Financial Analysis

COMMITMENTS AND CONTINGENCIES Leases Rent expense, including common area maintenance fees, was $0.5 million, $0.5 million, and $0.5 million for the fiscal years ended August 31, 2025, 2024, and 2023, respectively. Lease liability maturities as of August 31, 2025, were as follows: (in thousands) Years Ending August 31, Amount 2026 $ 236 2027 89 2028 72 2029 72 2030 72 Thereafter 235 Total undiscounted liabilities 776 Less: imputed interest (160) Total operating lease liabilities (including current portion) $ 616 Employment Agreements In the normal course of business, the Company has entered into employment agreements with certain of its executive officers that may require compensation payments upon termination. Income Taxes We follow guidance issued by the FASB with regard to our accounting for uncertainty in income taxes recognized in the financial statements. Such guidance prescribes a recognition threshold of more-likely-than-not and a measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In making this assessment, a company must determine whether it is more likely than not that a tax position will be sustained upon examination, based solely on the technical merits of the position, and must assume that the tax position will be examined by taxing authorities. Our policy is to include interest and penalties related to income tax expense. We file income tax returns with the IRS and various state …

CommitmentsAndContingenciesDisclosureTextBlock · excerpt; the full note is in the filing

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

CompensationAndEmployeeBenefitPlansTextBlock · excerpt; the full note is in the filing

The components of revenue for the fiscal years ended August 31, 2025, 2024, and 2023 were as follows: Years ended August 31, (in thousands) 2025 2024 2023 Software licenses Point in time $ 42,792 $ 40,068 $ 35,369 Over time 3,036 956 1,148 Services Over time 33,351 28,989 23,060 Total revenues $ 79,179 $ 70,013 $ 59,577

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STOCK OWNERSHIP PLANS The following table summarizes information about stock options: (in thousands, except per share and weighted-average amounts) Activity for the year ended August 31, 2025 Number of Options Weighted-Average Exercise Price Per Share Weighted-Average Remaining Contractual Life Outstanding, August 31, 2024 1,906 $ 37.64 6.91 years Granted 393 32.01 Exercised (85) 13.21 Canceled/Forfeited (290) 41.58 Outstanding, August 31, 2025 1,924 $ 36.98 6.52 years Vested and Exercisable, August 31, 2025 961 $ 35.51 4.84 years Vested and Expected to Vest, August 31, 2025 1,852 $ 37.04 6.43 years (in thousands, except per share and weighted-average amounts) Activity for the year ended August 31, 2024 Number of Options Weighted-Average Exercise Price Per Share Weighted-Average Remaining Contractual Life Outstanding, August 31, 2023 1,478 $ 34.62 6.62 years Granted 594 40.76 Exercised (114) 12.40 Canceled/Forfeited (52) 42.95 Outstanding, August 31, 2024 1,906 $ 37.64 6.91 years Vested and Exercisable, August 31, 2024 822 $ 31.19 4.82 years Vested and Expected to Vest, August 31, 2024 1,843 $ 37.53 6.83 years (in thousands, except per share and weighted-average amounts) Activity for the year ended August 31, 2023 Number of Options Weighted-Average Exercise Price Per Share Weighted-Average Remaining Contractual Life Outstanding, August 31, 2022 1,245 $ 28.61 6.14 years Granted 465 43.78 Exercised (170) 12.59 Canceled/Forfeited (62) 43.14 Outstanding, August 31, 2023 1,478 $ 3 …

DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock · excerpt; the full note is in the filing

INCOME TAXES We utilize ASC 740 to account for income taxes which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities. The Company is subject to the Global Intangible Low-Taxed Income (GILTI) rules, and has an annual GILTI inclusion income and deduction. Based on our assessment, we have not recorded a liability for uncertain tax positions. Management has considered that the accounting guidance under ASC 740-10-55-7 requires entities to assess deferred tax assets (DTAs) for realization and to record a valuation allowance if the DTA is not fully realizable. The objective of the valuation allowance is to reduce the deferred tax asset to the amount that is more likely than not to be realized. After completing the analysis, management determ …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

Recently Issued Accounting Standards In October 2023, the FASB issued Accounting Standards Update (ASU) 2023-06 - Disclosure Improvements: Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative (ASU 2023-06). ASU 2023-06 incorporates 14 of the 27 disclosure requirements published in SEC Release No. 33-10532 - Disclosure Update and Simplification into various topics within the ASC. ASU 2023-06's amendments represent clarifications to, or technical corrections of, current requirements. For SEC registrants, the effective date for each amendment will be the date on which the SEC removes that related disclosure from its rules. Early adoption is prohibited. The Company does not expect ASU 2023-06 to have a material effect on its consolidated financial statements as the updates are incremental to existing disclosures. In December 2023, the FASB issued a new standard (ASU 2023-09) to improve income tax disclosures. The guidance requires disclosure of disaggregated income taxes paid, prescribes standardized categories for the components of the effective tax rate reconciliation, and modifies other income-tax-related disclosures. The amendments will be effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied on a prospective basis. Retrospective application is permitted. The Company does not expect ASU 2023-09 to have a material effect on its consolidated financial statements a …

