Simulations Plus, Inc.

For the Fiscal Year Ended August 31, 2025

NOTE 1 –DESCRIPTION OF BUSINESS

Simulations Plus, Inc. was incorporated in California on July 17, 1996. The Company is a global leader and premier provider in the biopharma sector, offering advanced software and consulting services that enhance drug discovery and development, clinical trial operations, and commercialization. The Company supports its clients across the drug development lifecycle from the early discovery through all phases of clinical research and development (“R&D”), including clinical operations, to product commercialization. The Company serves clients as a strategic partner throughout the entire drug development lifecycle, offering solutions that integrate scientific software platforms, artificial intelligence-augmented insights, and expert consulting. This optimizes efficiency, costs, and time-to-market for our clients and enhances our competitive position.

Effective January 1, 2025, the Company merged Pro-ficiency with and into the Company through a short-form merger (the “Merger”). To effectuate the Merger, the Company filed Certificates of Ownership with the Secretaries of State of the states of Delaware (Pro-ficiency's state of incorporation) and California (the Company’s state of incorporation). Consummation of the Merger was not subject to approval of the Company’s stockholders and did not impact the rights of the Company’s stockholders.

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.

Basis of Presentation and 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 Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 606, we determine revenue recognition through the following steps:

i. Identification of the contract, or contracts, with a client

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 primarily derived from the sale of software licenses, which are recognized at the time the software is unlocked and the license term begins. Most licenses are for a duration of one year or less.

In addition to the software license, we provide a minimal level of client support to assist clients with software usage. If clients require more extensive support, they may enter into a separate agreement for additional training services and maintenance.

The majority of the software is installed on clients’ servers, and the Company does not maintain control over the software post-sale, except through licensing parameters that govern the number of users, accessible modules, and license expiration dates.

The Pro-ficiency adaptive learning platform includes software customization by incorporating content tailored to specific needs. Following customization, it generates a recurring revenue stream throughout the duration of a clinical trial. Revenue is recognized over time.

Payments are generally due upon invoicing on a net-30 basis, unless alternative payment terms are negotiated with the client based on their payment history. Standard industry practices 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.

Services Revenue:

Consulting services provided to our clients 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 client under the contracts. Payments are generally due upon invoicing on a net-30 basis, unless other payment terms are negotiated with the client based on client history. Standard industry practices apply.

Grant revenue:

The Company receives government awards in the form of cash grants that vary in size, duration, and conditions from domestic governmental agencies. Accounting for grant revenue does not fall under ASC 606, Revenue from Contracts with Clients. For government awards 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 Consolidated Statements of Operations and Comprehensive (Loss) 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$0.7 million, $1.0 million, and $1.1 million for the fiscal years ended August 31, 2025, 2024, and 2023, respectively within Services revenues on the Consolidated Statements of Operations and Comprehensive (Loss) 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 is classified under fixed assets. Subawards due to unrelated entities are classified under accrued expenses.

Remaining Performance Obligations

As of August 31, 2025, remaining performance obligations were $12.1 million;95% 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 fiscal years ended August 31, 2025, 2024, and 2023 were as follows:

Contract Balances

Contract assets excluding accounts receivable balances as of August 31, 2025, 2024, and 2023, were $4.9 million, $5.9 million, and $2.7 million, respectively. This balance is included in Prepaid and Other Current Assets on the Consolidated Balance Sheets.

During the fiscal year ended August 31, 2025 and August 31, 2024, the Company recognized $1.8 million and $2.9 million of revenue, respectively, that was included in contract liabilities as of August 31, 2024 and 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 client. 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 Consolidated Statements of Operations and Comprehensive (Loss) Income as sales and marketing expense.

Cash and Cash Equivalents

For purposes of the Consolidated Statements of Cash Flows, we consider all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.

Accounts Receivable and Allowance for Credit Losses

The Company extends credit to its clients 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 client 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:

Effective July 11, 2025, Simulations Plus, Inc. holds a $1,000,000 unsecured and subordinated convertible promissory note from Nurocor, Inc., a privately held Delaware corporation. The note bears interest at 10% annually and matures on July 11, 2030, unless converted earlier under specified conditions. As of August 31, 2025, principal and accrued interest income on the unsecured and subordinated convertible promissory note were $1,000,000 and $13,973.

The note is classified as a note receivable under ASC 310 and is carried at amortized cost. Interest income is accrued using the stated rate. The note is subject to periodic credit risk evaluations. As of August 31, 2025, no impairment has been recognized. This is recorded within other long-term assets on the Consolidated Balance Sheets.

The note includes multiple conversion features: (i) at the Company’s election into Nurocor Class B Common Stock at $0.15 per share, (ii) automatic conversion into securities issued in a qualified equity financing at the lower of a 20% discount to the financing price or $0.15 per share, and (iii) optional conversion upon a Change of Control. In addition, upon a Liquidation Event, the Company is entitled to repayment of principal, accrued interest, and a 50% premium, or if greater, consideration equivalent to conversion at $0.15 per share.

The conversion features were evaluated under ASC 815 and determined not to meet the definition of a derivative requiring bifurcation. The Company also holds related governance rights, including a board observer seat and access to financial statements rights, which do not affect the accounting classification but are disclosed as part of the overall investment terms.

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 debt 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 reassess the appropriateness of that classification at each reporting date. As of August 31, 2025 and 2024, all of our investments were classified as AFS.

