, 2015 | 16,943,001 | |||
Ending balance, value at Aug. 31, 2015 | $ 5,414 | 9,714,290 | 9,812,498 | 19,532,202 |
Exercise of stock options, shares | 112,463 | |||
Exercise of stock options, amount | $ 113 | 181,936 | 182,049 | |
Stock-based compensation | 347,077 | 347,077 | ||
Issuance of stock - acquisition, shares | 170,014 | |||
Issuance of stock - acquisition, value | $ 1,700 | 1,132,704 | 1,134,404 | |
Declaration of dividends | (3,413,274) | (3,413,274) | ||
Net income | 4,950,136 | 4,950,136 | ||
Ending balance, shares at Aug. 31, 2016 | 17,225,478 | |||
Ending balance, value at Aug. 31, 2016 | $ 7,227 | 11,376,007 | 11,349,360 | 22,732,594 |
Exercise of stock options, shares | 49,642 | |||
Exercise of stock options, amount | $ 49 | 111,355 | 111,404 | |
Stock-based compensation | 585,018 | 585,018 | ||
Issuance of stock - acquisition, shares | 2,484 | |||
Issuance of stock - acquisition, value | $ 2 | 36,761 | 36,763 | |
Declaration of dividends | (3,448,489) | (3,448,489) | ||
Net income | 5,787,597 | 5,787,597 | ||
Ending balance, shares at Aug. 31, 2017 | 17,277,604 | |||
Ending balance, value at Aug. 31, 2017 | $ 7,278 | $ 12,109,141 | $ 13,688,468 | $ 25,804,887 |
STATEMENTS OF CASH FLOWS
STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | ||
Aug. 31, 2017 | Aug. 31, 2016 | Aug. 31, 2015 | |
Cash flows from operating activities | |||
Net income | $ 5,787,597 | $ 4,950,136 | $ 3,842,961 |
Adjustments to reconcile net income to net cash provided by operating activities | |||
Depreciation and amortization of property and equipment | 151,444 | 196,250 | 211,454 |
Amortization of capitalized computer software development costs | 1,096,967 | 981,066 | 1,023,139 |
Amortization of Intellectual property | 886,667 | 755,000 | 755,000 |
Change in value of contingent consideration | 38,188 | 0 | 0 |
Stock-based compensation | 585,018 | 347,077 | 295,243 |
Shares issued to directors for services | 36,763 | 0 | 0 |
Deferred income taxes | (178,374) | (23,241) | 55,919 |
(Increase) decrease in | |||
Accounts receivable | (876,231) | (1,415,810) | 1,048,969 |
Revenues in excess of billings | (634,409) | 100,994 | (238,502) |
Prepaid income taxes | 93,043 | (555,486) | 748,359 |
Prepaid expenses and other assets | 40,528 | (29,093) | (104,836) |
Increase (decrease) in | |||
Accounts payable | 99,337 | (101,296) | 19,443 |
Accrued payroll and other expenses | 283,831 | 52,030 | (353,567) |
Billings in excess of revenues | (118,061) | 123,566 | (239,906) |
Accrued income taxes | (153,713) | (43,602) | 43,602 |
Other liabilities | (8,274) | (19,859) | (19,860) |
Deferred revenue | (252,582) | 97,477 | 48,573 |
Net cash provided by operating activities | 6,877,739 | 5,415,209 | 7,135,991 |
Cash flows from investing activities | |||
Purchases of property and equipment | (175,961) | (39,121) | (71,369) |
Cash used to acquire subsidiaries | (4,515,982) | (720,000) | (2,080,000) |
Cash received in acquisition | 1,720,434 | 0 | 190,184 |
Capitalized computer software development costs | (1,383,711) | (1,195,854) | (1,168,937) |
Net cash used in investing activities | (4,355,220) | (1,954,975) | (3,130,122) |
Cash flows from financing activities | |||
Payment of dividends | (3,448,489) | (3,413,274) | (3,375,566) |
Payments on contracts payable | (1,000,000) | (750,000) | (750,000) |
Proceeds from the exercise of stock options | 111,404 | 182,049 | 57,043 |
Net cash used in financing activities | (4,337,085) | (3,981,225) | (4,068,523) |
Net increase (decrease) in cash and cash equivalents | (1,814,566) | (520,991) | (62,654) |
Cash and cash equivalents, beginning of year | 8,030,284 | 8,551,275 | 8,614,929 |
Cash and cash equivalents, end of period | 6,215,718 | 8,030,284 | 8,551,275 |
Supplemental disclosures of cash flow information | |||
Income taxes paid | 2,687,921 | 2,908,587 | 961,907 |
Non-Cash Investing and Financing | |||
Stock issued for acquisition of Cognigen Corporation | 0 | 1,134,404 | 3,277,170 |
Creation of contract liabilities for acquisition of subsidiaries | $ 5,738,188 | $ 0 | $ 1,854,404 |
1. ORGANIZATION AND LINES OF BU
1. ORGANIZATION AND LINES OF BUSINESS | 12 Months Ended |
Aug. 31, 2017 | |
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. On September 2, 2014, Simulations Plus, Inc. acquired all outstanding equity interests of Cognigen Corporation (“Cognigen”) pursuant to the terms of the Merger Agreement and Cognigen became a wholly owned subsidiary of Simulations Plus, Inc. "). On June 1, 2017, Simulation Plus acquired all outstanding equity interest of DILIsym Services, Inc. (“DILIsym”) pursuant to a stock purchase agreement and DILIsym became a wholly owned subsidiary of Simulations Plus, Inc. Simulation Plus, Cognigen, and DILIsym collectively, the "Company” 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, 2017 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Principles of Consolidation The consolidated financial statements include the accounts of Simulations Plus, Inc. and, as of September 2, 2014, its wholly owned subsidiary, Cognigen Corporation, and as of June 1, 2017 the accounts of DILIsym Services, Inc. All significant intercompany accounts and transactions are eliminated in consolidation. Use of Estimates Our financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. Actual results could differ from those estimates. Significant accounting policies for us include revenue recognition, accounting for capitalized computer software development costs, valuation of stock options, and accounting for income taxes. Reclassifications 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 the FASB Accounting Standards Codification (“ASC”) 985-605, “Software – Revenue Recognition”. Software product 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 our 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. Certain of the Company's software products are housed and supported on the Company's computer networks. Software revenues for those products are included in income over the life We recognize revenue on sales of our DILIsym Subsidiary in accordance with ASC 605-25, “Revenue Recognition, Multiple-Element Arrangements” We recognize revenue from collaboration research, revenue from grants and consortium memberships 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, 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” 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. Amortization of software development costs amounted to $1,096,967, $981,066, and $1,023,139 for the years ended August 31, 2017, 2016, and 2015, 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, or fair market value for property and equipment acquired in business combinations, less accumulated depreciation and amortization. Depreciation and amortization are provided using the straight-line method over the estimated useful lives as follows: 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. Intangible Assets and Goodwill The Company performs valuations of assets acquired and liabilities assumed on each acquisition accounted for as a business combination and recognizes the assets acquired and liabilities assumed at their acquisition date fair value. Acquired intangible assets include customer relationships, software, trade name, and non-compete agreements. The Company determines the appropriate useful life by performing an analysis of expected cash flows based on historical experience of the acquired businesses. Intangible assets are amortized over their estimated useful lives using the straight-line method, which approximates the pattern in which the majority of the economic benefits are expected to be consumed. Goodwill represents the excess of the cost of an acquired entity over the fair value of the acquired net assets. Goodwill is not amortized, instead it is tested for impairment annually or when events or circumstances change that would indicate that goodwill might be impaired. Events or circumstances that could trigger an impairment review include, but are not limited to, a significant adverse change in legal factors or in the business climate, an adverse action or assessment by a regulator, unanticipated competition, a loss of key personnel, significant changes in the manner of the Company's use of the acquired assets or the strategy for the Company's overall business, significant negative industry or economic trends or significant under-performance relative to expected historical or projected future results of operations. Goodwill is tested for impairment at the reporting unit level, which is one level below or the same as an operating segment. As of August 31, 2017, the Company determined that it has three reporting units, Simulations Plus, Cognigen Corporation and DILIsym Services, Inc. When testing goodwill for impairment, the Company first performs a qualitative assessment to determine whether it is necessary to perform step one of a two-step annual goodwill impairment test for each reporting unit. The Company is required to perform step one only if it concludes that it is more likely than not that a reporting unit's fair value is less than its carrying value. Should this be the case, the first step of the two-step process is to identify whether a potential impairment exists by comparing the estimated fair values of the Company's reporting units with their respective book values, including goodwill. If the estimated fair value of the reporting unit exceeds book value, goodwill is considered not to be impaired, and no additional steps are necessary. If, however, the fair value of the reporting unit is less than book value, then the second step is performed to determine if goodwill is impaired and to measure the amount of impairment loss, if any. The amount of the impairment loss is the excess of the carrying amount of the goodwill over its implied fair value. The estimate of implied fair value of goodwill is primarily based on an estimate of the discounted cash flows expected to result from that reporting unit, but may require valuations of certain internally generated and unrecognized intangible assets such as the Company's software, technology, patents and trademarks. If the carrying amount of goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to the excess. As of August 31, 2017, the entire balance of goodwill was attributed to two of the Company's reporting units, Cognigen Corporation and DILIsym Services. Intangible assets subject to amortization are reviewed for impairment whenever events or circumstances indicate that the carrying amount of these assets may not be recoverable. The Company has not recognized any impairment charges during the periods ended August 31, 2017, 2016 and 2015. Reconciliation of Goodwill for the period ended August 31, 2017: Cognigen DILIsym Total Balance, August 31, 2014 – – – Addition 4,789,248 – 4,789,248 Impairments – – – Balance, August 31, 2015 4,789,248 – 4,789,248 Addition – – – Impairments – – – Balance, August 31, 2016 4,789,248 – 4,789,248 Addition – 5,597,950 5,597,950 Impairments – – – Balance, August 31, 2017 4,789,248 5,597,950 10,387,198 Other Intangible Assets The following table summarizes other intangible assets as of August 31, 2017: Amortization Period Acquisition Value Accumulated Amortization Net book value Customer relationships-Cognigen Straight line 8 years $ 1,100,000 $ 412,500 $ 687,500 Trade Name-Cognigen None 500,000 0 500,000 Covenants not to compete-Cognigen Straight line 5 years 50,000 30,000 20,000 Covenants not to compete-DILIsym Straight line 4 years 80,000 5,000 75,000 Trade Name-DILIsym None 860,000 0 850,000 Customer relationships-DILIsym Straight line 8 years 1,900,000 47,500 1,852,000 $ 4,490,000 $ 495,000 $ 3,995,000 Amortization expense for the year ended August 31, 2017, 2016 and 2015 was $200,000, $147,500, and $147,500. Future amortization for the next five years is as follows: Year ending August 31, Amount 2018 405,000 2019 405,000 2020 395,000 2021 390,000 2022 375,000 Business Acquisitions The Company accounted for the acquisition of Cognigen and DILIsym Services, Inc., using the purchase method of accounting where the assets acquired and liabilities assumed are recognized based on their respective estimated fair values. The excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. Determining the fair value of certain acquired assets and liabilities is subjective in nature and often involves the use of significant estimates and assumptions, including, but not limited to, the selection of appropriate valuation methodology, projected revenue, expenses and cash flows, weighted average cost of capital, discount rates, estimates of advertiser and publisher