COMMITMENTS AND CONTINGENCIES

12 Months Ended

Aug. 31, 2021

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 7 – COMMITMENTS AND CONTINGENCIES

Leases

Our corporate headquarters is located in Lancaster, California, where we lease 9,255 square feet of office space. The term of the lease extends to January 31, 2026 and the base rent is approximately $17 thousand per month. The lease agreement gives the Company the right, upon 180 days’ prior notice, to opt out of all or part of the last four years of the term, with no penalty.

We lease 12,623 square feet of office space in Buffalo, New York. The initial five-year lease term expired in October 2018; and was renewed for a three-year option, extending it to November 2021 at a base rent of approximately $16 thousand per month. On August 3, 2021, a new lease agreement was signed for a different property for a five-year term at a base rent of approximately $7 thousand per month with an annual 2% increase, and with two, five-year renewal options. Due to ongoing construction, the Company has not yet moved into the new property but anticipates doing so and commencing the lease term no later than November 2021.

We lease approximately 2,700 square feet of space in Research Triangle Park, North Carolina. The initial three-year term was due to expire in October 2020. An amendment to the initial lease became effective on April 1, 2020, which added 686 square feet and extended the term of the lease to September 30, 2023. The new base rent is approximately $8 thousand per month with an annual 3% increase.

We lease approximately 2,300 square feet of office space in Paris, France. As of April 1, 2020, the lease agreement had minimum payments equaling approximately $288 thousand. The lease is for a 9-year term, with an option to terminate every 3 years, and expires in November of 2024. The base rent is $16 thousand per quarter (approximately $5.3 thousand per month) and can be adjusted each December based on a consumer price index.

Rent expense, including common area maintenance fees for the years ended August 31, 2021, 2020 and 2019 was $655 thousand, $644 thousand and $584 thousand, respectively. 

Lease liability maturities as of August 31, 2021, were as follows:

(in thousands)       Years Ending August 31,	Amount
2022	$	422
2023		375
2024		275
2025		211
2026		83
Total undiscounted liabilities		1,366
Less: imputed interest		(88	)
Total future minimum lease payments	$	1,278

Line of Credit

On March 31, 2020, the Company entered into a Credit Agreement with Wells Fargo Bank, N.A. The Credit Agreement, has provided the Company with a credit facility of $3,500,000 through April 15, 2022. As of August 31, 2021, there were no amounts drawn against the line of credit. Interest accrues daily at the bank’s base rate. The base rate is the rate equal to the highest of (i) the Prime Rate in effect, (ii) 1.5% above Daily One Month LIBOR, and (iii) the Federal Funds Rate plus 1.5%. The rate as of August 31, 2021, was 3.25%. Under the terms of the agreement the borrower is to maintain a zero balance under this line of credit for a period of thirty consecutive days during each 12-month period commencing March 31, 2020. The Credit Agreement is collateralized by the assets of the Simulations Plus Division and is subject to certain financial covenants.

Employment Agreements

In the normal course of business, the Company has entered into employment agreements with certain of its key management personnel that may require compensation payments upon termination.

License Agreement

The Company had a royalty agreement with Dassault Systèmes Americas Corp. for access to their Metabolite Database for developing our Metabolite Module within ADMET Predictor. The module was renamed the Metabolism Module when we released ADMET Predictor version 6 on April 19, 2012. Under this agreement, we paid a royalty of 25% of revenue derived from the sale of the Metabolism/Metabolite module. This agreement was renegotiated, and the Company does not bear any royalty obligations towards Dassault Systèmes Americas Corp. effective June 30, 2019. In addition, the license agreement terminated on September 5, 2020. Under this agreement for the years ended August 31, 2021, 2020 and 2019 we incurred royalty expense (benefit) of $0, $(26) thousand and $196 thousand, respectively. We have not experienced any adverse impact on revenue since terminating the license agreement. In addition, the Company has developed a database to replace the Metabolite Database, which was completed at the end of fiscal year 2021.

Litigation

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