Simulations Plus - 10-Q quarterly report FY

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Effective December 22, 2025, Dr. Lisa LaVange resigned from her position as a Director of the Board and Chair of the Nominating & Corporate Governance Committee. Dr. LaVange’s resignation was not a result of any disagreement with the Company on any matter relating to its operations, policies or practices.

On December 20, 2025, Dr. Daniel Weiner notified the Company of his intention resign from the Company’s Board of Directors effective as of December 31, 2025. His resignation was not a result of any disagreement with the Company on any matter relating to its operation, policies, or practices. He withdrew his resignation from the Board and the committees on which he serves on December 22, 2025, effective immediately. Accordingly, Dr. Weiner will continue to serve as Chair of the Board and as a member of both the Compensation Committee and the Audit Committee.

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q


x			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended February 28, 2026

OR

o			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ______ to ______

Commission file number: 001-32046

Simulations Plus, Inc.

(Name of registrant as specified in its charter)


California			95-4595609
(State or other jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification No.)

800 Park Offices Drive, Suite 401

Research Triangle Park, NC 27709

(Address of principal executive offices including zip code)

(661) 723-7723

(Registrant’s telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:


Title of Each Class Common Stock, par value $0.001 per share			Trading Symbol SLP			Name of Each Exchange on Which Registered NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check one):


o	Large accelerated Filer	o	Accelerated Filer
x	Non-accelerated Filer	x	Smaller reporting company
o	Emerging Growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The number of shares outstanding of the registrant’s common stock, par value $0.001 per share, as of March 31, 2026, was 20,205,482.

Table of Contents

Simulations Plus, Inc.

FORM 10-Q

For the Quarterly Period Ended February 28, 2026

Table of Contents


	PART I. FINANCIAL INFORMATION
		Page
Item 1.	Condensed Consolidated Financial Statements

	Unaudited Condensed Consolidated Balance Sheets at February 28, 2026 and August 31, 2025	3

	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income for the three and six months ended February 28, 2026 and February 28, 2025	4

	Unaudited Condensed Consolidated Statements of Shareholders’ Equity for the three and six months ended February 28, 202 6 and February 28, 2025	5

	Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended February 28, 202 6 and February 28, 2025	6

	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	35

Item 4.	Controls and Procedures	35

	PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	35

Item 1A.	Risk Factors	35

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36

Item 3.	Defaults upon Senior Securities	36

Item 4.	Mine Safety Disclosures	36

Item 5.	Other Information	36

Item 6.	Exhibits	37

	Signatures	38

PART I. FINANCIAL INFORMATION

Item 1. Unaudited Condensed Consolidated Financial Statements

Table of Contents

SIMULATIONS PLUS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)



(in thousands, except per common share and common share data)	February 28, 2026		August 31, 2025
ASSETS
Current assets
Cash and cash equivalents	$	25,727	$	30,853
Accounts receivable, net of allowance for credit losses of $73 and $187	18,170		9,717
Prepaid income taxes	669		1,777
Prepaid expenses and other current assets	6,885		7,702
Short-term investments	16,109		1,500
Total current assets	67,560		51,549
Long-term assets
Capitalized computer software development costs, net of accumulated amortization of $23,543 and $21,863	11,158		11,117
Property and equipment, net	752		880
Operating lease right-of-use assets	373		407
Intellectual property, net of accumulated amortization of $9,555 and $9,021	5,663		6,197
Other intangible assets, net of accumulated amortization of $4,904 and $4,399	11,327		11,896
Goodwill	43,717		43,717

Deferred tax assets, net	4,589		4,774
Other assets	1,345		1,399
Total assets	$	146,484	$	131,936

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable	$	803	$	470
Accrued compensation	4,398		2,010
Accrued expenses	1,474		1,343


Operating lease liability - current portion	138		206
Deferred revenue	5,530		2,696
Total current liabilities	12,343		6,725
Long-term liabilities

Operating lease liability - net of current portion	370		410

Total liabilities	12,713		7,135
Commitments and contingencies
Shareholders' equity
Preferred stock, $0.001 par value — 10,000,000 shares authorized; no shares issued and outstanding	$	—	$	—
Common stock, $0.001 par value; 50,000,000 shares authorized, 20,205,482 and 20,137,480 shares issued and outstanding as of February 28, 2026, and August 31, 2025	20		20
Additional paid-in capital	163,176		159,416
Accumulated deficit	(29,153)		(34,364)
Accumulated other comprehensive loss	(272)		(271)
Total shareholders' equity	133,771		124,801
Total liabilities and shareholders' equity	$	146,484	131,936

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

Table of Contents

SIMULATIONS PLUS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended				Six Months Ended
(in thousands, except per common share and common share data)	February 28, 2026		February 28, 2025		February 28, 2026		February 28, 2025
Revenues
Software	$	14,635	$	13,484	$	23,518	$	24,199
Services	9,656		8,948		19,194		17,157
Total revenues	24,291		22,432		42,712		41,356
Cost of revenues
Software	1,648		2,587		3,060		5,225
Services	6,500		6,718		12,618		12,786
Total cost of revenues	8,148		9,305		15,678		18,011
Gross profit	16,143		13,127		27,034		23,345
Operating expenses
Research and development	3,470		2,143		6,450		3,991
Sales and marketing	2,930		3,717		6,109		6,568
General and administrative	4,113		4,555		8,132		9,948

Total operating expenses	10,513		10,415		20,691		$	20,507

Income from operations	5,630		2,712		6,343		2,838

Other income, net	256		796		513		940

Income before income taxes	5,886		3,508		6,856		3,778
Income tax expense	(1,351)		(434)		(1,645)		(498)
Net income	$	4,535	$	3,074	$	5,211	$	3,280

Earnings per share
Basic	$	0.22	$	0.15	$	0.26	$	0.16
Diluted	$	0.22	$	0.15	$	0.26	$	0.16

Weighted-average common shares outstanding
Basic	20,160		20,097		20,150		20,082
Diluted	20,243		20,277		20,232		20,262

Other comprehensive income (loss), net of tax
Foreign currency translation adjustments	11		(26)		5		(68)
Unrealized gains (losses) on available-for-sale securities	(6)		—		(6)		4
Comprehensive income	$	4,540	$	3,048	$	5,210	$	3,216

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

Table of Contents

SIMULATIONS PLUS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Unaudited)