turnover rates and estimates of terminal values. Business acquisitions are included in the Company's consolidated financial statements as of the date of the acquisition. Fair Value of Financial Instruments 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. The following table summarizes fair value measurements at August 31, 2017 and August 31, 2016 for assets and liabilities measured at fair value on a recurring basis: August 31, 2017: Level 1 Level 2 Level 3 Total Cash and cash equivalents $ 6,215,718 $ – $ – $ 6,215,718 Acquisition-related contingent consideration obligations $ – $ – $ 4,738,188 $ 4,738,188 August 31, 2016: Level 1 Level 2 Level 3 Total Cash and cash equivalents $ 8,030,284 $ – $ – $ 8,030,284 As of August 31, 2017, the Company has a liability for contingent consideration related to its acquisition of the DILIsym Services, Inc. The fair value measurement of the contingent consideration obligations is determined using Level 3 inputs. The fair value of contingent consideration obligations is based on a discounted cash flow model using a probability-weighted income approach. These fair value measurements represent Level 3 measurements as they are based on significant inputs not observable in the market. Significant judgment is employed in determining the appropriateness of these assumptions as of the acquisition date and for each subsequent period. Accordingly, changes in assumptions could have a material impact on the amount of contingent consideration expense the Company records in any given period. Changes in the value of the contingent consideration obligations are recorded in the Company’s Consolidated Statement of Operations. The following is a reconciliation of contingent consideration value. Value at August 31, 2016 $ 0 Purchase price contingent consideration 4,700,000 Contingent consideration payments – Change in value of contingent consideration 38,188 Value at August 31, 2017 $ 4,738,188 Advertising The Company expenses advertising costs as incurred. Advertising costs for the years ended August 31, 2017, 2016 and 2015 were approximately $58,445, $131,783 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” 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, 2017, 2016 and 2015 was $7,500. Accumulated amortization as of August 31, 2017 and 2016 was $41,250 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 for the year ended August 31, 2017, 2016 and 2015 was $600,000. Accumulated amortization as of August 31, 2017 and 2016 was $1,975,000 and $1,375,000, respectively. (See Note 5). On June 1, 2017, as part of the acquisition of DILIsym Services, Inc. the Company acquired certain developed technologies associated with the drug induced liver disease (DILI). These technologies were valued at $2,850,000 and are being amortized over 9 years under the straight-line method. Amortization expense for the fiscal year ended August 31, 2017 was $79,176 and is included in cost of revenues. Total amortization as of August 31, 2017 was $79,176. Total amortization expense for intellectual property agreements for the years ended August 31, 2017, 2016 and 2015 was $686,667, $607,500, and $607,500. Accumulated amortization as of August 31, 2017 and 2016 was $2,095,417 and $1,408,750, respectively. Future amortization for the next five years is as follows: Years ending August 31, TSRL Enslein DILI-Acquired Developed Technologies Total 2018 $ 600,000 $ 7,500 $ 316,667 $ 924,167 2019 $ 600,000 $ 7,500 $ 316,667 $ 924,167 2020 $ 600,000 $ 7,500 $ 316,667 $ 924,167 2021 $ 600,000 $ 7,500 $ 316,667 $ 924,167 2022 $ 600,000 $ 3,750 $ 316,667 $ 920,417 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, 2017, 2016 and 2015 were as follows: 2017 2016 2015 Numerator Net income attributable to common shareholders $ 5,787,897 $ 4,950,136 $ 3,842,961 Denominator Weighted-average number of common shares outstanding during the year 17,239,490 17,028,566 16,864,670 Dilutive effect of stock options 276,427 180,940 167,488 Common stock and common stock equivalents used for diluted earnings per share 17,515,917 17,209,506 17,032,158 Stock-Based Compensation The Company accounts for stock options using the modified prospective method in accordance with FASB ASC 718-10, “Compensation-Stock Compensation” 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 “Property and Equipment” Recently Issued Accounting Standards In May 2014, the Franchise Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers In November 2015, the FASB issued ASU No 2015-17, Income Taxes (Topic 740) 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 In April 2016, the FASB issued AS 2016-10, Revenue from Contracts with Customers (Topic 606), which amends certain aspects of the Board's new revenue standard, ASU 2014-09, Revenue from Contracts with Customers. The standard should be adopted concurrently with adoption of ASU 2014-09 which is effective for annual and interim periods beginning after December 15, 2017. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting. |
3. CONTRACTS IN PROGRESS
3. CONTRACTS IN PROGRESS | 12 Months Ended |
Aug. 31, 2017 | |
Contractors [Abstract] | |
CONTRACTS IN PROGRESS | Cost, estimated earnings, and billings on uncompleted contracts are summarized as follows as of August 31, 2017 and 2016: 2017 2016 Revenues earned to date on uncompleted contracts $ 7,162,360 $ 2,557,507 Billings to date on uncompleted contracts (5,898,236 ) (2,093,476 ) $ 1,264,124 $ 464,031 Contracts in progress are included in the accompanying balance sheets under the following captions: 2017 2016 Revenues in excess of billings $ 1,481,082 $ 694,131 Billings in excess of revenues (216,958 ) (230,100 ) $ 1,264,124 $ 464,031 |
4. PROPERTY AND EQUIPMENT
4. PROPERTY AND EQUIPMENT | 12 Months Ended |
Aug. 31, 2017 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | Property and equipment at August 31, 2017 and 2016 consisted of the following: 2017 2016 Equipment $ 618,915 $ 487,458 Computer equipment 141,615 125,385 Furniture and fixtures 239,105 200,595 Leasehold improvements 103,599 103,599 1,103,235 917,037 Less accumulated depreciation and amortization 812,100 660,656 Total $ 291,135 $ 256,381 Depreciation expense was $151,444, $196,250, and $211,454 for the years ended August 31, 2017, 2016, and 2015, respectively. |
5. CONTRACTS PAYABLE
5. CONTRACTS PAYABLE | 12 Months Ended |
Aug. 31, 2017 | |
Other Liabilities Disclosure [Abstract] | |
CONTRACTS PAYABLE | TSRL Pursuant to the termination and non-assertion agreement with TSRL (See note 2), the Company paid TSRL $2,500,000 over a three-year period. The final payment of $1,000,000 was made in April 2017. Cognigen Acquisition Liability-Related Party On September 2, 2014, the Company acquired Cognigen Corporation (See note 13). As part of the consideration the Company agreed that 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 $1,854,404, comprised of $720,000 of cash and the issuance of 170,014 shares of stock. The former shareholders of Cognigen are currently employed by the consolidated Company, one of whom served as the President of Simulations Plus, Inc. and Cognigen through the end of FY17. In July 2016 the final payment was made and the shares were issued. DILIsym Acquisition Liabilities: On June 1, 2017, the Company acquired DILIsym Services, Inc. The agreement provided for a working capital adjustment, an eighteen-month $1,000,000 holdback provision against certain representations and warrantees, and an Earn-out agreement of up to an additional $5,000,000 in Earn-out payments based on earnings over the next three years. The Earn-out liability has been recorded at an estimated fair value. Payments under the Earn-out liability will be due starting in FY 2019, it is estimated that approximately half of the liability will be paid in 2019 and the remainder of the Earn-out will be paid in the following year. As of August 31, 2017 the following liabilities have been recorded: Working Capital Liability $ 247,328 Holdback Liability 1,000,000 Earn-out Liability 4,738,188 Sub Total $ 5,985,516 Less: Current Portion 247,328 Long-Term $ 5,738,188 |
6. COMMITMENTS AND CONTINGENCIE
6. COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Aug. 31, 2017 | |
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. In May 2016 the Company exercised the two, two-year options extending the term of the lease through February 2, 2021 at a fixed rate of $25,000 per month. The new extension agreement allowed the Company with 90 days notice to opt out of the remaining lease in the last two years of the term upon payment of a recapture payment equal to the 3% base payment increase that would have been due under the original agreement. Our Buffalo subsidiary leases approximately 12,623 square feet of space in Buffalo, New York. The initial five-year term expires in October 2018; the lease allows for a three year option to extend to October 2021. The current base rent is $15,638 per month. In September 2017 DILIsym service signed a 3-year lease for approximately 1,900 rentable square feet of space in Research Triangle Park, North Carolina. The initial three-year term expires in October 2020. The initial base rent is $3,975 per month with an annual 3% adjustment. Prior to this lease DILIsym was on a month-to-month rental. Rent expense, including common area maintenance fees for the years ended August 31, 2017, 2016 and 2015 was $509,600, $491,800 and $488,888, respectively. Future minimum lease payments under non-cancelable operating leases with remaining terms of one year or more at August 31, 2017 were as follows: Years Ending August 31, 2018 $ 531,379 2019 380,407 2020 350,605 2021 131,130 $ 1,393,521 Employment Agreements In the normal course of business the Company has entered into employment agreements with certain of its key management personnel that may require compensation payments upon termination. License Agreement The Company executed 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 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. Under this agreement for the year ended August 31, 2017, 2016 and 2015 we incurred royalty expense of $139,551, $119,620 and $77,307, 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 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. In June 2017, the Plaintiff settled the case with certain of the Defendants; the case was dismissed on June 20, 2017. The Company incurred no liability as part of the settlement and has been dismissed with prejudice. |
7. SHAREHOLDERS' EQUITY
7. SHAREHOLDERS' EQUITY | 12 Months Ended |
Aug. 31, 2017 | |
Equity [Abstract] | |
SHAREHOLDERS' EQUITY | Dividend The Company’s Board of Directors declared cash dividends during fiscal year 2017, 2016 and 2015. The details of dividend paid are in the following tables: FY2015 Record Date Distribution Date Number of Shares Outstanding on Record Date Dividend per Share Total Amount 11/7/2014 11/14/2014 16,841,114 $ 0.05 $ 842,056 1/26/2015 2/02/2015 16,852,117 $ 0.05 $ 842,606 5/11/2015 5/18/2015 16,875,117 $ 0.05 $ 843,754 7/23/2015 7/30/2015 16,943,001 $ 0.05 $ 847,150 Total $ 3,375,566 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 2/05/2016 17,018,001 $ 0.05 $ 850,900 5/02/2016 5/09/2016 17,029,501 $ 0.05 $ 851,475 8/11/2016 8/18/2016 17,221,978 $ 0.05 $ 861,099 Total $ 3,413,274 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 2/06/2017 17,233,758 $ 0.05 $ 861,688 5/08/2017 5/15/2017 17,240,626 $ 0.05 $ 862,031 7/28/2017 8/04/2017 17,268,920 $ 0.05 $ 863,446 Total $ 3,448,489 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 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. Incentive Stock Options (“ISOs”) As of August 31, 2017, employees hold ISOs to purchase in the aggregate 1,194,042 shares of the Company’s common stock at exercise prices ranging from $1.00 to $14.50 per share. Transactions in FY15 Number of Weighted-Average Weighted-Average Outstanding, August 31, 2014 798,500 $ 4.59 6.27 Granted 37,000 $ 6.99 Exercised (95,384 ) $ 2.49 Canceled/Forfeited (119,116 ) $ 4.86 Outstanding, August 31, 2015 621,000 $ 5.01 6.01 Vested and Exercisable, August 31, 2015 265,700 $ 2.81 4.40 Vested and Expected to Vest, August 31, 2015 576,952 $ 4.87 6.32 Transactions in FY16 Number of Weighted-Average Weighted-Average Outstanding, August 31, 2015 621,000 $ 5.01 6.01 Granted 412,100 $ 9.71 Exercised (100,863 ) $ 1.45 Canceled/Forfeited (27,487 ) $ 7.66 Expired (10,000 ) $ 1.13 Outstanding, August 31, 2016 894,750 $ 7.54 7.72 Vested and Exercisable, August 31, 2016 253,380 $ 4.85 5.26 Vested and Expected to Vest, August 31, 2016 812,458 $ 7.40 7.58 Transactions in FY17 (ISO’s) Number of Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Life Outstanding, August 31, 2016 894,750 $ 7.54 7.72 Granted 409,582 $ 10.10 Exercised (40,142 ) $ 3.01 Cancelled/Forfeited (70,148 ) $ 8.92 Outstanding, August 31, 2017 1,194,042 $ 8.49 7.70 Exercisable, August 31, 2017 380,360 $ 6.45 5.49 Vested and Expected to Vest, August 31, 2017 1,091,981 $ 8.38 7.59 Non-Qualified Stock Options (“NQSOs”) As of August 31, 2017, the outside members of the Company’s Board of Directors hold NQSOs to purchase in the aggregate 55,084 shares of the Company’s common stock at exercise prices ranging from $1.67 to $14.50 per share. Transactions in FY15 Number of Weighted-Average Weighted-Average Outstanding, August 31, 2014 56,600 $ 4.82 7.96 Granted 13,750 $ 6.75 Exercised (6,503 ) $ 3.28 Cancelled/Forfeited (14,497 ) $ 4.97 Outstanding, August 31, 2015 49,350 $ 5.52 7.75 Exercisable, August 31, 2015 27,200 $ 4.70 6.31 Transactions in FY16 Number of Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Life Outstanding, August 31, 2015 49,350 $ 5.52 7.75 Granted 15,000 $ 8.62 Exercised (11,600 ) $ 3.33 Cancelled/Forfeited (0 ) $ – Outstanding, August 31, 2016 52,750 $ 6.88 8.07 Exercisable, August 31, 2016 26,500 $ 5.95 6.70 Transactions in FY17 (NQSOs) Number of Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Life Outstanding, August 31, 2016 52,750 $ 6.88 8.07 Granted 25,334 $ 11.44 Exercised (9,500 ) $ 5.88 Cancelled/Forfeited (13,500 ) $ 7.43 Outstanding, August 31, 2017 55,084 $ 9.02 8.59 Exercisable, August 31, 2017 21,125 $ 6.51 7.29 The fair value of the options, including both ISOs and NQSOs, granted during fiscal year 2017 is estimated at $1,294,826. 