Research & Development ("R&D") Capitalized Software Development Costs

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 FASB 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 $9.8 million during the fiscal year ended 2025, of which $3.0 million was capitalized. R&D expenditures were $9.0 million during fiscal year 2024, of which $3.3 million was capitalized. R&D expenditures during fiscal year 2023 were $7.8 million, of which $3.3 million was capitalized.

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.

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 $3.1 million, $2.1 million, and $1.5 million for the fiscal years ended August 31, 2025, 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. In connection with the identified triggering event mentioned below as of May 31, 2025, the Company performed, prior to the goodwill impairment test, a quantitative assessment of its long-lived assets and concluded that its long-lived assets were impaired at certain reporting units. The Company recorded impairment charges for its capitalized computer software development costs of $1.2 million at the Clinical Operations reporting unit. Such charges are recorded in impairments on the Consolidated Statements of Operations and Comprehensive (Loss) Income.

No impairment losses were recorded during the fiscal year ended August 31, 2024.

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:

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 and Comprehensive (Loss) Income. 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 August 31, 2025 and 2024:

Intangible Assets, Goodwill and Impairments

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 client 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 on the last day of the fiscal year 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.

Goodwill is tested for impairment at the reporting unit level, which is one level below or the same as an operating segment.

The company announced the reorganization of its internal structure at the end of the third quarter of fiscal 2025, and reorganized the internal structure to align products and services into integrated solution areas. The Company changed the composition of our reporting units under ASC 350, Intangibles - Goodwill and Other as part of our Q4 2025 reorganization. Because each former reporting unit moved in its entirety into a single new reporting unit, the related carrying amounts, including goodwill, were carried forward without reallocation. Consistent with ASC 350, we evaluated goodwill immediately before and immediately after the change and assessed the fair value to be the same.

Prior to the reorganization, the Company hadnine reporting units, Cheminformatics ("CHEM") software, Physiologically Based Pharmacokinetics ("PBPK") software, PBPK services, Clinical Pharmacology and Pharmacometrics ("CPP") software, CPP services, Quantitative Systems Pharmacology ("QSP") software, QSP Services, Adaptive Learning & Insights ("ALI") software, and Medical Communications ("MC") services. Following the reorganization, management began to review operating performance and allocate resources based on two new reporting units, Software and Services.

The former reporting unit's goodwill and net assets directly combine into the new reporting units, and as such, the Company did not reassign goodwill to the new reporting units.

The Company performed a qualitative assessment immediately before the reorganization and determined that indicators of impairment existed and a quantitative assessment was needed. As detailed below, the Company recognized $51.6 million in impairment charges in the third quarter of fiscal 2025.

When evaluating these assets for impairment, we may first perform a qualitative assessment to determine whether it is more likely than not that a reporting unit is impaired, known as Step 0. If we do not perform a qualitative assessment, or if we determine that it is not more likely than not that the fair value of the reporting unit exceeds its carrying amount, we would calculate the estimated fair value of the reporting unit using discounted cash flows or a combination of discounted cash flow and market approaches. The Company performed a qualitative assessment immediately after the reorganization and determined that no indicators of impairment existed.

The change in reporting units did not impact the Company’s consolidated financial statements for prior periods. However, beginning in the fourth quarter of fiscal 2025, segment results and goodwill disclosures reflect the new reporting unit structure.

During the third quarter of 2025, the Company identified the underperformance of revenue at various reporting units relative to forecasts utilized in the purchase price allocation and the significant stock price decline in relative terms and in comparison to peers as a triggering event (the "triggering event") as of May 31, 2025, indicating goodwill may be impaired. Accordingly, the Company conducted a quantitative impairment test of its goodwill as of May 31, 2025 for all reporting units. The Company estimated the implied fair value of its reporting units using an income and market approach. As a result of the quantitative impairment test performed, the Company determined that goodwill was impaired for its Software and Services reporting units and recorded a goodwill impairment charge of $15.7 million and $35.9 million, respectively, during the period ended May 31, 2025. Such charges are recorded in impairments on the Consolidated Statements of Operations and Comprehensive (Loss) Income.

The income approach was based upon projected future cash flows that were discounted to present value. The key underlying assumptions included forecasted revenues, gross profit and operating expenses, terminal growth rate, as well as an applicable discount rate for each reporting unit. The key assumptions in the market approach were the earnings multiple and market participant acquisition premium. Fair-value estimates are based on a complex series of judgments about future events and rely heavily on estimates and assumptions that have been deemed reasonable by the Company. Changes in the estimates or assumptions used in the quantitative impairment test could materially affect the determination of fair value of the Company’s reporting units and the associated goodwill impairment assessment. Potential events and circumstances that could have an adverse impact on our estimates and assumptions include, but are not limited to, lower than expected bookings growth, increases in costs, and other macroeconomic factors.

Below is a reconciliation of the changes in Goodwill carrying value per reportable segment:

*The Company had measurement period adjustments due to additional knowledge gained since June 11, 2024. The adjustments included a net working capital & excess cash settlement ($0.2 million) and deferred taxes related to the Pro-ficiency acquisition ($1.0 million). These have been allocated to the Software and Services reporting units.

The following table summarizes other intangible assets as of August 31, 2025:

The Company reviews indefinite-lived intangible assets, consisting of trade names in accordance with ASC 350 Intangibles - Goodwill and other, for impairment annually or when an event occurs that may indicate potential impairment. In connection with the identified triggering event as of May 31, 2025, the Company performed, prior to the goodwill impairment test, a quantitative assessment of its indefinite-lived assets by comparing discounted future cash flows to the net carrying value of the underlying assets, and concluded that its indefinite-lived intangible assets were impaired. The Company recorded impairment charges for its indefinite-lived intangible assets for its Software and Services reporting units of $4.9 million and $0.8 million, respectively, during the period ended May 31, 2025. Such charges are recorded in impairments on the Consolidated Statements of Operations and Comprehensive (Loss) Income.