NewAccountingPronouncementsPolicyPolicyTextBlock · excerpt; the full note is in the filing

"RESTRUCTURING At the end of the quarter ended May 31, 2025, the Company executed a restructuring plan to reduce its workforce by approximately 10% to enhance its operational efficiency and reduce operating expenses (the ""2025 Restructuring Plan""). Communication to employees and actions associated with the 2025 restructuring plan were completed by the end of the quarter ended May 31, 2025. The Company estimates that it incurred a one-time expense of approximately $0.7 million in charges in connection with the 2025 Restructuring Plan, consisting of involuntary severance payments, employee benefits, and related costs, substantially all of which the Company incurred in the fiscal year ending August 31, 2025. These costs are recorded within General and Administrative expenses on the Consolidated Statements of Operations and Comprehensive (loss) income. The restructuring was driven by macroeconomic factors negatively impacting the pharmaceutical and biotechnology markets. The reduction in workforce and cost reductions being implemented are expected to reduce operating expenses by approximately $4.3 million on an annualized basis. As of August 31, 2025, the Company has recorded total severance charges of $0.7 million related to the 2025 Restructuring Plan reflected in General and Administrative expenses. Also, as of August 31, 2025, the Company had no remaining accrued severance charges. The Company does not expect to incur further material severance charges related to the 2025 R …

RestructuringAndRelatedActivitiesDisclosureTextBlock · excerpt; the full note is in the filing

SEGMENT REPORTING The Company applies ASC 280, Segment Reporting, in determining reportable segments. We define our reportable segments based on the way the chief operating decision maker (CODM), which is our Chief Executive Officer, manages the operations for purposes of allocating resources and assessing segment performance. Our reportable segments include the following: Software: Supports pharmaceutical research, development, and commercialization through simulation, modeling, and AI-driven prediction. Its main products include GastroPlus, ADMET Predictor, and MonolixSuite, along with tools like DDDPlus, MembranePlus, DILIsym, and others for disease modeling and training. The company also advances partnerships with institutions like the FDA, NIEHS, PAS, and SACF to drive innovation in virtual drug testing, chemical safety, and AI-enabled discovery. Services: Advanced consulting services across the drug development lifecycle. Its scientists and engineers specialize in pharmacokinetics, pharmacodynamics, drug modeling, and regulatory strategy, supporting clients from discovery through clinical development. The CODM reviews revenue and gross profit to evaluate current-period performance versus budget and prior periods at each reportable segment and assesses management performance for purposes of annual incentive compensation. Gross profit is defined as revenue less cost of revenue incurred by the segment. No operating segments have been aggregated to form the reportable segme …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing

"SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Basis of Presentation and Use of Estimates The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates include, among other estimates, assumptions used in the allocation of the transaction price to separate performance obligations, estimates towards the measure of progress of completion on fixed-price service contracts, the determination of fair values and useful lives of both long-lived assets and intangible assets, goodwill, allowance for credit losses for accounts receivable, recoverability of deferred tax assets, recognition of deferred revenue, determination of fair value of equity-based awards, and assumptions used in testing for impairment of long-lived assets. Actual results could differ from those estimates, and such differences may be material to the consolidated financial statements. Revenue Recognition We generate revenue primarily …

SignificantAccountingPoliciesTextBlock · excerpt; the full note is in the filing

SHAREHOLDERS' EQUITY Shares Outstanding Shares of the Company's common stock outstanding for the fiscal years ended August 31, 2025, 2024, and 2023 were as follows: Years ended August 31, (in thousands) 2025 2024 2023 Common stock outstanding, beginning of period 20,051 19,938 20,260 Common stock repurchased during the period (492) Common stock issued during the period 86 113 170 Common stock outstanding, end of period 20,137 20,051 19,938 Dividends The Companys Board of Directors declared cash dividends during the fiscal years ended August 31, 2024. The Board of Directors determined to discontinue the Companys quarterly cash dividend after the dividend distribution on August 5, 2024. The details of dividends paid are in the following table: (in thousands, except dividend per share) For The Year Ended August 31, 2024 Record Date Distribution Date Number of Shares Outstanding on Record Date Dividend per Share Total Amount 10/30/2023 11/06/2023 19,939 $ 0.06 $ 1,196 1/29/2024 2/05/2024 19,973 $ 0.06 1,198 4/29/2024 5/06/2024 19,998 $ 0.06 1,200 7/29/2024 8/05/2024 20,046 $ 0.06 1,202 Total $ 4,796 Stock Option and Equity Incentive Plans On December 23, 2016, the Companys Board of Directors adopted, and on February 23, 2017, its shareholders approved, the Companys 2017 Equity Incentive Plan (the 2017 Plan), under which a total of 1.0 million shares of common stock were initially reserved for issuance. The 2017 plan would have terminated pursuant to its terms in December 2026; ho …

StockholdersEquityNoteDisclosureTextBlock · excerpt; the full note is in the filing

SUBSEQUENT EVENTS None.