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 2.15%, pre-vest forfeiture rate of 6.17%, expected volatility of 32.93%, risk-free interest rate of 2.16%, and expected life of 6.78 years. The total fair value of non-vested stock options as of August 31, 2017 was $1,866,395 and is amortizable over a weighted average period of 7.59 years. The fair value of the options, including both ISOs and NQSOs, granted during fiscal year 2016 is estimated at $1,189,730. 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 2.32%, pre-vest forfeiture rate of 6.31%, expected volatility of 34.22%, risk-free interest rate of 1.42%, and expected life of 6.80 years. The total fair value of non-vested stock options as of August 31, 2016 was $1,366,269 and is amortizable over a weighted average period of 7.58 years. The fair value of the options, including both ISOs and NQSOs, granted during fiscal year 2015 was estimated at $113,435. 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 3.03%, pre-vest forfeiture rate of 6.20%, expected volatility of 47.13%, risk-free interest rate of 2.09%, and expected life of 6.89 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 Intrinsic Intrinsic FY15 $ 1,182,797 $ 1,109,489 $ 396,485 FY16 $ 1,500,659 $ 1,025,718 $ 853,423 FY17 $ 7,479,068 $ 3,232,356 $ 479,713 The weighted-average remaining contractual life of options outstanding issued under the 2007 and 2017 Plan was 7.74 years at August 31, 2017. The exercise prices for the options outstanding at August 31, 2017 ranged from $1.00 to $14.50 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 42,000 1.6 years $ 1.00 42,000 1.6 years $1.00 $3.01 $ 4.50 14,000 1.0 years $ 3.22 14,000 1.1 years $3.22 $4.51 $ 6.00 70,000 1.4 years $ 5.52 70,000 1.4 years $5.52 $6.01 $ 7.50 327,510 7.0 years $ 6.86 194,905 7.0 years $6.86 $7.51 $ 9.00 10,000 9.0 years $ 8.62 4,000 9.0 years $9.72 $9.01 $ 10.50 772,700 9.0 years $ 9.88 76,580 8.5 years $0.00 $13.01 $ 14.50 12,916 10.0 years $14.44 0 1,249,126 7.74 years $8.51 401,485 5.6 years $6.45 |
8. INCOME TAXES
8. INCOME TAXES | 12 Months Ended |
Aug. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
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. The components of the income tax provision for fiscal year 2017, 2016 and 2015 were as follows: 2017 2016 2015 Current Federal $ 2,385,660 $ 2,118,229 $ 1,482,798 State 217,281 171,840 236,152 Foreign 28,103 19,428 75,099 2,631,044 2,309,497 1,794,049 Deferred Federal (612,629 ) 22,936 (15,036 ) State 434,255 (46,177 ) 70,955 (178,374 ) (23,241 ) 55,919 Total $ 2,452,670 $ 2,286,256 $ 1,849,968 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 2016 and 2015: 2017 2016 2015 Income tax computed at federal statutory tax rate 34.0% 34.0% 34.0% State taxes, net of federal benefit 3.5 3.4 5.0 Meals & Entertainment 0.0 0.1 0.1 Stock Based Compensation 0.0 1.3 0.3 Other permanent differences (0.5 ) (0.6 ) (0.0 ) Research and development credit (3.6 ) (2.7 ) (4.5 ) Domestic Production Activities (2.3 ) (3.6 ) (2.9 ) Change in prior year estimated taxes (1.3 ) (0.3 ) 0.5 Total 29.8% 31.6% 32.5% Significant components of the Company's deferred tax assets and liabilities for income taxes for the fiscal years ended August 31, 2017 and 2016 are as follows: 2017 2016 Deferred tax assets Accrued payroll and other expenses $ 254,897 $ 108,769 Deferred revenue 62,617 71,009 Capitalized merger costs 540,312 292,693 Intellectual property 18,775 21,205 Research and development credit – 54,427 State taxes 91,513 58,426 State Tax Deferred 293,879 160,391 Total deferred tax assets 1,261,993 766,920 Less: Valuation allowance – – 1,261,993 766,920 Deferred tax liabilities Property and equipment (95,071 ) (93,900 ) State Tax Deferred (16,763 ) (9,491 ) Intellectual Property (4,343,311 ) (2,004,451 ) Capitalized computer software development costs (1,733,808 ) (1,615,284 ) Total deferred tax liabilities (6,188,953 ) (3,723,126 ) Net deferred tax liabilities $ (4,926,960 ) $ (2,956,206 ) 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 2017, 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 2013 and 2015 thru 2016 are open for audit, and our state tax returns for fiscal year 2011 through 2016 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. 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. |
9. CONCENTRATIONS AND UNCERTAIN
9. CONCENTRATIONS AND UNCERTAINTIES | 12 Months Ended |
Aug. 31, 2017 | |
Risks and Uncertainties [Abstract] | |
CONCENTRATIONS AND UNCERTAINTIES | NOTE 9 – 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. The Company maintains cash at financial institutions that may, at times, exceed federally insured limits. At August 31, 2017 the Company had cash and cash equivalents exceeding insured limits by $5,231,000. Revenue concentration shows that international sales accounted for 38%, 38% and 37% of net sales for fiscal years 2017, 2016 and 2015, respectively. Three customers accounted for 7% (a dealer account in Japan representing various customers), 7% and 5% of net sales for fiscal year 2017. Three customers accounted for 10% (a dealer account in Japan representing various customers), 7% and 6% of net sales for fiscal year 2016. Three customers accounted for 10% (a dealer account in Japan representing various customers), 8% and 6% of net sales for fiscal year 2015. FY17 accounts receivable concentrations show that one customer comprised 10% (a dealer account in Japan representing various customers), of accounts receivable as of August 31, 2017. FY16 accounts receivable concentrations showed that three customers comprised 16% (a dealer account in Japan representing various customers), 10%, and 10% of accounts receivable at August 31, 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. During economic downturns, we have seen consolidations in the pharmaceutical industry. Although we have not seen any significant reduction in total revenues to date, our growth rate could be affected by consolidation and downsizing in the pharmaceutical industry. |
10. SEGMENT AND GEOGRAPHIC REPO
10. SEGMENT AND GEOGRAPHIC REPORTING | 12 Months Ended |
Aug. 31, 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 years ended August 31, 2017, 2016 and 2015 (in thousands, because of rounding, numbers may not foot): Year ended August 31, 2017 Simulations Plus, Inc. Cognigen Corporation DILIsym Eliminations Total Net Revenues $ 15,600 $ 7,300 $ 1,238 0 $ 24,138 Income from operations before income taxes $ 6,194 $ 1,750 $ 320 0 $ 8,264 Total assets $ 33,056 $ 9,363 $ 13,794 $ (17,702 ) $ 38,512 Goodwill $ 0 $ 4,789 $ 5,598 $ 10,387 Capital expenditures $ 48 $ 96 $ 32 $ 176 Capitalized software costs $ 1,133 $ 219 $ 24 $ 1,376 Depreciation and Amortization $ 1618 $ 374 $ 135 $ 2,127 Year ended August 31, 2016 Simulations Plus, Inc. Cognigen Corporation Eliminations Total Net Revenues $ 14,417 5,554 $ 19,972 Income from operations before income taxes $ 6,330 $ 901 $ 7,231 Total assets $ 26,306 $ 8,975 $ (7,238 ) $ 28,043 Goodwill $ 0 $ 4,789 $ 4,789 Capital expenditures $ 6 $ 32 $ 38 Capitalized software costs $ 1,017 $ 178 $ 1,195 Depreciation and Amortization $ 1,556 $ 375 $ 1,931 Year ended August 31, 2015 Simulations Plus, Inc. Cognigen Corporation Eliminations Total Net Revenues $ 13,086 $ 5,228 $ 18,314 Income from operations before income taxes $ 4,816 $ 1,041 $ 5,857 Total assets $ 25,549 $ 9,033 $ (7,238 ) $ 27,344 Goodwill $ 0 $ 4,789 $ 4,789 Capital expenditures $ 23 $ 14 $ 37 Capitalized software costs $ 1,019 $ 151 $ 1,170 Depreciation and Amortization $ 1,633 $ 357 $ 1,990 In addition, the Company allocates revenues to geographic areas based on the locations of its customers. Geographical revenues for the years ended August 31, 2017, 2016 and 2015 were as follows (in thousands, because of rounding, numbers may not foot): Year ended August 31, 2017 North America Europe Asia South America Total Simulations Plus, Inc. $ 7,846 $ 3,826 $ 3,926 $ 1 $ 15,600 Cognigen Corporation 7,300 – – – 7,300 DILIsym Services, Inc* 851 151 236 1,238 Total $ 15,997 $ 3,977 $ 4,162 $ 1 $ 24,138 *DILIsym was acquired on June 1, 2017. Year ended August 31, 2016 North America Europe Asia South America Total Simulations Plus, Inc. $ 6,830 $ 4,022 $ 3,564 $ 2 $ 14,418 Cognigen Corporation 5,554 – – – 5,554 Total $ 12,384 $ 4,022 $ 3,564 $ 2 $ 19,972 Year ended August 31, 2015 North America Europe Asia South America Total Simulations Plus, Inc. $ 6,261 $ 3,629 $ 3,153 $ 43 $ 13,086 Cognigen Corporation 5,228 – – – 5,228 Total $ 11,489 $ 3,629 $ 3,153 $ 43 $ 18,314 |
11. RELATED PARTY TRANSACTIONS
11. RELATED PARTY TRANSACTIONS | 12 Months Ended |
Aug. 31, 2017 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 11 – RELATED PARTY TRANSACTIONS On September 2, 2014 the Company acquired Cognigen Corporation. The Company incurred a liability of $1,854,404 due to the former shareholders of Cognigen Corporation who are currently employees and shareholders of the Consolidated Company. (See note 5). This liability was settled in July 2016 with a cash payment of $720,000 and the balance of $1,134,404 stock issuance. On June 1, 2017 the Company acquired DILIsym Service, Inc. As part of that agreement the Company paid $1,704,000 to former shareholders of DILIsym Services, Inc. who are currently employees of the Consolidated Company. In addition, as part of the acquisition agreement the Company owes approximately $1,980,000 of acquisition liabilities at August 31, 2017 to the former shareholders who are still employees of the Consolidated Company. One of the former shareholders of DILIsym is currently a director of Simulations Plus, under the agreement he received approximately, $29,000 and could receive up to approximately $34,000 in future earn-out payments. |
12. EMPLOYEE BENEFIT PLAN
12. EMPLOYEE BENEFIT PLAN | 12 Months Ended |
Aug. 31, 2017 | |
Compensation and Retirement Disclosure [Abstract] | |
EMPLOYEE BENEFIT PLAN | NOTE 12 - 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 $251,899, $219,756 and $237,300 for fiscal year 2017, 2016 and 2015, respectively. |
13. ACQUISITION_MERGER WITH SUB
13. ACQUISITION/MERGER WITH SUBSIDIARIES | 12 Months Ended |
Aug. 31, 2017 | |
Business Combinations [Abstract] | |
