simu-20241130

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 November 30, 2024

OR

o			Transition 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

Simulations Plus, Inc.

(Name of registrant as specified in its charter)


California			95-4595609
(State or other jurisdiction of Incorporation or Organization)			(I.R.S. Employer identification No.)

800 Park Offices Drive, Suite 401

Research Triangle Park, NC 27709

(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):


x	Large accelerated Filer	o	Accelerated Filer
o	Non-accelerated Filer	o	Smaller reporting company
o	Emerging 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 December 23, 2024, was 20,092,435.

Table of Contents

Simulations Plus, Inc.

FORM 10-Q

For the Quarterly Period Ended November 30, 2024

Table of Contents


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

	Condensed Consolidated Balance Sheets at November 30, 2024 and August 31, 2024	3

	Condensed Consolidated Statements of Operations and Comprehensive Income for the three months ended November 30, 2024 and 2023	4

	Condensed Consolidated Statements of Shareholders’ Equity for the three months ended November 30, 2024 and 2023	5

	Condensed Consolidated Statements of Cash Flows for the three months ended November 30, 2024 and 2023	6

	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	30

Item 4.	Controls and Procedures	31

	PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	31

Item 1A.	Risk Factors	32

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32

Item 3.	Defaults upon Senior Securities	32

Item 4.	Mine Safety Disclosures	32

Item 5.	Other Information	33

Item 6.	Exhibits	34

	Signatures	35

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Table of Contents

SIMULATIONS PLUS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


	(Unaudited)		(Audited)
(in thousands, except share and per share amounts)	November 30, 2024		August 31, 2024
ASSETS
Current assets
Cash and cash equivalents	$	6,187	$	10,311
Accounts receivable, net of allowance for credit losses of $145 and $149	12,804		9,136
Prepaid income taxes	2,327		2,197
Prepaid expenses and other current assets	7,098		7,753
Short-term investments	11,983		9,944
Total current assets	40,399		39,341
Long-term assets
Capitalized computer software development costs, net of accumulated amortization of $19,500 and $18,727	12,441		12,499
Property and equipment, net	819		812
Operating lease right-of-use assets	1,342		1,027
Intellectual property, net of accumulated amortization of $6,575 and $5,490	22,045		23,130
Other intangible assets, net of accumulated amortization of $3,497 and $3,177	23,076		23,210
Goodwill	96,305		96,078


Other assets	489		542
Total assets	$	196,916	$	196,639

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable	$	1,120	$	602
Accrued compensation	1,882		4,513
Accrued expenses	580		2,043

Contracts payable - current portion	2,440		2,440
Operating lease liability - current portion	485		475
Deferred revenue	3,231		1,996
Total current liabilities	9,738		12,069
Long-term liabilities
Deferred income taxes, net	1,648		1,608
Operating lease liability - net of current portion	835		531

Total liabilities	12,221		14,208
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; 20,085,014 and 20,051,134 shares issued and outstanding	154,424		152,328
Retained earnings	30,560		30,354
Accumulated other comprehensive loss	(289)		(251)
Total shareholders' equity	184,695		182,431
Total liabilities and shareholders' equity	$	196,916	$	196,639

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

Table of Contents

SIMULATIONS PLUS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME


	Three Months Ended

(in thousands, except per common share amounts)	November 30, 2024		November 30, 2023
Revenues
Software	$	10,715	$	7,589
Services	8,209		6,911
Total revenues	18,924		14,500
Cost of revenues
Software	2,638		991
Services	6,068		3,661
Total cost of revenues	8,706		4,652
Gross profit	10,218		9,848
Operating expenses
Research and development	1,848		1,217
Sales and marketing	2,851		1,989
General and administrative	5,393		5,682
Total operating expenses	10,092		8,888

Income from operations	126		960

Other income	144		1,446

Income before income taxes	270		2,406
Provision for income taxes	(64)		(461)
Net income	$	206	$	1,945

Earnings per share
Basic	$	0.01	$	0.10
Diluted	$	0.01	$	0.10

Weighted-average common shares outstanding
Basic	20,068		19,947
Diluted	20,266		20,279

