SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

	☒	Quarterly Report Pursuant to Section 13 or 15(d) of the Security Exchange Act of 1934 for the quarterly period ended February 28, 2021

OR

	☐	Transmission Report Pursuant to Section 13 or 15(d) of the Security Exchange Act of 1937 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.)

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 filings requirements for the past 90 days. Yes ☒ No ☐

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 ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated 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):

☐ Large accelerated filer	☐ Accelerated filer
☒ Non-accelerated Filer	☒ Smaller reporting company
☐ 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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the registrant’s common stock, par value $0.001 per share, as of April 12, 2021 was 20,107,895; no shares of preferred stock were outstanding.

Simulations Plus, Inc.

FORM 10-Q

For the Quarterly Period Ended February 28, 2021

Table of Contents

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

	Condensed Consolidated Balance Sheets at February 28, 2021 and August 31, 2020	3

	Condensed Consolidated Statements of Operations and Comprehensive Income for the three and six months ended February 28, 2021 and February 29, 2020	4

	Condensed Consolidated Statements of Shareholders’ Equity for the three and six months ended February 28, 2021 and February 29, 2020	5

	Condensed Consolidated Statements of Cash Flows for the six months ended February 28, 2021 and February 29, 2020	6

	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	37

Item 4.	Controls and Procedures	37

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	38

Item 1A.	Risk Factors	38

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38

Item 3.	Defaults upon Senior Securities	38

Item 4.	Mine Safety Disclosures	38

Item 5.	Other Information	38

Item 6.	Exhibits	38

	Signatures	39

Part I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

SIMULATIONS PLUS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


	(Unaudited)		(Audited)
	February 28,		August 31,
(in thousands, except share and per share amounts)	2021		2020
ASSETS
Current assets
Cash and cash equivalents	$	42,385	$	49,207
Accounts receivable, net of allowance for doubtful accounts of $100 and $50		11,306		7,422
Revenues in excess of billings		3,837		3,093
Prepaid income taxes		1,250		970
Prepaid expenses and other current assets		1,408		1,596
Short-term investments		75,367		66,804
Total current assets		135,553		129,092
Long-term assets
Capitalized computer software development costs, net of accumulated amortization of $14,271 and $13,582		6,871		6,087
Property and equipment, net		924		438
Operating lease right of use assets		1,532		927
Intellectual property, net of accumulated amortization of $5,801 and $5,087		11,184		11,898
Other intangible assets, net of accumulated amortization of $1,917 and $1,642		6,733		7,008
Goodwill		12,921		12,921
Other assets		51		51
Total assets	$	175,769	$	168,422

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable	$	400	$	351
Accrued payroll and other expenses		2,891		2,251
Current portion - contracts payable		2,000		2,000
Billings in excess of revenues		258		141
Operating lease liability, current portion		469		463
Deferred revenue		523		300
Total current liabilities		6,541		5,506

Long-term liabilities
Deferred income taxes, net		2,360		2,354
Operating lease liability		1,064		463
Payments due under contracts payable		4,307		4,064
Total liabilities		14,272		12,387

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, 20,059,528 and 19,923,277 shares issued and outstanding		130,713		128,541
Retained earnings		30,730		27,436
Accumulated other comprehensive income		54		58
Total shareholders' equity		161,497		156,035
Total liabilities and shareholders' equity	$	175,769	$	168,422

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

SIMULATIONS PLUS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

For the three and six months ended February 28, 2021 and February 29, 2020


(in thousands, except per common share amounts)	Three Months Ended						Six Months Ended
	(Unaudited)						(Unaudited)
	2021			2020			2021			2020
Revenues	$	13,147		$	10,350		$	23,848		$	19,751
Cost of revenues		2,911			2,666			5,344			5,309
Gross margin		10,236			7,684			18,504			14,442
Operating expenses
Selling, general, and administrative		5,458			4,110			9,866			7,623
Research and development		1,292			748			2,101			1,274
Total operating expenses		6,750			4,858			11,967			8,897

Income from operations		3,486			2,826			6,537			5,545

Other income (expense)
Interest income		58			12			119			22
Interest expense		(22	)		–			(22	)		–
Change in value of contingent consideration		(122	)		–			(243	)		–
Income/(Loss) on currency exchange		23			(2	)		28			2
Total other income (expense)		(63	)		10			(118	)		24

Income before provision for income taxes		3,423			2,836			6,419			5,569
Provision for income taxes		(212	)		(686	)		(729	)		(1,361	)
Net Income	$	3,211		$	2,150		$	5,690		$	4,208

Earnings per share
Basic	$	0.16		$	0.12		$	0.28		$	0.24
Diluted	$	0.15		$	0.12		$	0.27		$	0.23

Weighted-average common shares outstanding
Basic		20,006			17,638			19,968			17,624
Diluted		20,842			18,316			20,786			18,306

Other Comprehensive Income (Loss), net of tax
Foreign currency translation adjustments		(4	)		–			(4	)		–
Comprehensive Income	$	3,207		$	2,150		$	5,686		$	4,208

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

SIMULATIONS PLUS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

For the three and six months ended February 28, 2021 and February 29, 2020


(in thousands, except per common share amounts)	Three Months Ended						Six Months Ended
	(Unaudited)						(Unaudited)
	2021			2020			2021			2020
Common stock and additional paid in capital
Balance, beginning of period	$	129,253		$	15,830		$	128,541		$	15,327
Exercise of stock options		656			167			836			303
Stock-based compensation		717			345			1,166			640
Shares issued to Directors for services		87			72			170			144
Balance, end of period	$	130,713		$	16,414		$	130,713		$	16,414

Retained earnings
Balance, beginning of period	$	28,720		$	23,357		$	27,436		$	22,355
Declaration of dividend		(1,201	)		(1,059	)		(2,396	)		(2,115	)
Net income		3,211			2,150			5,690			4,208
Balance, end of period	$	30,730		$	24,448		$	30,730		$	24,448

Accumulated other comprehensive income
Balance, beginning of period	$	58		$	–		$	58		$	–
Other comprehensive income (loss)		(4	)		–			(4	)		–
Balance, end of period	$	54		$	–		$	54		$	–
Total shareholders’ equity		–			–			156,035			–
Other comprehensive income (loss)		–			–			–			–
Total shareholders’ equity	$	161,497		$	40,862		$	161,497		$	40,862
Common dividends declared per common share	$	0.06		$	0.06		$	0.12		$	0.12

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

SIMULATIONS PLUS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended
(in thousands)	February 28, 2021			February 29, 2020
Cash flows from operating activities
Net income	$	5,690		$	4,208
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		1,776			1,345
Change in value of contingent consideration		243			–
Amortization of note premiums		1,276			–
Stock-based compensation		1,336			784
Deferred income taxes		6			(17	)
Currency translation adjustments		(4	)		–
(Increase) decrease in
Accounts receivable		(3,884	)		(2,218	)

SEC Form 10-Q filed by Simulations Plus, Inc.