ACQUISITION/MERGER WITH SUBSIDIARIES | 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 $3,277,000. 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 provided for a targeted working capital adjustment to be made 120 days after the closing date. 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 $398,000 $ 1,524,389 Fixed assets acquired 458,351 Estimated value of software acquired 200,000 Estimated value of Intangibles acquired (Customer Lists, trade name etc.) 1,600,000 Working Capital Adjustment (26,707 ) Current Liabilities assumed (644,499 ) Goodwill 4,789,248 Estimated Deferred income taxes (662,500 ) Total Consideration $ 7,238,282 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. Based on the structure of the transaction, the Company does not anticipate benefiting from any tax deductions in future periods for recognized goodwill. DILIsym Services, Inc. On May 1, 2017, the Company entered into an Stock Purchase Agreement (the “Stock Agreement”) with DILIsym Services, Inc (“DILIsym”). On June 1 2016, the Company consummated the acquisition of all outstanding equity interests of DILIsym pursuant to the terms of the Stock Agreement, with DILIsym becoming a wholly owned subsidiary of the Company. We believe the combination of Simulations Plus and DILIsym provides substantial future potential based on the complementary strengths of each of the companies. Under the terms of the Stock Agreement, as described below, the Company will pay the former shareholders of DILIsym total consideration of approximately $10,463,000. On June 1, 2017, the Company paid the former shareholders of DILIsym a total of $4,515,982, which included a $4,000,000 initial payment and a preliminary working capital payment of $515,982. Additional working capital adjustments of $247,328 are due under the agreement and will be paid subsequent to August 31, 2017. Within three business days following the eighteen month anniversary of acquisition, May 1, 2017, (the date of the Stock Agreement) and subject to any offsets, the Company will pay the former shareholders of DILIsym a total of $1,000,000. The agreement calls for Earn-out payments up to an additional $5,000,000 based on a formula of pre-tax earnings over the next three years. The Earn-out liability has been recorded at fair value. Under the acquisition method of accounting, the total estimated purchase price is allocated to DILIsym’s tangible and intangible assets and liabilities based on their estimated fair values at the date of the completion of the acquisition (June 1, 2017). The following table summarizes the preliminary allocation of the purchase price for DILIsym: Assets acquired, including accounts receivable of $255,000 and estimated Contracts receivable of $153,000 $ 2,283,110 Developed Technologies Acquired 2,850,000 Estimated value of Intangibles acquired (Customer Lists, trade name etc.) 2,840,000 Current Liabilities assumed (911,049 ) Goodwill 5,597,950 Estimated Deferred income taxes (2,212,160 ) Total Consideration $ 10,463,310 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. Based on the structure of the transaction, the Company does not anticipate benefiting from any tax deductions in future periods for recognized goodwill. PROFORMA INFORMATION (UNAUDITED) Consolidated supplemental Pro Forma information The following consolidated supplemental pro forma information assumes that the acquisition of DILIsym took place on September 1, 2015 for the income statements for the fiscal year ended August 31, 2017, and 2016. These amounts have been calculated after applying the Company’s accounting policies and adjusting the results of DILIsym to reflect the same expenses in the fiscal year ended August 31, 2017 that were incurred in the fiscal year ended August 31, 2016. The adjustments include costs of acquisition of $620,000, and the amortization of intangibles and other technologies acquired during the merger assuming the fair value adjustments applied on September 1, 2015, together with consequential tax effects. For the fiscal year ended August 31 (in 1000’s) (Pro forma)* (Pro forma) 2017 2016 Net Sales $ 27,184 $ 22,847 Net Income $ 6,325 $ 5,423 *Includes 3 months actual results for the period of June 1, 2017 to August 31, 2017 |
14. UNAUDTED QUARTERLY FINANCIA
14. UNAUDTED QUARTERLY FINANCIAL DATA | 12 Months Ended |
Aug. 31, 2017 | |
Quarterly Financial Information Disclosure [Abstract] | |
UNAUDTED QUARTERLY FINANCIAL DATA | The following table presents selected unaudited quarterly financial data for each full quarterly period of the years ended August 31, 2017 and 2016: (in 1,000’s except for per share data) First Second Third Fourth* Year ended August 31, 2017 Quarter Quarter Quarter Quarter Revenues $ 5,418 $ 5,705 $ 6,749 $ 6,266 Gross Profit $ 4,082 $ 4,151 $ 5,304 $ 4,293 Net Income $ 1,362 $ 1,196 $ 2,080 $ 1,151 Earnings per share, Basic $ 0.08 $ 0.07 $ 0.12 $ 0.07 Earnings per share, Diluted $ 0.08 $ 0.07 $ 0.12 $ 0.06 First Second Third Fourth Year ended August 31, 2016 Quarter Quarter Quarter Quarter Revenues $ 4,839 $ 5.164 $ 6,012 $ 3,958 Gross Profit $ 3,755 $ 3,900 $ 4,817 $ 2,898 Net Income $ 1,106 $ 1,145 $ 1,909 $ 789 Earnings per share, Basic $ 0.07 $ 0.07 $ 0.11 $ 0.07 Earnings per share, Diluted $ 0.06 $ 0.07 $ 0.11 $ 0.06 *On June 1, 2017 the Company acquired DILIsym Services Inc., fourth quarter revenues include their results of operations and certain expenses of acquisition. |
15. SUBSEQUENT EVENTS
15. SUBSEQUENT EVENTS | 12 Months Ended |
Aug. 31, 2017 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | Dividend Declared On November 1, 2017, our Board of Directors declared a quarterly cash dividend of $0.06 per share to our shareholders. The dividend will be distributed on Monday, November 20, 2017, for shareholders of record as of Monday, November 13, 2017. |
2. SUMMARY OF SIGNIFICANT ACC22
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Aug. 31, 2017 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of Simulations Plus, Inc. and, as of September 2, 2014, its wholly owned subsidiary, Cognigen Corporation, and as of June 1, 2017 the accounts of DILIsym Services, Inc. All significant intercompany accounts and transactions are eliminated in consolidation. |
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. 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 the FASB Accounting Standards Codification (“ASC”) 985-605, “Software – Revenue Recognition”. Software product 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 our 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. Certain of the Company's software products are housed and supported on the Company's computer networks. Software revenues for those products are included in income over the life of the contract. We recognize revenue on sales of our DILIsym Subsidiary in accordance with ASC 605-25, “Revenue Recognition, Multiple-Element Arrangements” We recognize revenue from collaboration research, revenue from grants and consortium memberships 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, 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” 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. Amortization of software development costs amounted to $1,096,967, $981,066, and $1,023,139 for the years ended August 31, 2017, 2016, and 2015, 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, or fair market value for property and equipment acquired in business combinations, less accumulated depreciation and amortization. Depreciation and amortization are provided using the straight-line method over the estimated useful lives as follows: 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. |
Intangible Assets and Goodwill | Intangible Assets and Goodwill The Company performs valuations of assets acquired and liabilities assumed on each acquisition accounted for as a business combination and recognizes the assets acquired and liabilities assumed at their acquisition date fair value. Acquired intangible assets include customer relationships, software, trade name, and non-compete agreements. The Company determines the appropriate useful life by performing an analysis of expected cash flows based on historical experience of the acquired businesses. Intangible assets are amortized over their estimated useful lives using the straight-line method, which approximates the pattern in which the majority of the economic benefits are expected to be consumed. Goodwill represents the excess of the cost of an acquired entity over the fair value of the acquired net assets. Goodwill is not amortized, instead it is tested for impairment annually or when events or circumstances change that would indicate that goodwill might be impaired. Events or circumstances that could trigger an impairment review include, but are not limited to, a significant adverse change in legal factors or in the business climate, an adverse action or assessment by a regulator, unanticipated competition, a loss of key personnel, significant changes in the manner of the Company's use of the acquired assets or the strategy for the Company's overall business, significant negative industry or economic trends or significant under-performance relative to expected historical or projected future results of operations. Goodwill is tested for impairment at the reporting unit level, which is one level below or the same as an operating segment. As of August 31, 2017, the Company determined that it has three reporting units, Simulations Plus, Cognigen Corporation and DILIsym Services, Inc. When testing goodwill for impairment, the Company first performs a qualitative assessment to determine whether it is necessary to perform step one of a two-step annual goodwill impairment test for each reporting unit. The Company is required to perform step one only if it concludes that it is more likely than not that a reporting unit's fair value is less than its carrying value. Should this be the case, the first step of the two-step process is to identify whether a potential impairment exists by comparing the estimated fair values of the Company's reporting units with their respective book values, including goodwill. If the estimated fair value of the reporting unit exceeds book value, goodwill is considered not to be impaired, and no additional steps are necessary. If, however, the fair value of the reporting unit is less than book value, then the second step is performed to determine if goodwill is impaired and to measure the amount of impairment loss, if any. The amount of the impairment loss is the excess of the carrying amount of the goodwill over its implied fair value. The estimate of implied fair value of goodwill is primarily based on an estimate of the discounted cash flows expected to result from that reporting unit, but may require valuations of certain internally generated and unrecognized intangible assets such as the Company's software, technology, patents and trademarks. If the carrying amount of goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to the excess. As of August 31, 2017, the entire balance of goodwill was attributed to two of the Company's reporting units, Cognigen Corporation and DILIsym Services. Intangible assets subject to amortization are reviewed for impairment whenever events or circumstances indicate that the carrying amount of these assets may not be recoverable. The Company has not recognized any impairment charges during the periods ended August 31, 2017, 2016 and 2015. Reconciliation of Goodwill for the period ended August 31, 2017: Cognigen DILIsym Total Balance, August 31, 2014 – – – Addition 4,789,248 – 4,789,248 Impairments – – – Balance, August 31, 2015 4,789,248 – 4,789,248 Addition – – – Impairments – – – Balance, August 31, 2016 4,789,248 – 4,789,248 Addition – 5,597,950 5,597,950 Impairments – – – Balance, August 31, 2017 4,789,248 5,597,950 10,387,198 |
Other Intangible Assets | Other Intangible Assets The following table summarizes other intangible assets as of August 31, 2017: Amortization Period Acquisition Value Accumulated Amortization Net book value Customer relationships-Cognigen Straight line 8 years $ 1,100,000 $ 412,500 $ 687,500 Trade Name-Cognigen None 500,000 0 500,000 Covenants not to compete-Cognigen Straight line 5 years 50,000 30,000 20,000 Covenants not to compete-DILIsym Straight line 4 years 80,000 5,000 75,000 Trade Name-DILIsym None 860,000 0 850,000 Customer relationships-DILIsym Straight line 8 years 1,900,000 47,500 1,852,000 $ 4,490,000 $ 495,000 $ 3,995,000 Amortization expense for the year ended August 31, 2017, 2016 and 2015 was $200,000, $147,500, and $147,500. Future amortization for the next five years is as follows: Year ending August 31, Amount 2018 405,000 2019 405,000 2020 395,000 2021 390,000 2022 375,000 |
Business Acquisitions | Business Acquisitions The Company accounted for the acquisition of Cognigen and DILIsym Services, Inc., using the purchase method of accounting where the assets acquired and liabilities assumed are recognized based on their respective estimated fair values. The excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. Determining the fair value of certain acquired assets and liabilities is subjective in nature and often involves the use of significant estimates and assumptions, including, but not limited to, the selection of appropriate valuation methodology, projected revenue, expenses and cash flows, weighted average cost of capital, discount rates, estimates of advertiser and publisher turnover rates and estimates of terminal values. Business acquisitions are included in the Company's consolidated financial statements as of the date of the acquisition. |