Other comprehensive (loss) income, net of tax
Foreign currency translation adjustments	(42)		(54)
Unrealized gains on available-for-sale securities	4		—
Comprehensive income	$	168	$	1,891

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

Table of Contents

SIMULATIONS PLUS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY


	Three Months Ended

(in thousands, except per common share amounts)	November 30, 2024		November 30, 2023
Common stock and additional paid in capital
Balance, beginning of period	$	152,328	$	144,974
Exercise of stock options	288		164
Stock-based compensation	1,673		1,303
Shares issued to Directors for services	135		150




Balance, end of period	154,424		146,591

Retained earnings
Balance, beginning of period	30,354		25,196
Declaration of dividends	—		(1,196)

Net income	206		1,945
Balance, end of period	30,560		25,945

Accumulated other comprehensive loss
Balance, beginning of period	(251)		(141)
Other comprehensive loss	(38)		(54)
Balance, end of period	(289)		(195)
Total shareholders’ equity	$	184,695	$	172,341
Cash dividends declared per common share	$	—	$	0.06

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

Table of Contents

SIMULATIONS PLUS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Three Months Ended

(in thousands)		November 30, 2024		November 30, 2023
Cash flows from operating activities
Net income		$	206	$	1,945
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		2,265		1,091
Change in fair value of contingent consideration		—		(110)
Amortization of investment discounts		(39)		(395)
Stock-based compensation		1,724		1,362
Deferred income taxes		40		(388)

Unrealized gains (losses) on available-for-sale securities		4		—

Currency translation adjustments		(42)		(54)
(Increase) decrease in
Accounts receivable		(3,668)		(145)
Prepaid income taxes		(130)		767
Prepaid expenses and other assets		708		(1,515)
Increase (decrease) in
Accounts payable		518		173
Other liabilities		(4,095)		(2,129)

Deferred revenue		1,235		(440)
Net cash (used in) provided by operating activities		(1,274)		162

Cash flows from investing activities
Purchases of property and equipment		(86)		—
Purchase of short-term investments		(3,500)		(30,544)
Proceeds from maturities of short-term investments		1,500		14,778

Purchased intangibles		(186)		(247)

Net working capital & excess cash settlement - Pro-ficiency acquisition		(227)		—
Capitalized computer software development costs		(639)		(851)
Net cash used in investing activities		(3,138)		(16,864)

Cash flows from financing activities
Payment of dividends		—		(1,196)

Proceeds from the exercise of stock options		288		164

Net cash provided by (used in) financing activities		288		(1,032)

Net decrease in cash and cash equivalents		(4,124)		(17,734)
Cash and cash equivalents, beginning of period		$	10,311	$	57,523
Cash and cash equivalents, end of period		$	6,187	$	39,789

Supplemental disclosures of cash flow information
Income taxes paid		$	112	$	96
Non-Cash Investing and Financing Activities


Right of use assets capitalized		$	451	$	—

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

Table of Contents

Simulations Plus, Inc.

Notes to Condensed Consolidated Financial Statements

For the Three Months Ended November 30, 2024

NOTE 1 – DESCRIPTION OF BUSINESS

Simulations Plus, Inc. (the “Company”) was incorporated in California on July 17, 1996. We are a global leader and premier provider in the biopharma sector, offering advanced software and consulting services that enhance drug discovery, development, research, clinical trial operations, regulatory submissions, and commercialization. With the June 2024 acquisition of Pro-ficiency Holdings, Inc. and its subsidiaries (collectively, “Pro-ficiency”), the Company extended its reach across the drug development value chain from the initial protocol stage through all phases of clinical research and development (“R&D”) to product commercialization. Simulations Plus now has a one-of-a-kind platform to serve its clients at every step in the drug development process. This optimizes efficiency, costs and time-to-market for our clients and enhances our competitive position.

Our clients face many challenges. Developing new therapies is time-consuming and expensive, requiring an average of 10-15 years and an average cost of approximately $1.3-2.8 billion to develop a single drug. Drug sponsors must prioritize not only efficacy of the drug, but also issues like drug-drug interactions, inclusion of diverse populations, regulatory approvals, reduction of animal testing, safety and compliance during clinical trials, and commercial success.