During the third quarter of fiscal 2025, the Company recognized an impairment charge of $77.2 million. Subsequent to the quarter-end, the Company refined the allocation of this impairment between goodwill and indefinite-lived intangible assets as the valuation was finalized. The total impairment charge remains unchanged.

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

Total amortization expense for the fiscal years ended August 31, 2025, August 31, 2024, and August 31, 2023 was $1.2 million, $1.1 million, and $0.6 million, respectively.

The estimated future amortization of finite-lived intangible assets for the next five fiscal years are as follows:

The weighted-average amortization period for other internal use software is 11.2 years, customer relationships is 7.6 years, and ERP is 11.3 years.

The Company accounts for the impairment and disposition of long-lived assets in accordance with ASC 360, Property, Plant, and Equipment. Long-lived assets to be held and used are reviewed for events or changes in circumstances that indicate that their carrying value may not be recoverable. The Company measures recoverability by comparing the carrying amount of an asset to the expected future undiscounted net cash flows generated by the asset. If the Company determines that the asset may not be recoverable, or if the carrying amount of an asset exceeds its estimated future undiscounted cash flows, it recognizes an impairment charge to the extent of the difference between the fair value and the asset's carrying amount. In connection with the identified triggering event as of May 31, 2025, the Company performed, prior to the goodwill impairment test, a quantitative assessment of its long-lived assets and concluded that its long-lived assets were impaired at certain reporting units. The Company recorded impairment charges for its long-lived assets for its Software and Services reporting units of $15.7 million and $4.2 million, respectively, during the period ended May 31, 2025. Such charges are recorded in impairments on the Consolidated Statements of Operations and Comprehensive (Loss) Income. No impairment losses were recorded for the fiscal year ended August 31, 2024.

Fair Value of Financial Instruments

Assets and liabilities recorded at fair value in the Consolidated Balance Sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair value. The categories are as follows:

For certain of the Company's financial instruments, including accounts receivable, accounts payable, and accrued compensation and other accrued expenses, the carrying amounts are representative of their fair values due to their short maturities.

The Company invests a portion of excess cash in short-term debt securities. Short-term debt securities investments as of August 31, 2025 and 2024, consisted of corporate bonds and term deposits with maturities remaining of less than 12 months. In addition, under the fair-value hierarchy, the fair market values of the Company’s cash equivalents and investments are Level I. The Company may also invest excess cash in certificates of deposit, money market accounts, government-sponsored enterprise securities, and/or commercial paper. The Company accounts for its investments in accordance with ASC 320, Investments - Debt and Equity Securities. As of August 31, 2025 and 2024 all investments were classified as AFS securities. Unrealized losses on investments as of August 31, 2025, and August 31, 2024, were primarily caused by rising interest rates rather than changes in credit quality; thus, the Company didnot record an allowance for credit losses.

The following tables summarize our short-term investments and cash equivalents as of August 31, 2025 and 2024:

During fiscal 2025, the Company completed the final payment of $1.6 million related to the holdback liability from the acquisition of Immunetrics, Inc. (“Immunetrics”). Additionally, based on earned revenue for Immunetrics during the second earnout measurement period, the Company has assessed the fair value of the earnout liability to be zero. As of August 31, 2024, the Company had a liability for contingent consideration related to its acquisition of Immunetrics. The fair value measurement of the contingent consideration obligations is determined using Level 3 inputs. The fair value of contingent consideration obligations is based on a discounted cash flow model using a probability-weighted income approach. These fair value measurements represent Level 3 measurements as they are based on significant inputs not observable in markets. Significant judgment is employed in determining the appropriateness of these assumptions as of the acquisition date and for each subsequent period. Accordingly, changes in assumptions could have a material impact on the amount of contingent consideration expense the Company records in any given period. Changes in the fair value of the contingent consideration obligations are presented in the Company’s Consolidated Statements of Operations and Comprehensive (Loss) Income.

As of August 31, 2024 and 2023, the Company had a liability for contingent consideration related to its acquisition of Immunetrics. The fair value measurement of the contingent consideration obligations is determined using Level 3 inputs. The fair value of contingent consideration obligations is based on a discounted cash flow model using a probability-weighted income approach. These fair value measurements represent Level 3 measurements as they are based on significant inputs not observable in markets. Significant judgment is employed in determining the appropriateness of these assumptions as of the acquisition date and for each subsequent period. Accordingly, changes in assumptions could have a material impact on the amount of contingent consideration expense the Company records in any given period. Changes in the fair value of the contingent consideration obligations are recorded in the Company’s Consolidated Statement of Operations and Comprehensive (Loss) Income.

The following is a reconciliation of contingent consideration at fair value:

Business Combination

The acquisition method of accounting for business combinations requires us to use significant estimates and assumptions, including fair-value estimates, as of the business combination date and to refine those estimates as necessary during the measurement period (defined as the period, not to exceed one year, in which we may adjust the provisional amounts recognized for a business combination).