(in thousands, except common share data)	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
	Shares	Amount
Balance as of September 1, 2025	20,137,480	$	20	$	159,416	$	(34,364)	$	(271)	$	124,801
Exercise of stock options	250	—		2		—		—		2
Stock-based compensation	—	—		1,490		—		—		1,490
Shares issued to Directors for services	8,855	—		150		—		—		150
Net income	—	—				676		—		676
Other comprehensive loss	—	—		—		—		(6)		(6)
Balance as of November 30, 2025	20,146,585	$	20	$	161,058	$	(33,688)	$	(277)	$	127,113

Exercise of stock options	51,793	—		474		—		—		474
Stock-based compensation	—	—		1,524		—		—		1,524
Shares issued to Directors for services	7,104	—		120		—		—		120
Net income	—	—		—		4,535		—		4,535
Other comprehensive income	—	—		—		—		5		5
Balance as of February 28, 2026	20,205,482	$	20	$	163,176	$	(29,153)	$	(272)	$	133,771


(in thousands, except common share data)	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
	Shares	Amount
Balance as of September 1, 2024	20,051,134	$	20	$	152,308	$	30,354	$	(251)	$	182,431
Exercise of stock options	28,920	—		288		—		—		288
Stock-based compensation	—	—		1,673		—		—		1,673
Shares issued to Directors for services	4,960	—		135		—		—		135
Net income	—	—		—		206		—		206
Other comprehensive loss	—	—		—		—		(38)		(38)
Balance as of November 30, 2024	20,085,014	$	20	$	154,404	$	30,560	$	(289)	$	184,695










Exercise of stock options	22,096	—		28		—		—		28
Stock-based compensation	—	—		1,642		$	—	$	—	1,642
Shares issued to Directors for services	3,935	—		135		—		—		135
Net income	—	—		—		3,074		—		3,074
Other comprehensive loss	—	—		—		—		(26)		(26)
Balance as of February 28, 2025	20,111,045	$	20	$	156,209	$	33,634	$	(315)	$	189,548

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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SIMULATIONS PLUS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended

(in thousands)		February 28, 2026		February 28, 2025
Cash flows from operating activities
Net income		$	5,211	$	3,280
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation and amortization		2,893		4,539
Change in fair value of contingent consideration		—		(640)
Discharge of holdback obligation related to Immunetrics acquisition		—		(224)
Amortization of investment premiums		(99)		(60)
Stock-based compensation		3,238		3,416
Deferred income taxes		185		(907)
Loss from disposal of assets		75		—


Currency translation adjustments		5		(68)
(Increase) decrease in
Accounts receivable		(8,453)		(7,357)
Prepaid income taxes		1,108		822
Prepaid expenses and other current assets		871		376
Increase (decrease) in
Accounts payable		333		604
Other liabilities		2,445		(736)

Deferred revenue		2,834		1,350
Net cash provided by operating activities		10,646		4,395

Cash flows from investing activities
Purchases of property and equipment		(46)		(152)
Purchase of short-term investments		(16,016)		(5,000)
Proceeds from maturities of short-term investments		1,500		3,620
Proceeds from sales of investments		—		995

Purchased intangibles		(11)		(342)

Net working capital & excess cash settlement - Pro-ficiency acquisition		—		(227)
Capitalized computer software development costs		(1,675)		(1,348)
Net cash used in investing activities		(16,248)		(2,454)

Cash flows from financing activities

Payments on contracts payable		—		(1,576)
Proceeds from the exercise of stock options		476		316

Net cash provided by (used in) financing activities		476		(1,260)

Net (decrease) increase in cash and cash equivalents		(5,126)		681
Cash and cash equivalents, beginning of period		$	30,853	$	10,311
Cash and cash equivalents, end of period		$	25,727	$	10,992

Supplemental disclosures of cash flow information
Income taxes paid		$	352	$	616



Non-cash investing and financing activities
Right of use assets capitalized		$	—	$	451

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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Simulations Plus, Inc.

Notes to Condensed Consolidated Financial Statements

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.

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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.

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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 million and $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:

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	Three Months Ended				Six Months Ended
(in thousands)	February 28, 2026		February 28, 2025		February 28, 2026		February 28, 2025
Software licenses
Point in time	$	13,859	$	12,412	$	22,117	$	22,531
Over time	776		1,072		1,401		1,668
Services
Over time	9,656		8,948		19,194		17,157
Total revenues	$	24,291	$	22,432	$	42,712	$	41,356

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:



	Three Months Ended				Six Months Ended
(in thousands)	February 28, 2026		February 28, 2025		February 28, 2026		February 28, 2025
Balance, beginning of period	$	93	$	145	$	187	$	149
Provision for credit losses	10		18		(84)		22
Write-offs	(30)		16		(30)		8
Balance, end of period	$	73	$	179	$	73	$	179

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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.

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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:


Equipment			5 years
Computer equipment			3 to 7 years
Furniture and fixtures			5 to 7 years
Leasehold improvements			Shorter of the asset life or lease term

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:


(in thousands)	Software		Services		Total




Balance, August 31, 2025	$	21,801	$	21,916	$	43,717
Addition	—		—		—
Impairments	—		—		—
Balance, February 28, 2026	$	21,801	$	21,916	$	43,717

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


(in thousands)	Amortization Period	Gross Carrying Value		Accumulated Amortization		Net Book Value
Trade names	Indefinite	$	6,950	$	—	$	6,950
Covenants not to compete	Straight line 2 to 3 years	53		53		—
Other internal use software	Straight line 3 to 13 years	655		137		518
Customer relationships	Straight line 8 to 14 years	6,668		4,105		2,561
ERP	Straight line 15 years	1,907		609		1,298

		$	16,233	$	4,904	$	11,327

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:


(in thousands)	Amortization Period	Gross Carrying Value		Accumulated Amortization		Net Book Value
Trade names	Indefinite	$	6,950	$	—	$	6,950
Covenants not to compete	Straight line 2 years to 3 years	53		53		—
Other internal use software	Straight line 3 years to 13 years	718		110		608
Customer relationships	Straight line 8 years to 14 years	6,667		3,693		2,974
ERP	Straight line 15 years	1,907		543		1,364

		$	16,295	$	4,399	$	11,896

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.