Fair Value of Financial Instruments | 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. The following table summarizes fair value measurements at August 31, 2017 and August 31, 2016 for assets and liabilities measured at fair value on a recurring basis: August 31, 2017: Level 1 Level 2 Level 3 Total Cash and cash equivalents $ 6,215,718 $ – $ – $ 6,215,718 Acquisition-related contingent consideration obligations $ – $ – $ 4,738,188 $ 4,738,188 August 31, 2016: Level 1 Level 2 Level 3 Total Cash and cash equivalents $ 8,030,284 $ – $ – $ 8,030,284 As of August 31, 2017, the Company has a liability for contingent consideration related to its acquisition of the DILIsym Services, Inc. The fair value measurement of the contingent consideration obligations is determined using Level 3 inputs. The fair value of contingent consideration obligations is based on a discounted cash flow model using a probability-weighted income approach. These fair value measurements represent Level 3 measurements as they are based on significant inputs not observable in the market. Significant judgment is employed in determining the appropriateness of these assumptions as of the acquisition date and for each subsequent period. Accordingly, changes in assumptions could have a material impact on the amount of contingent consideration expense the Company records in any given period. Changes in the value of the contingent consideration obligations are recorded in the Company’s Consolidated Statement of Operations. The following is a reconciliation of contingent consideration value. Value at August 31, 2016 $ 0 Purchase price contingent consideration 4,700,000 Contingent consideration payments – Change in value of contingent consideration 38,188 Value at August 31, 2017 $ 4,738,188 |
Advertising | Advertising The Company expenses advertising costs as incurred. Advertising costs for the years ended August 31, 2017, 2016 and 2015 were approximately $58,445, $131,783 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” 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, 2017, 2016 and 2015 was $7,500. Accumulated amortization as of August 31, 2017 and 2016 was $41,250 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 for the year ended August 31, 2017, 2016 and 2015 was $600,000. Accumulated amortization as of August 31, 2017 and 2016 was $1,975,000 and $1,375,000, respectively. (See Note 5). On June 1, 2017, as part of the acquisition of DILIsym Services, Inc. the Company acquired certain developed technologies associated with the drug induced liver disease (DILI). These technologies were valued at $2,850,000 and are being amortized over 9 years under the straight-line method. Amortization expense for the fiscal year ended August 31, 2017 was $79,176 and is included in cost of revenues. Total amortization as of August 31, 2017 was $79,176. Total amortization expense for intellectual property agreements for the years ended August 31, 2017, 2016 and 2015 was $686,667, $607,500, and $607,500. Accumulated amortization as of August 31, 2017 and 2016 was $2,095,417 and $1,408,750, respectively. Future amortization for the next five years is as follows: Years ending August 31, TSRL Enslein DILI-Acquired Developed Technologies Total 2018 $ 600,000 $ 7,500 $ 316,667 $ 924,167 2019 $ 600,000 $ 7,500 $ 316,667 $ 924,167 2020 $ 600,000 $ 7,500 $ 316,667 $ 924,167 2021 $ 600,000 $ 7,500 $ 316,667 $ 924,167 2022 $ 600,000 $ 3,750 $ 316,667 $ 920,417 |
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, 2017, 2016 and 2015 were as follows: 2017 2016 2015 Numerator Net income attributable to common shareholders $ 5,787,897 $ 4,950,136 $ 3,842,961 Denominator Weighted-average number of common shares outstanding during the year 17,239,490 17,028,566 16,864,670 Dilutive effect of stock options 276,427 180,940 167,488 Common stock and common stock equivalents used for diluted earnings per share 17,515,917 17,209,506 17,032,158 |
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” |
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 “Property and Equipment” |
Recently Issued Accounting Standards | Recently Issued Accounting Standards In May 2014, the Franchise Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers In November 2015, the FASB issued ASU No 2015-17, Income Taxes (Topic 740) 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 In April 2016, the FASB issued AS 2016-10, Revenue from Contracts with Customers (Topic 606), which amends certain aspects of the Board's new revenue standard, ASU 2014-09, Revenue from Contracts with Customers. The standard should be adopted concurrently with adoption of ASU 2014-09 which is effective for annual and interim periods beginning after December 15, 2017. 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 ACC23
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Aug. 31, 2017 | |
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 |
Reconciliation of Goodwill | Cognigen DILIsym Total Balance, August 31, 2014 – – – Addition 4,789,248 – 4,789,248 Impairments – – – Balance, August 31, 2015 4,789,248 – 4,789,248 Addition – – – Impairments – – – Balance, August 31, 2016 4,789,248 – 4,789,248 Addition – 5,597,950 5,597,950 Impairments – – – Balance, August 31, 2017 4,789,248 5,597,950 10,387,198 |
Schedule of intangible assets | Amortization Period Acquisition Value Accumulated Amortization Net book value Customer relationships-Cognigen Straight line 8 years $ 1,100,000 $ 412,500 $ 687,500 Trade Name-Cognigen None 500,000 0 500,000 Covenants not to compete-Cognigen Straight line 5 years 50,000 30,000 20,000 Covenants not to compete-DILIsym Straight line 4 years 80,000 5,000 75,000 Trade Name-DILIsym None 860,000 0 850,000 Customer relationships-DILIsym Straight line 8 years 1,900,000 47,500 1,852,000 $ 4,490,000 $ 495,000 $ 3,995,000 |
Summarizes fair value measurements | August 31, 2017: Level 1 Level 2 Level 3 Total Cash and cash equivalents $ 6,215,718 $ – $ – $ 6,215,718 Acquisition-related contingent consideration obligations $ – $ – $ 4,738,188 $ 4,738,188 August 31, 2016: Level 1 Level 2 Level 3 Total Cash and cash equivalents $ 8,030,284 $ – $ – $ 8,030,284 |
Reconciliation of contingent consideration value | Value at August 31, 2016 $ 0 Purchase price contingent consideration 4,700,000 Contingent consideration payments – Change in value of contingent consideration 38,188 Value at August 31, 2017 $ 4,738,188 |
Schedule of future amortization | Years ending August 31, TSRL Enslein DILI-Acquired Developed Technologies Total 2018 $ 600,000 $ 7,500 $ 316,667 $ 924,167 2019 $ 600,000 $ 7,500 $ 316,667 $ 924,167 2020 $ 600,000 $ 7,500 $ 316,667 $ 924,167 2021 $ 600,000 $ 7,500 $ 316,667 $ 924,167 2022 $ 600,000 $ 3,750 $ 316,667 $ 920,417 |
Earnings per share | 2017 2016 2015 Numerator Net income attributable to common shareholders $ 5,787,897 $ 4,950,136 $ 3,842,961 Denominator Weighted-average number of common shares outstanding during the year 17,239,490 17,028,566 16,864,670 Dilutive effect of stock options 276,427 180,940 167,488 Common stock and common stock equivalents used for diluted earnings per share 17,515,917 17,209,506 17,032,158 |
Other Intangible Assets | |
Schedule of intangible assets | Year ending August 31, Amount 2018 405,000 2019 405,000 2020 395,000 2021 390,000 2022 375,000 |
Intellectual Property [Member] | |
Schedule of intangible assets | Years ending August 31, TSRL Enslein DILI-Acquired Developed Technologies Total 2018 $ 600,000 $ 7,500 $ 316,667 $ 924,167 2019 $ 600,000 $ 7,500 $ 316,667 $ 924,167 2020 $ 600,000 $ 7,500 $ 316,667 $ 924,167 2021 $ 600,000 $ 7,500 $ 316,667 $ 924,167 2022 $ 600,000 $ 3,750 $ 316,667 $ 920,417 |
3. CONTRACTS IN PROGRESS (Table
3. CONTRACTS IN PROGRESS (Tables) | 12 Months Ended |
Aug. 31, 2017 | |
Contractors [Abstract] | |
Cost, estimated earnings and billings on uncompleted contracts | 2017 2016 Revenues earned to date on uncompleted contracts $ 7,162,360 $ 2,557,507 Billings to date on uncompleted contracts (5,898,236 ) (2,093,476 ) $ 1,264,124 $ 464,031 |
Schedule of contracts in progress | 2017 2016 Revenues in excess of billings $ 1,481,082 $ 694,131 Billings in excess of revenues (216,958 ) (230,100 ) $ 1,264,124 $ 464,031 |
4. PROPERTY AND EQUIPMENT (Tabl
4. PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended |
Aug. 31, 2017 | |
Property, Plant and Equipment [Abstract] | |
Property and equipment | 2017 2016 Equipment $ 618,915 $ 487,458 Computer equipment 141,615 125,385 Furniture and fixtures 239,105 200,595 Leasehold improvements 103,599 103,599 1,103,235 917,037 Less accumulated depreciation and amortization 812,100 660,656 Total $ 291,135 $ 256,381 |
5. CONTRACTS PAYABLE (Tables)
5. CONTRACTS PAYABLE (Tables) | 12 Months Ended |
Aug. 31, 2017 | |
Other Liabilities Disclosure [Abstract] | |
Schedule of Liabilities | Working Capital Liability $ 247,328 Holdback Liability 1,000,000 Earn-out Liability 4,738,188 Sub Total $ 5,985,516 Less: Current Portion 247,328 Long-Term $ 5,738,188 |
6. COMMITMENTS AND CONTINGENC27
6. COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Aug. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Future minimum lease payments | Years Ending August 31, 2018 $ 531,379 2019 380,407 2020 350,605 2021 131,130 $ 1,393,521 |
7. SHAREHOLDERS' EQUITY (Tables
7. SHAREHOLDERS' EQUITY (Tables) | 12 Months Ended |
Aug. 31, 2017 | |
Schedule of dividends declared and paid | FY2015 Record Date Distribution Date Number of Shares Outstanding on Record Date Dividend per Share Total Amount 11/7/2014 11/14/2014 16,841,114 $ 0.05 $ 842,056 1/26/2015 2/02/2015 16,852,117 $ 0.05 $ 842,606 5/11/2015 5/18/2015 16,875,117 $ 0.05 $ 843,754 7/23/2015 7/30/2015 16,943,001 $ 0.05 $ 847,150 Total $ 3,375,566 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 2/05/2016 17,018,001 $ 0.05 $ 850,900 5/02/2016 5/09/2016 17,029,501 $ 0.05 $ 851,475 8/11/2016 8/18/2016 17,221,978 $ 0.05 $ 861,099 Total $ 3,413,274 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 2/06/2017 17,233,758 $ 0.05 $ 861,688 5/08/2017 5/15/2017 17,240,626 $ 0.05 $ 862,031 7/28/2017 8/04/2017 17,268,920 $ 0.05 $ 863,446 Total $ 3,448,489 |
Intrinsic Value of options outstanding and options exercisable | Intrinsic Value of Options Outstanding Intrinsic Value of Options Exercisable Intrinsic Value of Options Exercised FY15 $ 1,182,797 $ 1,109,489 $ 396,485 FY16 $ 1,500,659 $ 1,025,718 $ 853,423 FY17 $ 7,479,068 $ 3,232,356 $ 479,713 |
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 42,000 1.6 years $ 1.00 42,000 1.6 years $1.00 $3.01 $ 4.50 14,000 1.0 years $ 3.22 14,000 1.1 years $3.22 $4.51 $ 6.00 70,000 1.4 years $ 5.52 70,000 1.4 years $5.52 $6.01 $ 7.50 327,510 7.0 years $ 6.86 194,905 7.0 years $6.86 $7.51 $ 9.00 10,000 9.0 years $ 8.62 4,000 9.0 years $9.72 $9.01 $ 10.50 772,700 9.0 years $ 9.88 76,580 8.5 years $0.00 $13.01 $ 14.50 12,916 10.0 years $14.44 0 1,249,126 7.74 years $8.51 401,485 5.6 years $6.45 |
Incentive Stock Options (ISOs) [Member] | |
Schedule of stock option activity | Transactions in FY15 Number of Weighted-Average Weighted-Average Outstanding, August 31, 2014 798,500 $ 4.59 6.27 Granted 37,000 $ 6.99 Exercised (95,384 ) $ 2.49 Canceled/Forfeited (119,116 ) $ 4.86 Outstanding, August 31, 2015 621,000 $ 5.01 6.01 Vested and Exercisable, August 31, 2015 265,700 $ 2.81 4.40 Vested and Expected to Vest, August 31, 2015 576,952 $ 4.87 6.32 Transactions in FY16 Number of Weighted-Average Weighted-Average Outstanding, August 31, 2015 621,000 $ 5.01 6.01 Granted 412,100 $ 9.71 Exercised (100,863 ) $ 1.45 Canceled/Forfeited (27,487 ) $ 7.66 Expired (10,000 ) $ 1.13 Outstanding, August 31, 2016 894,750 $ 7.54 7.72 Vested and Exercisable, August 31, 2016 253,380 $ 4.85 5.26 Vested and Expected to Vest, August 31, 2016 812,458 $ 7.40 7.58 Transactions in FY17 (ISO’s) Number of Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Life Outstanding, August 31, 2016 894,750 $ 7.54 7.72 Granted 409,582 $ 10.10 Exercised (40,142 ) $ 3.01 Cancelled/Forfeited (70,148 ) $ 8.92 Outstanding, August 31, 2017 1,194,042 $ 8.49 7.70 Exercisable, August 31, 2017 380,360 $ 6.45 5.49 Vested and Expected to Vest, August 31, 2017 1,091,981 $ 8.38 7.59 |
Non-Qualified Stock Options (NQSOs) [Member] | |