Under the acquisition method of accounting, we recognize separately from goodwill the identifiable assets acquired, the liabilities assumed, and any noncontrolling interests in an acquiree, generally at the acquisition-date fair value. We measure goodwill as of the acquisition date as the excess of consideration transferred, which we also measure at fair value, over the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed. Costs that we incur to complete the business combination, such as investment banking, legal, and other professional fees, are not considered part of the consideration, and we recognize such costs as general and administrative expenses as they are incurred. We also account for acquired-company restructuring activities that we initiate separately from the business combination.

Should the initial accounting for a business combination be incomplete by the end of a reporting period that falls within the measurement period, we report provisional amounts in our consolidated financial statements. During the measurement period, we adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date, and we record those adjustments to our financial statements. We apply those measurement-period adjustments that we determine to be material retrospectively to comparative information in our financial statements, including adjustments to depreciation and amortization expense.

Under the acquisition method of accounting for business combinations, if we identify changes to acquired deferred-tax asset valuation allowances or liabilities related to uncertain tax positions during the measurement period, and they relate to new information obtained about facts and circumstances that existed as of the acquisition date, those changes are considered a measurement-period adjustment and we record the offset to goodwill. We record all other changes to deferred-tax asset valuation allowances and liabilities related to uncertain tax positions in current-period income tax expense. This accounting applies to all our acquisitions regardless of acquisition date.

During the fiscal years ended August 31, 2025, 2024, and 2023, the Company recorded mergers and acquisitions expense ofzero, $2.6 million, and $3.3 million, respectively. The Company deducted $0.1 million from the final settlement of the holdback liability in connection with the Immunetrics acquisition. The Company records mergers and acquisition expenses in general and administrative expenses in the Consolidated Statements of Operations and Comprehensive (Loss) Income.

Research and Development Costs

R&D costs are charged to expense as incurred until technological feasibility has been established. These costs include salaries used in the development of our final products.

We account for income taxes in accordance with ASC 740, Income Taxes, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns.

Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities.

Intellectual property

In June 2017, as part of the acquisition of DILIsym, the Company acquired certain developed technologies associated with drug-induced liver disease (“DILI”). These technologies were valued at $2.9 million and are being amortized over 9 years under the straight-line method.

In September 2018, we purchased certain intellectual property rights of Entelos Holding Company. The cost of $0.1 million is being amortized over 10 years under the straight-line method.

In April 2020, as part of the acquisition of Lixoft, the Company acquired certain developed technologies associated with the Lixoft scientific software. These technologies were valued at $8.0 million and are being amortized over 16 years under the straight-line method.

In June 2023, we purchased certain developed technology of Immunetrics. The cost of $1.1 million is being amortized over 5 years under the straight-line method.

In June 2024, we purchased certain developed technology of Pro-ficiency. The cost of $16.6 million is being amortized over 5 years under the straight-line method.

The following table summarizes intellectual property as of August 31, 2025:

In connection with the identified triggering event as of May 31, 2025, the Company performed, prior to the goodwill impairment test, a quantitative assessment of its long-lived assets and concluded that its long-lived assets were impaired at certain reporting units. We measure recoverability by comparing the carrying amount of an asset to the expected future undiscounted net cash flows generated by the asset. If we determine that the asset may not be recoverable, or if the carrying amount of an asset exceeds its estimated future undiscounted cash flows, we recognize an impairment charge to the extent of the difference between the fair value and the asset's carrying amount. Developed technologies related to the Pro-ficiency acquisition were determined to be impaired. Such charges of $13.4 million are recorded in impairments on the Consolidated Statements of Operations and Comprehensive (Loss) Income.

The following table summarizes intellectual property as of August 31, 2024:

Total amortization expense for intellectual property agreements was $3.5 million, $2.2 million, and $1.4 million for the fiscal years ended August 31, 2025, August 31, 2024, and August 31, 2023, respectively. The Company records these in Cost of revenues - software on the Consolidated Statements of Operations and Comprehensive (Loss) Income.

The estimated future amortization of intellectual property for the next five fiscal years is as follows:

Earnings per Share

We report earnings per share in accordance with ASC 260, Earnings Per Share. Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding. Diluted earnings per share is computed similarly to basic earnings per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. However, potential dilutive securities are not reflected in the diluted loss per share because such shares are anti-dilutive. The components of basic and diluted earnings per share for the fiscal years ended August 31, 2025, 2024, and 2023 were as follows:

Stock-Based Compensation

Compensation costs related to stock options are determined in accordance with ASC 718, Compensation - Stock Compensation. Compensation cost is calculated based on the grant-date fair value estimated using the Black-Scholes pricing model and then amortized on a straight-line basis over the requisite service period. Stock-based compensation costs related to stock options, not including shares issued to directors for services, were $6.1 million, $6.0 million, and $4.3 million for the fiscal years ended August 31, 2025, 2024, and 2023, respectively.

For the fiscal year ended August 31, 2025,1,736,277 shares were not considered in the computation of diluted earnings per common share because the Company recorded net losses. For the fiscal years ended August 31, 2024 and 2023,175,780 and 21,304 shares were not considered in the computation of diluted earnings per common share because their inclusion would result in an anti-dilutive effect on per-share amounts.

Recently Issued Accounting Standards

In October 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-06 - Disclosure Improvements: Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative (“ASU 2023-06”). ASU 2023-06 incorporates 14 of the 27 disclosure requirements published in SEC Release No. 33-10532 - Disclosure Update and Simplification into various topics within the ASC. ASU 2023-06's amendments represent clarifications to, or technical corrections of, current requirements. For SEC registrants, the effective date for each amendment will be the date on which the SEC removes that related disclosure from its rules. Early adoption is prohibited. The Company does not expect ASU 2023-06 to have a material effect on its consolidated financial statements as the updates are incremental to existing disclosures.