Our model-informed drug development (“MIDD”) software and services allow clients to use modeling and simulation to accelerate the drug development timeline, reduce the costs of R&D, comply with regulatory guidance and best practices, and increase confidence in the safety and efficacy of their drugs. Our adaptive learning solutions support the success of clinical trials by increasing the diversity and retention of participants and driving competency and compliance with trial protocols, while our medical communications solutions provide support in obtaining regulatory approval and post regulatory commercialization of drugs.

Through these offerings, we fulfill our mission to create value for our customers by accelerating and reducing the costs of R&D through innovative science-based software and consulting solutions that optimize treatment options and improve patient lives.

At the beginning of fiscal year 2024, the Company reorganized its internal structure to create a more integrated and cohesive operating platform based on key product and services offerings rather than separate divisions based on its prior acquisitions. This business unit restructuring is engendering greater scientific collaboration and knowledge sharing within the Company that leads to identifying new opportunities that both advance the Company’s business objectives and deepen client relationships. Continuing with our strategic plan of aligning our business units around products and services, the Pro-ficiency acquisition resulted in two new business units, Adaptive Learning & Insights and Medical Communications, giving the Company six business units that include:

•Cheminformatics (“CHEM”);

•Physiologically Based Pharmacokinetics (“PBPK”);

•Clinical Pharmacology and Pharmacometrics (“CPP”);

•Quantitative Systems Pharmacology (“QSP”);

•Adaptive Learning & Insights (“ALI”); and

•Medical Communications (“MC”).

The Company was previously headquartered in Southern California, however, in support of the Company's remote work culture and plan to reduce excess office space toward achieving its carbon footprint reduction targets, the Company fully exited four office locations in Lancaster, California; Raleigh, North Carolina; Buffalo, New York; and Pittsburgh, Pennsylvania. As a result, the company moved it's headquarters from Lancaster, California to Research Triangle Park, North Carolina and also maintains a European office in Paris, France. Our common stock has traded on the Nasdaq Global Select Market under the symbol “SLP” since May 13, 2021, prior to which it traded on the Nasdaq Capital Market under the same symbol.

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Table of Contents

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates include, among other estimates, assumptions used in the allocation of the transaction price to separate performance obligations, estimates towards the measure of progress of completion on fixed-price service contracts, the determination of fair values and useful lives of both long-lived assets and intangible assets, goodwill, allowance for credit losses for accounts receivable, recoverability of deferred tax assets, recognition of deferred revenue, determination of fair value of equity-based awards, and assumptions used in testing for impairment of long-lived assets. Actual results could differ from those estimates, and such differences may be material to the consolidated financial statements.

Revenue Recognition

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

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.

Software Revenues:

Software revenues are generated primarily from sales of software licenses at the time the software is unlocked and the term commences. Most of the licenses are for one year or less. Along with the license, a de minimis amount of customer support is provided to assist the customer with the software. Should the customer need more than a de 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. 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.

Grant revenue:

Table of Contents

The Company receives government assistance in the form of cash grants which vary in size, duration, and conditions from domestic governmental agencies. Accounting for the grant revenue does not fall under ASC 606, Revenue from Contracts with Customers. For government assistance in which no specific US GAAP applies, the Company accounts for such transactions as revenue and by analogy to a grant model. The grant revenue is recognized on a gross basis. The grant revenue is recognized over the duration of the program when the conditions attached to the grant are achieved. If conditions are not satisfied, the grants are often subject to reduction, repayment, or termination. The Company classifies the impact of government assistance on the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income as services revenue.

The Company received assistance from domestic governmental agencies to provide reimbursement for various costs incurred for research and development. These include direct grant awards and subawards. The grants awarded are currently set to expire at various dates through 2025. The Company recognized $0.2 million and $0.4 million for the three months ended November 30, 2024 and 2023, respectively, within Services revenues on the Condensed Consolidated Statements of Operations and Comprehensive Income related to such assistance. Amounts that have been earned but not yet funded are included in accounts receivable. Computer equipment allowable by the grants are classified under fixed assets. Subawards due to unrelated entities are classified under accrued expenses.