Schedule of stock option activity | Transactions in FY15 Number of Weighted-Average Weighted-Average Outstanding, August 31, 2014 56,600 $ 4.82 7.96 Granted 13,750 $ 6.75 Exercised (6,503 ) $ 3.28 Cancelled/Forfeited (14,497 ) $ 4.97 Outstanding, August 31, 2015 49,350 $ 5.52 7.75 Exercisable, August 31, 2015 27,200 $ 4.70 6.31 Transactions in FY16 Number of Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Life Outstanding, August 31, 2015 49,350 $ 5.52 7.75 Granted 15,000 $ 8.62 Exercised (11,600 ) $ 3.33 Cancelled/Forfeited (0 ) $ – Outstanding, August 31, 2016 52,750 $ 6.88 8.07 Exercisable, August 31, 2016 26,500 $ 5.95 6.70 Transactions in FY17 (NQSOs) Number of Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Life Outstanding, August 31, 2016 52,750 $ 6.88 8.07 Granted 25,334 $ 11.44 Exercised (9,500 ) $ 5.88 Cancelled/Forfeited (13,500 ) $ 7.43 Outstanding, August 31, 2017 55,084 $ 9.02 8.59 Exercisable, August 31, 2017 21,125 $ 6.51 7.29 |
8. INCOME TAXES (Tables)
8. INCOME TAXES (Tables) | 12 Months Ended |
Aug. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Components of the income tax provision | 2017 2016 2015 Current Federal $ 2,385,660 $ 2,118,229 $ 1,482,798 State 217,281 171,840 236,152 Foreign 28,103 19,428 75,099 2,631,044 2,309,497 1,794,049 Deferred Federal (612,629 ) 22,936 (15,036 ) State 434,255 (46,177 ) 70,955 (178,374 ) (23,241 ) 55,919 Total $ 2,452,670 $ 2,286,256 $ 1,849,968 |
Effective income tax rate | 2017 2016 2015 Income tax computed at federal statutory tax rate 34.0% 34.0% 34.0% State taxes, net of federal benefit 3.5 3.4 5.0 Meals & Entertainment 0.0 0.1 0.1 Stock Based Compensation 0.0 1.3 0.3 Other permanent differences (0.5 ) (0.6 ) (0.0 ) Research and development credit (3.6 ) (2.7 ) (4.5 ) Domestic Production Activities (2.3 ) (3.6 ) (2.9 ) Change in prior year estimated taxes (1.3 ) (0.3 ) 0.5 Total 29.8% 31.6% 32.5% |
Components of the Company deferred tax assets and liabilities | 2017 2016 Deferred tax assets Accrued payroll and other expenses $ 254,897 $ 108,769 Deferred revenue 62,617 71,009 Capitalized merger costs 540,312 292,693 Intellectual property 18,775 21,205 Research and development credit – 54,427 State taxes 91,513 58,426 State Tax Deferred 293,879 160,391 Total deferred tax assets 1,261,993 766,920 Less: Valuation allowance – – 1,261,993 766,920 Deferred tax liabilities Property and equipment (95,071 ) (93,900 ) State Tax Deferred (16,763 ) (9,491 ) Intellectual Property (4,343,311 ) (2,004,451 ) Capitalized computer software development costs (1,733,808 ) (1,615,284 ) Total deferred tax liabilities (6,188,953 ) (3,723,126 ) Net deferred tax liabilities $ (4,926,960 ) $ (2,956,206 ) |
10. SEGMENT AND GEOGRAPHIC RE30
10. SEGMENT AND GEOGRAPHIC REPORTING (Tables) | 12 Months Ended |
Aug. 31, 2017 | |
Segments, Geographical Areas [Abstract] | |
Schedule of consolidated results from reportable segments | Year ended August 31, 2017 Simulations Plus, Inc. Cognigen Corporation DILIsym Eliminations Total Net Revenues $ 15,600 $ 7,300 $ 1,238 0 $ 24,138 Income from operations before income taxes $ 6,194 $ 1,750 $ 320 0 $ 8,264 Total assets $ 33,056 $ 9,363 $ 13,794 $ (17,702 ) $ 38,512 Goodwill $ 0 $ 4,789 $ 5,598 $ 10,387 Capital expenditures $ 48 $ 96 $ 32 $ 176 Capitalized software costs $ 1,133 $ 219 $ 24 $ 1,376 Depreciation and Amortization $ 1618 $ 374 $ 135 $ 2,127 Year ended August 31, 2016 Simulations Plus, Inc. Cognigen Corporation Eliminations Total Net Revenues $ 14,417 5,554 $ 19,972 Income from operations before income taxes $ 6,330 $ 901 $ 7,231 Total assets $ 26,306 $ 8,975 $ (7,238 ) $ 28,043 Goodwill $ 0 $ 4,789 $ 4,789 Capital expenditures $ 6 $ 32 $ 38 Capitalized software costs $ 1,017 $ 178 $ 1,195 Depreciation and Amortization $ 1,556 $ 375 $ 1,931 Year ended August 31, 2015 Simulations Plus, Inc. Cognigen Corporation Eliminations Total Net Revenues $ 13,086 $ 5,228 $ 18,314 Income from operations before income taxes $ 4,816 $ 1,041 $ 5,857 Total assets $ 25,549 $ 9,033 $ (7,238 ) $ 27,344 Goodwill $ 0 $ 4,789 $ 4,789 Capital expenditures $ 23 $ 14 $ 37 Capitalized software costs $ 1,019 $ 151 $ 1,170 Depreciation and Amortization $ 1,633 $ 357 $ 1,990 |
Schedule of geographical revenues | Year ended August 31, 2017 North America Europe Asia South America Total Simulations Plus, Inc. $ 7,846 $ 3,826 $ 3,926 $ 1 $ 15,600 Cognigen Corporation 7,300 – – – 7,300 DILIsym Services, Inc* 851 151 236 1,238 Total $ 15,997 $ 3,977 $ 4,162 $ 1 $ 24,138 *DILIsym was acquired on June 1, 2017. Year ended August 31, 2016 North America Europe Asia South America Total Simulations Plus, Inc. $ 6,830 $ 4,022 $ 3,564 $ 2 $ 14,418 Cognigen Corporation 5,554 – – – 5,554 Total $ 12,384 $ 4,022 $ 3,564 $ 2 $ 19,972 Year ended August 31, 2015 North America Europe Asia South America Total Simulations Plus, Inc. $ 6,261 $ 3,629 $ 3,153 $ 43 $ 13,086 Cognigen Corporation 5,228 – – – 5,228 Total $ 11,489 $ 3,629 $ 3,153 $ 43 $ 18,314 |
13. ACQUISITION_MERGER WITH S31
13. ACQUISITION/MERGER WITH SUBSIDIARIES (Tables) | 12 Months Ended |
Aug. 31, 2017 | |
Schedule of statement of income | For the fiscal year ended August 31 (in 1000’s) (Pro forma)* (Pro forma) 2017 2016 Net Sales $ 27,184 $ 22,847 Net Income $ 6,325 $ 5,423 |
Cognigen | |
Allocation of purchase price | Assets acquired, including accounts receivable of $934,000 and estimated Contracts receivable of $398,000 $ 1,524,389 Fixed assets acquired 458,351 Estimated value of software acquired 200,000 Estimated value of Intangibles acquired (Customer Lists, trade name etc.) 1,600,000 Working Capital Adjustment (26,707 ) Current Liabilities assumed (644,499 ) Goodwill 4,789,248 Estimated Deferred income taxes (662,500 ) Total Consideration $ 7,238,282 |
DILIsym | |
Allocation of purchase price | Assets acquired, including accounts receivable of $255,000 and estimated Contracts receivable of $153,000 $ 2,283,110 Developed Technologies Acquired 2,850,000 Estimated value of Intangibles acquired (Customer Lists, trade name etc.) 2,840,000 Current Liabilities assumed (911,049 ) Goodwill 5,597,950 Estimated Deferred income taxes (2,212,160 ) Total Consideration $ 10,463,310 |
14. UNAUDTED QUARTERLY FINANC32
14. UNAUDTED QUARTERLY FINANCIAL DATA (Tables) | 12 Months Ended |
Aug. 31, 2017 | |
Quarterly Financial Information Disclosure [Abstract] | |
Quarterly Financial Information | First Second Third Fourth* Year ended August 31, 2017 Quarter Quarter Quarter Quarter Revenues $ 5,418 $ 5,705 $ 6,749 $ 6,266 Gross Profit $ 4,082 $ 4,151 $ 5,304 $ 4,293 Net Income $ 1,362 $ 1,196 $ 2,080 $ 1,151 Earnings per share, Basic $ 0.08 $ 0.07 $ 0.12 $ 0.07 Earnings per share, Diluted $ 0.08 $ 0.07 $ 0.12 $ 0.06 First Second Third Fourth Year ended August 31, 2016 Quarter Quarter Quarter Quarter Revenues $ 4,839 $ 5.164 $ 6,012 $ 3,958 Gross Profit $ 3,755 $ 3,900 $ 4,817 $ 2,898 Net Income $ 1,106 $ 1,145 $ 1,909 $ 789 Earnings per share, Basic $ 0.07 $ 0.07 $ 0.11 $ 0.07 Earnings per share, Diluted $ 0.06 $ 0.07 $ 0.11 $ 0.06 |
2. SUMMARY OF SIGNIFICANT ACC33
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) | 12 Months Ended |
Aug. 31, 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. SUMMARY OF SIGNIFICANT ACC34
2. SUMMARY OF SIGNIFICANT ACCOUNT POLICIES (Details Goodwill) - USD ($) | 12 Months Ended | ||
Aug. 31, 2017 | Aug. 31, 2016 | Aug. 31, 2015 | |
Goodwill, beginning balance | $ 4,789,248 | $ 4,789,248 | $ 0 |
Addition | 5,597,950 | 0 | 4,789,248 |
Impairments | 0 | 0 | 0 |
Goodwill, ending balance | 10,387,198 | 4,789,248 | 4,789,248 |
Cognigen | |||
Goodwill, beginning balance | 4,789,248 | 4,789,248 | 0 |
Addition | 0 | 0 | 4,789,248 |
Impairments | 0 | 0 | 0 |
Goodwill, ending balance | 4,789,248 | 4,789,248 | 4,789,248 |
DILIsym | |||
Goodwill, beginning balance | 0 | 0 | 0 |
Addition | 5,597,950 | 0 | 0 |
Impairments | 0 | 0 | 0 |
Goodwill, ending balance | $ 5,597,950 | $ 0 | $ 0 |
2. SUMMARY OF SIGNIFICANT ACC35
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Other Intangible Assets) - USD ($) | 12 Months Ended | |
Aug. 31, 2017 | Aug. 31, 2016 | |
Acquisition value | $ 4,490,000 | |
Accumulated amortization | 495,000 | $ 801,250 |
Net book value | 3,995,000 | $ 1,355,000 |
Customer Relationships [Member] | ||
Accumulated amortization | $ 412,500 | |
Customer Relationships [Member] | Cognigen | ||
Amortization period | Straight line 8 years | |
Acquisition value | $ 1,100,000 | |
Accumulated amortization | 412,500 | |
Net book value | $ 687,500 | |
Customer Relationships [Member] | DILIsym | ||
Amortization period | Straight line 8 years | |
Acquisition value | $ 1,900,000 | |
Accumulated amortization | 47,500 | |
Net book value | 1,852,000 | |
Trade name | ||
Accumulated amortization | $ 0 | |
Trade name | Cognigen | ||
Amortization period | None | |
Acquisition value | $ 500,000 | |
Accumulated amortization | 0 | |
Net book value | $ 500,000 | |
Trade name | DILIsym | ||
Amortization period | None | |
Acquisition value | $ 860,000 | |
Accumulated amortization | 0 | |
Net book value | 850,000 | |
Covenants not to compete | ||
Accumulated amortization | $ 20,000 | |
Covenants not to compete | Cognigen | ||
Amortization period | Straight line 5 years | |
Acquisition value | $ 50,000 | |
Accumulated amortization | 30,000 | |
Net book value | $ 20,000 | |
Covenants not to compete | DILIsym | ||
Amortization period | Straight line 4 years | |
Acquisition value | $ 80,000 | |
Accumulated amortization | 5,000 | |
Net book value | $ 75,000 |
2. SUMMARY OF SIGNIFICANT ACC36
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details - Fair value measurements) - USD ($) | Aug. 31, 2017 | Aug. 31, 2016 | Aug. 31, 2015 | Aug. 31, 2014 |
Cash and cash equivalents | $ 6,215,718 | $ 8,030,284 | $ 8,551,275 | $ 8,614,929 |
Acquisition-related contingent consideration obligations | 4,738,188 | 0 | ||
Fair Value, Inputs, Level 1 [Member] | ||||
Cash and cash equivalents | 6,215,718 | 8,030,284 | ||
Acquisition-related contingent consideration obligations | 0 | |||
Fair Value, Inputs, Level 2 [Member] | ||||
Cash and cash equivalents | 0 | 0 | ||
Acquisition-related contingent consideration obligations | 0 | |||
Fair Value, Inputs, Level 3 [Member] | ||||
Cash and cash equivalents | 0 | $ 0 | ||
Acquisition-related contingent consideration obligations | $ 4,738,188 |
2. SUMMARY OF SIGNIFICANT ACC37
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details - Reconciliation of contingent consideration) - USD ($) | 12 Months Ended | ||
Aug. 31, 2017 | Aug. 31, 2016 | Aug. 31, 2015 | |
Accounting Policies [Abstract] | |||
Value at beginning | $ 0 | ||
Purchase price contingent consideration | 4,700,000 | ||
Contingent consideration payments | 0 | ||
Change in value of contingent consideration | 38,188 | $ 0 | $ 0 |
Value at end | $ 4,738,188 | $ 0 |
2. SUMMARY OF SIGNIFICANT ACC38
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details - Amortization schedule) | Aug. 31, 2017USD ($) |
Intellectual Property [Member] | |
Future amortization 2018 | $ 924,167 |
Future amortization 2019 | 924,167 |
Future amortization 2020 | 924,167 |
Future amortization 2021 | 924,167 |
Future amortization 2022 | 924,167 |
Intellectual Property [Member] | TSRL [Member] | |
Future amortization 2018 | 600,000 |
Future amortization 2019 | 600,000 |
Future amortization 2020 | 600,000 |
Future amortization 2021 | 600,000 |
Future amortization 2022 | 600,000 |
Intellectual Property [Member] | Enslien Research | |
Future amortization 2018 | 7,500 |
Future amortization 2019 | 7,500 |
Future amortization 2020 | 7,500 |
Future amortization 2021 | 7,500 |
Future amortization 2022 | 3,750 |
Intellectual Property [Member] | DILI [Member] | |
Future amortization 2018 | 316,667 |
Future amortization 2019 | 316,667 |
Future amortization 2020 | 316,667 |
Future amortization 2021 | 316,667 |
Future amortization 2022 | 316,667 |
Other Intangible Assets | |
Future amortization 2018 | 405,000 |
Future amortization 2019 | 405,000 |
Future amortization 2020 | 395,000 |
Future amortization 2021 | 390,000 |
Future amortization 2022 | $ 375,000 |
2. SUMMARY OF SIGNIFICANT ACC39
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details - Earnings per share) - USD ($) | 3 Months Ended | 12 Months Ended | |||||||||
Aug. 31, 2017 | May 31, 2017 | Feb. 28, 2017 | Nov. 30, 2016 | Aug. 31, 2016 | May 31, 2016 | Feb. 29, 2016 | Nov. 30, 2015 | Aug. 31, 2017 | Aug. 31, 2016 | Aug. 31, 2015 | |
Numerator | |||||||||||
Net income attributable to common shareholders | $ 1,151,000 | $ 2,080,000 | $ 1,196,000 | $ 1,362,000 | $ 789,000 | $ 1,909,000 | $ 1,145,000 | $ 1,106,000 | $ 5,787,597 | $ 4,950,136 | $ 3,842,961 |
Denominator | |||||||||||
Weighted-average number of common shares outstanding during the period | 17,239,490 | 17,028,566 | 16,864,670 | ||||||||
Dilutive effect of stock options | 276,427 | 180,940 | 167,488 | ||||||||
