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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, 2025
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, 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, 2025, was 20,111,045.

Table of Contents
Simulations Plus, Inc.
FORM 10-Q
For the Quarterly Period Ended February 28, 2025
Table of Contents

| PART I. FINANCIAL INFORMATION |
|  | Page
Item 1. | Condensed Consolidated Financial Statements |
| Condensed Consolidated Balance Sheets at February 28, 2025 and August 31, 2024 | 3
| Condensed Consolidated Statements of Operations and Comprehensive Income for the three months and six months ended February 28, 2025 and February 29, 2024 | 4
| Condensed Consolidated Statements of Shareholders’ Equity for the three and six months ended Febr uary 28, 202 5 and February 29, 202 4 | 5
| Condensed Consolidated Statements of Cash Flows for the six months ended February 28, 2025 and February 29, 2024 | 6
| Notes to Condensed Consolidated Financial Statements | 7
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 23
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 32
Item 4. | Controls and Procedures | 32
| PART II. OTHER INFORMATION |
Item 1. | Legal Proceedings | 32
Item 1A. | Risk Factors | 33
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 35
Item 3. | Defaults upon Senior Securities | 35
Item 4. | Mine Safety Disclosures | 35
Item 5. | Other Information | 36
Item 6. | Exhibits | 37
| Signatures | 38

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

Table of Contents
SIMULATIONS PLUS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

|  | (Unaudited) |  | (Audited)
(in thousands, except share and per share amounts) |  | February 28, 2025 |  | August 31, 2024
ASSETS |  |  |  |
Current assets |  |  |  |
Cash and cash equivalents |  | $ | 10,992 |  |  | $ | 10,311 |
Accounts receivable, net of allowance for credit losses of $179 and $149 |  | 16,493 |  |  | 9,136 |
Prepaid income taxes |  | 1,375 |  |  | 2,197 |
Prepaid expenses and other current assets |  | 7,464 |  |  | 7,753 |
Short-term investments |  | 10,393 |  |  | 9,944 |
Total current assets |  | 46,717 |  |  | 39,341 |
Long-term assets |  |  |  |
Capitalized computer software development costs, net of accumulated amortization of $20,290 and $18,727 |  | 12,452 |  |  | 12,499 |
Property and equipment, net |  | 800 |  |  | 812 |
Operating lease right-of-use assets |  | 827 |  |  | 1,027 |
Intellectual property, net of accumulated amortization of $7,659 and $5,490 |  | 20,961 |  |  | 23,130 |
Other intangible assets, net of accumulated amortization of $3,819 and $3,177 |  | 22,910 |  |  | 23,210 |
Goodwill |  | 96,305 |  |  | 96,078 |
Other assets |  | 455 |  |  | 542 |
Total assets |  | $ | 201,427 |  |  | $ | 196,639 |
LIABILITIES AND SHAREHOLDERS' EQUITY |  |  |  |
Current liabilities |  |  |  |
Accounts payable |  | $ | 1,206 |  |  | $ | 602 |
Accrued compensation |  | 4,431 |  |  | 4,513 |
Accrued expenses |  | 1,399 |  |  | 2,043 |
Contracts payable - current portion |  | — |  |  | 2,440 |
Operating lease liability - current portion |  | 313 |  |  | 475 |
Deferred revenue |  | 3,346 |  |  | 1,996 |
Total current liabilities |  | 10,695 |  |  | 12,069 |
Long-term liabilities |  |  |  |
Deferred income taxes, net |  | 701 |  |  | 1,608 |
Operating lease liability - net of current portion |  | 483 |  |  | 531 |
Total liabilities |  | 11,879 |  |  | 14,208 |
Commitments and contingencies - note 4 |  | — |  |  | — |
Shareholders' equity |  |  |  |
Preferred stock, $0.001 par value — 10,000,000 shares authorized; no shares issued and outstanding |  | $ | — |  |  | $ | — |
Common stock, $0.001 par value and additional paid-in capital —50,000,000 shares authorized; 20,111,045 and 20,051,134 shares issued and outstanding |  | 156,229 |  |  | 152,328 |
Retained earnings |  | 33,634 |  |  | 30,354 |
Accumulated other comprehensive loss |  | (315) |  |  | (251) |
Total shareholders' equity |  | 189,548 |  |  | 182,431 |
Total liabilities and shareholders' equity |  | $ | 201,427 |  |  | $ | 196,639 |

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

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SIMULATIONS PLUS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)

|  | Three Months Ended |  | Six Months Ended |
(in thousands, except per common share amounts) |  | February 28, 2025 |  | February 29, 2024 |  | February 28, 2025 |  | February 29, 2024 |
Revenues |  |  |  |  |  |  |  |  |
Software |  | $ | 13,484 |  |  | $ | 11,614 |  |  | $ | 24,199 |  |  | $ | 19,203 |  |
Services |  | 8,948 |  |  | 6,691 |  |  | 17,157 |  |  | 13,602 |  |
Total revenues |  | 22,432 |  |  | 18,305 |  |  | 41,356 |  |  | 32,805 |  |
Cost of revenues |  |  |  |  |  |  |  |  |
Software |  | 2,587 |  |  | 1,348 |  |  | 5,225 |  |  | 2,339 |  |
Services |  | 6,718 |  |  | 3,736 |  |  | 12,786 |  |  | 7,397 |  |
Total cost of revenues |  | 9,305 |  |  | 5,084 |  |  | 18,011 |  |  | 9,736 |  |
Gross profit |  | 13,127 |  |  | 13,221 |  |  | 23,345 |  |  | 23,069 |  |
Operating expenses |  |  |  |  |  |  |  |  |
Research and development |  | 2,143 |  |  | 1,312 |  |  | 3,991 |  |  | 2,529 |  |
Sales and marketing |  | 3,717 |  |  | 1,949 |  |  | 6,568 |  |  | 3,938 |  |
General and administrative |  | 4,555 |  |  | 5,518 |  |  | 9,948 |  |  | 11,200 |  |
Total operating expenses |  | 10,415 |  |  | 8,779 |  |  | 20,507 |  |  | 17,667 |  |
Income from operations |  | 2,712 |  |  | 4,442 |  |  | 2,838 |  |  | 5,402 |  |
Other income |  | 796 |  |  | 810 |  |  | 940 |  |  | 2,256 |  |
Income before income taxes |  | 3,508 |  |  | 5,252 |  |  | 3,778 |  |  | 7,658 |  |
Provision for income taxes |  | (434) |  |  | (1,223) |  |  | (498) |  |  | (1,684) |  |
Net income |  | $ | 3,074 |  |  | $ | 4,029 |  |  | $ | 3,280 |  |  | $ | 5,974 |  |
Earnings per share |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.15 |  |  | $ | 0.20 |  |  | $ | 0.16 |  |  | $ | 0.30 |  |
Diluted |  | $ | 0.15 |  |  | $ | 0.20 |  |  | $ | 0.16 |  |  | $ | 0.29 |  |
Weighted-average common shares outstanding |  |  |  |  |  |  |  |  |
Basic |  | 20,097 |  |  | 19,975 |  |  | 20,082 |  |  | 19,961 |  |
Diluted |  | 20,277 |  |  | 20,315 |  |  | 20,262 |  |  | 20,288 |  |
Other comprehensive (loss) income, net of tax |  |  |  |  |  |  |  |  |
Foreign currency translation adjustments |  | (26) |  |  | (15) |  |  | (68) |  |  | (69) |  |
Unrealized gains on available-for-sale securities |  | — |  |  | — |  |  | 4 |  |  | — |  |
Comprehensive income |  | $ | 3,048 |  |  | $ | 4,014 |  |  | $ | 3,216 |  |  | $ | 5,905 |  |

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

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SIMULATIONS PLUS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)

|  | Three Months Ended |  | Six Months Ended
(in thousands, except per common share amounts) |  | February 28, 2025 |  | February 29, 2024 |  | February 28, 2025 |  | February 29, 2024 |  |
Common stock and additional paid in capital |  |  |  |  |  |  |  |  |  |
Balance, beginning of period |  | $ | 154,424 |  |  | $ | 146,591 |  |  | $ | 152,328 |  |  | $ | 144,974 |  |  |
Exercise of stock options |  | 28 |  |  | 146 |  |  | 316 |  |  | 310 |  |  |
Stock-based compensation |  | 1,642 |  |  | 1,585 |  |  | 3,315 |  |  | 2,888 |  |  |
Shares issued to Directors for services |  | 135 |  |  | 150 |  |  | 270 |  |  | 300 |  |  |
Balance, end of period |  | 156,229 |  |  | 148,472 |  |  | 156,229 |  |  | 148,472 |  |  |
Retained earnings |  |  |  |  |  |  |  |  |  |
Balance, beginning of period |  | 30,560 |  |  | 25,945 |  |  | 30,354 |  |  | 25,196 |  |  |
Declaration of dividends |  | — |  |  | (1,198) |  |  | — |  |  | (2,394) |  |  |
Net income |  | 3,074 |  |  | 4,029 |  |  | 3,280 |  |  | 5,974 |  |  |
Balance, end of period |  | 33,634 |  |  | 28,776 |  |  | 33,634 |  |  | 28,776 |  |  |
Accumulated other comprehensive loss |  |  |  |  |  |  |  |  |  |
Balance, beginning of period |  | (289) |  |  | (195) |  |  | (251) |  |  | (141) |  |  |
Other comprehensive income (loss) |  | (26) |  |  | (15) |  |  | (64) |  |  | (69) |  |  |
Balance, end of period |  | (315) |  |  | (210) |  |  | (315) |  |  | (210) |  |  |
Total shareholders’ equity |  | $ | 189,548 |  |  | $ | 177,038 |  |  | $ | 189,548 |  |  | $ | 177,038 |  |  |
Cash dividends declared per common share |  | $ | — |  |  | $ | 0.06 |  |  | $ | — |  |  | $ | 0.12 |  |  |

