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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
x
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended May 31, 2024
OR
oTransition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ______ to ______
Commission file number: 001-32046
SLP_TopLogo.gif
Simulations Plus, Inc.
(Name of registrant as specified in its charter)
California95-4595609
(State or other jurisdiction of Incorporation or Organization)(I.R.S. Employer identification No.)
42505 10th Street West
Lancaster, CA 93534-7059
(Address of principal executive offices including zip code)
(661) 723-7723
(Registrant’s telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Each Class
    Common Stock, par value $0.001 per share
Trading Symbol
SLP
Name of Each Exchange on Which Registered
NASDAQ Stock Market LLC
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check one):
xLarge accelerated FileroAccelerated Filer
oNon-accelerated Filer oSmaller reporting company
oEmerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
The number of shares outstanding of the registrant’s common stock, par value $0.001 per share, as of June 30, 2024, was 20,007,738.


Simulations Plus, Inc.
FORM 10-Q
For the Quarterly Period Ended May 31, 2024

Table of Contents

Page
Item 1A.
PART I. FINANCIAL INFORMATION
Item 1.    Condensed Consolidated Financial Statements

SIMULATIONS PLUS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)(Audited)
(in thousands, except share and per share amounts)May 31, 2024August 31, 2023
ASSETS
Current assets
Cash and cash equivalents$109,092 $57,523 
Accounts receivable, net of allowance for credit losses of $149 and $46
10,144 10,201 
Prepaid income taxes1,202 804 
Prepaid expenses and other current assets5,303 3,904 
Short-term investments9,875 57,940 
Total current assets135,616 130,372 
Long-term assets
Capitalized computer software development costs, net of accumulated amortization of $18,502 and $17,199
12,614 11,335 
Property and equipment, net882 671 
Operating lease right-of-use assets948 1,247 
Intellectual property, net of accumulated amortization of $10,498 and $9,301
7,492 8,689 
Other intangible assets, net of accumulated amortization of $2,862 and $2,107
12,712 12,825 
Goodwill19,099 19,099 
Deferred tax assets2,804 1,438 
Other assets524 425 
Total assets$192,691 $186,101 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable$658 $144 
Accrued compensation4,111 4,392 
Accrued expenses894 659 
Contracts payable3,810 3,250 
Operating lease liability - current portion410 442 
Deferred revenue1,437 3,100 
Total current liabilities11,320 11,987 
Long-term liabilities
Operating lease liability512 755 
Contracts payable – net of current portion 3,330 
Total liabilities11,832 16,072 
Commitments and contingencies  
Shareholders' equity
Preferred stock, $0.001 par value — 10,000,000 shares authorized; no shares issued and outstanding
$ $ 
Common stock, $0.001 par value and additional paid-in capital —50,000,000 shares authorized; 20,007,488 and 19,937,961 shares issued and outstanding
150,451 144,974 
Retained earnings30,713 25,196 
Accumulated other comprehensive loss(305)(141)
Total shareholders' equity180,859 170,029 
Total liabilities and shareholders' equity$192,691 $186,101 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

SIMULATIONS PLUS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)
Three Months EndedNine Months Ended
(in thousands, except per common share amounts)May 31, 2024May 31, 2023May 31, 2024May 31, 2023
Revenues
Software$11,908 $10,632 $31,111 $27,193 
Services6,636 5,602 20,238 16,755 
Total revenues18,544 16,234 51,349 43,948 
Cost of revenues
Software1,400 908 3,739 2,636 
Services3,887 2,053 11,284 5,616 
Total cost of revenues5,287 2,961 15,023 8,252 
Gross profit13,257 13,273 36,326 35,696 
Operating expenses
Research and development1,300 945 3,829 3,428 
Sales and marketing2,399 1,683 6,337 4,898 
General and administrative7,678 6,548 18,878 18,361 
Total operating expenses11,377 9,176 29,044 26,687 
Income from operations1,880 4,097 7,282 9,009 
Other income2,010 843 4,266 2,617 
   
Income before income taxes3,890 4,940 11,548 11,626 
Provision for income taxes(753)(932)(2,437)(2,199)
Net income$3,137 $4,008 $9,111 $9,427 
Earnings per share
Basic$0.16 $0.20 $0.46 $0.47 
Diluted$0.15 $0.20 $0.45 $0.46 
Weighted-average common shares outstanding
Basic19,995 19,972 19,972 20,123 
Diluted20,433 20,355 20,324 20,512 
Other comprehensive (loss) income, net of tax
Foreign currency translation adjustments(56)144 (125)174 
Unrealized losses on available-for-sale securities(39) (39) 
Comprehensive income$3,042 $4,152 $8,947 $9,601 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

SIMULATIONS PLUS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
Three Months EndedNine Months Ended
(in thousands, except per common share amounts)May 31, 2024May 31, 2023May 31, 2024May 31, 2023
Common stock and additional paid in capital
Balance, beginning of period$148,472 $137,821 $144,974 $138,512 
Exercise of stock options164 572 474 1,535 
Stock-based compensation1,665 1,123 4,553 3,169 
Shares issued to Directors for services150 150 450 450 
Repurchase and retirement of common shares— 4,000 — — 
Balance, end of period150,451 143,666 150,451 143,666 
Retained earnings
Balance, beginning of period28,776 27,050 25,196 40,044 
Declaration of dividends(1,200)(1,200)(3,594)(3,613)
Repurchase and retirement of common shares— (4,000)— (20,000)
Net income3,137 4,008 9,111 9,427 
Balance, end of period30,713 25,858 30,713 25,858 
Accumulated other comprehensive (loss) income
Balance, beginning of period(210)(278)(141)(308)
Other comprehensive (loss) income(95)144 (164)174 
Balance, end of period(305)(134)(305)(134)
Total shareholders’ equity$180,859 $169,390 $180,859 $169,390 
Cash dividends declared per common share$0.06 $0.06 $0.18 $0.18 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

