Simulations Plus, Inc.

For the three and six months ended February 28, 2026, and February 28, 2025

NOTE 1 –DESCRIPTION OF BUSINESS

Simulations Plus, Inc. (the "Company", "we", "our") 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. We believe this helps to optimize efficiency, costs, and time-to-market for our clients and enhances our competitive position.

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.

The unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). These rules and regulations permit some of the information and footnote disclosures normally included in annual financial statements, prepared in accordance with U.S. GAAP, to be condensed or omitted. In management’s opinion, the unaudited consolidated financial statements contain all adjustments that are of a normal recurring nature, necessary for a fair presentation of the results of operations and financial position of the Company for the interim periods presented. Operating results for the interim period ended February 28, 2026, and 2025 are not necessarily indicative of the results that may be expected for the full year. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the fiscal year ended August 31, 2025, and the notes thereto included in the Company’s Annual Report on Form 10-K.

Revenue Recognition

We generate revenue primarily from the sale of software licenses and by providing consulting services to the pharmaceutical industry in support of our clients' 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 customer

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 customer support to assist customers with software usage. If customers 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 customers’ 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 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 customer 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 for as Software as a Service over the life of the contract. These arrangements account for less than 10% of software revenues of the Company.

Services Revenue:

Consulting services provided to our customers 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 customer under the contracts. Payments are generally due upon invoicing on a net-30 basis, unless other payment terms are negotiated with the customer based on customer history. Typical industry standards 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 Customers. 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 Condensed Consolidated Statements of Operations and Comprehensive 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 2026. The Company recognized$0.1 million and $0.2 million for the three and six months ended February 28, 2026, and$0.2 millionand$0.4 million for the three and six months ended February 28, 2025, respectively within Services revenues on the Condensed Consolidated Statements of Operations and Comprehensive 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 February 28, 2026, remaining performance obligations were $19.8 million, of which 98% is 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 three and six months ended February 28, 2026, and February 28, 2025, respectively, were as follows:

Contract Balances

Contract assets excluding accounts receivable balances as of February 28, 2026, and August 31, 2025, were $4.8 million and $4.9 million, respectively. This balance is included in Prepaid Expenses and Other Current Assets on the Condensed Consolidated Balance Sheets.

During the three and six months ended February 28, 2026, the Company recognized $0.3 million and $2.0 million of revenue, respectively, that was included in contract liabilities as of August 31, 2025. During the three and six months ended February 28, 2025, the Company recognized $0.4 million and $1.9 million of revenue, respectively that was included in contract liabilities as of August 31, 2024.

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 customer. 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 condensed consolidated statements of operations and comprehensive income as sales and marketing expense.

Cash and Cash Equivalents

For purposes of the 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 customers 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 customer 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 accounts receivable is summarized as follows:

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. During the three and six months ended February 28, 2026, all of our investments were classified as AFS or were term deposits. For the year ended August 31, 2025, we had no AFS investments.

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

R&D activities include both the enhancement of existing products and the 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 $4.3 million and $8.2 million during the three and six months ended February 28, 2026, of which $0.8 million and $1.7 million, respectively, were capitalized. R&D expenditures during the three and six months ended February 28, 2025, were $2.9 million and $5.5 million, respectively, of which $0.8 million and $1.5 million, respectively, were 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 and the purchase of existing software to be used in our software products.

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 $0.9 million and $1.7 million, respectively, for the three and six months ended February 28, 2026, and $0.8 million and $1.6 million, respectively, for the three and six months ended February 28, 2025, 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.

No impairment losses were recorded during the three and six months ended February 28, 2026, and February 28, 2025, respectively.

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.

Depreciation expense for the three and six months ended February 28, 2026, was $0.1 million and $0.2 million, respectively. Depreciation expense for the three and six months ended February 28, 2025, was $0.1 million and $0.2 million, respectively.

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 condensed consolidated statements of operations. Maintenance of and minor upgrades to internal use software are also classified as general and administrative expenses as incurred.

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 customer 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.

Below is a reconciliation of the changes in Goodwill carrying value per reportable segment for the six months ended February 28, 2026:

The following table summarizes other intangible assets as of February 28, 2026:

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.

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.

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

Total amortization expense for the three and six months ended February 28, 2026, was $0.3 million and $0.5 million, respectively. Total amortization expense for the three and six months ended February 28, 2025, was $0.3 million and $0.6 million, respectively.

The weighted-average amortization period for covenants not to compete is zero, other internal use software is 10.7 years, customer relationships is 7.3 years, and ERP is 10.8 years.