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, 2025 |  | February 29, 2024 |  |
Cash flows from operating activities |  |  |  |  |  |  |  |  |  |
Net income |  |  |  |  |  | $ | 3,280 |  |  | $ | 5,974 |  |  |
Adjustments to reconcile net income to net cash provided by operating activities |  |  |  |  |  |  |  |  |  |
Depreciation and amortization |  |  |  |  |  | 4,539 |  |  | 2,196 |  |  |
Change in fair value of contingent consideration |  |  |  |  |  | (640) |  |  | 330 |  |  |
Discharge of holdback obligation related to Immunetrics acquisition |  |  |  |  |  | (224) |  |  | — |  |  |
Amortization of investment discounts |  |  |  |  |  | (60) |  |  | (796) |  |  |
Stock-based compensation |  |  |  |  |  | 3,416 |  |  | 3,147 |  |  |
Deferred income taxes |  |  |  |  |  | (907) |  |  | (885) |  |  |
Currency translation adjustments |  |  |  |  |  | (68) |  |  | (69) |  |  |
(Increase) decrease in |  |  |  |  |  |  |  |  |  |
Accounts receivable |  |  |  |  |  | (7,357) |  |  | (2,913) |  |  |
Prepaid income taxes |  |  |  |  |  | 822 |  |  | (560) |  |  |
Prepaid expenses and other assets |  |  |  |  |  | 376 |  |  | (1,170) |  |  |
Increase (decrease) in |  |  |  |  |  |  |  |  |  |
Accounts payable |  |  |  |  |  | 604 |  |  | 216 |  |  |
Other liabilities |  |  |  |  |  | (736) |  |  | 1,145 |  |  |
Deferred revenue |  |  |  |  |  | 1,350 |  |  | (643) |  |  |
Net cash provided by operating activities |  |  |  |  |  | 4,395 |  |  | 5,972 |  |  |
Cash flows from investing activities |  |  |  |  |  |  |  |  |  |
Purchases of property and equipment |  |  |  |  |  | (152) |  |  | (433) |  |  |
Purchase of short-term investments |  |  |  |  |  | (5,000) |  |  | (48,989) |  |  |
Proceeds from maturities of short-term investments |  |  |  |  |  | 3,620 |  |  | 36,252 |  |  |
Proceeds from sales of investments |  |  |  |  |  | 995 |  |  | — |  |  |
Purchase of long-term investments |  |  |  |  |  | — |  |  | (9,024) |  |  |
Purchased intangibles |  |  |  |  |  | (342) |  |  | (467) |  |  |
Net working capital & excess cash settlement - Pro-ficiency acquisition |  |  |  |  |  | (227) |  |  | — |  |  |
Capitalized computer software development costs |  |  |  |  |  | (1,348) |  |  | (1,719) |  |  |
Net cash used in investing activities |  |  |  |  |  | (2,454) |  |  | (24,380) |  |  |
Cash flows from financing activities |  |  |  |  |  |  |  |  |  |
Payment of dividends |  |  |  |  |  | — |  |  | (2,394) |  |  |
Payments on contracts payable |  |  |  |  |  | (1,576) |  |  | — |  |  |
Proceeds from the exercise of stock options |  |  |  |  |  | 316 |  |  | 310 |  |  |
Net cash used in financing activities |  |  |  |  |  | (1,260) |  |  | (2,084) |  |  |
Net increase in cash and cash equivalents |  |  |  |  |  | 681 |  |  | (20,492) |  |  |
Cash and cash equivalents, beginning of period |  |  |  |  |  | $ | 10,311 |  |  | $ | 57,523 |  |  |
Cash and cash equivalents, end of period |  |  |  |  |  | $ | 10,992 |  |  | $ | 37,031 |  |  |
Supplemental disclosures of cash flow information |  |  |  |  |  |  |  |  |  |
Income taxes paid |  |  |  |  |  | $ | 616 |  |  | $ | 3,142 |  |  |
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, 2025 and February 29, 2024
NOTE 1 – DESCRIPTION OF BUSINESS
Simulations Plus, Inc. (the “Company”) was incorporated in California on July 17, 1996. We are a global leader and premier provider in the biopharma sector, offering advanced software and consulting services that enhance drug discovery, development, research, clinical trial operations, regulatory submissions, and commercialization. With the June 2024 acquisition of Pro-ficiency Holdings, Inc. and its subsidiaries (collectively, “Pro-ficiency”), the Company extended its reach across the drug development value chain from the initial protocol stage through all phases of clinical research and development (“R&D”) to product commercialization. The Company now has a one-of-a-kind platform to serve its clients at every step in the drug development process. This optimizes efficiency, costs, and time-to-market for our clients and enhances our competitive position.
Effective January 1, 2025, the Company merged Pro-ficiency with and into the Company through a short-form merger (the “Merger”). To effectuate the Merger, the Company filed Certificates of Ownership with the Secretaries of State of the states of Delaware (Pro-ficiency's state of incorporation) and California (Simulation Plus’ state of incorporation). Consummation of the Merger was not subject to approval of the Company’s stockholders and did not impact the rights of the Company’s stockholders.
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 $1.3-$2.8 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 diverse populations, regulatory approvals, reduction of animal testing, safety and compliance during clinical trials, and commercial success.
Our model-informed drug development (“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. Our adaptive learning solutions support the success of clinical trials by increasing the diversity and 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.
At the beginning of fiscal year 2024, the Company reorganized its internal structure to create a more integrated and cohesive operating platform based on key products and services offerings rather than separate divisions based on its prior acquisitions. This business unit restructuring is engendering greater scientific collaboration and knowledge-sharing within the Company, leading to identifying new opportunities that both advance the Company’s business objectives and deepen client relationships. Continuing with our strategic plan of aligning our business units around products and services, the Pro-ficiency acquisition resulted in two new business units, Adaptive Learning & Insights and Medical Communications, giving the Company six total business units:
•Cheminformatics (“CHEM”);
•Physiologically Based Pharmacokinetics (“PBPK”);
•Clinical Pharmacology and Pharmacometrics (“CPP”);
•Quantitative Systems Pharmacology (“QSP”);
•Adaptive Learning & Insights (“ALI”); and
•Medical Communications (“MC”).
The Company was previously headquartered in Southern California; however, in support of the Company's remote work culture and plan to reduce excess office space to achieve its carbon footprint reduction targets, the Company fully exited four office locations in Lancaster, California; Raleigh, North Carolina; Buffalo, New York; and Pittsburgh, Pennsylvania. As a result, the company moved its headquarters from Lancaster, California to Research Triangle Park, North Carolina, and also maintains a European office in Paris, France.

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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.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates include, among other estimates, assumptions used in the allocation of the transaction price to separate performance obligations, estimates towards the measure of progress of completion on fixed-price service contracts, the determination of fair values and useful lives of both long-lived assets and intangible assets, goodwill, allowance for credit losses for accounts receivable, recoverability of deferred tax assets, recognition of deferred revenue, determination of fair value of equity-based awards, and assumptions used in testing for impairment of long-lived assets. Actual results could differ from those estimates, and such differences may be material to the consolidated financial statements.
Revenue Recognition
We generate revenue primarily from the sale of software licenses and by providing consulting services to the pharmaceutical industry for drug development and commercialization.
In accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 606, we determine revenue recognition through the following steps:
i.Identification of the contract, or contracts, with a customer
ii.Identification of the performance obligations in the contract
iii.Determination of the transaction price
iv.Allocation of the transaction price to the performance obligations in the contract
v.Recognition of revenue when, or as, we satisfy a performance obligation
Components of Revenue
The following is a description of principal activities from which the Company generates revenue. As part of the accounting for these arrangements, the Company must develop assumptions that require judgment to determine the standalone selling price for each performance obligation identified in the contract. Standalone selling prices are determined based on the prices at which the Company separately sells its services or goods.
Software Revenues:
Software revenues are primarily derived from the sale of software licenses, which are recognized at the time the software is unlocked and the license term begins. Most licenses are for a duration of one year or less.
In addition to the software license, we provide a minimal level of customer support to assist customers with software usage. If customers require more extensive support, they may enter into a separate agreement for additional training services.
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 adaptive learning platform includes software customization by incorporating content tailored to specific needs. Following customization, it generates a recurring revenue stream throughout the duration of a clinical trial.
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.

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For certain software arrangements, the Company hosts the licenses on servers maintained by the Company. Revenue for those arrangements is accounted as Software as a Service over the life of the contract. These arrangements account for a small portion of software revenues of the Company.
Consulting Contracts:
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 assistance in the form of cash grants which 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 assistance 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 2025. The Company recognized $0.2 million and $0.3 million and $0.4 million and $0.7 million for the three and six months ended February 28, 2025, and February 29, 2024, 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, 2025, remaining performance obligations were $15.1 million; 98% of the remaining performance obligations are expected to be recognized over the next twelve months, with the remainder expected to be recognized thereafter.
Disaggregation of Revenues
The components of revenue for the three and six months ended February 28, 2025 and February 29, 2024, respectively, were as follows:

|  | Three Months Ended |  | Six Months Ended |  |
(in thousands) |  | February 28, 2025 |  | February 29, 2024 |  | February 28, 2025 |  | February 29, 2024 |  |
Software licenses |  |  |  |  |  |  |  |  |  |
Point in time |  | $ | 12,412 |  |  | $ | 11,354 |  |  | $ | 22,531 |  |  | $ | 18,675 |  |  |
Over time |  | 1,072 |  |  | 260 |  |  | 1,668 |  |  | 528 |  |  |
Services |  |  |  |  |  |  |  |  |  |
Over time |  | 8,948 |  |  | 6,691 |  |  | 17,157 |  |  | 13,602 |  |  |
Total revenues |  | $ | 22,432 |  |  | $ | 18,305 |  |  | $ | 41,356 |  |  | $ | 32,805 |  |  |

Contract Balances
Contract assets excluding accounts receivable balances as of February 28, 2025, and August 31, 2024, were $5.4 million and $5.9 million, respectively.

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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, and during the three and six months ended February 29, 2024, the Company recognized $0.4 million and $2.5 million of revenue, respectively, that was included in contract liabilities as of August 31, 2023.
Deferred Commissions
Sales commissions earned by our sales force and our commissioned sales representatives are considered incremental and recoverable costs of obtaining a contract with a 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, 2025 |  | February 29, 2024 |  | February 28, 2025 |  | February 29, 2024 |  |
Balance, beginning of period |  | $ | 145 |  |  | $ | 37 |  |  | $ | 149 |  |  | $ | 46 |  |  |
Provision for credit losses |  | 18 |  |  | (7) |  |  | 22 |  |  | (16) |  |  |
Write-offs |  | 16 |  |  | — |  |  | 8 |  |  | — |  |  |
Balance, end of period |  | $ | 179 |  |  | $ | 30 |  |  | $ | 179 |  |  | $ | 30 |  |  |

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.