SIMULATIONS PLUS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
(in thousands)May 31, 2024May 31, 2023
Cash flows from operating activities
Net income$9,111 $9,427 
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization3,459 2,803 
Change in fair value of contingent consideration(270) 
Amortization of investment discounts(1,085)(738)
Stock-based compensation4,942 3,548 
Deferred income taxes(1,366)(1,346)
Currency translation adjustments(125)174 
(Increase) decrease in
Accounts receivable57 3,573 
Prepaid income taxes(398)1,391 
Prepaid expenses and other assets(1,498)(1,430)
Increase (decrease) in  
Accounts payable514 132 
Other liabilities(22)161 
Accrued income taxes 793 
Deferred revenue(1,663)308 
Net cash provided by operating activities11,656 18,796 
Cash flows from investing activities  
Purchases of property and equipment(550)(257)
Purchase of short-term investments(67,159)(71,835)
Proceeds from maturities of short-term investments71,093 82,007 
Proceeds from sales of investments45,177  
Purchased intangibles(508)(519)
Capitalized computer software development costs(2,520)(2,550)
Net cash provided by investing activities45,533 6,846 
Cash flows from financing activities  
Payment of dividends(3,594)(3,613)
Payments on contracts payable(2,500) 
Proceeds from the exercise of stock options474 1,535 
Repurchase and retirement of common shares (20,000)
Net cash used in financing activities(5,620)(22,078)
  
Net increase in cash and cash equivalents51,569 3,564 
Cash and cash equivalents, beginning of period$57,523 $51,567 
Cash and cash equivalents, end of period$109,092 $55,131 
Supplemental disclosures of cash flow information
Income taxes paid$4,214 $1,559 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

Simulations Plus, Inc.
Notes to Condensed Consolidated Financial Statements
For the three months and nine months ended May 31, 2024 and May 31, 2023
(Unaudited)
NOTE 1 – ORGANIZATION AND LINES OF BUSINESS
Organization

Simulations Plus, Inc. (“Simulations Plus”) was incorporated on July 17, 1996. In September 2014, Simulations Plus acquired all of the outstanding equity interests of Cognigen Corporation (“Cognigen”) and Cognigen became a wholly owned subsidiary of Simulations Plus. In June 2017, Simulations Plus acquired DILIsym Services, Inc. (“DILIsym”) as a wholly owned subsidiary. In April 2020, Simulations Plus acquired Lixoft, a French société par actions simplifiée (“Lixoft” or “SLP France”), as a wholly owned subsidiary pursuant to a stock purchase and contribution agreement. In June 2023, Simulations Plus acquired Immunetrics, Inc. (“Immunetrics”) as a wholly owned subsidiary through a reverse triangular merger. (Simulations Plus together with its subsidiaries, collectively, the “Company,” “we,” “us,” “our”).

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

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

Effective September 1, 2023, the Company merged Immunetrics with and into Simulations Plus through a short-form merger (the “Immunetrics Merger”). To effectuate the Immunetrics Merger, the Company filed Certificates of Ownership with the Secretaries of State of the states of Delaware (Immunetrics’ state of incorporation) and California (Simulations Plus’ state of incorporation). Consummation of the Immunetrics Merger was not subject to approval of the Company’s stockholders and did not impact the rights of the Company’s stockholders.
At the beginning of fiscal year 2024, in order to create a more integrated and cohesive company, the Company reorganized its internal structure to move away from divisions based on its prior acquisitions and instead formed business units organized around key product and service offerings that the Company provides, which include:

Cheminformatics;
Physiologically Based Pharmacokinetics (“PBPK”);
Quantitative Systems Pharmacology (“QSP”);
Clinical Pharmacology and Pharmacometrics (“CPP”); and
Regulatory Strategies (“REG”).

Lines of Business

For more than 25 years, Simulations Plus has been a leading provider in the biosimulation market, offering software and consulting services that support drug discovery, development, research, and regulatory submissions. Our solutions bridge artificial intelligence (“AI”)/machine learning, physiologically based pharmacokinetics, quantitative systems pharmacology/toxicology, and population PK/PD modeling approaches. Our technology is licensed and applied by major pharmaceutical and biotechnology companies, universities, and regulatory agencies worldwide.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation

The condensed consolidated financial statements include the accounts of Simulations Plus and its wholly owned operating subsidiaries, SLPI and SLP France. 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.
Reclassifications

Certain numbers in the prior year have been reclassified to conform to the current year’s presentation.
Revenue Recognition
We generate revenue primarily from the sale of software licenses and by providing consulting services to the pharmaceutical industry for drug development.

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

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

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

Revenue ComponentsTypical Payment Terms
Software Revenues:
Software revenues are generated primarily from sales of software licenses at the time the software is unlocked, and the term commences. The license period typically is one year or less. Along with the license, a di minimis amount of customer support is provided to assist the customer with the software. Should the customer need more than a di minimis amount of support, they can choose to enter into a separate contract for additional training. Most software is installed on our customers’ servers and the Company has no control of the software once the sale is made except for the licensing parameters that control numbers of users, modules, and expiration dates.
Payments are generally due upon invoicing on a net-30 basis, unless other payment terms are negotiated with the customer based on customer history. Typical industry standards apply.
For certain software arrangements the Company hosts the licenses on servers maintained by the Company. Revenue for those arrangements is accounted as Software as a Service over the life of the contract. These arrangements account for a small portion of software revenues of the Company.
Consulting Contracts:
Consulting services provided to our customers are generally recognized over time as the contracts are performed and the services are rendered. The Company measures its consulting revenue based on time expended compared to total estimated hours to complete a project. The Company believes the method chosen for its contract revenue best depicts the transfer of benefits to the customer under the contracts.Payment terms vary, depending on the size of the contract, credit history and history with the client, and deliverables within the contract.
Consortium-Member Based Services:
The performance obligation is recognized on a time-elapsed basis, by month for which the services are provided, as the Company transfers control evenly over the contractual period.Payment is due at the beginning of the period, generally on a net-30 or -60 basis.
Remaining Performance Obligations
Transaction price allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes deferred revenue and unbilled amounts that will be recognized as revenue in future periods. As of May 31, 2024, remaining performance obligations were $10.5 million. Ninety-six percent of the remaining performance obligations are expected to be recognized over the next twelve months, with the remainder expected to be recognized thereafter. Remaining performance obligations estimates are subject to change and are affected by several factors, including contract terminations and changes in the scope of contracts.
Disaggregation of Revenues