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


(in thousands)
Years Ending August 31,	Amount
Remainder of 2026	$	478
2027	$	840
2028	$	693
2029	$	372
2030	$	372

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:


Level Input:						Input Definition:
Level I						Inputs that are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.
Level II						Inputs, other than quoted prices included in Level I, that are observable for the asset or liability through corroboration with market data at the measurement date.
Level III						Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.

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:


	February 28, 2026

(in thousands)	Amortized cost		Unrealized gains		Unrealized losses		Fair value
Level 1:
Money Market	$	12,558	$	—	$	—	$	12,558
Term deposits (due within one year)	6,500		—		—		6,500
Corporate debt securities (due within one year)	10,615		—		(6)		10,609
Total Level 1	29,673		—		(6)		29,667
Level 2:	—		—		—		—
Level 3:	—		—		—		—
Total securities	$	29,673	$	—	$	(6)	$	29,667

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	August 31, 2025

(in thousands)	Amortized cost		Unrealized gains		Unrealized losses		Fair value
Level 1:
Term deposits (due within one year)	$	3,500	$	—	$	—	$	3,500



Money Market	13,159		—		—		13,159
Total Level 1	16,659		—		—		16,659
Level 2:	—		—		—		—
Level 3:	—		—		—		—
Total securities	16,659		—		—		16,659

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 of zero 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 of zero 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.

Income Taxes

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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:


(in thousands)	Amortization Period	Gross Carrying Value		Accumulated Amortization		Net Book Value


Developed technologies–DILIsym acquisition	Straight line 9 years	$	2,850	$	2,769	$	81
Intellectual rights of Entelos Holding Company	Straight line 10 years	50		38		12
Developed technologies–Lixoft acquisition	Straight line 16 years	8,010		2,935		5,075
Developed technologies–Immunetrics acquisition	Straight line 5 years	1,080		585		495
Developed technologies–Pro-ficiency acquisition	Straight line 5 years	3,228		3,228		—
		$	15,218	$	9,555	$	5,663

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


(in thousands)	Amortization Period	Gross Carrying Value		Accumulated Amortization		Net Book Value


Developed technologies–DILIsym acquisition	Straight line 9 years	$	2,850	$	2,610	$	240
Intellectual rights of Entelos Holding Company	Straight line 10 years	50		36		14
Developed technologies–Lixoft acquisition	Straight line 16 years	8,010		2,670		5,340
Developed technologies–Immunetrics acquisition	Straight line 5 years	1,080		477		603
Developed technologies–Pro-ficiency acquisition	Straight line 5 years	3,228		3,228		—
		$	15,218	$	9,021	$	6,197

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:


(in thousands)
Years Ending August 31,	Amount
Remainder of 2026	$	459
2027	$	744
2028	$	699
2029	$	526
2030	$	524

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:

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	Three Months Ended				Six Months Ended

(in thousands)	February 28, 2026		February 28, 2025		February 28, 2026		February 28, 2025
Numerator
Net income attributable to common shareholders	$	4,535	$	3,074	$	5,211	$	3,280

Denominator
Weighted-average number of common shares outstanding during the period	20,160		20,097		20,150		20,082
Dilutive effect of stock options	83		180		82		180
Common stock and common-stock equivalents used for diluted earnings per share	20,243		20,277		20,232		20,262

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.

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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:



	Three Months Ended				Six Months Ended

(in thousands)	February 28, 2026		February 28, 2025		February 28, 2026		February 28, 2025
Interest income	$	288	$	154	$	555	$	313

Change in fair valuation of contingent consideration	—		640		—		640



Gain (loss) on currency exchange	(32)		2		(42)		(13)
Total other income	$	256	$	796	$	513	$	940

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NOTE 4 – COMMITMENTS AND CONTINGENCIES

Income Taxes

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:



	Three Months Ended		Six Months Ended
(in thousands)	February 28, 2026	February 28, 2025	February 28, 2026	February 28, 2025
Common stock outstanding, beginning of period	20,146	20,085	20,137	20,051

Common stock issued during the period	59	26	68	60
Common stock outstanding, end of period	20,205	20,111	20,205	20,111

NOTE 6 – STOCK OWNERSHIP PLANS

The following table summarizes information about stock options:

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(in thousands, except per share and weighted-average amounts)
Activity for the six months ended February 28, 2026	Number of Options	Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Life
Outstanding, August 31, 2025	1,924	$	36.98	6.52 years
Granted	692	16.02
Exercised	(65)	9.71
Canceled/Forfeited	(111)	28.07
Outstanding, February 28, 2026	2,440	$	32.16	7.21 years
Vested and Exercisable, February 28, 2026	1,117	$	38.57	5.40 years
Vested and Expected to Vest, February 28, 2026	2,283	$	32.83	7.08 years

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:



(in thousands, except weighted-average amounts)	Six Months Ended February 28, 2026			Fiscal Year 2025
Estimated fair value of awards granted	$	6,187		$	6,597
Unvested forfeiture rate	6.94		%	6.29		%
Weighted-average grant price	$	16.02		$	32.01
Weighted-average market price	$	16.02		$	32.01
Weighted-average volatility	52.29		%	47.03		%
Weighted-average risk-free rate	3.67		%	3.95		%
Weighted-average dividend yield	0.00		%	0.00		%
Weighted-average expected life	6.60 years			6.61 years

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)


Exercise Price Per Share				Awards Outstanding				Awards Exercisable
Low		High		Quantity	Weighted -Average Remaining Contractual Life	Weighted-Average Exercise Price		Quantity	Weighted-Average Remaining Contractual Life	Weighted-Average Exercise Price

$	10.05	$	17.12	811	8.34 years	$	15.16	120	0.99 years	$	10.07
$	19.81	$	33.29	442	7.02 years	$	30.81	201	5.08 years	$	28.61
$	34.23	$	46.09	955	6.84 years	$	41.35	593	6.56 years	$	41.34
$	47.88	$	66.14	232	5.16 years	$	56.25	203	4.94 years	$	57.17
				2,440	7.20 years	$	32.11	1,117	5.37 years	$	38.42

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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.

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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.