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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, 2025 and for the year ended August 31, 2024, all of our debt investments were classified as AFS.
Research & Development and Capitalized Software Development Costs
R&D activities include both enhancement of existing products and development of new products. Development of new products and adding functionality to existing products are capitalized in accordance with FASB ASC 985-20, “Costs of Software to Be Sold, Leased, or Marketed.” R&D expenditures, which primarily relate to both capitalized and expensed salaries, R&D supplies, and R&D consulting, were $2.9 million and $5.5 million during the three and six months ended February 28, 2025, respectively, of which $0.8 million and $1.5 million, respectively, were capitalized. R&D expenditures during the three and six months ended February 29, 2024, were $2.1 million and $4.3 million, respectively, of which $0.8 million and $1.8 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 $0.8 million and $0.4 million for the three months ended February 28, 2025, and February 29, 2024, respectively, and $1.6 million and $0.8 million for the six months ended February 28, 2025, and February 29, 2024, 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, 2025, and February 29, 2024, respectively.
Property and Equipment
Property and equipment are recorded at cost, or fair market value for property and equipment acquired in business combinations, less accumulated depreciation and amortization. Depreciation and amortization are calculated using the straight-line method over the estimated useful lives as follows:

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.
Internal-use Software

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We have capitalized certain internal-use software costs in accordance with ASC 350-40, which are included in intangible assets. The amortization of such costs is classified as general and administrative expenses on the consolidated statements of operations. Maintenance of and minor upgrades to internal-use software are also classified as general and administrative expenses as incurred.
Leases
The Company determines if an arrangement is a lease at inception and whether its classification as either an operating or finance lease at lease commencement. The Company's current portfolio includes operating leases. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities (current and long-term) in our condensed consolidated balance sheets.
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we generally use our incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at the commencement date. The operating lease ROU asset also includes any lease payments made at or before the commencement date and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense is recognized on a straight-line basis over the lease term.
Supplemental information related to operating leases was as follows as of February 28, 2025:

(in thousands) |  |
ROU assets |  | $ | 827 |
Lease liabilities, current |  | $ | 313 |
Lease liabilities, long-term |  | $ | 483 |
Operating lease costs |  | $ | 274 |
Weighted-average remaining lease term |  | 5.20 years
Weighted-average discount rate |  | 4.51 | %

Intangible Assets and Goodwill
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.
The below is a reconciliation of Goodwill for the six months ended February 28, 2025:

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(in thousands) |  | CPP |  | QSP |  | ALI |  | MC |  | Total
Balance, August 31, 2024 |  | $ | 7,323 |  |  | $ | 11,776 |  |  | $ | 31,108 |  |  | $ | 45,871 |  |  | $ | 96,078 |
Addition |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Measurement period adjustment* |  | — |  |  | — |  |  | 92 |  |  | 135 |  |  | 227 |
Impairments |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Balance, February 28, 2025 |  | $ | 7,323 |  |  | $ | 11,776 |  |  | $ | 31,200 |  |  | $ | 46,006 |  |  | $ | 96,305 |

*Adjustment for net working capital & excess cash settlement in association with Pro-ficiency acquisition
The following table summarizes other intangible assets as of February 28, 2025:

(in thousands) |  | Amortization Period |  | Acquisition Value |  | Accumulated Amortization |  | Net Book Value
Trade names |  | None |  | $ | 12,610 |  |  | $ | — |  |  | $ | 12,610 |
Covenants not to compete |  | Straight line 2 to 3 years |  | 100 |  |  | 43 |  |  | 57 |
Other internal use software |  | Straight line 3 to 13 years |  | 950 |  |  | 78 |  |  | 872 |
Customer relationships |  | Straight line 8 to 14 years |  | 10,540 |  |  | 3,231 |  |  | 7,309 |
ERP |  | Straight line 15 years |  | 2,529 |  |  | 467 |  |  | 2,062 |
|  |  |  | $ | 26,729 |  |  | $ | 3,819 |  |  | $ | 22,910 |

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

(in thousands) |  | Amortization Period |  | Acquisition Value |  | Accumulated Amortization |  | Net Book Value
Trade names |  | None |  | $ | 12,610 |  |  | $ | — |  |  | $ | 12,610 |
Covenants not to compete |  | Straight line 2 to 3 years |  | 100 |  |  | 23 |  |  | 77 |
Other internal use software |  | Straight line 3 to 13 years |  | 608 |  |  | 47 |  |  | 561 |
Customer relationships |  | Straight line 8 to 14 years |  | 10,540 |  |  | 2,726 |  |  | 7,814 |
ERP |  | Straight line 15 years |  | 2,529 |  |  | 381 |  |  | 2,148 |
|  |  |  | $ | 26,387 |  |  | $ | 3,177 |  |  | $ | 23,210 |

Total amortization expense for the three months ended February 28, 2025, and February 29, 2024, was $0.3 million and $0.3 million, respectively, and amortization expense for the six months ended February 28, 2025, and February 29, 2024, was $0.6 million and $0.5 million, respectively.
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 fiscal year 2025 |  | $ | 694 |
2026 |  | $ | 1,264 |
2027 |  | $ | 1,216 |
2028 |  | $ | 1,052 |
2029 |  | $ | 1,052 |

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:

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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 our financial instruments, including accounts receivable, accounts payable, and accrued compensation and other accrued expenses, the carrying amounts are representative of their fair values due to their short maturities.
The Company invests a portion of excess cash in short-term debt securities. Short-term debt securities investments as of February 28, 2025, and August 31, 2024, consisted of corporate bonds and term deposits with maturities remaining of less than 12 months. In addition, under the fair-value hierarchy, the fair market values of the Company’s cash equivalents and investments are Level I. The Company may also invest excess cash in certificates of deposit, money market accounts, government-sponsored enterprise securities, and/or commercial paper. The Company accounts for its investments in accordance with ASC 320, Investments - Debt and Equity Securities. As of February 28, 2025, all investments were classified as AFS securities. Unrealized losses on investments as of February 28, 2025, and August 31, 2024, were primarily caused by rising interest rates rather than changes in credit quality; thus the Company did not record an allowance for credit losses.
The following tables summarize our short-term investments as of February 28, 2025, and August 31, 2024:

|  | February 28, 2025
(in thousands) |  | Amortized cost |  | Unrealized gains |  | Unrealized losses |  | Fair value
Level 1: |  |  |  |  |  |  |  |
Term deposits (due within one year) |  | $ | 5,000 |  |  | $ | — |  |  | $ | — |  |  | $ | 5,000 |
Corporate debt securities (due within one year) |  | 5,389 |  |  | 4 |  |  | — |  |  | 5,393 |
Total Level 1 |  | 10,389 |  |  | 4 |  |  | — |  |  | 10,393 |
Level 2: |  | — |  |  | — |  |  | — |  |  | — |
Level 3: |  | — |  |  | — |  |  | — |  |  | — |
Total available-for-sale securities |  | $ | 10,389 |  |  | $ | 4 |  |  | $ | — |  |  | $ | 10,393 |

|  | August 31, 2024
(in thousands) |  | Amortized cost |  | Unrealized gains |  | Unrealized losses |  | Fair value
Level 1: |  |  |  |  |  |  |  |
Term deposits (due within one year) |  | $ | 1,500 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,500 |
Corporate debt securities (due within one year) |  | 8,448 |  |  | — |  |  | (4) |  |  | 8,444 |
Total Level 1 |  | 9,948 |  |  | — |  |  | (4) |  |  | 9,944 |
Level 2: |  | — |  |  | — |  |  | — |  |  | — |
Level 3: |  | — |  |  | — |  |  | — |  |  | — |
Total available-for-sale securities |  | $ | 9,948 |  |  | $ | — |  |  | $ | (4) |  |  | $ | 9,944 |

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During the three months ended February 28, 2025, the Company completed the final payment of $1.6 million related to the holdback liability from the acquisition of Immunetrics, Inc. (“Immunetrics”). Additionally, based on earned revenue for Immunetrics during the second earnout measurement period, the Company has assessed the fair value of the earnout liability to be zero. However, the final settlement with the sellers is pending, and while the Company does not anticipate any earnout payment, it is still subject to final determination. As of August 31, 2024, the Company had a liability for contingent consideration related to its acquisition of Immunetrics. The fair value measurement of the contingent consideration obligations is determined using Level 3 inputs. The fair value of contingent consideration obligations is based on a discounted cash flow model using a probability-weighted income approach. These fair value measurements represent Level 3 measurements as they are based on significant inputs not observable in markets. Significant judgment is employed in determining the appropriateness of these assumptions as of the acquisition date and for each subsequent period. Accordingly, changes in assumptions could have a material impact on the amount of contingent consideration expense the Company records in any given period. Changes in the fair value of the contingent consideration obligations are presented in the Company’s Condensed Consolidated Statements of Operations and Comprehensive Income.
The following is a reconciliation of contingent consideration at fair value:

(in thousands) |  | Amount
Contingent consideration at August 31, 2024 |  | $ | 640 |
Contingent consideration payment |  | — |
Change in fair value of contingent consideration |  | (640) |
Contingent consideration at February 28, 2025 |  | $ | — |

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 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 of our acquisitions regardless of acquisition date.
During the three months ended February 28, 2025, and February 29, 2024, the Company recognized a mergers and acquisitions benefit of $0.1 million and $0, respectively. The Company deducted $0.2 million from the final settlement of the holdback liability in connection with the Immunetrics acquisition. During the six months ended February 28, 2025, and February 29, 2024, the Company recognized mergers and acquisitions expense of $0.1 million and less than $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

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Research and development 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
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.
The following table summarizes intellectual property as of February 28, 2025:

(in thousands) |  | Amortization Period |  | Acquisition Value |  | Accumulated Amortization |  | Net Book Value
Developed technologies–DILIsym acquisition |  | Straight line 9 years |  | $ | 2,850 |  |  | $ | 2,452 |  |  | $ | 398 |
Intellectual rights of Entelos Holding Company |  | Straight line 10 years |  | 50 |  |  | 32 |  |  | 18 |
Developed technologies–Lixoft acquisition |  | Straight line 16 years |  | 8,010 |  |  | 2,410 |  |  | 5,600 |
Developed technologies–Immunetrics acquisition |  | Straight line 5 years |  | 1,080 |  |  | 369 |  |  | 711 |
Developed technologies–Pro-ficiency acquisition |  | Straight line 5 years |  | 16,630 |  |  | 2,396 |  |  | 14,234 |
|  |  |  | $ | 28,620 |  |  | $ | 7,659 |  |  | $ | 20,961 |

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

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(in thousands) |  | Amortization Period |  | Acquisition Value |  | Accumulated Amortization |  | Net Book Value
Developed technologies–DILIsym acquisition |  | Straight line 9 years |  | $ | 2,850 |  |  | $ | 2,294 |  |  | $ | 556 |
Intellectual rights of Entelos Holding Company |  | Straight line 10 years |  | 50 |  |  | 30 |  |  | 20 |
Developed technologies–Lixoft acquisition |  | Straight line 16 years |  | 8,010 |  |  | 2,173 |  |  | 5,837 |
Developed technologies–Immunetrics acquisition |  | Straight line 5 years |  | 1,080 |  |  | 261 |  |  | 819 |
Developed technologies–Pro-ficiency acquisition |  | Straight line 5 years |  | 16,630 |  |  | 732 |  |  | 15,898 |
|  |  |  | $ | 28,620 |  |  | $ | 5,490 |  |  | $ | 23,130 |

Total amortization expense for intellectual property agreements was $1.1 million and $0.4 million for the three months ended February 28, 2025, and February 29, 2024, respectively, and $2.2 million and $0.8 million for the six months ended February 28, 2025, and February 29, 2024, respectively.
Estimated future amortization of intellectual property for the next five fiscal years are as follows:

(in thousands) |  |
Years Ending August 31, |  | Amount
Remainder of fiscal year 2025 |  | $ | 2,170 |
2026 |  | $ | 4,264 |
2027 |  | $ | 4,024 |
2028 |  | $ | 3,979 |
2029 |  | $ | 3,066 |

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, 2025, and February 29, 2024, were as follows:

|  | Three Months Ended |  | Six Months Ended
(in thousands) |  | February 28, 2025 |  | February 29, 2024 |  | February 28, 2025 |  | February 29, 2024 |  |
Numerator |  |  |  |  |  |  |  |  |  |
Net income attributable to common shareholders |  | $ | 3,074 |  |  | $ | 4,029 |  |  | $ | 3,280 |  |  | $ | 5,974 |  |  |
Denominator |  |  |  |  |  |  |  |  |  |
Weighted-average number of common shares outstanding during the period |  | 20,097 |  |  | 19,975 |  |  | 20,082 |  |  | 19,961 |  |  |
Dilutive effect of stock options |  | 180 |  |  | 340 |  |  | 180 |  |  | 327 |  |  |
Common stock and common-stock equivalents used for diluted earnings per share |  | 20,277 |  |  | 20,315 |  |  | 20,262 |  |  | 20,288 |  |  |

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 $1.6 million and $1.6 million for the three months ended February 28, 2025, and February 29, 2024, respectively, and $3.3 million and $2.9 million for the six months ended February 28, 2025, and February 29, 2024, respectively.

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Impairment of Long-lived Assets
We account 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. We measure recoverability by comparing the carrying amount of an asset to the expected future undiscounted net cash flows generated by the asset. If we determine that the asset may not be recoverable, or if the carrying amount of an asset exceeds its estimated future undiscounted cash flows, we recognize an impairment charge to the extent of the difference between the fair value and the asset's carrying amount. No impairment losses were recorded for the three and six months ended February 28, 2025, and February 29, 2024, respectively.
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.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statements. The Company does not expect ASU 2023-07 to have a material effect on its consolidated financial statements.
In December 2023, the FASB issued a new standard 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 is currently evaluating the ASU to determine its impact on the Company’s disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Topic 220): Disaggregation of Income Statement Expenses. The new guidance is intended to enhance transparency and disclosures by requiring public business entities to disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods. The ASU is effective for annual reporting periods after December 15, 2026, and for interim reporting periods beginning December 15, 2027, with early adoption permitted. The Company is in the process of evaluating the impact that the adoption of this ASU will have on its financial statements and related disclosures. The Company does not expect ASU 2024-03 to have a material effect on its consolidated financial statements.
NOTE 3 – OTHER INCOME
The components of other income for the three and six months ended February 28, 2025, and February 29, 2024, were as follows:

|  | Three Months Ended |  | Six Months Ended |  |
(in thousands) |  | February 28, 2025 |  | February 29, 2024 |  | February 28, 2025 |  | February 29, 2024 |  |
Interest income |  | $ | 154 |  |  | $ | 1,348 |  |  | $ | 313 |  |  | $ | 2,640 |  |  |
Change in fair valuation of contingent consideration |  | 640 |  |  | (440) |  |  | 640 |  |  | (330) |  |  |
(Loss) gain on currency exchange |  | 2 |  |  | (98) |  |  | (13) |  |  | (54) |  |  |
Total other income |  | $ | 796 |  |  | $ | 810 |  |  | $ | 940 |  |  | $ | 2,256 |  |  |

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NOTE 4 – COMMITMENTS AND CONTINGENCIES
Leases
Rent expense, including common area maintenance fees ("CAM"), was $0.1 million and $0.1 million for the three months ended February 28, 2025, and February 29, 2024, respectively, and $0.2 million and $0.3 million for the six months ended February 28, 2025, and February 29, 2024, respectively.
Lease liability maturities as of February 28, 2025, were as follows:

(in thousands) | Years Ending August 31, |  | Amount
Remainder of fiscal year 2025 |  | $ | 194 |
2026 |  | 282 |
2027 |  | 86 |
2028 |  | 64 |
2029 |  | 64 |
Thereafter |  | 273 |
Total undiscounted liabilities |  | 963 |
Less: imputed interest |  | (167) |
Total operating lease liabilities (including current portion) |  | $ | 796 |

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 jurisdictions as well as with the countries of India and France. Our federal income tax returns for fiscal years 2021 through 2024 are open for audit, and our state tax returns for fiscal years 2020 through 2024 remain open for audit.
Our review of prior-year tax positions using the criteria and provisions presented in guidance issued by FASB did not result in a material impact on our financial position or results of operations.
Litigation
We are not a party to any legal proceedings and are not aware of any pending or threatened legal proceedings of any kind.
NOTE 5 – SHAREHOLDERS' EQUITY
Shares Outstanding
Shares of Company's common stock outstanding for the three and six months ended February 28, 2025, and February 29, 2024, were as follows:

|  | Three Months Ended |  | Six Months Ended |  |
(in thousands) |  | February 28, 2025 |  | February 29, 2024 |  | February 28, 2025 |  | February 29, 2024 |  |
Common stock outstanding, beginning of period |  | 20,085 |  |  | 19,966 |  |  | 20,051 |  |  | 19,938 |  |  |
Common stock issued during the period |  | 26 |  |  | 18 |  |  | 60 |  |  | 46 |  |  |
Common stock outstanding, end of period |  | 20,111 |  |  | 19,984 |  |  | 20,111 |  |  | 19,984 |  |  |

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The following table summarizes information about stock options:

(in thousands, except per share and weighted-average amounts) |  |  |  |  |  |
Activity for the six months ended February 28, 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 |  | 356 |  |  | 33.18 |  |  |
Exercised |  | (71) |  |  | 13.50 |  |  |
Canceled/Forfeited |  | (97) |  |  | 42.94 |  |  |
Outstanding, February 28, 2025 |  | 2,094 |  |  | $ | 37.46 |  |  | 7.05 years
Vested and Exercisable, February 28, 2025 |  | 990 |  |  | $ | 35.16 |  |  | 5.31 years
Vested and Expected to Vest, February 28, 2025 |  | 1,997 |  |  | $ | 37.49 |  |  | 6.95 years

The total grant-date fair value of nonvested stock options as of February 28, 2025, was $21.1 million and is amortizable over a weighted-average period of 3.20 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, 2025, and for the fiscal year ended August 31, 2024:

(in thousands, except weighted-average amounts) |  | Six Months Ended February 28, 2025 |  | Fiscal Year 2024 |  |
Estimated fair value of awards granted |  | $ | 6,190 |  |  | $ | 11,902 |  |  |
Unvested forfeiture rate |  | 6.26 | % |  | 5.53 | % |  |
Weighted-average grant price |  | $ | 33.18 |  |  | $ | 40.76 |  |  |
Weighted-average market price |  | $ | 33.18 |  |  | $ | 40.76 |  |  |
Weighted-average volatility |  | 46.93 | % |  | 44.63 | % |  |
Weighted-average risk-free rate |  | 3.95 | % |  | 4.77 | % |  |
Weighted-average dividend yield |  | 0.00 | % |  | 0.59 | % |  |
Weighted-average expected life |  | 6.61 years |  | 6.59 years |  |

The exercise prices for the options outstanding at February 28, 2025, ranged from $6.85 to $66.14 per share, and the information relating to these options is as follows:
(in thousands except prices and weighted-average amounts)

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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
$ | 6.85 |  |  | $ | 9.77 |  |  | 93 |  |  | 0.99 years |  | $ | 9.71 |  |  | 93 |  |  | 0.99 years |  | $ | 9.71 |
$ | 9.78 |  |  | $ | 18.76 |  |  | 128 |  |  | 1.99 years |  | $ | 10.08 |  |  | 128 |  |  | 1.99 years |  | $ | 10.08 |
$ | 18.77 |  |  | $ | 33.40 |  |  | 498 |  |  | 8.02 years |  | $ | 31.07 |  |  | 147 |  |  | 4.16 years |  | $ | 26.05 |
$ | 33.41 |  |  | $ | 47.63 |  |  | 1,101 |  |  | 7.90 years |  | $ | 41.36 |  |  | 429 |  |  | 7.36 years |  | $ | 41.32 |
$ | 47.64 |  |  | $ | 66.14 |  |  | 274 |  |  | 6.32 years |  | $ | 55.65 |  |  | 193 |  |  | 5.89 years |  | $ | 57.33 |
|  |  |  | 2,094 |  |  | 7.05 years |  | $ | 37.46 |  |  | 990 |  |  | 5.31 years |  | $ | 35.16 |