The components of disaggregation of revenue for the three and nine months ended May 31, 2024, and May 31, 2023, were as follows:

Three Months EndedNine Months Ended
(in thousands)May 31, 2024May 31, 2023May 31, 2024May 31, 2023
Software licenses
Point in time$11,678 $10,348 $30,353 $26,341 
Over time230 284 758 852 
Services   
Over time6,636 5,602 20,238 16,755 
Total revenue$18,544 $16,234 $51,349 $43,948 
In addition, the Company allocates revenues to geographic areas based on the locations of its customers. Geographical revenues for the three and nine months ended May 31, 2024, and May 31, 2023, were as follows:
(in thousands)Three Months Ended
May 31, 2024May 31, 2023
$% of total $% of total
Americas$12,428 67 %$10,774 66 %
EMEA4,513 24 %3,358 21 %
Asia Pacific1,603 9 %2,102 13 %
Total$18,544 100 %$16,234 100 %
Nine Months Ended
(in thousands)May 31, 2024May 31, 2023
$% of total $% of total
Americas$35,780 70 %$29,863 68 %
EMEA11,480 22 %9,106 21 %
Asia Pacific4,089 8 %4,979 11 %
Total$51,349 100 %$43,948 100 %
Contract Balances
We receive payments from customers based upon contractual billing schedules, although we recognize revenue when, or as, we satisfy our performance obligations. This timing difference results in accounts receivable, contract assets, and contract liabilities. We record accounts receivable when the right to consideration becomes unconditional. We record a contract asset if the right to consideration is conditioned on something other than the passage of time, such as our future performance. Contract assets are included in prepaid expenses and other current assets on our condensed consolidated balance sheets. We record a contract liability when we have an obligation to transfer goods or services to a customer for which we have either received consideration or a payment is due from a customer. We refer to contract liabilities as deferred revenue on our condensed consolidated balance sheets.
Contract asset balances as of May 31, 2024, and August 31, 2023, were $3.7 million and $2.7 million, respectively.
During the three and nine months ended May 31, 2024, the Company recognized $0.2 million and $2.8 million, respectively, of revenue that was included in contract liabilities as of August 31, 2023, and during the three and nine months ended May 31, 2023, the Company recognized $0.2 million and $2.5 million, respectively, of revenue that was included in contract liabilities as of August 31, 2022.
Deferred Commissions

Sales commissions earned by our sales force and our commissioned sales representatives are considered incremental and recoverable costs of obtaining a contract with a customer. We apply the practical expedient as described in ASC 340-40-25-4 to expense costs as incurred for sales commissions, since the amortization period of the asset that we otherwise would have recognized is one year or less. This expense is included in the condensed consolidated statements of operations and comprehensive income as sales and marketing expense.
Cash and Cash Equivalents
For purposes of the statements of cash flows, we consider all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.
Accounts Receivable and Allowance for Credit Losses
The Company extends credit to its customers in the normal course of business. The Company evaluates its allowance for credit losses based on its estimate of the collectability of its trade accounts receivable. As part of this assessment, the Company considers various factors including the financial condition of the individual companies with which it does business, the aging of receivable balances, historical experience, changes in customer payment terms, current market conditions, and reasonable and supportable forecasts of future economic conditions. In times of economic turmoil, the Company’s estimates and judgments with respect to the collectability of its receivables are subject to greater uncertainty than in more stable periods. Accounts receivable balances will be charged off against the allowance for credit losses after all means of collection have been exhausted and the potential for recovery is considered remote.
The activity in the allowance for credit losses related to our trade receivables is summarized as follows:
Three Months EndedNine Months Ended
(in thousands)May 31, 2024May 31, 2023May 31, 2024May 31, 2023
Balance, beginning of period$37 $12 $46 $12 
Provision for credit losses112 75 103 75 
Write-offs (38) (38)
Balance, end of period$149 $49 $149 $49 
Investments
The Company may invest excess cash balances in short-term and long-term marketable debt securities. Investments may consist of certificates of deposit, money market accounts, government-sponsored enterprise securities, corporate bonds, and/or commercial paper within the parameters of our Investment Policy and Guidelines. The Company accounts for its investments in marketable securities in accordance with ASC 320, Investments – Debt and Equity Securities. This statement requires debt securities to be classified into three categories:

Held-to-maturity—Debt securities that the entity has the positive intent and ability to hold to maturity are measured at amortized cost and are presented at the net amount expected to be collected. Any change in the allowance for credit losses during the period is reflected in earnings. Discounts and premiums to par value of the debt securities are amortized to interest income/expense over the term of the security.

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

Available-for-Sale (“AFS”)—Debt securities not classified as either securities held-to-maturity or trading securities are reported at fair value. For available-for-sale debt securities in an unrealized-loss position, we evaluate as of the balance sheet date whether the unrealized losses are attributable to a credit loss or other factors. The portion of unrealized losses related to a credit loss is recognized in earnings, and the portion of unrealized loss not related to a credit loss is recognized in other comprehensive income (loss). For available-for-sale debt securities, the unrealized gains and losses are included in other comprehensive income until realized, at which time they are reported through net income.


We classify our investments in marketable debt securities based on the facts and circumstances present at the time of purchase of the securities. We subsequently reassess the appropriateness of that classification at each reporting date. During the three months ended May 31, 2024, all of our investments were classified as available-for-sale as we sold the held-to-maturity securities to fund our acquisition of Pro-ficiency. All of our investments were classified as held-to-maturity for the year ended August 31, 2023.
Capitalized Computer Software Development Costs
Software development costs are capitalized in accordance with ASC 985-20. Capitalization of software development costs begins upon the establishment of technological feasibility and is discontinued when the product is available for sale.