In December 2023, the FASB issued a new standard (ASU 2023-09) to improve income tax disclosures. The guidance requires disclosure of disaggregated income taxes paid, prescribes standardized categories for the components of the effective tax rate reconciliation, and modifies other income-tax-related disclosures. The amendments will be effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied on a prospective basis. Retrospective application is permitted. The Company does not expect ASU 2023-09 to have a material effect on its consolidated financial statements as the additional incremental disclosures information is available to the Company.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires companies to disclose additional information about the types of expenses in commonly presented expense captions. The new standard requires tabular disclosure of specified natural expenses in certain expense captions, a qualitative description of amounts that are not separately disaggregated, and disclosure of the Company's definition and total amount of selling expenses. The ASU should be applied prospectively for annual reporting periods beginning after December 15, 2026, with retrospective application and early adoption permitted. The Company is currently evaluating the impacts of this guidance on the Company's consolidated financial statements.

Recently Adopted Accounting Standards

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires companies to enhance the disclosures about segment expenses. The new standard requires the disclosure of the Company’s Chief Operating Decision Maker (CODM), expanded incremental line-item disclosures of significant segment expenses used by the CODM for decision-making, and the inclusion of previous annual-only segment disclosure requirements on a quarterly basis. This ASU should be applied retrospectively for fiscal years beginning after December 15, 2023, and early adoption is permitted. The Company adopted this guidance for annual disclosures for the year ended August 31, 2025. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

NOTE 3 –OTHER INCOME

The components of other income for the fiscal years ended August 31, 2025, 2024, and 2023, were as follows:

NOTE 4 –PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

Depreciation expense was $0.3 million, $0.3 million, and $0.2 million for the fiscal years ended August 31, 2025, 2024, and 2023, respectively.

NOTE 5 –COMMITMENTS AND CONTINGENCIES

Leases

Rent expense, including common area maintenance fees, was $0.5 million, $0.5 million, and $0.5 million for the fiscal years ended August 31, 2025, 2024, and 2023, respectively.

Lease liability maturities as of August 31, 2025, were as follows:

Employment Agreements

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

We follow guidance issued by the FASB with regard to our accounting for uncertainty in income taxes recognized in the financial statements. Such guidance prescribes a recognition threshold of more-likely-than-not and a measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In making this assessment, a company must determine whether it is more likely than not that a tax position will be sustained upon examination, based solely on the technical merits of the position, and must assume that the tax position will be examined by taxing authorities. Our policy is to include interest and penalties related to income tax expense. We file income tax returns with the IRS and various state jurisdictions as well as with the countries of India and France. Our federal income tax returns for fiscal years 2021 through 2024 are open for audit, and our state tax returns for fiscal years 2019 through 2024 remain open for audit.

Our review of prior-year tax positions using the criteria and provisions presented in guidance issued by FASB did not result in a material impact on our financial position or results of operations.

Litigation

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

NOTE 6 –SHAREHOLDERS' EQUITY

Shares Outstanding

Shares of the Company's common stock outstanding for the fiscal years ended August 31, 2025, 2024, and 2023 were as follows:

Dividends

The Company’s Board of Directors declared cash dividends during the fiscal years ended August 31, 2024. The Board of Directors determined to discontinue the Company’s quarterly cash dividend after the dividend distribution on August 5, 2024. The details of dividends paid are in the following table:

Stock Option and Equity Incentive Plans

On December 23, 2016, the Company’s Board of Directors adopted, and on February 23, 2017, its shareholders approved, the Company’s 2017 Equity Incentive Plan (the “2017 Plan”), under which a total of 1.0 million shares of common stock were initially reserved for issuance. The 2017 plan would have terminated pursuant to its terms in December 2026; however, the 2017 Plan was replaced by the Company’s 2021 Plan (as defined below), and as a result, no further issuances of shares may be made under the 2017 Plan.

On April 9, 2021, the Company’s Board of Directors adopted, and on June 23, 2021, its shareholders approved, the Company’s 2021 Equity Incentive Plan (the “2021 Plan,” and together with the 2017 Plan, the “Plans”), under which a total of 1.3 million shares of common stock were initially reserved for issuance. On October 20, 2022, the Company’s Board of Directors approved, and on February 9, 2023, its shareholders approved, an amendment to the 2021 Plan to increase the number of shares of common stock authorized for issuance thereunder from 1.3 million shares to 1.55 million shares of common stock of the Company. Thereafter, on October 19, 2023, the Company’s Board of Directors approved, and on February 8, 2024, its shareholders approved, an amendment to the 2021 Plan to further increase the number of shares of common stock authorized for issuance thereunder from 1.55 million to 2.5 million shares of common stock of the Company. The 2021 Plan will terminate in 2031.

As of August 31, 2025, employees and directors of the Company held Qualified Incentive Stock Options (“ISOs”) and Non-Qualified Stock Options (“NQSOs”) to purchase an aggregate of 1.9 million shares of common stock at exercise prices ranging from $6.85 to $66.14 per share.

NOTE 7 –STOCK OWNERSHIP PLANS

The following table summarizes information about stock options:

The total grant-date fair value of nonvested stock options as of August 31, 2025, was $18.0 million and is amortizable over a weighted-average period of 2.9 years.

The fair value of these options was estimated at the date of grant using the Black-Scholes option-pricing model. The Black-Scholes option-valuation model was developed for use in estimating the fair value of stock options, which do not have vesting restrictions and are fully transferable. In addition, option-valuation models require the input of highly subjective assumptions, including the expected stock price volatility.