During the three and six months ended February 28, 2025, and February 29, 2024, respectively, 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.
The Company's par-value common stock and additional paid-in capital as of February 28, 2025, were $11 thousand and $156.2 million, respectively.
Share Repurchases
No share repurchases were made during the three and six months ended February 28, 2025, and February 29, 2024.
NOTE 6 – CONCENTRATIONS AND UNCERTAINTIES
Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash, cash equivalents, trade accounts receivable, and short-term investments. The Company holds cash and cash equivalents with balances that exceed FDIC-insured limits. Cash maintained in excess of these limits is on deposit with a large, national bank. Accordingly, the Company does not have depository exposure to regional banks. In addition, the Company holds cash at a bank in France that is not FDIC-insured. Historically, the Company has not experienced any losses in such accounts, and management believes that the financial institutions at which its cash is held are stable; however, no assurances can be provided. While the Company may be exposed to credit losses due to the nonperformance of its counterparties, the Company does not expect the settlement of these transactions to have a material effect on its results of operations, cash flows, or financial condition.
Revenue concentration shows that international sales accounted for 26% and 29% of revenue for the six months ended February 28, 2025, and February 29, 2024, respectively. 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. Our three largest customers in terms of revenue accounted for 11%, 4%, and 3% of total revenues, respectively, for the six months ended February 29, 2024.
Accounts-receivable concentrations show that our three largest customers in terms of accounts receivable each comprised between 4% and 13% of accounts receivable as of February 28, 2025; our five largest customers in terms of accounts receivable comprised between 4% and 19% of accounts receivable as of February 29, 2024. As of the filing date of this report, our largest customer, which represented 13% of accounts receivable as of February 28, 2025, was current on all outstanding invoices, except for a de minimis amount.
We operate in biosimulation, simulation-enabled performance and intelligence solutions, and medical communications to the biopharma industry, which is highly competitive and changes rapidly. Our operating results could be significantly affected by our ability to develop new products and find new distribution channels for new and existing products.
NOTE 7 – SEGMENT REPORTING

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The Company applies ASC 280, Segment Reporting, in determining reportable segments. The Company has two reportable segments: Software and Services. Segment information is presented in the same manner that the chief operating decision maker (“CODM”) reviews certain financial information based on these reportable segments. The CODM reviews revenue and gross profit for both of the reportable segments. 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 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 internal revenue transactions between the Company’s segments.
The following tables summarize the results for each segment for the three months ended February 28, 2025, and February 29, 2024, respectively. Please refer to Results of Operations within MD&A for a discussion of results in below tables:

(in thousands) |  | Three Months Ended February 28, 2025
|  | Software |  | Services |  | Total
Revenues |  | $ | 13,484 |  |  | $ | 8,948 |  |  | $ | 22,432 |
Cost of revenues |  | 2,587 |  |  | 6,718 |  |  | 9,305 |
Gross profit |  | $ | 10,897 |  |  | $ | 2,230 |  |  | $ | 13,127 |
Gross margin |  | 81 | % |  | 25 | % |  | 59 | %

Our software business and services business represented 60% and 40% of total revenue, respectively, for the three months ended February 28, 2025.

(in thousands) |  | Three Months Ended February 29, 2024
|  | Software |  | Services |  | Total
Revenues |  | $ | 11,614 |  |  | $ | 6,691 |  |  | $ | 18,305 |
Cost of revenues |  | 1,348 |  |  | 3,736 |  |  | 5,084 |
Gross profit |  | $ | 10,266 |  |  | $ | 2,955 |  |  | $ | 13,221 |
Gross margin |  | 88 | % |  | 44 | % |  | 72 | %

Our software business and services business represented 63% and 37% of total revenue, respectively, for the three months ended February 29, 2024.
The following tables summarize the results for each segment for the six months ended February 28, 2025, and February 29, 2024, respectively. Please refer to Results of Operations within MD&A for a discussion of results in below tables:

(in thousands) |  | Six Months Ended February 28, 2025
|  | Software |  | Services |  | Total
Revenues |  | $ | 24,199 |  |  | $ | 17,157 |  |  | $ | 41,356 |
Cost of revenues |  | 5,225 |  |  | 12,786 |  |  | 18,011 |
Gross profit |  | $ | 18,974 |  |  | $ | 4,371 |  |  | $ | 23,345 |
Gross margin |  | 78 | % |  | 25 | % |  | 56 | %

Our software business and services business represented 59% and 41% of total revenue, respectively, for the six months ended February 28, 2025.

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(in thousands) |  | Six Months Ended February 29, 2024
|  | Software |  | Services |  | Total
Revenues |  | $ | 19,203 |  |  | $ | 13,602 |  |  | $ | 32,805 |
Cost of revenues |  | 2,339 |  |  | 7,397 |  |  | 9,736 |
Gross profit |  | $ | 16,864 |  |  | $ | 6,205 |  |  | $ | 23,069 |
Gross margin |  | 88 | % |  | 46 | % |  | 70 | %

Our software business and services business represented 59% and 41% of total revenue, respectively, for the six months ended February 29, 2024.
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, 2025, and February 29, 2024, were as follows:

(in thousands) |  | Three Months Ended
|  | February 28, 2025 |  | February 29, 2024
|  | $ |  | % of total |  | $ |  | % of total
Americas |  | $ | 16,112 |  |  | 72 | % |  | $ | 12,461 |  |  | 68 | %
EMEA |  | 4,806 |  |  | 21 | % |  | 4,665 |  |  | 25 | %
Asia Pacific |  | 1,514 |  |  | 7 | % |  | 1,179 |  |  | 6 | %
Total |  | $ | 22,432 |  |  | 100 | % |  | $ | 18,305 |  |  | 100 | %

(in thousands) |  | Six Months Ended |  |  |  |
|  | February 28, 2025 |  | February 29, 2024 |  |
|  | $ |  | % of total* |  | $ |  | % of total |  |  |  |
Americas |  | $ | 30,581 |  |  | 74 | % |  | $ | 23,353 |  |  | 71 | % |  |  |  |
EMEA |  | 7,526 |  |  | 18 | % |  | 6,966 |  |  | 21 | % |  |  |  |
Asia Pacific |  | 3,249 |  |  | 8 | % |  | 2,486 |  |  | 8 | % |  |  |  |
Total |  | $ | 41,356 |  |  | 100 | % |  | $ | 32,805 |  |  | 100 | % |  |  |  |

*Percentages may not add due to rounding
NOTE 8 – 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 $0.2 million for the three months ended February 28, 2025, and February 29, 2024, respectively, and $0.5 million and $0.4 million for the six months ended February 28, 2025, and February 29, 2024, respectively.
NOTE 9 - SUBSEQUENT EVENTS
The Company has evaluated subsequent events occurring after the balance sheet date through April 4, 2025, the date the financial statements were authorized for issuance. Based on this evaluation, the Company has determined that there are no subsequent events that require adjustment to or disclosure in the financial statements.
ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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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, 2024, filed with the Securities and Exchange Commission (“SEC”) on October 30, 2024, 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.
Results of Operations
Comparison of Three Months Ended February 28, 2025, and February 29, 2024

(in thousands) |  | Three Months Ended |  | % of Revenue |  |  |  |
|  | February 28, 2025 |  | February 29, 2024 |  | February 28, 2025 |  | February 29, 2024 |  | $ Change |  | % Change
Revenue |  | $ | 22,432 |  |  | $ | 18,305 |  |  | 100 | % |  | 100 | % |  | $ | 4,127 |  |  | 23 | %
Cost of revenue |  | 9,305 |  |  | 5,084 |  |  | 41 | % |  | 28 | % |  | 4,221 |  |  | 83 | %
Gross profit |  | 13,127 |  |  | 13,221 |  |  | 59 | % |  | 72 | % |  | (94) |  |  | (1) | %
Research and development |  | 2,143 |  |  | 1,312 |  |  | 10 | % |  | 7 | % |  | 831 |  |  | 63 | %
Sales and marketing |  | 3,717 |  |  | 1,949 |  |  | 17 | % |  | 11 | % |  | 1,768 |  |  | 91 | %
General and administrative |  | 4,555 |  |  | 5,518 |  |  | 20 | % |  | 30 | % |  | (963) |  |  | (17) | %
Total operating expenses |  | 10,415 |  |  | 8,779 |  |  | 46 | % |  | 48 | % |  | 1,636 |  |  | 19 | %
Income from operations |  | 2,712 |  |  | 4,442 |  |  | 12 | % |  | 24 | % |  | (1,730) |  |  | (39) | %
Other income, net |  | 796 |  |  | 810 |  |  | 4 | % |  | 4 | % |  | (14) |  |  | (2) | %
Income before income taxes |  | 3,508 |  |  | 5,252 |  |  | 16 | % |  | 29 | % |  | (1,744) |  |  | (33) | %
Provision for income taxes |  | (434) |  |  | (1,223) |  |  | (2) | % |  | (7) | % |  | 789 |  |  | 65 | %
Net income |  | $ | 3,074 |  |  | $ | 4,029 |  |  | 14 | % |  | 22 | % |  | $ | (955) |  |  | (24) | %