	Three Months Ended February 28, 2026									Six Months Ended February 28, 2026
(in thousands)	Software			Services			Total			Software			Services			Total
Revenue	$	14,635		$	9,656		$	24,291		$	23,518		$	19,194		$	42,712
Less:
Cost of revenue (1)	1,648			6,500			8,148			3,060			12,618			15,678
Gross Profit	12,987			3,156			16,143			20,458			6,576			27,034
Gross Margin	89		%	33		%	66		%	87		%	34		%	63		%
Less:
Research and Development							3,470									6,450
Sales and Marketing							2,930									6,109
General and administrative (2)							4,113									8,132

Income from operations							5,630									6,343
Add:
Interest income and other, net							288									555


Loss on currency exchange							(32)									(42)
Income before income taxes							$	5,886								$	6,856

(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.


	Three Months Ended February 28, 2025									Six Months Ended February 28, 2025
(in thousands)	Software			Services			Total			Software			Services			Total
Revenue	$	13,484		$	8,948		$	22,432		$	24,199		$	17,157		$	41,356
Less:
Cost of revenue (1)	2,587			6,718			9,305			5,225			12,786			18,011
Gross Profit	10,897			2,230			13,127			18,974			4,371			23,345
Gross Margin	81		%	25		%	59		%	78		%	25		%	56		%
Less:
Research and Development							2,143									3,991
Sales and Marketing							3,717									6,568
General and administrative (2)							4,555									9,948
Income from operations							2,712									2,838
Add:
Interest income and other, net							154									313
Change in value of contingent consideration							640									640

Income (loss) on currency exchange							2									(13)
Income before income taxes							$	3,508								$	3,778

(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.

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(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):


	For the three months ended
(in thousands)	February 28, 2026		% of total*		February 28, 2025		% of total

Discovery	$	2,734	19	%	$	2,316	17	%
Development	11,453		78	%	10,207		76	%
Clinical Operations	415		3	%	894		7	%
Commercialization	33		—	%	67		—	%
Total Software	14,635		100	%	13,484		100	%

Discovery	—		—	%	28		—	%
Development	7,411		77	%	6,641		74	%

Commercialization	2,245		23	%	2,279		25	%
Total Services	9,656		100	%	8,948		100	%

Total	$	24,291	100	%	$	22,432	100	%


	For the six months ended
(in thousands)	February 28, 2026		% of total*		February 28, 2025		% of total

Discovery	$	4,056	17	%	$	3,603	15	%
Development	18,684		80	%	17,882		74	%
Clinical Operations	715		3	%	2,579		10	%
Commercialization	63		—	%	135		1	%
Total Software	23,518		100	%	24,199		100	%

Discovery	35		—	%	50		—	%
Development	14,152		74	%	12,883		75	%
Clinical Operations	—		—	%	—		—	%
Commercialization	5,007		26	%	4,224		25	%
Total Services	19,194		100	%	17,157		100	%

Total	$	42,712	100	%	$	41,356	100	%

*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:

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(in thousands)	Three Months Ended
	February 28, 2026				February 28, 2025
	$		% of total*		$		% of total
Americas	$	16,578	68	%	$	16,112	72	%
EMEA	5,957		25	%	4,806		21	%
Asia Pacific	1,756		7	%	1,514		7	%
Total	$	24,291	100	%	$	22,432	100	%



(in thousands)	Six Months Ended
	February 28, 2026				February 28, 2025
	$		% of total*		$		% of total
Americas	$	30,023	70	%	$	30,581	74	%
EMEA	9,092		21	%	7,526		18	%
Asia Pacific	3,597		8	%	3,249		8	%
Total	$	42,712	100	%	$	41,356	100	%

*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.

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Executive Overview

Our clients face many challenges. Developing new therapies is time-consuming and expensive, requiring an average of 10-15 years and an average cost of approximately $2.2 billion to develop a single drug. Drug sponsors must prioritize not only efficacy and safety of the drug, but also issues like drug-drug interactions, inclusion of patients representative of the indicated population, regulatory approvals, minimization of animal testing, safety and compliance during clinical trials, and commercial success. Our clients face many macro-economic issues including the current attention on global drug pricing resulting in temporary reduction in R&D spending on the part of pharmaceutical and biotech companies.

Our MIDD software and services allow clients to use modeling and simulation to accelerate drug development, reduce the costs of R&D, comply with regulatory guidance and best practices, and increase confidence in the safety and efficacy of their drugs and biologics. Our adaptive learning solutions support the success of clinical trials by accelerating recruitment of an appropriate patient population, increasing retention of participants, and by driving competency and compliance with trial protocols, while our medical communications solutions provide support in obtaining regulatory approval and commercialization of drugs.

The Company is headquartered in Research Triangle Park, North Carolina, and has a European office in Paris, France. The Company has a remote work culture that supports employee work-life balance and minimizes its carbon footprint.

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Forward-Looking Statements

This document and the documents incorporated in this document by reference contain forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact contained in this document and the materials accompanying this document are forward-looking statements.

The forward-looking statements are based on the beliefs of our management, as well as assumptions made by and information currently available to our management. Frequently, but not always, forward-looking statements are identified by the use of the future tense and by words such as “believes,” “expects,” “anticipates,” “intends,” “will,” “may,” “could,” “would,” “projects,” “continues,” “estimates,” or similar expressions. Forward-looking statements are not guarantees of future performance and actual results could differ materially from those indicated by the forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause our or our industry’s actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by the forward-looking statements.

The forward-looking statements contained or incorporated by reference in this document are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”), and are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. These statements include declarations regarding our plans, intentions, beliefs, or current expectations.

Among the important factors that could cause actual results to differ materially from those indicated by forward-looking statements are the risks and uncertainties described under “Risk Factors” in our Annual Report on Form 10-K for the year ended August 31, 2025, filed with the Securities and Exchange Commission (“SEC”) on December 1, 2025, and elsewhere in this document and in our other filings with the SEC.

Forward-looking statements are expressly qualified in their entirety by this cautionary statement. The forward-looking statements included in this document are made as of the date of this document and we do not undertake any obligation to update forward-looking statements to reflect new information, subsequent events, or otherwise.

Our historical results are not necessarily indicative of the results that may be expected for any period in the future.