The establishment of technological feasibility and the ongoing assessment for recoverability of capitalized software development costs require considerable judgment by management with respect to certain external factors including, but not limited to, technological feasibility, anticipated future gross revenue, estimated economic life, and changes in software and hardware technologies. Capitalized software development costs are comprised primarily of salaries and direct payroll-related costs and the purchase of existing software to be used in our software products.
Amortization of capitalized software development costs is calculated on a product-by-product basis on the straight-line method over the estimated economic life of the products (not to exceed five years). Amortization of software development costs amounted to $0.5 million and $0.4 million, for the three months ended May 31, 2024, and May 31, 2023, respectively, and $1.3 million and $1.2 million for the nine months ended May 31, 2024, and May 31, 2023, respectively. We expect future amortization expense to vary due to increases in capitalized computer software development costs.
The Company assesses capitalized computer software development costs for impairment 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 calculated using the straight-line method over the estimated useful lives as follows:
Equipment5 years
Computer equipment
3 to 7 years
Furniture and fixtures
5 to 7 years
Leasehold improvementsShorter of the asset life or lease term
Maintenance and minor replacements are charged to expense as incurred. Gains and losses on disposals are included in the results of operations.
Internal-use Software
We have capitalized certain internal-use software costs in accordance with ASC 350-40, which are included in intangible assets. The amortization of such costs is classified as general and administrative expenses on the condensed consolidated statements of operations. Maintenance of and minor upgrades to internal-use software are also classified as general and administrative expenses as incurred.
Leases
We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities (current and long-term) in our condensed consolidated balance sheets.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we generally use our incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at the commencement date. The operating lease ROU asset also includes any lease payments made at or before the commencement date and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense is recognized on a straight-line basis over the lease term.
Supplemental information related to operating leases was as follows as of May 31, 2024:
(in thousands)
ROU assets$948 
Lease liabilities, current$410 
Lease liabilities, long-term$512 
Operating lease costs$361 
Weighted-average remaining lease term2.73 years
Weighted-average discount rate5.32 %
Intangible Assets and Goodwill
We perform valuations of assets acquired and liabilities assumed on each acquisition accounted for as a business combination and recognize the assets acquired and liabilities assumed at their acquisition-date fair value. Acquired intangible assets include customer relationships, software, trade names, and noncompete agreements. We determine the appropriate useful life by performing an analysis of expected cash flows based on historical experience of the acquired businesses. Finite-lived intangible assets are amortized over their estimated useful lives using the straight-line method, which approximates the pattern in which the majority of the economic benefits are expected to be consumed. Finite-lived intangible assets subject to amortization are reviewed for impairment whenever events or circumstances indicate that the carrying amount of these assets may not be recoverable.
Goodwill represents the excess of the cost of an acquired entity over the fair value of the acquired net assets. Goodwill and indefinite-lived intangible assets are tested for impairment annually or when events or circumstances change that would indicate that they might be impaired. Events or circumstances that could trigger an impairment review include, but are not limited to, a significant adverse change in legal factors or in the business climate, an adverse action or assessment by a regulator, unanticipated competition, a loss of key personnel, significant changes in the manner of our use of the acquired assets or the strategy for our overall business, significant negative industry or economic trends, or significant underperformance relative to expected historical or projected future results of operations.
Goodwill and the other assets and liabilities acquired as part of the Immunetrics acquisition have been assigned to our QSP reporting unit.
Goodwill and intangible assets are tested for impairment at the reporting unit level, which is either one level below or the same level as an operating segment.
Consistent with the reorganization of our internal structuring to move away from divisions based on our prior acquisitions to business units organized around key product and service offerings, as of May 31, 2024, our reporting units now include the following business units:

Cheminformatics;
Physiologically Based Pharmacokinetics, or PBPK;
Quantitative Systems Pharmacology, or QSP;
Clinical Pharmacology and Pharmacometrics, or CPP; and
Regulatory Strategies, or REG.


As part of this reorganization, we also took the opportunity to evaluate our departmental structure with a focus on continuing to improve operational performance and profitability. Accordingly, we moved all services personnel into cost of revenues departments, all research and development (“R&D”) personnel into R&D expense departments, all sales and marketing personnel into sales and marketing expense departments, and all overhead personnel into general and administrative expense departments. To provide investors improved visibility to our progress, we also decided to report separately our sales and marketing expenses from our general and administrative expenses.
Reconciliation of Goodwill for the nine months ended May 31, 2024:
(in thousands)CPPQSPTotal
Balance, August 31, 2023$7,323 $11,776 $19,099 
Addition   
Impairments   
Balance, May 31, 2024$7,323 $11,776 $19,099 
The following table summarizes other intangible assets as of May 31, 2024:
(in thousands)Amortization
Period
Acquisition
Value
Accumulated
Amortization
Net Book Value
Trade namesNone$4,210 $— $4,210 
Covenants not to compete
Straight line 2 to 3 years
30 15 15 
Other internal use software
Straight line 3 to 5 years
575 33 542 
Customer relationships
Straight line 8 to 14 years
8,230 2,480 5,750 
ERP
Straight line 15 years
2,529 334 2,195 
$15,574 $2,862 $12,712 
The following table summarizes other intangible assets as of August 31, 2023:
(in thousands)Amortization
Period
Acquisition
Value
Accumulated
Amortization
Net Book Value
Trade namesNone$4,210 $ $4,210 
Covenants not to compete
Straight line 3 years
30 3 27 
Other internal use software
Straight line 3 to 5 years
350 10 340 
Customer relationships
Straight line 8 to 14 years
8,230 1,887 6,343 
ERP
Straight line 15 years
2,112 207 1,905 
$14,932 $2,107 $12,825 
Total amortization expense for the three months ended May 31, 2024, and May 31, 2023 was $0.3 million and $0.1 million, respectively, and amortization expense for the nine months ended May 31, 2024, and May 31, 2023 was $0.8 million and $0.4 million, respectively.
Estimated future amortization of finite-lived intangible assets for the next five fiscal years are as follows:
(in thousands)
Years Ending August 31,
Amount
Remainder of 2024$238 
2025$957 
2026$945 
2027$898 
2028$755 