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"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 $1.2 million related to income before taxes of $4.8 million for the three months ended May 31, 2026, and an income tax expense of $2.9 million related to income before taxes of $11.7 million for the nine months ended May 31 …

CommitmentsAndContingenciesDisclosureTextBlock · excerpt; the full note is in the filing

EMPLOYEE BENEFIT PLANWe maintain a 401(k) Plan for eligible employees. We make matching contributions equal to 100% of the employees elective deferral, not to exceed 4% of the employees gross salary. We contributed $0.2 million and $0.7 million for the three and nine months ended May31, 2026. We contributed $0.2 million and $0.7 million for the three and nine months ended May31, 2025, respectively …

CompensationAndEmployeeBenefitPlansTextBlock · excerpt; the full note is in the filing

The components of revenue for the three and nine months ended May 31, 2026, and May 31, 2025, respectively, were as follows: Three Months Ended Nine Months Ended (in thousands) May 31, 2026 May 31, 2025 May 31, 2026 May 31, 2025 Software licenses Point in time $ 11,993 $ 11,974 $ 34,110 $ 34,505 Over time 615 641 2,016 2,309 Services Over time 9,278 7,748 28,472 24,905 Total revenues $ 21,886 $ 20,363 $ 64,598 $ 61,719

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STOCK OWNERSHIP PLANS The following table summarizes information about stock options: (in thousands, except per share and weighted-average amounts) Activity for the nine months ended May 31, 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 716 15.99 Exercised (70) 9.74 Canceled/Forfeited (154) 31.22 Outstanding, May 31, 2026 2,416 $ 31.92 7.01 years Vested and Exercisable, May 31, 2026 1,102 $ 38.62 5.19 years Vested and Expected to Vest, May 31, 2026 2,274 $ 32.53 6.89 years The total grant-date fair value of nonvested stock options as of May 31, 2026, was $17.7 million and is amortizable over a weighted-average period of 2.9 years. The fair value of these options was estimated at the date of grant using the Black-Scholes option-pricing model. The Black-Scholes option-valuation model was developed for use in estimating the fair value of stock options, which do not have vesting restrictions and are fully transferable. In addition, option-valuation models require the input of highly subjective assumptions, including the expected stock price volatility. The following table summarizes the fair value of the options, including both ISOs and NQSOs, granted during the nine months ended May 31, 2026, and for the fiscal year ended August 31, 2025: (in thousands, except weighted-average amounts) Nine Months Ended May 31, 2026 Fiscal Year 2025 Estimated fair value of …

DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock · excerpt; the full note is in the filing

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 thereafte …

NewAccountingPronouncementsPolicyPolicyTextBlock · excerpt; the full note is in the filing

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 s …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing

"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 sta …

SignificantAccountingPoliciesTextBlock · excerpt; the full note is in the filing

SHAREHOLDERS' EQUITY Shares Outstanding Shares of the Company's common stock outstanding for the three and nine months ended May 31, 2026, and May 31, 2025, were as follows: Three Months Ended Nine Months Ended (in thousands) May 31, 2026 May 31, 2025 May 31, 2026 May 31, 2025 Common stock outstanding, beginning of period 20,205 20,111 20,137 20,051 Common stock issued during the period 11 5 79 65 Common stock outstanding, end of period 20,216 20,116 20,216 20,116

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SUBSEQUENT EVENTS The Company evaluated subsequent events through the date on which these condensed consolidated financial statements were issued. Merger Agreement On June 15, 2026, the Company entered into an Agreement and Plan of Merger (the Merger Agreement) with SP Evolution HoldCo II, LLC, a Delaware limited liability company and an affiliate of Altaris, LLC (Parent), and SP Evolution BidCo II, LLC, a Delaware limited liability company and wholly owned subsidiary of Parent (Merger Sub). Pursuant to the Merger Agreement, Merger Sub will merge with and into the Company, with the Company surviving the merger as a wholly owned subsidiary of Parent. Under the terms of the Merger Agreement, holders of the Companys common stock will be entitled to receive cash consideration of $18.50 per share, without interest and subject to any applicable withholding taxes, for each share of the Companys common stock outstanding immediately prior to the effective time of the Merger. The Merger Agreement also provides for the treatment of the Company's outstanding equity awards in accordance with its terms upon consummation of the Merger. The transaction has an implied equity value of approximately $375 million. The completion of the Merger is subject to customary closing conditions, including approval by the Companys stockholders, the receipt of required regulatory approvals, and the absence of any law or order prohibiting the consummation of the transaction. The Merger Agreement also contain …

SubsequentEventsTextBlock · excerpt; the full note is in the filing