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Results of Operations

Comparison of Three Months Ended February 28, 2026, and February 28, 2025


(in thousands)	Three Months Ended				% of Revenue
	February 28, 2026		February 28, 2025		February 28, 2026		February 28, 2025		$ Change		% Change
Revenues
Software	$	14,635	$	13,484	60	%	60	%	$	1,151	9	%
Services	9,656		8,948		40	%	40	%	708		8	%
Total revenues	24,291		22,432		100	%	100	%	1,859		8	%
Cost of revenue
Software	1,648		2,587		7	%	12	%	(939)		-36	%
Services	6,500		6,718		27	%	30	%	(218)		-3	%
Total cost of revenues	8,148		9,305		34	%	41	%	(1,157)		-12	%
Gross profit	16,143		13,127		66	%	59	%	3,016		23	%
Research and development	3,470		2,143		14	%	10	%	1,327		62	%
Sales and marketing	2,930		3,717		12	%	17	%	(787)		-21	%
General and administrative	4,113		4,555		17	%	20	%	(442)		-10	%

Total operating expenses	10,513		10,415		43	%	46	%	98		1	%
Income from operations	5,630		2,712		23	%	12	%	2,918		108	%
Other income, net	256		796		1	%	4	%	(540)		-68	%
Income before income taxes	5,886		3,508		24	%	16	%	2,378		68	%
Income tax expense	(1,351)		(434)		-6	%	-2	%	(917)		211	%
Net income	$	4,535	$	3,074	19	%	14	%	$	1,461	48	%

Revenues

Revenues increased by $1.9 million, or 8%, to $24.3 million for the three months ended February 28, 2026, compared to $22.4 million for the three months ended February 28, 2025. This increase is primarily due to a $1.2 million, or 9% increase, in software-related revenue and a $0.7 million, or 8%, increase in service-related revenue when compared to the three months ended February 28, 2025. The software-related revenue increase of $1.2 million, or 9%, compared to the three months ended February 28, 2025, was primarily due to a $1.2 million increase in revenue from Development solutions, $0.4 million increase in revenue from Discovery solutions, partially offset by a $0.5 million decline in revenue from Clinical Operations solutions. The service-related revenue increase of $0.7 million, or 8%, compared to the three months ended February 28, 2025, was primarily due to organic revenue growth of $0.8 million from Development solutions.

Cost of revenues

Cost of revenues decreased by $1.2 million, or 12%, for the three months ended February 28, 2026, compared to the three months ended February 28, 2025. This decrease is primarily due to a $0.9 million, or 36%, decrease in software-related costs, partially offset by a $0.2 million, or 3%, increase in service-related costs.

The software-related costs decrease of $0.9 million, or 36%, compared to the three months ended February 28, 2025, was primarily due to less amortization of $0.8 million following the impairment of the Pro-ficiency developed technology in the third quarter of fiscal 2025.

The service-related costs increased $0.2 million, or 3%, compared to the three months ended February 28, 2025; the increase was primarily due to higher fulfillment costs associated with increased client services activity. The modest increase in service-related costs relative to revenue growth also reflected improved operating efficiency from headcount reductions implemented in the third quarter of fiscal 2025, and organizational changes that shifted certain internal resources from supporting services to research and development.

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Gross profit

Gross profit increased $3.0 million, or 23% to $16.1 million for the three months ended February 28, 2026, compared to $13.1 million for the three months ended February 28, 2025. This increase was primarily driven by higher revenues, lower software-related costs, organizational changes that shifted certain internal resources from supporting services to research and development, improved billable utilization, and higher average yields.

Software gross profit increased by $2.1 million to 89% gross margin compared to 81% gross margin for the three months ended February 28, 2025. This improvement was primarily driven by increased software-related revenue, particularly from Development and Discovery solutions, and lower software-related costs, largely reflecting reduced amortization expense following the impairment of the Pro-ficiency developed technology in the third quarter of fiscal 2025.

Services gross profit increased by $0.9 million to 33% gross margin compared to 25% gross margin for the three months ended February 28, 2025. The increase was primarily attributable to higher services revenue from increased client services activity within Development solutions, as well as improved operating efficiency driven by headcount reductions implemented in the third quarter of fiscal 2025, organizational changes that shifted certain internal resources from supporting services to research and development, higher billable utilization, and higher average yields.

Overall gross margin was 66% for the three months ended February 28, 2026, compared to 59% for the three months ended February 28, 2025, primarily due to higher software and services revenues, lower software amortization expense, organizational changes that shifted certain internal resources from supporting services to research and development, higher billable utilization, and higher average yields.

Research and development

We incurred $4.3 million of research and development costs during the three months ended February 28, 2026. Of this amount, $0.8 million was capitalized as part of capitalized software development costs, and $3.5 million was expensed. We incurred $2.9 million of research and development costs during the three months ended February 28, 2025. Of this amount, $0.8 million was capitalized, and $2.1 million was expensed. Research and development spend increased by $1.3 million, or 46%, for the three months ended February 28, 2026, compared to the three months ended February 28, 2025, representing our continued investment in innovation for future growth, including the development of an integrated, cloud-enabled modeling ecosystem that connects our validated scientific engines with AI-driven capabilities and workflow automation across the drug development lifecycle. The increase was primarily attributable to higher personnel-related costs, including organizational changes that shifted certain internal resources from supporting services to research and development, as well as increased efforts to support these development initiatives.

R&D spend as a percentage of revenue increased to 14% for the three months ended February 28, 2026, from 10% for the three months ended February 28, 2025, representing our continued investment in innovation for future growth. Total R&D cost (defined as capitalized R&D plus R&D expense) was 18% of revenue for the three months ended February 28, 2026, compared to 13% for the three months ended February 28, 2025.

Sales and marketing expenses

Sales and marketing expenses decreased by $0.8 million, or 21%, to $2.9 million for the three months ended February 28, 2026, compared to $3.7 million for the three months ended February 28, 2025. Sales and marketing as a percentage of revenue, decreased to 12% for the three months ended February 28, 2026, from 17% for the three months ended February 28, 2025. The decrease is attributable to the headcount reduction implemented in the third quarter of fiscal 2025.

General, and administrative expenses

G&A expenses decreased by $0.4 million, or 10%, to $4.1 million for the three months ended February 28, 2026, compared to $4.6 million for the three months ended February 28, 2025. G&A as a percentage of revenue decreased to 17% for the three months ended February 28, 2026, from 20% for the three months ended February 28, 2025. The decrease primarily reflected lower corporate support costs and reduced non-recurring spending.