Fair Value of Financial Instruments
Assets and liabilities recorded at fair value in the condensed consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair value. The categories are as follows:
Level Input:Input Definition:
Level IInputs that are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.
Level IIInputs, other than quoted prices included in Level I, that are observable for the asset or liability through corroboration with market data at the measurement date.
Level IIIUnobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.
For certain of our financial instruments, including accounts receivable, accounts payable, and accrued compensation and other accrued expenses, the carrying amounts are representative of their fair values due to their short maturities.

We invest a portion of our excess cash balances in short-term debt securities. Short-term debt securities investments as of May 31, 2024, and August 31, 2023, consisted of corporate bonds and term deposits with maturities remaining of less than 12 months. In addition, under the fair-value hierarchy, the fair market values of the Company’s cash equivalents and investments are Level I. We may also invest excess cash balances in certificates of deposit, money market accounts, government-sponsored enterprise securities, and/or commercial paper. We account for our investments in accordance with ASC 320, Investments – Debt and Equity Securities. As of May 31, 2024, all investments were classified as available-for-sale securities, as we recently sold securities previously classified as held-to-maturity to fund the acquisition that closed on June 11, 2024, as discussed in Note 10. We believe unrealized losses on investments were primarily caused by rising interest rates rather than changes in credit quality, and, accordingly, we have not recorded an allowance for credit losses on our debt securities as of May 31, 2024 and August 31, 2023.
The following tables summarize our short-term investments as of May 31, 2024, and August 31, 2023:
May 31, 2024
(in thousands)Amortized costUnrealized gainsUnrealized lossesFair value
Level 1:
Term deposits (due within one year)$1,500 $ $ $1,500 
Corporate debt securities (due within one year)8,414  (39)8,375 
Total Level 19,914  (39)9,875 
Level 2:    
Level 3:    
Total available-for-sale securities$9,914 $ $(39)$9,875 
August 31, 2023
(in thousands)Amortized costUnrealized gainsUnrealized lossesFair value
Level 1:
Term deposits (due within one year)$4,000 $ $ $4,000 
U.S. government and agency securities (due within one year)4,453 (5)4,448 
Commercial paper (due within one year)9,070 (9)9,061 
Corporate debt securities (due within one year)40,417  (101)40,316 
Total Level 157,940  (115)57,825 
Level 2:    
Level 3:    
Total held-to-maturity securities$57,940 $ $(115)$57,825 

As of May 31, 2024 and August 31, 2023, the Company had a liability for contingent consideration related to its acquisition of Immunetrics. 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 markets. Significant judgment is employed in determining the appropriateness of these assumptions as of the acquisition date and for each subsequent period. Accordingly, changes in assumptions could have a material impact on the amount of contingent consideration expense the Company records in any given period. Changes in the fair value of the contingent consideration obligations are recorded in the Company’s Condensed Consolidated Statement of Operations.
The following is a reconciliation of contingent consideration at fair value:
(in thousands)Amount
Contingent consideration at August 31, 2023$4,780 
Contingent consideration payment(2,500)
Change in fair value of contingent consideration(270)
 Contingent consideration at May 31, 2024$2,010 

Business Combination

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

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

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

Under the acquisition method of accounting for business combinations, if we identify changes to acquired deferred-tax asset valuation allowances or liabilities related to uncertain tax positions during the measurement period, and they relate to new information obtained about facts and circumstances that existed as of the acquisition date, those changes are considered a measurement period adjustment and we record the offset to goodwill. We record all other changes to deferred-tax asset valuation allowances and liabilities related to uncertain tax positions in current-period income tax expense. This accounting applies to all of our acquisitions regardless of acquisition date.
Research and Development Costs
Research and development costs are charged to expense as incurred until technological feasibility has been established. These costs include salaries, laboratory experiments, and purchased software that was developed by other companies and incorporated into, or used in the development of, our final products.
Income Taxes
We account for income taxes in accordance with ASC 740, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.


Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities.
Intellectual property
In May 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, royalties, or other payments under that 1997 agreement. We agreed to pay TSRL total consideration of $6.0 million, which was amortized over 10 years under the straight-line method and is fully amortized as of May 31, 2024.

In June 2017, as part of the acquisition of DILIsym, the Company acquired certain developed technologies associated with drug-induced liver disease (“DILI”). These technologies were valued at $2.9 million and are being amortized over 9 years under the straight-line method.

In September 2018, we purchased certain intellectual property rights of Entelos Holding Company. The cost of $0.1 million is being amortized over 10 years under the straight-line method.

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

In June 2023, we purchased certain developed technology of Immunetrics. The cost of $1.1 million is being amortized over 5 years under the straight-line method.
The following table summarizes intellectual property as of May 31, 2024:
(in thousands)Amortization
Period
Acquisition
Value
Accumulated
Amortization
Net Book
Value
Termination/nonassertion agreement-TSRL Inc.
Straight line 10 years
$6,000 $6,000 $ 
Developed technologies–DILIsym acquisition
Straight line 9 years
2,850 2,215 635 
Intellectual rights of Entelos Holding Company
Straight line 10 years
50 28 22 
Developed technologies–Lixoft acquisition
Straight line 16 years
8,010 2,048 5,962 
Developed technologies–Immunetrics acquisition
Straight line 5 years
1,080 207 873 
$17,990 $10,498 $7,492 
The following table summarizes intellectual property as of August 31, 2023:
(in thousands)Amortization
Period
Acquisition
Value
Accumulated
Amortization
Net Book
Value
Termination/nonassertion agreement-TSRL Inc.
Straight line 10 years
$6,000 $5,575 $425 
Developed technologies–DILIsym acquisition
Straight line 9 years
2,850 1,978 872 
Intellectual rights of Entelos Holding Company
Straight line 10 years
50 25 25 
Developed technologies–Lixoft acquisition
Straight line 16 years
8,010 1,678 6,332 
Developed technologies–Immunetrics acquisition
Straight line 5 years
1,080 45 1,035 
$17,990 $9,301 $8,689 