Revenues

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Revenues increased by $4.1 million, or 23%, to $22.4 million for the three months ended February 28, 2025, compared to $18.3 million for the three months ended February 29, 2024. This increase is primarily due to a $1.9 million, or 16%, increase in software-related revenue and a $2.3 million, or 34%, increase in service-related revenue when compared to the three months ended February 29, 2024. The software-related revenue increase of $1.9 million, or 16%, compared to the three months ended February 29, 2024, was primarily due to additional revenue from ALI of $0.9 million, higher revenues from QSP of $0.4 million, higher revenues from CPP of $0.3 million, and higher revenues from CHEM of $0.2 million. The service-related revenue increase of $2.3 million or 34%, compared to the three months ended February 29, 2024, was primarily due to additional revenue from MC of $2.3 million, higher revenues from CPP of $0.6 million, offset by lower revenue from PBPK of $0.5 million.
Cost of revenues
Cost of revenues increased by $4.2 million, or 83%, for the three months ended February 28, 2025, compared to the three months ended February 29, 2024. This increase is primarily due to a $1.2 million or 92%, increase in software-related cost and a $3.0 million or 80%, increase in service-related costs. The software-related costs increase of $1.2 million or 92%, compared to the three months ended February 29, 2024, was primarily due to additional amortization of $0.8 million as a result of the acquisition of Pro-ficiency, $0.4 million of higher amortization of capitalized software cost, offset by a decrease of $0.2 million of the Therapeutic Systems Research Laboratories (“TSRL”) agreement being fully amortized in the third quarter of fiscal year 2024. The service-related costs increase of $3.0 million or 80%, compared to the three months ended February 29, 2024, was primarily due to additional costs from MC of $1.6 million, $0.2 million of higher accrued bonuses, and a $0.8 million shift from G&A expense to cost of revenues, due to the reorganization of our internal structure from divisions to business units. The $0.8 million increase in cost of revenues corresponds to the $0.8 million decrease in general and administrative expenses discussed below.
Gross profit
Gross profit remained consistent at $13.1 million for the three months ended February 28, 2025 and February 29, 2024. The gross profit increased moderately in our software business by $0.6 million, or 6%, and decreased moderately for our services business by $0.7 million, or 25%, for the three months ended February 28, 2025, compared to the three months ended February 29, 2024.
Overall gross margin percentage was 59% and 72% for the three months ended February 28, 2025 and 2024, respectively.
Research and development
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 as part of capitalized software development costs and $2.1 million was expensed. We incurred $2.1 million of research and development costs during the three months ended February 29, 2024. Of this amount, $0.8 million was capitalized, and $1.3 million was expensed. Research and development spend increased by $0.8 million, or 38%, for the three months ended February 28, 2025, compared to the three months ended February 29, 2024, primarily due to an increase of $0.5 million from the acquisition of Pro-ficiency. The overall increase of $0.8 million, or 38%, corresponds to a 1% increase in research and development expense as a percentage of revenue.
Sales and marketing expenses
Sales and marketing expenses increased by $1.8 million, or 91%, to $3.7 million for the three months ended February 28, 2025, compared to $1.9 million for the three months ended February 29, 2024. This corresponds to a 6% increase in sales and marketing expense as a percentage of revenue. The increase was primarily due to higher efforts on event-related spending to enhance brand awareness and customer engagement of $0.8 million, a $0.2 million increase in expenses related to the acquisition of Pro-ficiency, a $0.2 million rise in sales commissions driven by higher sales, a $0.1 million increase in headcount costs, and a $0.1 million increase in accrued bonuses. This strategic investment in sales and marketing reflects our ongoing efforts to drive growth, strengthen market presence, and improve customer engagement.
General, and administrative expenses

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General, and administrative (“G&A”) expenses decreased by $1.0 million, or 17%, to $4.6 million for the three months ended February 28, 2025, compared to $5.5 million for the three months ended February 29, 2024. This corresponds to an 11% decrease in G&A expense as a percentage of revenue. The decrease is primarily driven by a $0.8 million shift from G&A expense to cost of revenues, as referenced above, due to the reorganization of our internal structure from divisions to business units.
Other income
Total other income was $0.8 million for the three months ended February 28, 2025, compared to total other income of $0.8 million for the three months ended February 29, 2024. Interest income decreased by $1.2 million due to the use of cash from investment in debt securities to acquire Pro-ficiency and other income increased by $1.1 million due to changes in the fair value of the earnout liability related to the Immunetrics acquisition. The fair value of the earnout liability decreased, as no earnout payment is anticipated related to the second earnout measurement period.
Provision for income taxes
The provision for income taxes was $0.4 million for the three months ended February 28, 2025, compared to $1.2 million for the three months ended February 29, 2024. Our effective tax rate decreased to 12% mainly due to disqualifying dispositions of incentive stock options for the three months ended February 28, 2025, when compared to 23% for the three months ended February 29, 2024.
Results of Operations
Comparison of Six months ended February 28, 2025 and February 29, 2024

(in thousands) |  | Six Months Ended |  | % of Revenue |  |  |  |
|  | February 28, 2025 |  | February 29, 2024 |  | February 28, 2025 |  | February 29, 2024 |  | $ Change |  | % Change
Revenue |  | $ | 41,356 |  |  | $ | 32,805 |  |  | 100 | % |  | 100 | % |  | $ | 8,551 |  |  | 26 | %
Cost of revenue |  | 18,011 |  |  | 9,736 |  |  | 44 | % |  | 30 | % |  | 8,275 |  |  | 85 | %
Gross profit |  | 23,345 |  |  | 23,069 |  |  | 56 | % |  | 70 | % |  | 276 |  |  | 1 | %
Research and development |  | 3,991 |  |  | 2,529 |  |  | 10 | % |  | 8 | % |  | 1,462 |  |  | 58 | %
Sales and marketing |  | 6,568 |  |  | 3,938 |  |  | 16 | % |  | 12 | % |  | 2,630 |  |  | 67 | %
General and administrative |  | 9,948 |  |  | 11,200 |  |  | 24 | % |  | 34 | % |  | (1,252) |  |  | (11) | %
Total operating expenses |  | 20,507 |  |  | 17,667 |  |  | 50 | % |  | 54 | % |  | 2,840 |  |  | 16 | %
Income from operations |  | 2,838 |  |  | 5,402 |  |  | 7 | % |  | 16 | % |  | (2,564) |  |  | (47) | %
Other income, net |  | 940 |  |  | 2,256 |  |  | 2 | % |  | 7 | % |  | (1,316) |  |  | (58) | %
Income before income taxes |  | 3,778 |  |  | 7,658 |  |  | 9 | % |  | 23 | % |  | (3,880) |  |  | (51) | %
Provision for income taxes |  | (498) |  |  | (1,684) |  |  | (1) | % |  | (5) | % |  | 1,186 |  |  | (70) | %
Net income |  | $ | 3,280 |  |  | $ | 5,974 |  |  | 8 | % |  | 18 | % |  | $ | (2,694) |  |  | (45) | %

Revenues
Revenues increased by $8.6 million, or 26%, to $41.4 million for the six months ended February 28, 2025, compared to $32.8 million for the six months ended February 29, 2024. This increase is primarily due to a $5.0 million, or 26%, increase in software-related revenue and a $3.6 million, or 26%, increase in service-related revenue when compared to the six months ended February 29, 2024. The software-related revenue increase of $5.0 million, or 26%, compared to the six months ended February 29, 2024, was primarily due to additional revenue from ALI of $2.6 million, higher revenues from QSP of $1.5 million, higher revenues from CPP of $1.0 million. The service-related revenue increase of $3.6 million, or 26%, compared to the six months ended February 29, 2024, was primarily due to additional revenue from MC of $4.2 million and higher revenues from CPP of $0.4 million, offset by lower revenue from PBPK of $0.6 million and lower revenue from QSP of $0.4 million.
Cost of revenues

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Cost of revenues increased by $8.3 million, or 85%, for the six months ended February 28, 2025, compared to the six months ended February 29, 2024. This increase is primarily due to a $2.9 million or 123%, increase in software-related cost and a $5.4 million or 73%, increase in service-related costs. The software-related costs increase of $2.9 million or 123%, compared to the six months ended February 29, 2024, was primarily due to additional amortization of $1.7 million as a result of the acquisition of Pro-ficiency, and $0.8 million of higher amortization of capitalized software cost, offset by a decrease of $0.3 million of fully amortized TSRL in the third quarter of fiscal year 2024. The service-related costs increase of $5.4 million or 73%, compared to the six months ended February 29, 2024, was primarily due to additional costs from MC of $3.1 million, and $1.6 million shift from G&A expense to cost of revenues, due to the reorganization of our internal structure from divisions to business units. The $1.6 million increase in cost of revenues corresponds to the $1.6 million decrease in general and administrative expenses discussed below.
Gross profit
Gross profit increased by $0.3 million or 1%, to $23.3 million for the six months ended February 28, 2025, compared to $23.1 million for the six months ended February 29, 2024. The gross profit increased in our software business by $2.1 million, or 13%, and decreased for our services business by $1.8 million, or 30%, for the three months ended February 28, 2025, compared to the three months ended February 29, 2024.
Overall gross margin percentage was 56% and 70% for the six months ended February 28, 2025, and 2024, respectively.
Research and development
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 as a part of capitalized software development costs and $4.0 million was expensed. We incurred $4.3 million of research and development costs during the six months ended February 29, 2024. Of this amount, $1.8 million was capitalized and $2.5 million was expensed. Research and development spend increased by $1.2 million, or 28%, for the six months ended February 28, 2025, compared to the six months ended February 29, 2024, primarily due to an increase of $0.9 million from the acquisition of Pro-ficiency. The research and development expense as a percentage of revenue remained consistent for the six months ended February 28, 2025 and February 29, 2024, respectively.
Sales and marketing expenses
Sales and marketing expenses increased by $2.6 million, or 67%, to $6.6 million for the six months ended February 28, 2025, compared to $3.9 million for the six months ended February 29, 2024. This corresponds to a 4% increase in sales and marketing expense as a percentage of revenue. The increase was primarily due to an increase of $0.8 million from the acquisition of Pro-ficiency, $0.9 million in higher event-related spending to enhance brand awareness and customer engagement, increased sales commission of $0.3 million, and increased headcounts of $0.1 million. This strategic investment in sales and marketing reflects our ongoing efforts to drive growth, strengthen market presence, and improve customer engagement.
General, and administrative expenses
General, and administrative (“G&A”) expenses decreased by $1.3 million, or 11%, to $9.9 million for the six months ended February 28, 2025, compared to $11.2 million for the six months ended February 29, 2024. This corresponds to an 11% decrease in G&A expense as a percentage of revenue. The decrease is primarily driven by a $1.6 million shift from G&A expense to cost of revenues, as referenced above, due to the reorganization of our internal structure from divisions to business units, offset by an increase of $0.5 million from the acquisition of Pro-ficiency.
Other income
Total other income was $0.9 million for the six months ended February 28, 2025, compared to total other income of $2.3 million for the six months ended February 29, 2024. $2.3 million of the decrease in interest income is attributable to the use of cash from investment in debt securities to acquire Pro-ficiency, partially offset by a $1.0 million increase due to the decrease in the fair value of the Immunetrics earnout liability, as no earnout payment is anticipated related to the second earnout measurement period.
Provision for income taxes