Other income

Total other income was $0.3 million for the three months ended February 28, 2026, compared to total other income of $0.8 million for the three months ended February 28, 2025. Interest income increased by $0.1 million due to higher balances of

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cash invested in interest-bearing accounts. For the three months ended February 28, 2025, the Company recognized $0.6 million gain on the change in fair value of contingent consideration related to the Immunetrics holdback liability, which was settled.

Income tax expense

The expense for income taxes was $1.4 million for the three months ended February 28, 2026, compared to $0.4 million for the three months ended February 28, 2025. The Company tax rate increased to 23% for the three months ended February 28, 2026, compared to 12% for the three months ended February 28, 2025. 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.

Results of Operations

Comparison of Six Months Ended February 28, 2026, and February 28, 2025


(in thousands)	Six Months Ended				% of Revenue
	February 28, 2026		February 28, 2025			February 28, 2026		February 28, 2025		$ Change		% Change
Revenue
Software	$	23,518	$	24,199		55	%	59	%	$	(681)	-3	%
Services	19,194		17,157			45	%	41	%	2,037		12	%
Total revenues	42,712		41,356			100	%	100	%	1,356		3	%
Cost of revenue
Software	3,060		5,225			7	%	13	%	(2,165)		-41	%
Services	12,618		12,786			30	%	31	%	(168)		-1	%
Total cost of revenues	15,678		18,011			37	%	44	%	(2,333)		-13	%
Gross profit	27,034		23,345			63	%	56	%	3,689		16	%
Research and development	6,450		3,991			15	%	10	%	2,459		62	%
Sales and marketing	6,109		6,568			14	%	16	%	(459)		-7	%
General and administrative	8,132		9,948			19	%	24	%	(1,816)		-18	%

Total operating expenses	20,691		20,507			48	%	50	%	184		1	%
Income from operations	6,343		2,838			15	%	7	%	3,505		124	%
Other income, net	513		940			1	%	2	%	(427)		-45	%
Income before income taxes	6,856		3,778			16	%	9	%	3,078		81	%
Income tax expense	(1,645)		(498)			-4	%	-1	%	(1,147)		230	%
Net income	$	5,211	$	3,280		12	%	8	%	$	1,931	59	%

Revenues

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Revenues increased by $1.4 million, or 3%, to $42.7 million for the six months ended February 28, 2026, compared to $41.4 million for the six months ended February 28, 2025. This increase is primarily due to a $2.0 million, or 12%, increase in service-related revenue and a $0.7 million, or 3%, decrease in software-related revenue when compared to the six months ended February 28, 2025. The service-related revenue increase of $2.0 million, or 12%, compared to the six months ended February 28, 2025, was primarily due to organic revenue growth within Development solutions of $1.3 million and Commercialization solutions of $0.8 million. The software-related revenue decrease of $0.7 million, or 3%, compared to the six months ended February 28, 2025, was primarily due to Clinical Operations solutions revenue decline of $1.9 million, partially offset by revenue growth of $0.8 million and $0.5 million within Development solutions and Discovery solutions, respectively.

Cost of revenues

Cost of revenues decreased by $2.3 million, or 13%, for the six months ended February 28, 2026, compared to the six months ended February 28, 2025. This decrease is primarily due to a $2.2 million or 41% decrease in software-related costs and a $0.2 million or 1% increase in service-related costs.

The software-related costs decrease of $2.2 million or 41%, compared to the six months ended February 28, 2025, was attributable to $1.6 million less amortization of acquired technology from the Pro-ficiency as the balances were impaired in the third quarter of fiscal 2025.

The service-related costs increase of $0.2 million or 1%, compared to the six months ended February 28, 2025. The increase in service-related costs was primarily due to higher fulfillment costs associated with increased client services activity. The modest increase in service-related costs relative to service-related revenue growth reflected improved operating efficiency resulting from headcount reductions implemented in the third quarter of fiscal 2025, organizational changes that shifted certain internal resources from supporting services to research and development.

Gross profit

Gross profit increased to $27.0 million or 63% gross margin for the six months ended February 28, 2026, compared to $23.3 million or 56% gross margin for the six months ended February 28, 2025. The increase was primarily attributable to higher service-related revenues, lower software-related costs, organizational changes that shifted certain internal resources from supporting services to research and development, and improved operating efficiency.

Software gross profit increased by $1.5 million, and software gross margin increased to 87% for the six months ended February 28, 2026, compared to 78% for the six months ended February 28, 2025. This improvement was primarily due to lower software-related costs, largely reflecting reduced amortization expense following the impairment of the Pro-ficiency acquired technology in the third quarter of fiscal 2025, partially offset by lower software-related revenue driven primarily by a decline in Clinical Operations solutions revenue.

Services gross profit increased by $2.2 million, and services gross margin increased to 34% for the six months ended February 28, 2026, compared to 25% for the six months ended February 28, 2025. This improvement was primarily due to higher service-related revenue from organic growth within Development solutions and Commercialization solutions, together with improved operating efficiency resulting from headcount reductions implemented in the third quarter of fiscal 2025 and organizational changes that shifted certain internal resources from supporting services to research and development.

Overall gross margin increased to 63% for the six months ended February 28, 2026, compared to 56% for the six months ended February 28, 2025, primarily due to higher service-related revenues, lower software amortization expense, organizational changes that shifted certain internal resources from supporting services to research and development, and improved operating efficiency.

Research and development

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We incurred $8.2 million of research and development costs during the six months ended February 28, 2026. Of this amount, $1.7 million was capitalized as part of capitalized software development costs and $6.5 million was expensed. We incurred $5.5 million of research and development costs during the six months ended February 28, 2025. Of this amount, $1.5 million was capitalized and $4.0 million was expensed. Research and development spend increased by $2.7 million, or 48%, for the six months ended February 28, 2026, compared to the six months ended February 28, 2025, reflecting higher investment in product and platform development activities, including continued enhancement and expansion of our software offerings and related capabilities. The increase was primarily attributable to higher personnel-related costs, including organizational changes that shifted certain internal resources from supporting services to research and development, as well as increased efforts to support these development initiatives.

R&D spend as a percentage of revenue increased to 15% for the six months ended February 28, 2026, from 10% for the six months ended February 28, 2025, representing our continued investment in innovation for future growth, including the development of an integrated, cloud-enabled modeling ecosystem that connects our validated scientific engines with AI-driven capabilities and workflow automation across the drug development lifecycle. Total R&D cost (defined as capitalized R&D plus R&D expense) was 18% of revenue for the six months ended February 28, 2026, compared to 13% for the six months ended February 28, 2025.