The following table summarizes the fair value of the options, including both ISOs and NQSOs, granted during the years ended August 31, 2025, 2024, and 2023:

The exercise prices for the options outstanding as of August 31, 2025, ranged from $6.85 to $66.14 per share, and the information relating to these options is as follows:

(in thousands except prices and weighted-average amounts)

During the years ended August 31, 2025, 2024, and 2023 we issued 23,195,15,200, and 13,765 shares of stock valued at $0.5 million, $0.6 million, and $0.6 million respectively, to our nonmanagement directors as compensation for board-related duties.

Share Repurchases

No share repurchases were made during the fiscal years ended August 31, 2025 and 2024.

On December 29, 2022, our Board of Directors authorized and approved a share repurchase program for up to $50 million of the outstanding shares of our common stock, and on January 11, 2023, we entered into an accelerated share repurchase agreement (the “ASR Agreement”) with Morgan Stanley & Co. LLC (“Morgan Stanley”) to repurchase an aggregate of $20 million of our outstanding shares of common stock as part of the share repurchase program, which was settled in full in May 2023. The share repurchase program has no expiration date but may be terminated at any time at our Board of Directors’ discretion.

In January 2023, we received an initial delivery of an aggregate of 408,685 shares of our common stock from Morgan Stanley pursuant to the ASR Agreement, in exchange for which we made an initial payment of $20 million to Morgan Stanley. These 408,685 shares were retired and are treated as authorized, unissued shares. At final settlement on May 20, 2023, based on the volume-weighted average price of our common stock during the term of the ASR Agreement, Morgan Stanley delivered an additional 83,356 shares of Company common stock to us, which shares were also retired and treated as authorized, unissued shares.

After completion of the repurchases under the ASR Agreement, $30 million remains available for additional repurchases under our authorized repurchase program.

NOTE 8 –INCOME TAXES

We utilize ASC 740 to account for income taxes which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.

Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities. The Company is subject to the Global Intangible Low-Taxed Income (“GILTI”) rules, and has an annual GILTI inclusion income and deduction. Based on our assessment, we have not recorded a liability for uncertain tax positions.

Management has considered that the accounting guidance under ASC 740-10-55-7 requires entities to assess deferred tax assets (DTAs) for realization and to record a valuation allowance if the DTA is not fully realizable. The objective of the valuation allowance is to reduce the deferred tax asset to the amount that is more likely than not to be realized. After completing the analysis, management determined the deferred tax asset is realizable and no valuation allowance is required.

The components of the income tax (benefit) expense for the fiscal years ended August 31, 2025, 2024, and 2023 were as follows:

A reconciliation of the expected income tax computed using the federal statutory income tax rate to the Company's effective income tax rate is as follows for the fiscal years ended August 31, 2025, 2024, and 2023:

The book impairment of $77.2 million had zero tax basis. The goodwill component of the impairment resulted in a permanent item in the amount of $51.9 million ($10.9 million tax effected). The other intangibles component of impairment in the amount of $25.3 million ($6.4 million tax effected) release of an existing deferred tax liability.

Significant components of the Company's deferred tax assets and liabilities for income taxes for the fiscal years ended August 31, 2025, and 2024 are as follows:

We follow ASC 740 with regard to our accounting for uncertainty in income taxes recognized in the financial statements. Such guidance prescribes a recognition threshold of more likely than not and a measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In making this assessment, we determine whether it is more likely than not that a tax position will be sustained upon examination, based solely on the technical merits of the position and assume that the tax position will be examined by taxing authorities. Interest and penalties were insignificant for the fiscal years ended August 31, 2025, 2024, and 2023, respectively. We file income tax returns with the IRS and various state jurisdictions as well as with the countries of India and France. Our federal income tax returns for fiscal year 2021 through 2024 are open for audit, and our state tax returns for fiscal year 2019 through 2024 remain open for audit. Based on our assessment, we have not recorded any liability for uncertain tax positions in the consolidated financial for the fiscal years ended August 31, 2025, 2024, and 2023, respectively. The Company had no uncertain tax position for all open tax years.

Net Operating Loss is summarized as follows:

Our review of prior-year tax positions using the criteria and provisions presented in guidance issued by FASB did not result in a material impact on our financial position or results of operations.

NOTE 9 –CONCENTRATIONS AND UNCERTAINTIES

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash, cash equivalents, trade accounts receivable, and short-term investments. The Company holds cash and cash equivalents with balances that exceed FDIC-insured limits. Cash maintained in excess of these limits is on deposit with a large, national bank. Accordingly, the Company does not have depository exposure to regional banks. In addition, the Company holds cash at a bank in France that is not FDIC-insured. Historically, the Company has not experienced any losses in such accounts, and management believes that the financial institutions at which its cash is held are stable; however, no assurances can be provided. While the Company may be exposed to credit losses due to the nonperformance of its counterparties, the Company does not expect the settlement of these transactions to have a material effect on its results of operations, cash flows, or financial condition.

Revenue concentration shows that international sales accounted for 27%,28%, and 31% of revenue for the fiscal years ended August 31, 2025, 2024, and 2023, respectively. Our three largest clients in terms of revenue accounted for 7%,3%, and 3% of total revenues, respectively, for the fiscal year ended August 31, 2025. Our four largest clients in terms of revenue accounted for 7%,3%,3%, and 2% of total revenues, respectively, for the fiscal year ended August 31, 2024. Our three largest clients in terms of revenue accounted for 6%,4%, and 3% of total revenues, respectively, for the fiscal year ended August 31, 2023.