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

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 may also invest excess cash in certificates of deposit, money market accounts, government-sponsored enterprise securities, and/or commercial paper. In addition, under the fair-value hierarchy, the fair market values of the Company’s cash equivalents and investments are Level I. As of February 28, 2026, all investments were classified as short-term investments and cash equivalents.

The following tables summarize our short-term investments and cash equivalents as of February 28, 2026, and August 31, 2025:

Accrued interest on term deposits was $0.1 million as of February 28, 2026 and less than $0.1 million as of August 31, 2025. These balances are included within Prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets.

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 condensed 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 three months ended February 28, 2026, and February 28, 2025, the Company recognized a mergers and acquisitions benefit ofzero and $0.1 million, respectively. During the six months ended February 28, 2026, and February 28, 2025, the Company recognized a mergers and acquisitions expense ofzero and $0.1 million, respectively. The Company records mergers and acquisition expenses in general and administrative expenses in the condensed consolidated statements of operations and comprehensive income.

Research and Development Costs

R&D costs are charged to expense as incurred until technological feasibility has been established. These costs include salaries and purchased software that was developed by other companies and incorporated into, or 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 condensed 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. This was subsequently impaired in May, 2025 for the remaining net book value.

The following table summarizes intellectual property as of February 28, 2026:

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

Total amortization expense for intellectual property agreements was $0.3 million and $1.1 million for the three months ended February 28, 2026, and 2025, respectively, and $0.5 million and $2.2 million for the six months ended February 28, 2026, and 2025, respectively. The Company records these in Cost of revenues - software on the Condensed Consolidated Statements of Operations and Comprehensive Income.

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. The components of basic and diluted earnings per share for the three and six months ended February 28, 2026, and February 28, 2025, 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, was $1.5 million and $1.6 million for the three months ended February 28, 2026, and February 28, 2025, respectively, and $3.0 million and $3.3 million for the six months ended February 28, 2026, and February 28, 2025, respectively.

For the three months ended February 28, 2026, and 2025,288,941 and 2,500 shares, respectively, were excluded from the computation of diluted earnings per share because their inclusion would have been anti-dilutive. For the six months ended February 28, 2026, and 2025,242,699 and 1,264 respectively, were not similarly excluded.

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. The amendments should be applied on a prospective basis. Retrospective application is permitted. The Company will adopt this standard prospectively beginning with its annual period ended August 31, 2026, and interim periods thereafter. 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 July 2025, the FASB issued ASU 2025-05, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The ASU provides a practical expedient related to the estimation of expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under ASC 606. In developing reasonable and supportable forecasts as part of estimating expected credit losses, all entities may elect a practical expedient that assumes that current conditions as of the balance sheet date do not change for the remaining life of the asset. The ASU also provides non-public entities with an accounting policy election. The ASU will be effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted. The Company does not anticipate this having a material impact to our consolidated financial statements or disclosure.

In September 2025, the FASB issued ASU 2025-06, “Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40)” which eliminates all references to project stages and requires capitalization of software costs when: (i) management authorizes and commits to funding the software project, and (ii) it is probable the software project will be completed and used as intended, known as the “probable-to-completion recognition threshold.” Entities must consider whether there is significant uncertainty associated with the development activities of the software in determining if the threshold is met. In addition, the amendments in the update specify that property, plant and equipment disclosure requirements are required for capitalized internal-use software costs, regardless of financial statement presentation and also incorporate the recognition requirements for website-specific development costs. This ASU will be effective for the Company for our fiscal year 2029 annual reporting period with the guidance applied either prospectively, retrospectively, or via a modified prospective transition method. Early adoption is permitted. We are currently evaluating the impact that the adoption of this ASU will have on our interim and consolidated financial statements.

In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832), to provide guidance on how business entities recognize, measure, and present government grants received. The effective date for this standard is for fiscal years beginning after December 15, 2028, and interim periods within those fiscal years. Early adoption is permitted. The amendments in this ASU may be applied using a modified prospective, modified retrospective, or retrospective approach. We are currently evaluating the impact that the adoption of this ASU will have on our interim and consolidated financial statements.

In December 2025, the FASB issued ASU 2025-11 to amend the guidance in “Interim Reporting” (Topic 270). The update provides clarifications intended to improve the consistency and usability of interim disclosure requirements, including a comprehensive listing of required interim disclosures and a new disclosure principle for reporting material events occurring after the most recent annual period. The amendments do not change the underlying objectives of interim reporting but are designed to enhance clarity in application. The guidance is effective for fiscal years beginning after December 15, 2027, including interim periods within those fiscal years. The Company will adopt this guidance in fiscal 2029 and has not yet determined the impact on its 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, and interim periods thereafter. 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 three and six months ended February 28, 2026, and February 28, 2025, were as follows:

NOTE 4 –COMMITMENTS AND CONTINGENCIES

We follow guidance issued by the FASB regarding 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 France and India. Our federal income tax returns for fiscal years 2022 through 2025 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.