Sales and marketing expenses

Sales and marketing expenses decreased by $0.5 million, or 7%, to $6.1 million for the six months ended February 28, 2026, compared to $6.6 million for the six months ended February 28, 2025. The decrease is attributable to $0.4 million lower compensation cost from the headcount reduction implemented in the third quarter of fiscal 2025, offset by $0.3 million of higher variable selling costs and customer-facing activities to support commercial execution and demand generation across our offerings.

General, and administrative expenses

General and administrative (“G&A”) expenses decreased by $1.8 million, or 18%, to $8.1 million for the six months ended February 28, 2026, compared to $9.9 million for the six months ended February 28, 2025. The decrease primarily reflected lower corporate support costs and reduced non-recurring spending. In addition, merger-and-acquisition-related costs decreased due to lower deal activity and associated professional fees in the current period. Facilities costs decreased as we continued to optimize our real estate footprint consistent with a remote-first operating model.

Other income

Total other income was $0.5 million for the six months ended February 28, 2026, compared to total other income of $0.9 million for the six months ended February 28, 2025. The decrease is attributable to a $0.6 million decrease in the fair value of the Immunetrics earnout liability in the prior period, as no earnout payment was anticipated related to the second earnout measurement period, this was partially offset by increased interest income of $0.2 million due to higher balances of cash invested in interest-bearing accounts.

Income tax expense

The expense for income taxes was $1.6 million for the six months ended February 28, 2026, compared to $0.5 million for the six months ended February 28, 2025. The Company tax rate increased to 24% for the six months ended February 28, 2026, compared to 13% for the six months ended February 28, 2025. 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.

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Liquidity and Capital Resources

Our principal sources of capital have been cash flows from our operations. We expect existing cash, cash equivalents, short-term investments, cash generated by ongoing operations, and working capital will be sufficient to fund our operating activities and cash commitments for investing and financing activities and material capital expenditures for the next 12 months.

We continue to seek opportunities for strategic acquisitions, investments, and partnerships. If one or more strategic opportunities are identified, a substantial portion of our cash reserves may be required to complete the transaction. If we identify an attractive strategic opportunity that would require more cash to complete than we are willing or able to use from our cash reserves, we may consider financing options to complete the transaction, including obtaining loans or selling our securities. Additionally, our quest for strategic opportunities could result in a significant change to our liquidity position and/or our results of operations if any such transactions are completed.

Except as discussed elsewhere in this Quarterly Report, we are not aware of any trends or demands, commitments, events, or uncertainties that are reasonably likely to result in a decrease in liquidity of our assets.

Cash, Cash Equivalents, and Investments

At February 28, 2026, the Company had $25.7 million in cash and cash equivalents, $16.1 million in short-term investments, and net working capital of $55.2 million. Short-term investments consist of CD's, corporate bonds, and cash equivalents. The investments are U.S.-dollar-denominated securities.

Cash Flows

Operating Activities

Our cash flows from operating activities primarily include net income adjusted for (i) non-cash items included in net income, such as provisions (recoveries) for credit losses, depreciation and amortization, stock-based compensation, deferred taxes, and other non-cash items and (ii) changes in the balances of operating assets and liabilities. Net cash provided by operating activities was $10.6 million for the six months ended February 28, 2026, compared to $4.4 million for the six months ended February 28, 2025. The $6.3 million improvement was driven primarily by an increase in cash-adjusted net income, an increase in deferred revenue and a decrease in cash outflow in other liabilities, partially offset by an increase in accounts receivable.

Investing Activities

Net cash used in investing activities during the six months ended February 28, 2026, was $16.2 million, compared to $2.5 million during the six months ended February 28, 2025. The increase of $13.8 million primarily reflects deployment and rebalancing of our short-term investment portfolio and capitalized software development to support product and platform enhancements. During the six months ended February 28, 2026, we invested $16.0 million in short-term investments as part of our treasury strategy to prudently invest excess cash while preserving liquidity and capital, and we incurred $1.7 million of capitalized computer software development costs to support ongoing product development and technology improvements. These uses of cash were partially offset by $1.5 million of maturities of short-term investments as securities matured in the normal course of portfolio management.

Financing Activities

Net cash provided by financing activities during the six months ended February 28, 2026, was $0.5 million, compared to cash used in financing activities of $1.3 million for the six months ended February 28, 2025. The increase of $1.7 million was attributable to cash settlement of $1.6 million from the holdback obligations related to the Immunetrics acquisition and an increase in proceeds from the exercise of stock options.

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Share Repurchases

For the three and six months ended February 28, 2026, and February 28, 2025, respectively, we did not repurchase any shares of Company stock. As of February 28, 2026, $30 million remains available for additional repurchases under our authorized repurchase program. However, we are not obligated to repurchase any additional shares, and the timing, manner, price, and actual amount of further share repurchases will depend on a variety of factors, including stock price, market conditions, other capital management needs and opportunities, and corporate and regulatory considerations. The share repurchase program has no expiration date but may be terminated at any time at our Board of Directors’ discretion.

Critical Accounting Estimates

Estimates

Our financial statements and accompanying notes are prepared in accordance with GAAP. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. Actual results could differ from those estimates. Critical Accounting Estimates for us include revenue recognition, accounting for capitalized software development costs, accounting for intangible assets and goodwill, valuation of stock options, business acquisitions and accounting for income taxes.

Revenue Recognition

We generate revenue primarily from the sale of software licenses, providing consulting services, and customizing a software platform tailored to the pharmaceutical industry for drug development.

The Company determines 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, the Company satisfies a performance obligation

The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance, and collectability of consideration is probable. Contracts generally have fixed pricing terms and are not subject to variable pricing. The Company considers the nature and significance of each specific performance obligation under a contract when allocating the proceeds under each contract. Accounting for contracts includes significant judgment in the estimation of hours/cost to be incurred on consulting contracts, and the de minimis nature of the post-sales costs associated with software sales.

Capitalized Computer Software Development Costs

Software development costs are capitalized in accordance with ASC 985-20, “Costs of Software to Be Sold, Leased, or Marketed.” 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 computer software development costs require considerable judgment by management with respect to certain external factors including, but not limited to, technological feasibility, anticipated future gross revenues, 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 the Company’s software products. Total capitalized computer software development costs were $0.8 million and $0.8 million for the three months ended February 28, 2026, and February 28, 2025, respectively.