Total amortization expense for intellectual property agreements for the three months ended May 31, 2024, and May 31, 2023, was $0.4 million and $0.4 million, respectively, and $1.2 million and $1.1 million for the nine months ended May 31, 2024, and May 31, 2023, respectively.
Estimated future amortization of intellectual property for the next five fiscal years are as follows:
(in thousands)
Years Ending August 31,
Amount
Remainder of 2024$237 
2025$1,009 
2026$933 
2027$693 
2028$648 
Earnings per Share
We report earnings per share in accordance with ASC 260. Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding. Diluted earnings per share is computed similarly to basic earnings per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. The components of basic and diluted earnings per share for the three and nine months ended May 31, 2024, and May 31, 2023, were as follows:
Three Months EndedNine Months Ended
(in thousands)May 31, 2024May 31, 2023May 31, 2024May 31, 2023
Numerator
Net income attributable to common shareholders$3,137 $4,008 $9,111 $9,427 
Denominator
Weighted-average number of common shares outstanding during the period19,995 19,972 19,972 20,123 
Dilutive effect of stock options438 383 352 389 
Common stock and common stock equivalents used for diluted earnings per share20,433 20,355 20,324 20,512 
Stock-Based Compensation
Compensation costs related to stock options are determined in accordance with ASC 718. Compensation cost is calculated based on the grant-date fair value estimated using the Black-Scholes pricing model and then amortized on a straight-line basis over the requisite service period. Stock-based compensation costs related to stock options, not including shares issued to directors for services, was $1.7 million and $1.1 million for the three months ended May 31, 2024, and May 31, 2023, respectively, and $4.6 million and $3.2 million for the nine months ended May 31, 2024, and May 31, 2023, respectively.
Impairment of Long-lived Assets
We account for the impairment and disposition of long-lived assets in accordance with ASC 360. Long-lived assets to be held and used are reviewed for events or changes in circumstances that indicate that their carrying value may not be recoverable. We measure recoverability by comparing the carrying amount of an asset to the expected future undiscounted net cash flows generated by the asset. If we determine that the asset may not be recoverable, or if the carrying amount of an asset exceeds its estimated future undiscounted cash flows, we recognize an impairment charge to the extent of the difference between the fair value and the asset's carrying amount. No impairment losses were recorded during the three and nine months ended May 31, 2024, and May 31, 2023, respectively.
Recently Issued Accounting Standards

In October 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-06 - Disclosure Improvements: Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative (“ASU 2023-06”). ASU 2023-06 incorporates 14 of the 27 disclosure requirements published in SEC Release No. 33-10532 - Disclosure Update and Simplification into various topics within the Accounting Standards Codification (“ASC”). ASU 2023-06's amendments represent clarifications to, or technical corrections of, current requirements. For SEC registrants, the effective date for each amendment will be the date on which the SEC removes that related disclosure from its rules. Early adoption is prohibited. The Company does not expect ASU 2023-06 to have a material effect on its condensed consolidated financial statements.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the ASU to determine its impact on the Company’s disclosures.
Recently Adopted Accounting Standards
In October 2021, the FASB issued ASU 2021-08, Business Combinations - Accounting for contract assets and contract liabilities from contracts with customers (Topic 805), which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with Revenues from Contracts with Customers (Topic 606). For public companies, the guidance is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The Company adopted the guidance during fiscal year 2023. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements.
In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832), which requires business entities to disclose information about transactions with a government that are accounted for by applying a grant or contribution model by analogy (for example, IFRS guidance in IAS 20 or guidance on contributions for not-for-profit entities in ASC 958-605). For transactions within scope, the new standard requires the disclosure of information about the nature of the transaction, including significant terms and conditions, as well as the amounts and specific financial-statement line items affected by the transaction. The new guidance is effective for annual reporting periods beginning after December 15, 2021. The Company adopted the guidance during fiscal year 2023. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements.
NOTE 3 – OTHER INCOME
The components of other income for the three and nine months ended May 31, 2024, and May 31, 2023, were as follows:
Three Months EndedNine Months Ended
(in thousands)May 31, 2024May 31, 2023May 31, 2024May 31, 2023
Interest income$1,522 $1,120 $4,162 $2,876 
Change in fair valuation of contingent consideration599  269  
Realized losses from sale of AFS securities(125) (125) 
Realized gains from sale of AFS securities5  5  
Gain (loss) on currency exchange9 (277)(45)(259)
Total other income$2,010 $843 $4,266 $2,617 
NOTE 4 – COMMITMENTS AND CONTINGENCIES
Leases
We lease 4,200 square feet of office space in Lancaster, California, where our corporate headquarters are located. The lease term extends to April 30, 2028, and the base rent is $8 thousand per month with an annual increase of 3%. The lease agreement gives the Company the right, upon 180 days prior notice, to opt out of all or part of the last three years of the lease term with no penalty.