We recorded an income tax expense of $1.4 million related to income before taxes of $5.9 million for the three months ended February 28, 2026, and an income tax expense of $1.6 million related to income before taxes of $6.9 million for the six months ended February 28, 2026. We recorded an income tax expense of $0.4 million related to income before taxes of $3.5 million for the three months ended February 28, 2025, and an income tax expense of $0.5 million related to income before taxes of $3.8 million for the six months ended February 28, 2025. The income tax rate for the three and six months ended February 28, 2026, was 23% and 24%, respectively. The income tax rate for the three and six months ended February 28, 2025, was 12% and 13%, respectively. The increase in the tax rate is primarily due to the result of a favorable discrete item in the prior year that did not recur in the current year, a less favorable jurisdictional mix of earnings between the U.S. and France, increased unfavorable Global Intangible Low-Taxed Income ("GILTI") impacts driven by higher French taxable income, and a lower Foreign-Derived Intangible Income ("FDII") benefit. In addition, certain items affecting the current-year effective tax rate relate to accelerated deductions elected under the One Big Beautiful Bill Act ("OBBBA"). These deductions are expected to be favorable to cash flows as they accelerate the timing of tax benefits and reduce near-term cash tax payments.

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 5 –SHAREHOLDERS' EQUITY

Shares Outstanding

Shares of the Company's common stock outstanding for the three and six months ended February 28, 2026, and February 28, 2025, were as follows:

NOTE 6 –STOCK OWNERSHIP PLANS

The following table summarizes information about stock options:

The total grant-date fair value of nonvested stock options as of February 28, 2026, was $18.0 million and is amortizable over a weighted-average period of 3.0 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 six months ended February 28, 2026, and for the fiscal year ended August 31, 2025:

The exercise prices for the options outstanding at February 28, 2026, ranged from $10.05 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 three and six months ended February 28, 2026, we issued 7,104 and 15,959 shares of stock valued at $0.1 million and $0.3 million, respectively, and during the three and six months ended February 28, 2025, we issued 3,935 and 8,895 shares of stock valued at $0.1 million and $0.3 million, respectively, to our nonmanagement directors as compensation for board-related duties.

NOTE 7 –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.

Revenue concentration shows that international sales accounted for 30% and 26% of revenue for the six months ended February 28, 2026, and February 28, 2025, respectively. Our three largest customers in terms of revenue accounted for 9%,5%, and 3% of total revenues, respectively, for the six months ended February 28, 2026. Our three largest customers in terms of revenue accounted for 7%,6%, and 4% of total revenues, respectively, for the six months ended February 28, 2025.

Accounts-receivable concentrations show that our three largest customers in terms of accounts receivable each comprised between 6% and 9% of accounts receivable as of February 28, 2026; our three largest customers in terms of accounts receivable comprised between 4% and 13% of accounts receivable as of February 28, 2025.

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 8 –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®, MonolixSuite™, and others for disease modeling and training, as well as Pro-ficiency® for clinical operations. 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 entire drug development lifecycle. Its scientists and engineers specialize in drug discovery, pharmacokinetics, pharmacodynamics, drug modeling, clinical trial data analysis, regulatory strategy, and medical communications.

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 condensed consolidated income before income taxes. The following schedule reconciles the total of reportable segments’ gross profit and significant expenses to consolidated income before income taxes for the three and six months ended February 28, 2026, and February 28, 2025, respectively.

(1)Cost of revenue for the three and six months ended February 28, 2026, includes$1.2 million and$2.2 million, respectively of amortization within our Software reportable segment.

(2) General and administrative for the three and six months ended February 28, 2026, includes $0.1 million and $0.2 million of depreciation and $0.3 million and $0.5 million of amortization, respectively.

(1)Cost of revenue for the three and six months ended February 28, 2025, includes$1.9 million and$3.7 million, respectively of amortization within our Software reportable segment.

(2) General and administrative for the three and six months ended February 28, 2025, includes $0.1 million and $0.2 million of depreciation and $0.3 million and $0.6 million of amortization, respectively.

Revenue by lifecycle solution area and offering type (Software and Services):

*Percentages may not add due to rounding

The Company allocates revenues to geographic areas based on the locations of its customers. Geographical revenues for the three and six months ended February 28, 2026, and February 28, 2025, were as follows:

*Percentages may not add due to rounding

As of February 28, 2026, and February 28, 2025, 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 9 –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 $0.3 million and $0.5 million for the three and six months ended February 28, 2026. We contributed $0.3 million and $0.5 million for the three and six months ended February 28, 2025, respectively.