Amortization of capitalized computer 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 $0.8 million, respectively, for the three months ended February 28, 2026, and February 28, 2025, respectively and $1.7 million and $1.6 million, respectively, for the six months ended February 28, 2026, and February 28, 2025. We expect future amortization expense to vary due to variations in capitalized computer software development costs.

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We test capitalized computer software development costs for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

Intangible Assets and Goodwill

The Company performs valuations of assets acquired and liabilities assumed on each acquisition accounted for as a business combination and recognizes the assets acquired and liabilities assumed at their acquisition-date fair value. Acquired intangible assets include customer relationships, software, trade names, and noncompete agreements. The Company determines the appropriate useful life by performing an analysis of expected cash flows based on historical experience of the acquired businesses. 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.

Goodwill represents the excess of the cost of an acquired entity over the fair value of the acquired net assets. Goodwill is not amortized; instead, it is tested for impairment annually or when events or circumstances change that would indicate that goodwill 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 the Company's use of the acquired assets or the strategy for the Company's 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. As of February 28, 2026, the Company determined that it had two reporting units - Software and Services.

As of February 28, 2026, the entire balance of goodwill was attributed to both of the Company's reporting units, Software and Services. 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.

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

Business Acquisitions

The Company accounted for the acquisitions using the acquisition method of accounting where the assets acquired and liabilities assumed are recognized based on their respective estimated fair values. The excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. Determining the fair value of certain acquired assets and liabilities is subjective in nature and often involves the use of significant estimates and assumptions, including, but not limited to, the selection of appropriate valuation methodology, projected revenue, expenses, and cash flows, weighted-average cost of capital, discount rates, and estimates of terminal values. Business acquisitions are included in the Company's consolidated financial statements as of the date of the acquisition.

Research and Development Costs

R&D costs are charged to expense as incurred until technological feasibility has been established, or when the costs are for maintenance and minor modification of existing software products that do not add significant new capabilities to the products. These costs include salaries and benefits, laboratory experiments, and purchased software that was developed by other companies and incorporated into, or used in the development of, our final products.

Income Taxes

The Company accounts for income taxes in accordance with ASC 740-10, “Income Taxes,” which requires the recognition of deferred tax assets and liabilities for 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.

Stock-Based Compensation

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The Company accounts for stock options in accordance with ASC 718-10, “Compensation-Stock Compensation.” Under this method, compensation costs include the estimated grant-date fair value of awards amortized over the options’ vesting 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.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

As of February 28, 2026, there has been no material change in our exposure to market risk from that described in Item 7A of our Annual Report.

Item 4. Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of February 28, 2026. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well-designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, management concluded as of February 28, 2026, that our disclosure controls and procedures were effective.

Changes in Internal Controls over Financial Reporting

No change in our internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For a description of our material pending legal proceedings, please see Note 4, Commitments and Contingencies, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report.

Item 1A. Risk Factors

Please carefully consider the information set forth in this Quarterly Report and the risk factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended August 31, 2025, which could materially affect our business, financial condition, or future results. The risks described in our Annual Report, as well as other risks and uncertainties, could materially and adversely affect our business, results of operations, and financial condition, which in turn could materially and adversely affect the trading price of shares of our common stock. There have been no material updates or changes to the risk factors previously disclosed in our Annual Report; provided, however, additional risks not currently known or currently material to us may also harm our business.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

None.

Issuer Purchases of Equity Securities

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Rule 10b5-1 Trading Plans

The adoption, modification or termination of contracts, instructions, or written plans for the purchase or sale of our securities by our Section 16 officers and directors for the quarter ended February 28, 2026, each of which is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act (“Rule 10b5-1 Plan”), were as follows:

Name

Title

Action

Date Adopted

Expiration Date

Aggregate # of Securities to be Purchased/Sold

Walter Woltosz (1)

Director

Adoption

12/04/2025

02/03/2028

360,000

John DiBella (2)

Chief Revenue Officer

Adoption

01/14/2026

04/30/2027

10,000

Jill Fiedler-Kelly (3)

President, Services Solutions

Adoption

02/09/2026

02/15/2027

9,400

(1) On December 4, 2025, Walter Woltosz and his spouse entered into a Plan, which provides for the potential sale of up to 360,000 shares of Company common stock. The Plan expires on February 3, 2028, or upon the earlier upon completion or expiration of all transactions subject to the Plan.

(2) On January 14, 2026, John DiBella entered into a new Plan, which provides for the potential sale of up to 10,000 shares of Company common stock. The new plan expires on April 30, 2027, or upon the earlier completion of all authorized transactions under the Plan.

(3) On February 9, 2026, Jill Fiedler-Kelly entered into a Plan, which provided for the potential exercise of vested stock options and the associated sale of up to 9,400 shares of Company common stock underlying such options. The Plan expires on February 15, 2027, or upon the earlier completion or expiration of all transactions subject to the Plan.

The Rule 10b5-1 trading arrangements described above were adopted and precleared in accordance with the Company’s Insider Trading Policy and actual sale transactions made pursuant to such trading arrangements will be disclosed publicly in future Section 16 filings with the SEC.

Other than those disclosed above, none of our directors or officers adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” in each case as defined in Item 408 of Regulation S-K.

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Item 6. EXHIBITS


EXHIBIT NUMBER						DESCRIPTION















































10.1†						Third Amendment to 2021 Equity Incentive Plan, dated February 12, 2026, incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed on February 12, 2026.
31.1 *						Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 *						Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 **						Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS***						Inline XBRL Instance Document
101.SCH***						Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents




104***						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101 attachments).

_____________________________



*						Filed herewith.
**						Furnished herewith.
***						The XBRL related information in Exhibit 101 shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

†						Refers to management contracts or compensatory plans or arrangements.

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SIGNATURE

In accordance with Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Research Triangle Park, State of North Carolina, on April 10, 2026.


		SIMULATIONS PLUS, INC.

Date:	April 10, 2026	By:	/s/ Will Frederick
			Will Frederick Executive Vice President and Chief Financial Officer (Principal financial officer)

Simulations Plus - 10-Q quarterly report FY

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