We lease 1,510 square feet of office space in Durham, North Carolina. The lease term extends to September 30, 2026, and the base rent is $4 thousand per month with an annual increase of 3%. The amended lease agreement gives the Company the right, upon 9 months prior notice, to extend the lease for 60 months.
We lease 4,317 square feet of office space in Buffalo, New York. The lease term extends to November 30, 2026, and the base rent is $7 thousand per month with an annual 2% increase. The lease agreement provides the Company with two five-year renewal options and the right to terminate the lease with one year’s prior written notice with certain penalties.
We lease 2,300 square feet of office space in Paris, France. The lease term extends to November 30, 2024, and the rent is $5 thousand per month, which amount is subject to adjustment each December based on a consumer price index.
We lease 7,141 square feet of office space in Pittsburgh, Pennsylvania. The lease term extends to May 31, 2025, and the base rent is $10 thousand per month. The lease agreement provides the Company with one five-year renewal option.
We have a data center colocation space in Buffalo, New York, with a lease term through November 30, 2026, and rent of $6 thousand per month with an annual 3% increase.

Rent expense, including common area maintenance fees, for the three months ended May 31, 2024, and May 31, 2023, was $0.1 million and $0.1 million, respectively, and $0.4 million and $0.4 million for the nine months ended May 31, 2024, and May 31, 2023, respectively.
Lease liability maturities as of May 31, 2024, were as follows:
(in thousands)Years Ending August 31,Amount
Remainder of 2024$119 
2025411 
2026313 
2027145 
202868 
Total undiscounted liabilities1,056 
Less: imputed interest(134)
Total operating lease liabilities (including current portion)$922 
Employment Agreements

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

We follow guidance issued by the FASB with regard to our accounting for uncertainty in income taxes recognized in the financial statements. Such guidance prescribes a recognition threshold of more-likely-than-not and a measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In making this assessment, a company must determine whether it is more likely than not that a tax position will be sustained upon examination, based solely on the technical merits of the position, and must assume that the tax position will be examined by taxing authorities. Our policy is to include interest and penalties related to income tax expense. We file income tax returns with the IRS and various state jurisdictions as well as with the countries of India and France. Our federal income tax returns for fiscal years 2020 through 2023 are open for audit, and our state tax returns for fiscal years 2019 through 2023 remain open for audit.

Our review of prior-year tax positions using the criteria and provisions presented in guidance issued by FASB did not result in a material impact on our financial position or results of operations.
Litigation

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

NOTE 5 – SHAREHOLDERS' EQUITY
Shares Outstanding

Shares of Company's common stock outstanding for the three and nine months ended May 31, 2024, and May 31, 2023, were as follows:
Three Months EndedNine Months Ended
(in thousands)May 31, 2024May 31, 2023May 31, 2024May 31, 2023
Common stock outstanding, beginning of period19,984 19,931 19,938 20,260 
Common stock repurchased during the period— (83)— (492)
Common stock issued during the period23 80 69 159 
Common stock outstanding, end of period20,007 19,927 20,007 19,927 
Dividends

The Company’s Board of Directors declared cash dividends during the nine months ended May 31, 2024 and fiscal year ended August 31, 2023. The details of dividends paid are in the following tables:
(in thousands, except dividend per share)Nine Months Ended May 31, 2024
Record DateDistribution DateNumber of Shares
Outstanding on
Record Date
Dividend per
Share
Total Amount
10/30/202311/06/202319,939 $0.06 $1,196 
1/29/20242/05/202419,973 $0.06 1,198 
4/29/20245/06/202419,998 $0.06 1,200 
Total$3,594 
(in thousands, except dividend per share) Fiscal Year Ended August 31, 2023
Record DateDistribution DateNumber of Shares
Outstanding on
Record Date
Dividend per
Share
Total Amount
10/31/202211/07/202220,299 $0.06 $1,218 
1/30/20232/06/202319,924 $0.06 1,195 
4/24/20235/01/202319,999 $0.06 1,200 
7/31/20238/07/202319,931 $0.06 1,196 
Total  $4,809 
Stock Option Plans

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

On April 9, 2021, the Company’s Board of Directors adopted, and on June 23, 2021, its shareholders approved, the Company’s 2021 Equity Incentive Plan (the “2021 Plan,” and together with the 2017 Plan, the “Plans”), under which a total of 1.3 million shares of common stock were initially reserved for issuance. On October 20, 2022, the Company’s Board of Directors approved, and on February 9, 2023, its shareholders approved, an amendment to the 2021 Plan to increase the number of shares of common stock authorized for issuance thereunder from 1.3 million shares to 1.55 million shares of common stock of the Company. Thereafter, on October 19, 2023, the Company’s Board of Directors approved, and on February 8, 2024, its shareholders approved, an amendment to the 2021 Plan to increase the number of shares of common stock authorized for issuance thereunder from 1.55 million to 2.5 million shares of common stock of the Company. The 2021 Plan will terminate in 2031.
As of May 31, 2024, employees and directors of the Company held Qualified Incentive Stock Options (“ISOs”) and Non-Qualified Stock Options (“NQSOs”) to purchase an aggregate of 2.0 million shares of common stock at exercise prices ranging from $6.85 to $66.14 per share.
The following table summarizes information about stock options:
(in thousands, except per share and weighted-average amounts)
Activity for the nine months ended May 31, 2024Number of
Options
Weighted-Average
Exercise Price
Per Share
Weighted-Average
Remaining
Contractual Life
Outstanding, August 31, 20231,478 $34.62 6.62 years
Granted566 40.42 
Exercised(73)15.25 
Canceled/Forfeited(13)45.36 
Outstanding, May 31, 20241,958 $36.95 7.01 years
Vested and Exercisable, May 31, 2024851 $29.78 4.81 years
Vested and Expected to Vest, May 31, 20241,886 $36.80 6.92 years
The total grant-date fair value of nonvested stock options as of May 31, 2024, was $22.3 million and is amortizable over a weighted-average period of 3.36 years.
The fair value of these options was estimated at the date of grant using the Black-Scholes option-pricing model. The Black-Scholes option-valuation model was developed for use in estimating the fair value of traded options, which do not have vesting restrictions and are fully transferable. In addition, option-valuation models require the input of highly subjective assumptions, including the expected stock price volatility.
The following table summarizes the fair value of the options, including both ISOs and NQSOs, granted during the nine-month period ended May 31, 2024 and for the fiscal year ended August 31, 2023:
(in thousands, except weighted-average amounts)Nine Months Ended May 31, 2024Fiscal Year 2023
Estimated fair value of awards granted$11,229 $10,067 
Unvested Forfeiture Rate5.80 %0.22 %
Weighted-average grant price$40.42 $43.78 
Weighted-average market price$40.42 $43.78 
Weighted-average volatility44.47 %46.14 %
Weighted-average risk-free rate4.79 %4.29 %
Weighted-average dividend yield0.59 %0.55 %
Weighted-average expected life6.59 years6.55 years
The exercise prices for the options outstanding at May 31, 2024, ranged from $6.85 to $66.14 per share, and the information relating to these options are as follows:

(in thousands except prices and weighted-average amounts)
Exercise Price Per ShareAwards OutstandingAwards Exercisable
LowHighQuantityWeighted -Average
Remaining
Contractual
Life
Weighted-Average
Exercise
Price
QuantityWeighted-Average
Remaining
Contractual
Life
Weighted-Average
Exercise
Price
$6.85 $9.77 165 1.38 years$9.02 164 1.38 years$9.02 
$9.78 $18.76 145 2.74 years$10.08 145 2.74 years$10.08 
$18.77 $33.40 179 4.91 years$25.73 162 4.84 years$24.98 
$33.41 $47.63 1,199 8.65 years$41.35 212 7.45 years$41.06 
$47.64 $66.14 270 6.81 years$56.33 168 6.61 years$57.54 
  1,958 7.01 years$36.95 851 4.81 years$29.78 
During the three and nine months ended May 31, 2024, we issued 3,310 and 11,525 shares of stock valued at $0.2 million and $0.5 million, respectively, to our nonmanagement directors as compensation for board-related duties.
The Company's par-value common stock and additional paid-in capital as of May 31, 2024, were $11 thousand and $150.4 million, respectively.
Share Repurchases
No share repurchases were made during the nine months ended May 31, 2024.
On December 29, 2022, our Board of Directors authorized and approved a share repurchase program for up to $50 million of the outstanding shares of our common stock, and on January 11, 2023, we entered into an accelerated share repurchase agreement (the “ASR Agreement”) with Morgan Stanley & Co. LLC (“Morgan Stanley”) to repurchase an aggregate of $20 million of our outstanding shares of common stock as part of the share repurchase program, which was settled in full in May 2023. The share repurchase program has no expiration date but may be terminated at any time at our Board of Directors’ discretion.
In January 2023, we received an initial delivery of an aggregate of 408,685 shares of our common stock from Morgan Stanley pursuant to the ASR Agreement, in exchange for which we made an initial payment of $20 million to Morgan Stanley. These 408,685 shares were retired and are treated as authorized, unissued shares. At final settlement on May 20, 2023, based on the volume-weighted average price of our common stock during the term of the ASR Agreement, Morgan Stanley delivered an additional 83,356 shares of Company common stock to us, which shares were also retired and treated as authorized, unissued shares.

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


NOTE 6 – CONCENTRATIONS AND UNCERTAINTIES
Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash, cash equivalents, trade accounts receivable, and short-term investments. The Company holds cash and cash equivalents with balances that exceed FDIC-insured limits. Cash maintained in excess of these limits is on deposit with a large, national bank. Accordingly, the Company does not have depository exposure to regional banks. In addition, the Company holds cash at a bank in France that is not FDIC-insured. Historically, the Company has not experienced any losses in such accounts, and management believes that the financial institutions at which its cash is held are stable; however, no assurances can be provided. While the Company may be exposed to credit losses due to the nonperformance of its counterparties, the Company does not expect the settlement of these transactions to have a material effect on its results of operations, cash flows, or financial condition.
Revenue concentration shows that international sales accounted for 30% and 32% of revenue for the nine months ended May 31, 2024 and May 31, 2023, respectively. Our four largest customers in terms of revenue accounted for 9%, 3%, 3%, and 2% of revenue, respectively, for the nine months ended May 31, 2024. Our four largest customers in terms of revenue accounted for 6%, 5%, 3%, and 2% of revenue, respectively, for the nine months ended May 31, 2023.
Accounts-receivable concentrations show that our six largest customers in terms of accounts receivable each comprised between 4% and 7% of accounts receivable as of May 31, 2024; our six largest customers in terms of accounts receivable comprised between 3% and 9% of accounts receivable as of May 31, 2023.
We operate in the biosimulation market, which is highly competitive and changes rapidly. Our operating results could be significantly affected by our ability to develop new products and find new distribution channels for new and existing products.
NOTE 7 – SEGMENT REPORTING

The Company applies ASC 280, Segment Reporting, in determining reportable segments. The Company has two reportable segments: Software and Services. Segment information is presented in the same manner that the chief operating decision maker (“CODM”) reviews certain financial information based on these reportable segments. The CODM reviews revenue and gross profit for both of the reportable segments. Gross profit is defined as revenue less cost of revenue incurred by the segment.
No operating segments have been aggregated to form the reportable segments. The Company does not allocate assets at the reportable segment level, as these are managed on an entity-wide group basis and, accordingly, the Company does not report asset information by segment. The Company does not allocate operating expenses that are managed on an entity-wide group basis and, accordingly, the Company does not allocate and report operating expenses at a segment level. There are no internal revenue transactions between the Company’s segments.
The following tables summarize the results for each segment for the three months ended May 31, 2024, and May 31, 2023:
(in thousands)Three Months Ended May 31, 2024
SoftwareServicesTotal
Revenues$11,908 $6,636 $18,544 
Cost of revenues1,400 3,887 5,287 
Gross profit$10,508 $2,749 $13,257 
Gross margin88 %41 %71 %
Our software business and services business represented 64% and 36% of total revenue, respectively, for the three months ended May 31, 2024.

(in thousands)Three Months Ended May 31, 2023
SoftwareServicesTotal
Revenues$10,632 $5,602 $16,234