Remaining Performance Obligations

As of November 30, 2024, remaining performance obligations were $11.2 million, 97% of the remaining performance obligations are expected to be recognized over the next twelve months, with the remainder expected to be recognized thereafter.

Disaggregation of Revenues

The components of revenue for the three months ended November 30, 2024 and 2023, respectively were as follows:



	Three Months Ended
(in thousands)		November 30, 2024		November 30, 2023
Software licenses
Point in time		$	10,119	$	7,321
Over time		596		268
Services
Over time		8,209		6,911
Total revenues		$	18,924	$	14,500

Contract Balances

Contract asset excluding accounts receivable balances as of November 30, 2024, and August 31, 2024, were $5.6 million and $5.9 million respectively.

During the three months ended November 30, 2024, the Company recognized $1.5 million of revenue that was included in contract liabilities as of August 31, 2024, and during the three months ended November 30, 2023, the Company recognized $2.2 million of revenue that was included in contract liabilities as of August 31, 2023.

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.

Table of Contents

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 Ended
(in thousands)		November 30, 2024		November 30, 2023
Balance, beginning of period		$	149	$	46
Provision for credit losses		4		(9)
Write-offs		(8)		—
Balance, end of period		$	145	$	37

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 AFS 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 AFS 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. As of November 30, 2024, all of our investments were classified as AFS. During the three months ended November 30, 2024 and for the year ended August 31, 2024, all of our investments were classified as AFS.

Research & Development and Capitalized Software Development Costs

Research and development ("R&D") activities include both enhancement of existing products and development of new products. Development of new products and adding functionality to existing products are capitalized in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 985-20, “Costs of Software to Be Sold, Leased, or Marketed.” R&D expenditures, which primarily relate to both capitalized and expensed salaries, R&D supplies, and R&D consulting, were $2.6 million during the three months ended November 30, 2024, of which $0.7 million was capitalized. R&D expenditures during the three months ended November 30, 2023 were $2.2 million, of which $0.9 million was capitalized.

Table of Contents

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 $0.8 million and $0.4 million for the three months ended November 30, 2024 and 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:


Equipment			5 years
Computer equipment			3 to 7 years
Furniture and fixtures			5 to 7 years
Leasehold improvements			Shorter 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 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 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 November 30, 2024:

Table of Contents


(in thousands)
ROU assets	$	1,342
Lease liabilities, current	$	485
Lease liabilities, long-term	$	835
Operating lease costs	$	147
Weighted-average remaining lease term	4.52 years
Weighted-average discount rate	4.71		%

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 of intangible assets 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.

Reconciliation of Goodwill for the three months ended November 30, 2024:


(in thousands)	CPP		QSP		ALI		MC		Total



Balance, August 31, 2024	$	7,323	$	11,776	$	31,108	$	45,871	$	96,078
Addition	—		—		—		—		—
Measurement period adjustment*	—		—		92		135		227
Impairments	—		—		—		—		—
Balance, November 30, 2024	$	7,323	$	11,776	$	31,200	$	46,006	$	96,305

*Adjustment for net working capital & excess cash settlement in association with Pro-ficiency acquisition

The following table summarizes other intangible assets as of November 30, 2024:


(in thousands)	Amortization Period	Acquisition Value		Accumulated Amortization		Net Book Value
Trade names	None	$	12,610	$	—	$	12,610
Covenants not to compete	Straight line 2 to 3 years	100		33		67
Other internal use software	Straight line 3 to 13 years	794		60		734
Customer relationships	Straight line 8 to 14 years	10,540		2,980		7,560
ERP	Straight line 15 years	2,529		424		2,105

		$	26,573	$	3,497	$	23,076

The following table summarizes other intangible assets as of August 31, 2024:

Table of Contents


(in thousands)	Amortization Period	Acquisition Value		Accumulated Amortization		Net Book Value
Trade names	None	$	12,610	$	—	$	12,610
Covenants not to compete	Straight line 2 to 3 years	100		23		77
Other internal use software	Straight line 3 to 13 years	608		47		561
Customer relationships	Straight line 8 to 14 years	10,540		2,726

SEC Form 10-Q filed by Simulations Plus Inc.