Accounts receivable concentrations show that our three largest clients in terms of accounts receivable each comprised between 6% and 9% of accounts receivable as of August 31, 2025; our six largest clients in terms of accounts receivable comprised between 3% and 9% of accounts receivable as of August 31, 2024. As of the filing date of this report, our largest client, which represented 9% of accounts receivable as of August 31, 2025, was current on all outstanding invoices, except for ade minimis amount.

We operate in biosimulation, simulation-enabled performance and intelligence solutions, and medical communications to the biopharma industry, which is highly competitive and changes rapidly. Our operating results could be significantly affected by our ability to develop new products and find new distribution channels for new and existing products.

NOTE 10 –SEGMENT REPORTING

The Company applies ASC 280, Segment Reporting, in determining reportable segments. We define our reportable segments based on the way the chief operating decision maker (“CODM”), which is our Chief Executive Officer, manages the operations for purposes of allocating resources and assessing segment performance. Our reportable segments include the following:

•Software: Supports pharmaceutical research, development, and commercialization through simulation, modeling, and AI-driven prediction. Its main products include GastroPlus®, ADMET Predictor®, and MonolixSuite™, along with tools like DDDPlus™, MembranePlus™, DILIsym®, and others for disease modeling and training. The company also advances partnerships with institutions like the FDA, NIEHS, PAS, and SACF to drive innovation in virtual drug testing, chemical safety, and AI-enabled discovery.

•Services: Advanced consulting services across the drug development lifecycle. Its scientists and engineers specialize in pharmacokinetics, pharmacodynamics, drug modeling, and regulatory strategy, supporting clients from discovery through clinical development.

The CODM reviews revenue and gross profit to evaluate current-period performance versus budget and prior periods at each reportable segment and assesses management performance for purposes of annual incentive compensation. Gross profit is defined as revenue less cost of revenue incurred by the segment.

No operating segments have been aggregated to form the reportable segments. The Company does not allocate assets at the reportable segment level, as these are managed on an entity-wide group basis and, accordingly, the Company does not report asset information by segment. The Company does not allocate operating expenses (R&D, S&M, and G&A) that are managed on an entity-wide group basis and, accordingly, the Company does not allocate and report operating expenses at a segment level. There are no intersegment revenue transactions between the Company’s segments. Other segment items for each segment primarily include depreciation, income tax expense, and other income not reviewed by the CODM at the segment level. These are not allocated to segments and are presented below segment gross profit.

There are no differences in measurement between the segment profit measure used by CODM and consolidated (loss) income before income taxes. The following schedule reconciles the total of reportable segments’ gross profit and significant expenses to consolidated income (loss) before income taxes.

(1)Cost of revenue includes$6.7 million of amortization within our Software reportable segment.

(2) General and administrative includes $0.3 million of depreciation and $1.2 million of amortization, respectively.

(1)Cost of revenue includes$4.5 million of amortization within our Software reportable segment.

(2) General and administrative includes $0.3 million of depreciation and $0.9 million of amortization, respectively.

(1)Cost of revenue includes$3.0 million of amortization within our Software reportable segment.

(2) General and administrative includes $0.3 million of depreciation and $0.6 million of amortization, respectively.

Revenue, classified by significant product and service offerings, was as follows:

The Company allocates revenues to geographic areas based on the locations of its clients. Geographical revenues for the fiscal years ended August 31, 2025, 2024, and 2023, were as follows:

*Percentages may not add due to rounding

As of August 31, 2025 and 2024, substantially all of the Company’s long-lived assets were located in the United States; long-lived assets located in any individual foreign country were not material.

NOTE 11 –EMPLOYEE BENEFIT PLAN

We maintain a 401(k) Plan for eligible employees. We make matching contributions equal to 100% of the employee’s elective deferral, not to exceed 4% of the employee’s gross salary. We contributed $0.9 million, $0.8 million, and $0.6 million for the fiscal years ended August 31, 2025, 2024, and 2023 respectively.

NOTE 12 -ACQUISITIONS

On June 16, 2023, the Company completed the acquisition of Immunetrics for an estimated consideration of $15.3 million.

The Company made the first cash earnout payments in the aggregate amount of $2.5 million to the former equity holders and employees of Immunetrics in March 2024. During fiscal year ended August 31, 2025, the Company determined the second earnout measurement period's fair value to be zero based on earned revenues.

During the fiscal year ended August 31, 2025, the Company completed the final payment of $1.6 million related to the holdback liability of Immunetrics.

The primary purpose of this acquisition is to be able to capitalize on a tremendous growth opportunity by providing support for quantitative systems pharmacology (“QSP”) in a greater range of therapeutic areas, including oncology.

Under the acquisition method of accounting, the total purchase price reflects Immunetrics’ tangible and intangible assets and liabilities based on their estimated fair values at the date of the completion of the acquisition (June 16, 2023). The following table summarizes the allocation of the final purchase price for Immunetrics:

The total purchase consideration related to Immunetrics acquisition consisted of cash consideration. The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributed to the developed technologies and other intangibles as customer relationships and trade name. Immunetrics is primarily attributable to the Services segment of the Company. Goodwill acquired as part of Immunetrics acquisition has been assigned to a separate reporting unit and the assets and liabilities of Immunetrics are assigned to the same reporting unit, Immunetrics. This goodwill isnot expected to be deductible for income tax purposes.