Common stock and common stock equivalents used for diluted earnings per share | 17,515,917 | 17,209,506 | 17,032,158 |
2. SUMMARY OF SIGNIFICANT ACC40
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 12 Months Ended | ||
Aug. 31, 2017 | Aug. 31, 2016 | Aug. 31, 2015 | |
Amortization of software development | $ 1,096,967 | $ 981,066 | $ 1,023,139 |
Amortization of intellectual property | 886,667 | 755,000 | 755,000 |
Advertising costs | 58,445 | 131,783 | 38,000 |
Accumulated amortization of intellectual property | 495,000 | 801,250 | |
Stock-based compensation | 585,018 | 347,077 | 295,243 |
Impairment of long-lived assets | 0 | 0 | 0 |
Other Intangible Assets | |||
Amortization of intellectual property | 200,000 | 147,500 | 147,500 |
Accumulated amortization of intellectual property | 495,000 | 295,000 | |
Intellectual Property [Member] | |||
Amortization of intellectual property | 686,667 | 607,500 | 607,500 |
Accumulated amortization of intellectual property | 2,095,417 | 1,408,750 | |
Covenants not to compete | |||
Accumulated amortization of intellectual property | 20,000 | ||
Trade name | |||
Accumulated amortization of intellectual property | 0 | ||
Customer Relationships [Member] | |||
Accumulated amortization of intellectual property | 412,500 | ||
Enslien Research | Intellectual Property [Member] | |||
Amortization of intellectual property | 7,500 | 7,500 | 7,500 |
Accumulated amortization of intellectual property | 41,250 | 33,750 | |
TSRL [Member] | Intellectual Property [Member] | |||
Amortization of intellectual property | 600,000 | 600,000 | $ 600,000 |
Accumulated amortization of intellectual property | 1,975,000 | $ 1,375,000 | |
DILIsym | Intellectual Property [Member] | |||
Amortization of intellectual property | 79,176 | ||
Accumulated amortization of intellectual property | $ 79,176 |
3. CONTRACTS IN PROGRESS (Detai
3. CONTRACTS IN PROGRESS (Details - Billings to date) - USD ($) | Aug. 31, 2017 | Aug. 31, 2016 |
Contractors [Abstract] | ||
Revenues earned to date on uncompleted contracts | $ 7,162,360 | $ 2,557,507 |
Billings to date on uncompleted contracts | (5,898,236) | (2,093,476) |
Revenues over billings on uncompleted contracts | $ 1,264,124 | $ 464,031 |
3. CONTRACTS IN PROGRESS (Det42
3. CONTRACTS IN PROGRESS (Details - Contracts in progress) - USD ($) | Aug. 31, 2017 | Aug. 31, 2016 |
Contractors [Abstract] | ||
Revenues in excess of billings | $ 1,481,082 | $ 694,131 |
Billings in excess of revenues | (216,958) | (230,100) |
Revenues over billings on uncompleted contracts | $ 1,264,124 | $ 464,031 |
4. PROPERTY AND EQUIPMENT (Deta
4. PROPERTY AND EQUIPMENT (Details) - USD ($) | Aug. 31, 2017 | Aug. 31, 2016 |
Property and equipment, gross | $ 1,103,235 | $ 917,037 |
Less accumulated depreciation and amortization | 812,100 | 660,656 |
Net Book Value | 291,135 | 256,381 |
Equipment [Member] | ||
Property and equipment, gross | 618,915 | 487,458 |
Computer equipment [Member] | ||
Property and equipment, gross | 141,615 | 125,385 |
Furniture and fixtures [Member] | ||
Property and equipment, gross | 239,105 | 200,595 |
Leasehold improvements [Member] | ||
Property and equipment, gross | $ 103,599 | $ 103,599 |
4. PROPERTY AND EQUIPMENT (De44
4. PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 12 Months Ended | ||
Aug. 31, 2017 | Aug. 31, 2016 | Aug. 31, 2015 | |
Property, Plant and Equipment [Abstract] | |||
Depreciation | $ 151,444 | $ 196,250 | $ 211,454 |
5. CONTRACTS PAYABLE (Details)
5. CONTRACTS PAYABLE (Details) | Aug. 31, 2017USD ($) |
Other Liabilities Disclosure [Abstract] | |
Working Capital Liability | $ 247,328 |
Holdback Liability | 1,000,000 |
Earn-out Liability | 4,738,188 |
Sub Total | 5,985,516 |
Less: Current Portion | 247,328 |
Long-Term | $ 5,738,188 |
5. CONTRACT PAYABLE (Details Na
5. CONTRACT PAYABLE (Details Narrative) - USD ($) | 12 Months Ended | ||
Aug. 31, 2017 | Aug. 31, 2016 | Aug. 31, 2015 | |
Contract payable | $ 247,328 | $ 1,000,000 | |
Stock issued for acquisition, value | 36,763 | 1,134,404 | $ 3,277,170 |
TSRL [Member] | Termination and Non-Assertion Agreement | |||
Contract payable | $ 0 | 1,000,000 | |
Cognigen | |||
Stock issued for acquisition, value | $ 1,854,404 | ||
Stock issued for acquisition, shares | 170,014 | ||
Cognigen | Former shareholders of Cognigen | |||
Stock issued for acquisition, value | $ 3,277,000 | ||
Stock issued for acquisition, shares | 491,159 |
6. COMMITMENTS AND CONTINGENC47
6. COMMITMENTS AND CONTINGENCIES (Details) | Aug. 31, 2017USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2,018 | $ 531,379 |
2,019 | 380,407 |
2,020 | 350,605 |
2,021 | 131,130 |
Future minimum lease payments | $ 1,393,521 |
6. COMMITMENTS AND CONTINGENC48
6. COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | 12 Months Ended | ||
Aug. 31, 2017 | Aug. 31, 2016 | Aug. 31, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |||
Rent expense | $ 509,600 | $ 491,800 | $ 488,888 |
Royalties expense | $ 139,551 | $ 119,620 | $ 77,307 |
7. SHAREHOLDERS EQUITY (Details
7. SHAREHOLDERS EQUITY (Details - Dividends) - USD ($) | 12 Months Ended | ||
Aug. 31, 2017 | Aug. 31, 2016 | Aug. 31, 2015 | |
Total Amount | $ 3,448,489 | $ 3,413,274 | $ 3,375,566 |
FY 2017 1st Qtr [Member] | |||
Record Date | Nov. 10, 2016 | ||
Distribution Date | Nov. 17, 2016 | ||
Number of Shares Outstanding on Record Date | 17,226,478 | ||
Dividend per Share | $ 0.05 | ||
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 2017 3rd Qtr [Member] | |||
Record Date | May 8, 2017 | ||
Distribution Date | May 15, 2017 | ||
Number of Shares Outstanding on Record Date | 17,240,626 | ||
Dividend per Share | $ 0.05 | ||
Total Amount | $ 862,031 | ||
FY 2017 4th Qtr [Member] | |||
Record Date | Jul. 28, 2017 | ||
Distribution Date | Aug. 4, 2017 | ||
Number of Shares Outstanding on Record Date | 17,268,920 | ||
Dividend per Share | $ 0.05 | ||
Total Amount | $ 863,446 | ||
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 | $ 0.05 | ||
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 | $ 0.05 | ||
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 | 17,029,501 | ||
Dividend per Share | $ 0.05 | ||
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 | $ 0.05 | ||
Total Amount | $ 861,099 | ||
FY 2015 1st Qtr [Member] | |||
Record Date | Nov. 7, 2014 | ||
Distribution Date | Nov. 14, 2014 | ||
Number of Shares Outstanding on Record Date | 16,841,114 | ||
Dividend per Share | $ 0.05 | ||
Total Amount | $ 842,056 | ||
FY 2015 2nd Qtr [Member] | |||
Record Date | Jan. 26, 2015 | ||
Distribution Date | Feb. 2, 2015 | ||
Number of Shares Outstanding on Record Date | 16,852,117 | ||
Dividend per Share | $ 0.05 | ||
Total Amount | $ 842,606 | ||
FY 2015 3rd Qtr [Member] | |||
Record Date | May 11, 2015 | ||
Distribution Date | May 18, 2015 | ||
Number of Shares Outstanding on Record Date | 16,875,117 | ||
Dividend per Share | $ 0.05 | ||
Total Amount | $ 843,754 | ||
FY 2015 4th Qtr [Member] | |||
Record Date | Jul. 23, 2015 | ||
Distribution Date | Jul. 30, 2015 | ||
Number of Shares Outstanding on Record Date | 16,943,001 | ||
Dividend per Share | $ 0.05 | ||
Total Amount | $ 847,150 |
7. SHAREHOLDERS EQUITY (Detai50
7. SHAREHOLDERS EQUITY (Details - Option activity) - $ / shares | 12 Months Ended | ||
Aug. 31, 2017 | Aug. 31, 2016 | Aug. 31, 2015 | |
Number of Options | |||
Awards Outstanding, ending balance | 1,249,126 | ||
Vested and Exercisable, end of period | 401,485 | ||
Weighted-Average Exercise Price Per Share | |||
Outstanding | $ 8.51 | ||
Vested and Exercisable, end of period | $ 6.45 | ||
Incentive Stock Options (ISOs) [Member] | |||
Number of Options | |||
Awards Outstanding, beginning balance | 894,750 | 621,000 | 798,500 |
Granted | 409,582 | 412,100 | 37,000 |
Exercised | (40,142) | (100,863) | (95,384) |
Canceled/Forfeited | (70,148) | (27,487) | (119,116) |
Expired | (10,000) | 0 | |
Awards Outstanding, ending balance | 1,194,042 | 894,750 | 621,000 |
Vested and Exercisable, end of period | 380,360 | 253,380 | 265,700 |
Vested and Expected to Vest, end of period | 1,091,981 | 812,458 | 576,952 |
Weighted-Average Exercise Price Per Share | |||
Outstanding | $ 7.54 | $ 5.01 | $ 4.59 |
Granted | 10.1 | 9.71 | 6.99 |
Exercised | 3.01 | 1.45 | 2.49 |
Canceled/Forfeited | 8.92 | 7.66 | 4.86 |
Expired | 1.13 | ||
Outstanding | 8.49 | 7.54 | 5.01 |
Vested and Exercisable, end of period | 6.45 | 4.85 | 2.81 |
Vested and Expected to Vest, end of period | $ 8.38 | $ 7.40 | $ 4.87 |
Weighted-Average Remaining Contractual Life | |||
Outstanding, beginning of period | 7 years 8 months 19 days | 6 years 4 days | 6 years 3 months 7 days |
Outstanding, end of period | 7 years 8 months 12 days | 7 years 8 months 19 days | 6 years 4 days |
Vested and Exercisable | 5 years 5 months 27 days | 5 years 3 months 4 days | 4 years 4 months 24 days |
Vested and Expected to Vest | 7 years 7 months 2 days | 7 years 6 months 29 days | 6 years 3 months 26 days |
Non-Qualified Stock Options (NQSOs) [Member] | |||
Number of Options | |||
Awards Outstanding, beginning balance | 52,750 | 49,350 | 56,600 |
Granted | 25,334 | 15,000 | 13,750 |
Exercised | (9,500) | (11,600) | (6,503) |
Canceled/Forfeited | (13,500) | 0 | (14,497) |
Awards Outstanding, ending balance | 55,084 | 52,750 | 49,350 |
Vested and Exercisable, end of period | 21,125 | 26,500 | 27,200 |
Weighted-Average Exercise Price Per Share | |||
Outstanding | $ 6.88 | $ 5.52 | $ 4.82 |
Granted | 11.44 | 8.62 | 6.75 |
Exercised | 5.88 | 3.33 | 3.28 |
Canceled/Forfeited | 7.43 | 4.97 | |
Outstanding | 9.02 | 6.88 | 5.52 |
Vested and Exercisable, end of period | $ 6.51 | $ 5.95 | $ 4.70 |
Weighted-Average Remaining Contractual Life | |||
Outstanding, beginning of period | 8 years 26 days | 7 years 9 months | 7 years 11 months 15 days |
Outstanding, end of period | 8 years 7 months 2 days | 8 years 26 days | 7 years 9 months |
Vested and Exercisable | 7 years 3 months 15 days | 6 years 8 months 12 days | 6 years 3 months 22 days |
7. SHAREHOLDERS EQUITY (Detai51
7. SHAREHOLDERS EQUITY (Details - Intrinsic Value) - USD ($) | 12 Months Ended | ||
Aug. 31, 2017 | Aug. 31, 2016 | Aug. 31, 2015 | |
Equity [Abstract] | |||
Intrinsic Value of Options Outstanding | $ 7,479,068 | $ 1,500,659 | $ 1,182,797 |
Intrinsic Value of Options Exercisable | 3,232,356 | 1,025,718 | 1,109,489 |
Intrinsic Value of Options Exercised | $ 479,713 | $ 853,423 | $ 396,485 |
7. SHAREHOLDERS EQUITY (Detai52
7. SHAREHOLDERS EQUITY (Details - Options outstanding and exercisable) | 12 Months Ended |
Aug. 31, 2017$ / sharesshares | |
Awards outstanding | shares | 1,249,126 |
Awards outstanding weighted average remaining contractual life | 7 years 8 months 26 days |
Awards outstanding weighted average exercise price | $ 8.51 |
Awards exercisable | shares | 401,485 |
Awards exercisable weighted average remaining contractual life | 5 years 7 months 6 days |
Awards exercisable weighted average exercise price | $ 6.45 |
$1.00 to $1.50 [Member] | |
Exercise price low | 1 |
Exercise price high | $ 1.50 |
Awards outstanding | shares | 42,000 |
Awards outstanding weighted average remaining contractual life | 1 year 7 months 6 days |
Awards outstanding weighted average exercise price | $ 1 |
Awards exercisable | shares | 42,000 |
Awards exercisable weighted average remaining contractual life | 1 year 7 months 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 | 14,000 |
Awards outstanding weighted average remaining contractual life | 1 year |
Awards outstanding weighted average exercise price | $ 3.22 |
Awards exercisable | shares | 14,000 |
Awards exercisable weighted average remaining contractual life | 1 year 1 month 6 days |
Awards exercisable weighted average exercise price | $ 3.22 |
$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 4 months 24 days |
Awards outstanding weighted average exercise price | $ 5.52 |
Awards exercisable | shares | 70,000 |
Awards exercisable weighted average remaining contractual life | 1 year 4 months 24 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 | 327,510 |
Awards outstanding weighted average remaining contractual life | 7 years |
Awards outstanding weighted average exercise price | $ 6.86 |
Awards exercisable | shares | 194,905 |
Awards exercisable weighted average remaining contractual life | 7 years |
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 |
Awards outstanding weighted average exercise price | $ 8.62 |
Awards exercisable | shares | 4,000 |
Awards exercisable weighted average remaining contractual life | 9 years |
Awards exercisable weighted average exercise price | $ 9.72 |
$9.01 to $10.50 [Member] | |
Exercise price low | 9.01 |