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The provision for income taxes was $0.5 million for the six months ended February 28, 2025, compared to $1.7 million for the six months ended February 29, 2024. Our effective tax rate decreased to 13% mainly due to disqualifying dispositions of incentive stock options for the six months ended February 28, 2025, when compared to 22% for the six months ended February 29, 2024.
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 and beyond.
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 it. 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 opportunities 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, 2025, the Company had $11.0 million in cash and cash equivalents, $10.4 million in short-term investments, and working capital of $36.0 million. Short-term investments consist of highly liquid investment-grade fixed-income securities, diversified among industries and issuers. The investments are U.S.-dollar-denominated securities. Our fixed-income investments are exposed to interest rate risk and credit risk. The settlement risk related to these investments is insignificant, given that the short-term investments held are primarily highly liquid investment-grade fixed-income securities and can readily be converted to cash when needed.
Cash Flows
Operating Activities
Net cash provided by operating activities was $4.4 million for the six months ended February 28, 2025. Our operating cash flows resulted in part from our net income of $3.3 million, offset by cash payments we made to third parties for their services and employee compensation. The changes in balances of assets of $6.2 million was primarily due to change in accounts receivables driven by higher revenues and invoicing that occurred closer to the end of the current quarter. The changes in liabilities balances of $1.2 million were primarily due to higher deferred revenues of $1.4 million driven by higher invoicing that occurred closer to the end of the current quarter and timing of revenue recognition.
Net cash provided by operating activities was $6.0 million for the six months ended February 29, 2024. Our operating cash flows resulted primarily from our net income of $6.0 million. In addition, $3.9 million related to changes in balances of operating assets and liabilities was added to net income and $3.9 million related to noncash charges was added to net income to reconcile to cash flow from operations. The changes in balances of other liabilities of $1.1 million were primarily driven by accrued liabilities of $2.4 million for investments, bonus accrual of $2.4 million, offset by $3.1 million of bonus payments and lower deferred revenues of $0.6 million. The changes in balances of prepaid expenses and other current assets are primarily due to increase in accounts receivables driven by timing of invoicing and an increase in prepaid expenses of $1.7 million.
Net cash provided by operating activities decreased by $1.6 million during the six months ended February 28, 2025, compared to the six months ended February 29, 2024. This decrease was driven by drivers as explained above for both comparative periods.
Investing Activities

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Net cash used in investing activities during the six months ended February 28, 2025, was $2.5 million, primarily due to purchase of short-term investments of $5.0 million and computer software development costs of $1.3 million, offset by proceeds from maturities of short-term investments of $3.6 million.
Net cash used in investing activities during the six months ended February 29, 2024, was $24.4 million, primarily due to purchase of short-term investments of $49.0 million, purchase of long-term investments of $58.0 million, and computer software development costs of $1.7 million, offset by the proceeds from maturities of short-term investments of $36.3 million.
Financing Activities
Net cash used in financing activities during the six months ended February 28, 2025, was $1.3 million, primarily due to cash settlement of $1.6 million from the holdback obligation related to the Immunetrics acquisition, offset by proceeds from the exercise of stock options totaling $0.3 million.
Net cash used in financing activities during six months ended February 29, 2024, was $2.1 million, primarily due to dividend payments totaling $2.4 million, offset by proceeds from the exercise of stock options totaling $0.3 million.
Pro-ficiency Acquisition
On June 11, 2024, the Company entered into a Stock Purchase Agreement, by and among the Company, Pro-ficiency, each of the stockholders of Pro-ficiency (collectively, the “Sellers”) and WRYP Stockholders Services, LLC, solely in its capacity as the Sellers’ Representative (the “Purchase Agreement”). Pursuant to the Purchase Agreement, at closing on June 11, 2024, (the “Closing”), the Company purchased 100% of the issued and outstanding capital stock of Pro-ficiency (the “Acquisition”) from the Sellers for an aggregate purchase price of $100 million in cash, subject to post-closing adjustments for net working capital, closing cash, indebtedness, and transaction expenses (collectively, the “Purchase Price”). An aggregate of $1 million of the Purchase Price was placed in escrow to fund payment obligations of the Sellers with respect to post-closing Purchase Price adjustments and post-Closing indemnification obligations of the Sellers, and another portion of the Purchase Price was deposited into an account to reimburse the Seller Representative for any fees and expenses incurred by the Seller Representative in performing its duties under the Purchase Agreement as the representative of the Sellers. As a result of the Acquisition, at Closing, Pro-ficiency became a wholly-owned subsidiary of the Company.
The Purchase Agreement contains standard representations, warranties and covenants, and other terms customary in similar transactions. Subject to the provisions of the Purchase Agreement, the Sellers have agreed to indemnify the Company and its affiliates for losses resulting from breaches of representations, warranties, and covenants of the Sellers and Pro-ficiency in the Purchase Agreement and for certain other specified matters. The Sellers’ indemnification obligations are subject to various limitations, including, among other things, a deductible, caps, and time limitations.
In connection with the Acquisition, the Company obtained a customary buyer’s representation and warranty insurance policy (the “R&W Insurance Policy”) providing for up to $10 million in coverage in the case of breaches of representations and warranties of the Sellers and Pro-ficiency contained in the Purchase Agreement, subject to certain exclusions and an initial $0.5 million retention. The Company, on the one hand, and the Sellers, on the other hand, each bore one-half of the cost of obtaining the R&W Insurance Policy.

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Immunetrics Acquisition
During the quarter ended February 28, 2025, the Company completed the final payment of $1.6 million related to the holdback liability from the Immunetrics acquisition. Additionally, based on earned revenue for Immunetrics during the second earnout measurement period, the Company has assessed the fair value of the earnout liability to be zero. However, the final settlement with the sellers is pending, and while the Company does not anticipate any earnout payment, it is still subject to final determination.
Share Repurchases
For the three and six months ended February 28, 2025, and February 29, 2024, respectively, we did not repurchase any shares of Company stock. As of February 28, 2025, $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. Significant accounting policies for us include revenue recognition, accounting for capitalized software development costs, valuation of stock options, 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 judgement 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, 2025, and February 29, 2024, respectively, and $1.5 million and $1.8 million for the six months ended February 28, 2025, and February 29, 2024, respectively.

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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 $0.8 million and $0.4 million, respectively, for the three months ended February 28, 2025, and February 29, 2024, respectively, and $1.6 million and $0.8 million for the six months ended February 28, 2025, and February 29, 2024, respectively. We expect future amortization expense to vary due to variations in capitalized computer software development costs.
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, 2025, the Company determined that it had six reporting units: CHEM, PBPK, QSP, CPP, MC, and ALI.
As of February 28, 2025, the entire balance of goodwill was attributed to four of the Company's reporting units, CPP, QSP, ALI, and MC. 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, 2025, and February 29, 2024, 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
Research and development 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.

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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
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, not including shares issued to directors for services, were $1.6 million and $1.6 million, for the three months ended February 28, 2025, and February 29, 2024, respectively, and $3.3 million and $2.9 million for the six months ended February 28, 2025, and February 29, 2024, respectively.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
As of February 28, 2025, 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, 2025. 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, 2025, 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.

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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, 2024, 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. Except as set forth below, 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.
Cash expenditures associated with the acquisition of Pro-ficiency may create certain liquidity and cash flow risks for us.
As consideration for the acquisition of Pro-ficiency, at closing on June 11, 2024, we paid approximately $100 million in cash to the previous equity holders of Pro-ficiency, which constituted a significant portion of our cash reserves as of the closing date. In addition to the acquisition consideration, we incurred significant transaction costs and expect to incur additional integration costs in connection with the acquisition. While we anticipated that the closing consideration and transactions costs would be incurred, there are many factors beyond our control that could affect the total amount of the integration expenses associated with the acquisition. Moreover, many of the expenses that will be incurred are, by their nature, difficult to estimate accurately. To the extent the integration expenses are higher than anticipated, we may experience liquidity or cash flow issues.
Pro-ficiency and its operating subsidiaries may not perform as we or the market expects, which could have an adverse effect on the price of our common stock.
Pro-ficiency, which is now a wholly owned subsidiary of the Company, and its operating subsidiaries, may not perform as we or the market expects. Risks associated with the Pro-ficiency acquisition include, without limitation:
•integrating businesses is a difficult, expensive, and time-consuming process, and the failure to successfully integrate our businesses with the business of Pro-ficiency in the expected time frame could adversely affect our financial condition and results of operation;
•the addition of Pro-ficiency has increased the size of our operations, and, if we are not able to manage our expanded operations effectively, our common stock price may be adversely affected;
•the extent to which we may realize the expected synergies and cost savings is uncertain at this time; and
•the success of the Pro-ficiency acquisition will also depend upon relationships with third parties and Pro-ficiency’s and our pre-existing customers, which relationships may be affected by customer preferences or public attitudes about the Pro-ficiency acquisition. Any adverse changes in these relationships could adversely affect our business, financial condition, and results of operations.
Risks Relating to Artificial Intelligence and Machine Learning
The use of AI in our products and services may result in reputational harm and competitive harm.
We use artificial intelligence and machine learning in our business, including using artificial intelligence in our modeling and simulation software for drug discovery and development, including the prediction of properties of molecules utilizing both artificial intelligence (“AI”) and machine learning technology. As with many technological innovations, there are significant risks and challenges involved in maintaining and deploying these technologies. Artificial intelligence algorithms or training methodologies may be flawed. Datasets may be overbroad or insufficient and information generated by artificial intelligence may be illegal or harmful. There may also be insufficient back-testing. The rapid evolution and increased adoption of AI technologies may intensify our cybersecurity risks. Overall, there can be no assurance that the usage of such technologies will enhance our products or services or be beneficial to our business, including our efficiency or profitability.
Our use of artificial intelligence and machine learning may result in legal and regulatory risks.