Intangible assets consist of indefinite-lived intangible asset trade names and definite-lived intangibles as customer relationships, developed technologies, and covenants not to compete. We amortize purchased definite-lived intangible assets on a straight-line basis over their respective useful lives. The weighted-average life of the total acquired identifiable definite-lived intangible assets is 7.5 years. The following table presents the details of intangible assets acquired.

During the third quarter of fiscal year 2025, we recorded $3.9 million of goodwill, intangible, and fixed asset impairment charges attributable to the Immunetrics acquisition. The impairment charges relate to the triggering event. These costs are included in Impairment on our consolidated statement of operations. See Note 2 – Significant Accounting Policies for additional details.

On June 11, 2024, the Company entered into a stock purchase agreement, pursuant to which it acquired Pro-ficiency Holdings, Inc. (“Pro-ficiency”) for estimated consideration of $100.2 million.

The primary purpose of this acquisition was to bring together two businesses, each with complementary expertise and services that are grounded in science and focused on applying advanced technologies like AI to enhance actionable data analytics.

Under the acquisition method of accounting, the total purchase price reflects Pro-ficiency’s tangible and intangible assets and liabilities based on their estimated fair values at the date of the completion of the acquisition (June 11, 2024). The following table summarizes the allocation of the final purchase price for Pro-ficiency:

(a) As previously reported in the Company's Annual Report on Form 10-K for the year ended August 31, 2024.

The Company had two measurement period adjustments due to additional knowledge gained since June 11, 2024. The adjustments include a net working capital & excess cash settlement of $0.2 million and deferred taxes of $1.0 million.

The total purchase consideration related to the Pro-ficiency acquisition consisted of cash consideration. The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributed to the developed technologies and other intangibles such as customer relationships and trade names. Pro-ficiency is structured into two functions: Clinical Operations and Commercialization. Clinical Operations primarily contributes to the software segment and Commercialization primarily contributes to the services segment of the Company. Goodwill acquired as part of the Pro-ficiency acquisition has been assigned to the Clinical Operations and Commercialization reporting units and the assets and liabilities of Pro-ficiency are assigned to the same reporting units. This goodwill isnot expected to be deductible for income tax purposes.

Intangible assets consist of indefinite-lived intangible asset trade names and definite-lived intangibles as customer relationships, developed technologies, and covenants not to compete. We amortize purchased definite-lived intangible assets on a straight-line basis over their respective useful lives. The weighted-average life of the total acquired identifiable definite-lived intangible assets is 5.3 years. The following table presents the details of intangible assets acquired.

The estimated future amortization of finite-lived intangible assets for the next five years is as follows:

During the third quarter of fiscal year 2025, we recorded $72.2 million of goodwill, intangible, and fixed asset impairment charges attributable to the Pro-ficiency acquisition. The impairment charges relate to the triggering event. These costs are included in Impairment on our consolidated statement of operations. See Note 2 – Significant Accounting Policies for additional details.

Consolidated Supplemental Pro Forma Information

The following unaudited consolidated supplemental pro forma information assumes that the acquisition of Pro-ficiency took place on September 1, 2022 for the fiscal year ended August 31, 2024. These amounts have been calculated after applying the Company’s accounting policies and adjusting the results of Pro-ficiency to reflect the same expenses in the fiscal years ended August 31, 2024 and 2023. The adjustments include costs of acquisition directly attributable to Pro-ficiency of $2.3 million and amortization of intangibles including developed technologies acquired during the acquisition, assuming the fair-value adjustments applied on September 1, 2022, together with consequential tax effects. The adjustments also consist of acquisition costs directly attributable to Immunetrics of $2.9 million consisting of $1.6 million of bonus compensation and $1.3 million of other professional fees, and amortization of intangibles including developed technologies acquired during the merger, assuming the fair-value adjustments applied on September 1, 2022, together with consequential tax effects. The pro forma information in below table includes actual revenues and net loss of $2.3 million and $1.9 million, respectively for Pro-ficiency from the acquisition date of June 11, 2024 to August 31, 2024 and the revenues and net loss of $1.3 million and $0.4 million, respectively, for Immunetrics from the acquisition date of June 16, 2023 to August 31, 2023.

NOTE 13 -RESTRUCTURING

At the end of the quarter ended May 31, 2025, the Company executed a restructuring plan to reduce its workforce by approximately 10% to enhance its operational efficiency and reduce operating expenses (the "2025 Restructuring Plan"). Communication to employees and actions associated with the 2025 restructuring plan were completed by the end of the quarter ended May 31, 2025.

The Company estimates that it incurred a one-time expense of approximately $0.7 million in charges in connection with the 2025 Restructuring Plan, consisting of involuntary severance payments, employee benefits, and related costs, substantially all of which the Company incurred in the fiscal year ending August 31, 2025. These costs are recorded within General and Administrative expenses on the Consolidated Statements of Operations and Comprehensive (loss) income. The restructuring was driven by macroeconomic factors negatively impacting the pharmaceutical and biotechnology markets. The reduction in workforce and cost reductions being implemented are expected to reduce operating expenses by approximately $4.3 million on an annualized basis.

As of August 31, 2025, the Company has recorded total severance charges of $0.7 million related to the 2025 Restructuring Plan reflected in General and Administrative expenses. Also, as of August 31, 2025, the Company had no remaining accrued severance charges. The Company does not expect to incur further material severance charges related to the 2025 Restructuring Plan in future periods.

NOTE 14 -SUBSEQUENT EVENTS

None.