Exercise price high | $ 10.50 |
Awards outstanding | shares | 772,700 |
Awards outstanding weighted average remaining contractual life | 9 years |
Awards outstanding weighted average exercise price | $ 9.88 |
Awards exercisable | shares | 76,580 |
Awards exercisable weighted average remaining contractual life | 8 years 6 months |
Awards exercisable weighted average exercise price | $ 0 |
$13.01 to $14.50 [Member] | |
Exercise price low | 13.01 |
Exercise price high | $ 14.50 |
Awards outstanding | shares | 12,916 |
Awards outstanding weighted average remaining contractual life | 10 years |
Awards outstanding weighted average exercise price | $ 14.44 |
Awards exercisable | shares | 0 |
7. SHAREHOLDERS' EQUITY (Detail
7. SHAREHOLDERS' EQUITY (Details Narrative) - USD ($) | 12 Months Ended | ||
Aug. 31, 2017 | Aug. 31, 2016 | Aug. 31, 2015 | |
2007 Stock Option Plan [Member] | |||
Common stock reserved for issuance under the plan | 2,000,000 | ||
Options both ISO and NQSO [Member] | |||
Fair value of the options granted | $ 1,294,826 | $ 1,189,730 | $ 113,435 |
Dividend yield | 2.15% | 2.32% | 3.03% |
Pre-vest forfeiture rate | 6.17% | 6.31% | 6.20% |
Expected volatility | 32.93% | 34.22% | 47.13% |
Risk-free interest rate | 2.16% | 1.42% | 2.09% |
Expected life | 6 years 9 months 11 days | 6 years 9 months 18 days | 6 years 10 months 21 days |
Fair value of non-vested stock options | $ 1,866,395 | $ 1,366,269 | |
Weighted average amortizable period | 7 years 7 months 2 days | 7 years 6 months 29 days |
8. INCOME TAXES (Details - Inco
8. INCOME TAXES (Details - Income tax provision) - USD ($) | 12 Months Ended | ||
Aug. 31, 2017 | Aug. 31, 2016 | Aug. 31, 2015 | |
Current | |||
Federal | $ 2,385,660 | $ 2,118,229 | $ 1,482,798 |
State | 217,281 | 171,840 | 236,152 |
Foreign | 28,103 | 19,428 | 75,099 |
Total current tax expense (benefit) | 2,631,044 | 2,309,497 | 1,794,049 |
Deferred | |||
Federal | (612,629) | 22,936 | (15,036) |
State | 434,255 | (46,177) | 70,955 |
Total deferred federal and state | (178,374) | (23,241) | 55,919 |
Total Federal and State income tax expense (benefit) | $ 2,452,670 | $ 2,286,256 | $ 1,849,968 |
8. INCOME TAXES (Details - Reco
8. INCOME TAXES (Details - Reconciliation) | 12 Months Ended | ||
Aug. 31, 2017 | Aug. 31, 2016 | Aug. 31, 2015 | |
Income Tax Disclosure [Abstract] | |||
Income tax computed at federal statutory tax rate | 34.00% | 34.00% | 34.00% |
State taxes, net of federal benefit | 3.55% | 3.45% | 5.00% |
Meals & Entertainment | 0.00% | 0.10% | 0.10% |
Stock Based Compensation | 0.00% | 1.30% | 0.30% |
Other permanent differences | (0.50%) | (0.60%) | 0.00% |
Research and development credit | (3.60%) | (2.70%) | (4.50%) |
Domestic Production Activities | (2.30%) | (3.60%) | (2.90%) |
Change in prior year estimated taxes | (1.30%) | (0.30%) | 0.50% |
Total | 29.80% | 31.60% | 32.50% |
8. INCOME TAXES (Details - Defe
8. INCOME TAXES (Details - Deferred taxes) - USD ($) | Aug. 31, 2017 | Aug. 31, 2016 |
Deferred tax assets | ||
Accrued payroll and other expenses | $ 254,897 | $ 108,769 |
Deferred revenue | 62,617 | 71,009 |
Capitalized merger costs | 540,312 | 292,693 |
Intellectual property | 18,775 | 21,205 |
Research and development credit | 0 | 54,427 |
State taxes | 91,513 | 58,426 |
State Tax Deferred | 293,879 | 160,391 |
Total deferred tax assets | 1,261,993 | 766,920 |
Less Valuation allowance | 0 | 0 |
Deferred tax asset | 1,261,993 | 766,920 |
Deferred tax liabilities | ||
Property and equipment | (95,071) | (93,900) |
State Tax Deferred | (16,763) | (9,491) |
Intellectual Property | (4,343,311) | (2,004,451) |
Capitalized computer software development costs | (1,733,808) | (1,615,284) |
Total deferred tax liabilities | (6,188,953) | (3,723,126) |
Net deferred tax liabilities | $ (4,926,960) | $ (2,956,206) |
9. CONCENTRATIONS AND UNCERTA57
9. CONCENTRATIONS AND UNCERTAINTIES (Details Narrative) - USD ($) | 12 Months Ended | ||
Aug. 31, 2017 | Aug. 31, 2016 | Aug. 31, 2015 | |
Cash and cash equivalents exceeding insured limits | $ 5,231,000 | ||
Net Sales [Member] | International Sales [Member] | |||
Net sales concentration percentage | 38.00% | 38.00% | 37.00% |
Net Sales [Member] | Customer 1 [Member] | |||
Net sales concentration percentage | 7.00% | 10.00% | 10.00% |
Net Sales [Member] | Customer 2 [Member] | |||
Net sales concentration percentage | 7.00% | 7.00% | 8.00% |
Net Sales [Member] | Customer 3 [Member] | |||
Net sales concentration percentage | 5.00% | 6.00% | 6.00% |
Accounts Receivable [Member] | Customer 1 [Member] | |||
Net sales concentration percentage | 10.00% | 16.00% | |
Accounts Receivable [Member] | Customer 2 [Member] | |||
Net sales concentration percentage | 10.00% | ||
Accounts Receivable [Member] | Customer 3 [Member] | |||
Net sales concentration percentage | 10.00% |
10. SEGMENT AND GEOGRAPHIC RE58
10. SEGMENT AND GEOGRAPHIC REPORTING (Details - Segment reporting) - USD ($) | 3 Months Ended | 12 Months Ended | ||||||||||
Aug. 31, 2017 | May 31, 2017 | Feb. 28, 2017 | Nov. 30, 2016 | Aug. 31, 2016 | May 31, 2016 | Feb. 29, 2016 | Nov. 30, 2015 | Aug. 31, 2017 | Aug. 31, 2016 | Aug. 31, 2015 | Aug. 31, 2014 | |
Net Revenues | $ 6,266,000 | $ 6,749,000 | $ 5,705,000 | $ 5,418,000 | $ 3,958,000 | $ 6,012,000 | $ 5,164,000 | $ 4,839,000 | $ 24,137,913 | $ 19,972,079 | $ 18,314,248 | |
Income (loss) from operations before income taxes | 8,264,284 | 7,231,806 | 5,856,528 | |||||||||
Total assets | 38,512,468 | 27,814,317 | 38,512,468 | 27,814,317 | 27,344,000 | |||||||
Goodwill | 10,387,198 | 4,789,248 | 10,387,198 | 4,789,248 | 4,789,248 | $ 0 | ||||||
Capital expenditures | 176,000 | 38,000 | 37,000 | |||||||||
Capitalized software costs | 1,376,000 | 1,195,000 | 1,376,000 | 1,195,000 | 1,170,000 | |||||||
Depreciation and Amortization | 2,127,000 | 1,931,000 | 1,990,000 | |||||||||
Simulations Plus, Inc. [Member] | ||||||||||||
Net Revenues | 15,600,000 | 14,418,000 | 13,086,000 | |||||||||
Income (loss) from operations before income taxes | 6,194,000 | 6,330,000 | 4,816,000 | |||||||||
Total assets | 33,056,000 | 26,306,000 | 33,056,000 | 26,306,000 | 25,549,000 | |||||||
Goodwill | 0 | 0 | 0 | 0 | ||||||||
Capital expenditures | 48,000 | 6,000 | 23,000 | |||||||||
Capitalized software costs | 1,133,000 | 1,017,000 | 1,133,000 | 1,017,000 | 1,019,000 | |||||||
Depreciation and Amortization | 1,618,000 | 1,556,000 | 1,633,000 | |||||||||
Cognigen | ||||||||||||
Net Revenues | 7,300,000 | 5,554,000 | 5,228,000 | |||||||||
Income (loss) from operations before income taxes | 1,750,000 | 901,000 | 1,041,000 | |||||||||
Total assets | 9,363,000 | 8,975,000 | 9,363,000 | 8,975,000 | 9,033,000 | |||||||
Goodwill | 4,789,000 | 4,789,000 | 4,789,000 | 4,789,000 | ||||||||
Capital expenditures | 96,000 | 32,000 | 14,000 | |||||||||
Capitalized software costs | 219,000 | 178,000 | 219,000 | 178,000 | 151,000 | |||||||
Depreciation and Amortization | 374,000 | 375,000 | 357,000 | |||||||||
DILIsym | ||||||||||||
Net Revenues | 1,238,000 | |||||||||||
Income (loss) from operations before income taxes | 320,000 | |||||||||||
Total assets | 13,794,000 | 13,794,000 | ||||||||||
Goodwill | 5,598,000 | 5,598,000 | ||||||||||
Capital expenditures | 32,000 | |||||||||||
Capitalized software costs | 24,000 | 24,000 | ||||||||||
Depreciation and Amortization | 135,000 | |||||||||||
Eliminations [Member] | ||||||||||||
Total assets | $ (17,702,000) | $ (7,238,000) | $ (17,702,000) | $ (7,238,000) | $ (7,238,000) |
10. SEGMENT AND GEOGRAPHIC RE59
10. SEGMENT AND GEOGRAPHIC REPORTING (Details - geographic) - USD ($) | 3 Months Ended | 12 Months Ended | |||||||||
Aug. 31, 2017 | May 31, 2017 | Feb. 28, 2017 | Nov. 30, 2016 | Aug. 31, 2016 | May 31, 2016 | Feb. 29, 2016 | Nov. 30, 2015 | Aug. 31, 2017 | Aug. 31, 2016 | Aug. 31, 2015 | |
Revenues | $ 6,266,000 | $ 6,749,000 | $ 5,705,000 | $ 5,418,000 | $ 3,958,000 | $ 6,012,000 | $ 5,164,000 | $ 4,839,000 | $ 24,137,913 | $ 19,972,079 | $ 18,314,248 |
Simulations Plus, Inc. [Member] | |||||||||||
Revenues | 15,600,000 | 14,418,000 | 13,086,000 | ||||||||
Simulations Plus, Inc. [Member] | North America [Member] | |||||||||||
Revenues | 7,846,000 | 6,830,000 | 6,261,000 | ||||||||
Simulations Plus, Inc. [Member] | Europe [Member] | |||||||||||
Revenues | 3,826,000 | 4,022,000 | 3,629,000 | ||||||||
Simulations Plus, Inc. [Member] | Asia [Member] | |||||||||||
Revenues | 3,926,000 | 3,564,000 | 3,153,000 | ||||||||
Simulations Plus, Inc. [Member] | South America [Member] | |||||||||||
Revenues | 1,000 | 2,000 | 43,000 | ||||||||
Cognigen | |||||||||||
Revenues | 7,300,000 | 5,554,000 | 5,228,000 | ||||||||
Cognigen | North America [Member] | |||||||||||
Revenues | 7,300,000 | 5,554,000 | 5,228,000 | ||||||||
Cognigen | Europe [Member] | |||||||||||
Revenues | 0 | 0 | 0 | ||||||||
Cognigen | Asia [Member] | |||||||||||
Revenues | 0 | 0 | 0 | ||||||||
Cognigen | South America [Member] | |||||||||||
Revenues | 0 | $ 0 | $ 0 | ||||||||
DILIsym | |||||||||||
Revenues | 1,238,000 | ||||||||||
DILIsym | North America [Member] | |||||||||||
Revenues | 851,000 | ||||||||||
DILIsym | Europe [Member] | |||||||||||
Revenues | 151,000 | ||||||||||
DILIsym | Asia [Member] | |||||||||||
Revenues | $ 236,000 |
11. RELATED PARTY TRANSACTIONS
11. RELATED PARTY TRANSACTIONS (Details Narrative) - DILIsym - USD ($) | 12 Months Ended | |
Aug. 31, 2017 | Jun. 02, 2017 | |
Payment for acquisition | $ 4,515,982 | |
Acquisition liabilities owed | $ 911,049 | |
Former Shareholders [Member] | ||
Payment for acquisition | 1,704,000 | |
Acquisition liabilities owed | $ 1,980,000 |
12. EMPLOYEE BENEFIT PLAN (Deta
12. EMPLOYEE BENEFIT PLAN (Details Narrative) - USD ($) | 12 Months Ended | ||
Aug. 31, 2017 | Aug. 31, 2016 | Aug. 31, 2015 | |
Compensation and Retirement Disclosure [Abstract] | |||
Contribution by employer in benefit plan | $ 251,899 | $ 219,756 | $ 237,300 |
13. ACQUISITION_MERGER WITH S62
13. ACQUISITION/MERGER WITH SUBSIDIARIES (Details - purchase price allocation) - USD ($) | Sep. 02, 2014 | Jun. 02, 2017 | Aug. 31, 2017 | Aug. 31, 2016 | Aug. 31, 2015 | Aug. 31, 2014 |
Goodwill | $ 10,387,198 | $ 4,789,248 | $ 4,789,248 | $ 0 | ||
Cognigen | ||||||
Assets acquired | $ 1,524,389 | |||||
Fixed assets acquired | 458,351 | |||||
Estimated value of software acquired | 200,000 | |||||
Estimated value of Intangibles acquired (Customer Lists, trade name etc.) | 1,600,000 | |||||
Working Capital Adjustment | (26,707) | |||||
Current Liabilities assumed | (644,499) | |||||
Goodwill | 4,789,248 | 4,789,248 | 4,789,248 | 4,789,248 | 0 | |
Estimated Deferred income taxes | (662,500) | |||||
Total Consideration | $ 7,238,282 | |||||
DILIsym | ||||||
Assets acquired | $ 2,283,110 | |||||
Developed Technologies Acquired | 2,850,000 | |||||
Estimated value of Intangibles acquired (Customer Lists, trade name etc.) | 2,840,000 | |||||
Current Liabilities assumed | (911,049) | |||||
Goodwill | 5,597,950 | $ 5,597,950 | $ 0 | $ 0 | $ 0 | |
Estimated Deferred income taxes | (2,212,160) | |||||
Total Consideration | $ 10,463,310 |
13. ACQUISITION_MERGER WITH S63
13. ACQUISITION/MERGER WITH SUBSIDIARIES (Details - Proforma Information) - USD ($) | 12 Months Ended | |
Aug. 31, 2017 | Aug. 31, 2016 | |
Business Combinations [Abstract] | ||
Revenues - pro forma | $ 27,184,000 | $ 22,847,000 |
Net loss - pro forma | $ 6,325,000 | $ 5,423,000 |
13. ACQUISITION_MERGER WITH S64
13. ACQUISITION/MERGER WITH SUBSIDIARIES (Details Narrative) | 12 Months Ended |
Aug. 31, 2017USD ($) | |
DILIsym | |
Cash paid for acquisition | $ 4,515,982 |
14. UNAUDTED QUARTERLY FINANC65
14. UNAUDTED QUARTERLY FINANCIAL DATA (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |||||||||
Aug. 31, 2017 | May 31, 2017 | Feb. 28, 2017 | Nov. 30, 2016 | Aug. 31, 2016 | May 31, 2016 | Feb. 29, 2016 | Nov. 30, 2015 | Aug. 31, 2017 | Aug. 31, 2016 | Aug. 31, 2015 | |
Quarterly Financial Information Disclosure [Abstract] | |||||||||||
Revenues | $ 6,266,000 | $ 6,749,000 | $ 5,705,000 | $ 5,418,000 | $ 3,958,000 | $ 6,012,000 | $ 5,164,000 | $ 4,839,000 | $ 24,137,913 | $ 19,972,079 | $ 18,314,248 |
Gross Profit | 4,293,000 | 5,304,000 | 4,151,000 | 4,082,000 | 2,898,000 | 4,817,000 | 3,900,000 | 3,755,000 | 17,830,113 | 15,370,566 | 13,921,771 |
Net Income | $ 1,151,000 | $ 2,080,000 | $ 1,196,000 | $ 1,362,000 | $ 789,000 | $ 1,909,000 | $ 1,145,000 | $ 1,106,000 | $ 5,787,597 | $ 4,950,136 | $ 3,842,961 |
Earnings per share, Basic | $ .07 | $ .12 | $ .07 | $ .08 | $ .07 | $ .11 | $ .07 | $ .07 | $ 0.34 | $ 0.29 | $ 0.23 |
Earnings per share, Diluted | $ .06 | $ .12 | $ .07 | $ .08 | $ .06 | $ .11 | $ .07 | $ .06 | $ 0.33 | $ 0.29 | $ 0.23 |