Simulations Plus Inc

Current report

Cash expenditures associated with the acquisition of Pro-ficiency may create certain liquidity and cash flow risks for us.

Current report

As consideration for the acquisition of Pro-ficiency, at closing on June 11, 2024 we paid approximately $100 million in cash to the previous equity holders of Pro-ficiency, which constituted a significant portion of our cash reserves as of the closing date. In addition to the acquisition consideration, we incurred significant transaction costs and expect to incur additional integration costs in connection with the acquisition. While we anticipated that the closing consideration and transactions costs would be incurred, there are many factors beyond our control that could affect the total amount of the integration expenses associated with the acquisition. Moreover, many of the expenses that will be incurred are, by their nature, difficult to estimate accurately. To the extent the integration expenses are higher than anticipated, we may experience liquidity or cash flow issues.

Current report

Pro-ficiency and its operating subsidiaries may not perform as we or the market expects, which could have an adverse effect on the price of our common stock.

Current report

Pro-ficiency, which is now a wholly owned subsidiary of the Company, and its operating subsidiaries may not perform as we or the market expects. Risks associated with the Pro-ficiency acquisition include, without limitation:

Current report

•integrating businesses is a difficult, expensive, and time-consuming process, and the failure to successfully integrate our businesses with the business of Pro-ficiency in the expected time frame could adversely affect our financial condition and results of operation;

Current report

•the addition of Pro-ficiency has increased the size of our operations, and, if we are not able to manage our expanded operations effectively, our common stock price may be adversely affected;

Current report

•the extent to which we may realize the expected synergies and cost savings is uncertain at this time; and

Current report

•the success of the Pro-ficiency acquisition will also depend upon relationships with third parties and Pro-ficiency’s and our pre-existing customers, which relationships may be affected by customer preferences or public attitudes about the Pro-ficiency acquisition. Any adverse changes in these relationships could adversely affect our business, financial condition, and results of operations.

Current report

The obligations and liabilities of Pro-ficiency, some of which may be unanticipated or unknown, may be greater than we have anticipated, which may diminish the value of Pro-ficiency to us.

Current report

Pro-ficiency’s obligations and liabilities, some of which may not have been fully disclosed to us, may be greater than we have anticipated. The obligations and liabilities of Pro-ficiency could have a material adverse effect on our business or Pro-ficiency’s value to us or on our business, financial condition, or results of operations. Although $0.5 has been placed in escrow to cover any negative net working capital adjustments (if any) and we have purchased the $10 million R&W Insurance Policy to cover the sellers’ and Pro-ficiency’s indemnification obligations under the Purchase Agreement, the escrowed amount and/or the R&W Policy may not be sufficient to cover all claims brought against us or Pro-ficiency in the future in relation to Pro-ficiency’s’ business or operations and certain claims may be excluded from coverage under the R&W Insurance Policy. In the event that we are responsible for liabilities substantially in excess of the escrowed amount and/or any other amounts recovered through the R&W Insurance Policy, other rights to indemnification under the Purchase Agreement or alternative remedies that might be available to us, or any other applicable insurance, we could suffer severe consequences that would substantially reduce our earnings and cash flows or otherwise materially and adversely affect our business, financial condition, or results of operations.