Simulations Plus(US:SLP)2025-07-15 12:02PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements The company's financials reflect a significant net loss and asset decrease due to a $77.2 million impairment charge Condensed Consolidated Balance Sheets Total assets and shareholders' equity declined significantly, driven by major impairment charges to goodwill Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | May 31, 2025 | August 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $26,950 | $10,311 | +$16,639 | | Total current assets | $51,775 | $39,341 | +$12,434 | | Goodwill | $43,487 | $96,078 | -$52,591 | | Intellectual property, net | $6,464 | $23,130 | -$16,666 | | Other intangible assets, net | $12,368 | $23,210 | -$10,842 | | Total assets | $134,360 | $196,639 | -$62,279 | | Total liabilities | $10,581 | $14,208 | -$3,627 | | (Accumulated deficit) retained earnings | ($33,683) | $30,354 | -$64,037 | | Total shareholders' equity | $123,779 | $182,431 | -$58,652 | Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income Revenue grew but a $77.2 million impairment charge led to a substantial net loss for the quarter and nine-month period Statement of Operations Highlights (in thousands, except per share data) | Metric | Q3 2025 | Q3 2024 | % Change | 9 Months 2025 | 9 Months 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $20,363 | $18,544 | 10% | $61,719 | $51,349 | 20% | | Gross Profit | $13,032 | $13,257 | -2% | $36,377 | $36,326 | 0% | | Impairments | $77,221 | $0 | N/A | $77,221 | $0 | N/A | | (Loss) Income from Operations | ($74,226) | $1,880 | -4048% | ($71,388) | $7,282 | -1080% | | Net (Loss) Income | ($67,317) | $3,137 | -2246% | ($64,037) | $9,111 | -803% | | Diluted (Loss) EPS | ($3.35) | $0.15 | -2333% | ($3.19) | $0.45 | -809% | Condensed Consolidated Statements of Cash Flows Operating cash flow remained positive, supported by a large non-cash impairment charge offsetting the net loss Cash Flow Summary (in thousands) | Activity | Nine Months Ended May 31, 2025 | Nine Months Ended May 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $12,539 | $11,656 | | Net cash provided by investing activities | $5,353 | $45,533 | | Net cash used in financing activities | ($1,253) | ($5,620) | | Net increase in cash and cash equivalents | $16,639 | $51,569 | Notes to Condensed Consolidated Financial Statements Notes detail a $77.2M impairment charge, a 10% workforce reduction, and segment performance post-acquisition - In Q3 2025, the company recorded total impairment charges of $77.2 million due to revenue underperformance and a significant stock price decline5963141 - The company executed a restructuring plan at the end of Q3 2025, reducing its workforce by approximately 10% for annualized savings of approximately $4.3 million119120 Segment Performance - Nine Months Ended May 31, 2025 (in thousands) | Segment | Revenues | Gross Profit | Gross Margin | | :--- | :--- | :--- | :--- | | Software | $36,814 | $29,049 | 79% | | Services | $24,905 | $7,328 | 29% | | Total | $61,719 | $36,377 | 59% | - The company's business now comprises six business units following the Pro-ficiency acquisition1719 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses revenue growth from acquisitions, margin decline, and the impact of a $77.2M impairment charge - For the nine months ended May 31, 2025, revenue increased 20% to $61.7 million, driven by the Pro-ficiency acquisition146 - Gross margin for the nine-month period declined to 59% from 71%, largely attributed to the underperformance of Pro-ficiency revenues147149 - A triggering event, identified as revenue underperformance and a stock price decline, led to $77.2 million in impairment charges141154 - The company used $100 million in cash for the Pro-ficiency acquisition and held $27.0 million in cash as of May 31, 2025160168 Quantitative and Qualitative Disclosures about Market Risk The company reports no material change in its market risk exposure since the last Annual Report - There has been no material change in the company's exposure to market risk since the last Annual Report192 Controls and Procedures Management concluded that disclosure controls and procedures were effective with no material changes to internal controls - Management concluded that as of May 31, 2025, the company's disclosure controls and procedures were effective193 - No material changes to internal control over financial reporting occurred during the most recent fiscal quarter194 PART II. OTHER INFORMATION Legal Proceedings The company is not a party to any material legal proceedings - The company is not a party to any material legal proceedings101196 Risk Factors Updated risks include liquidity post-acquisition, AI implementation, and potential government regulatory changes - The $100 million cash payment for the Pro-ficiency acquisition has created potential liquidity and cash flow risks198 - The company identifies risks related to its use of AI, including flawed algorithms and an evolving, uncertain legal and regulatory environment199202203 - Changes in government regulation, including from the new Department of Government Efficiency (DOGE), could adversely impact business204205206 Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities or share repurchases during the period - There were no unregistered sales of equity securities in the period207 - The company did not repurchase any of its shares during the three and nine months ended May 31, 2025172208 Defaults upon Senior Securities The company reported no defaults upon senior securities - None209 Mine Safety Disclosures This item is not applicable to the company - Not applicable210 Other Information A director adopted a prearranged Rule 10b5-1 stock trading plan for the potential sale of company shares - On April 29, 2025, Director Dr. Lisa LaVange adopted a Rule 10b5-1 trading plan for the potential sale of up to 4,100 shares of common stock211 Exhibits This section lists exhibits filed with the Form 10-Q, including agreements and officer certifications - Exhibits filed include acquisition agreements, corporate governance documents, and required CEO/CFO certifications217