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Artificial intelligence entails significant legal risks. The IP ownership and license rights of new technologies such as artificial intelligence and machine learning have not been fully addressed by U.S. courts, and there is uncertainty and ongoing litigation in different jurisdictions as to the degree and extent of protection warranted for artificial intelligence technologies and relevant system input and outputs. If we fail to obtain protection for the intellectual property rights concerning technologies developed using artificial intelligence or machine learning, or later have our intellectual property rights invalidated or otherwise diminished, our competitors may be able to take advantage of our research and development efforts to develop competing products, which could adversely affect our business, reputation, financial condition, or results of operations. Moreover, the use or adoption of artificial intelligence and machine learning in our technology may expose us to breach of a data or software license, website terms of service claims, claimed violations of privacy rights or other tort claims.
The regulatory landscape surrounding artificial intelligence is also evolving, and the use of machine learning technologies may become subject to regulation under new laws or new applications of existing laws. In the U.S., there is increasing uncertainty as to the federal government’s future approach to AI regulation, including as to the continued applicability of the 2023 executive order of the prior U.S. presidential administration to, among other things, establish extensive new standards for AI safety and security. In January 2025, President Trump signed an executive order revoking this 2023 executive order and directing the heads of various federal governmental bodies to review actions taken under that executive order and develop a new action plan with respect to AI-related matters. Additionally, other jurisdictions may decide to adopt similar or more restrictive legislation that may render the use of such technologies challenging. For example, the EU AI Act (which could become applicable to us depending on the global expansion of our business) came into force on August 1, 2024, and will generally become fully applicable after a two-year transitional period. The EU AI Act introduces various requirements for AI systems and models placed on the market or put into service in the EU, including specific transparency and other requirements for general purpose AI systems and the models on which those systems are based. Several U.S. states are considering enacting or have already enacted regulations concerning the use of AI technologies, including those focused on consumer protection, and depending on the scope of AI regulation at the federal level, some states may move to regulate AI model development and deployment. Further, at both the U.S. federal and state level, there have been various proposals (and in some cases laws enacted) addressing “deepfakes” and other AI-generated synthetic media. These current or future restrictions may make it harder for us to conduct our business using artificial intelligence, and violations of these laws and regulations could result in fines and penalties, criminal sanctions against us, our officers or our employees, prohibitions on the conduct of our business, and damage to our reputation. Governmental regulation and laws related to AI may also increase the burden and cost of research and development or require increased transparency that makes it more difficult to protect our IP.
We receive government assistance in the form of cash grants. The interruption of or termination or failure to fund one or more of these grants, or other actions taken by Department of Government Efficiency (“DOGE”) could have an adverse impact on our business, financial condition, results of operations and cash flows.
We receive government assistance in the form of cash grants which vary in size, duration and conditions from domestic governmental agencies, to provide reimbursement for various costs incurred for research and development. These include direct grant awards and subawards. The U.S. government has and may continue to implement initiatives focused on efficiencies, affordability and cost growth and other changes, such as those pursued by the recently created DOGE. On January 20, 2025, President Trump announced an executive order establishing the DOGE to maximize government efficiency and productivity. In February 2025, President Trump stated that he has directed DOGE to review spending for potential waste and fraud. Pressures on and uncertainty surrounding the U.S. federal government’s budget and potential changes in budgetary priorities, could adversely affect our revenue, financial condition, and results of operations in ways that are indeterminate at this time. These initiatives and changes to procurement practices may change the way grants and government assistance is provided, if at all, which may affect whether and how we pursue opportunities to provide our products and services, which may have an adverse impact on our business, financial condition, results of operations and cash flows.
Changes in government regulation, funding or in practices relating to the pharmaceutical or biotechnology industries, including potential health care reform, could decrease the need for the services we provide.
Governmental agencies throughout the world, but particularly in the U.S., strictly regulate the drug development process. Our business involves helping pharmaceutical and biotechnology companies, among others, navigate the regulatory drug approval process. Accordingly, many regulations, and often new regulations, are expected to result in higher regulatory standards and often additional revenues for companies that service these industries. However, some changes in regulations, such as a relaxation in regulatory requirements or the introduction of streamlined or expedited drug approval procedures, or an increase in regulatory requirements that we have difficulty satisfying or that make our services less competitive, could eliminate or substantially reduce the demand for our services.

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Further, any future government or DOGE proposals to reduce or eliminate budgetary deficits may include reduced allocations to the FDA, and other related U.S. government agencies. These budgetary pressures may result in a reduced ability by the FDA and others to perform their respective roles and may have a related impact on institutions and research laboratories whose funding is fully or partially dependent on both the level and the timing of funding from government sources. Robert F. Kennedy Jr., the Secretary of the U.S. Department of Health and Human Services, which oversees the FDA, has previously stated his intent to downsize or restructure these agencies, including by appointing new directors to the agencies. In the event of a partial or complete government shutdown, the FDA and certain other science agencies may temporarily cease certain operations. Furthermore, during such shutdown, the FDA may maintain only operations deemed to be essential for public health while suspending the acceptance of new medical product applications and routine regulatory and compliance work related to medical products, certain drugs, and foods. Disruptions at the FDA and other agencies, such as those resulting from a restructuring of these agencies, a government shutdown, or uncertainty from stopgap spending bills may slow the time necessary for new drugs and devices to be reviewed and/or approved by necessary government agencies and may affect the ability of the healthcare and drug industries to deliver new products to the market in a timely manner, which would adversely affect our operating results and business.
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.

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Item 5. Other Information
Rule 10b5-1 Trading Plans
The adoption 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, 2025, 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
Dr. Daniel Weiner (1) |  | Director |  | Termination |  | 01/17/2023 |  | 01/27/2025 |  | 9,874 |
Dr. Daniel Weiner (2) |  | Director |  | Termination |  | 02/06/2024 |  | 02/08/2025 |  | 12,000 |
Dr. Lisa LaVange (3) |  | Director |  | Termination |  | 02/06/2024 |  | 02/08/2025 |  | 4,600 |

(1) On January 27, 2025, the pre-arranged stock trading plan pursuant to Rule 10b5-1, adopted by Dr. Daniel Weiner on January 17, 2023, automatically terminated pursuant to its terms. The expired plan provided for (i) the potential exercise of vested stock options and the associated sale of up to up to 6,000 shares of Company common stock underlying such options, and (ii) the potential sale of up to an additional 3,874 shares of Company common stock.
(2) On February 8, 2025, the pre-arranged stock trading plan pursuant to Rule 10b5-1, adopted by Dr. Daniel Weiner on February 6, 2024, automatically terminated pursuant to its terms. The expired plan provided for (i) the potential exercise of vested stock options and the associated sale of up to up to 6,000 shares of Company common stock underlying such options, and (ii) the potential sale of up to an additional 6,000 shares of Company common stock.
(3) On February 8, 2025, the pre-arranged stock trading plan pursuant to Rule 10b5-1, adopted by Dr. Lisa LaVange on February 6, 2024, automatically terminated pursuant to its terms. The expired plan provided for (i) the potential exercise of vested stock options and the associated sale of up to up to 1,000 shares of Company common stock underlying such options, and (ii) the potential sale of up to an additional 3,600 shares of Company common stock.
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,” during the current reporting period, in each case as defined in Item 408 of Regulation S-K.

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Item 6. EXHIBITS

EXHIBIT NUMBER |  | DESCRIPTION
2.1^ |  | Agreement and Plan of Merger, dated July 23, 2014, by and among the Company, Cognigen Corporation and the other parties thereto, incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K/A filed November 18, 2014.
2.2^ |  | Stock Purchase Agreement by and among Simulations Plus, Inc., DILIsym Services, Inc., the Shareholders’ Representative and the Shareholders of DILIsym Services, Inc., incorporated by reference to Exhibit 10.13 to the Company’s Form 10-Q filed July 10, 2017.
2.3^ |  | Share Purchase and Contribution Agreement Relating to Lixoft, dated March 31, 2020, incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed April 2, 2020.
2.4^ |  | Agreement and Plan of Merger, dated June 16, 2023, by and among Simulations Plus, Inc., Insight Merger Sub, Inc., Immunetrics, Inc. and LaunchCyte LLC, incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed June 20, 2023.
2.5^+ |  | Stock Purchase Agreement, by and among the Company, Pro-ficiency Holdings, Inc. (“Pro-ficiency”), each of the stockholders of Pro-ficiency (collectively, the “Sellers”) and WRYP Stockholders Services, LLC, solely in its capacity as the Sellers’ Representative, dated June 11, 2024, incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed June 12, 2024.
3.1 |  | Articles of Incorporation of the Company, incorporated by reference to an Exhibit 3.1 to the Company’s Form 10-K filed November 29, 2010.
3.2 |  | Amended and Restated Bylaws of the Company, incorporated by reference to an exhibit to the Company’s Form 10-K filed November 29, 2010.
3.3 |  | Certificate of Amendment to the Amended and Restated Bylaws of Simulations Plus, Inc., incorporated by reference to Appendix A to the Company’s Definitive Schedule 14A Proxy Statement filed December 31, 2018.
4.1 |  | Form of Common Stock Certificate, incorporated by reference to the Company’s Registration Statement on Form SB-2 (Registration No. 333-6680) filed March 25, 1997.
4.2 |  | Share Exchange Agreement, incorporated by reference to the Company’s Registration Statement on Form SB-2 (Registration No. 333-6680) filed March 25, 1997.
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.
^ |  | Schedules, exhibits, and similar supporting attachments or agreements are omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish a supplemental copy of any omitted schedule or similar attachment to the Securities and Exchange Commission upon request.
† |  | Refers to management contracts or compensatory plans or arrangements.
+ |  | Portions of the exhibit, marked by brackets, have been omitted because the omitted information (i) is not material and (ii) would likely cause competitive harm if publicly disclosed.

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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 4, 2025.

|  | SIMULATIONS PLUS, INC.
Date: | April 4, 2025 | By: | /s/ Will Frederick
|  |  | Will Fredrick Chief Financial Officer (Principal financial officer) and Chief Operating Officer