Walt Woltosz - Chairman, CEO Ted Grasela - President John Kneisel - CFO John DiBella - VP Marketing and Sales.

Welcome to the webinar. You have entered as an attendee in listen-only mode. Presenting this afternoon will be Chairman and CEO, Walt Woltosz; President, Ted Grasela; Chief Financial Officer, John Kneisel and Vice President of Marketing and Sales, John DiBella. An opportunity to ask questions will follow today's presentation.

[Operator Instructions] This call is being recorded for playback and our Web site www.simulaitons-plus.com. Now before we begin our presentation Safe Harbor statements. With the exception of historical information, the matters discussed in this presentation are forward-looking statements that involve a number of risks and uncertainties.

The actual results of the company could differ significantly from those statements.

Factors that could cause or contribute to such differences include, but are not limited to, continuing demand for the company's products, competitive factors, the company's ability to finance future growth, the company's ability to produce and market new products in a timely fashion, the company's ability to continue to attract and retain skilled personnel and the company's ability to sustain or improve current levels of productivity.

Further information on the company's risk factors is contained in the company's quarterly and annual reports as filed with the U.S. Securities and Exchange Commission. It's now my pleasure to turn the presentation over to Walt Woltosz, Chairman and CEO of Simulations Plus..

Thank you, Renee. And welcome everyone to our third quarter fiscal 2015 conference call.

For background for those of you that maybe new to the company Simulations Plus is a major provider of software and consultant services for our pharmaceutical research and development all the way from earliest drug discovery, when chemists are just drawing molecules that they might have in mind all the way through all the clinical trial phases and even beyond patent life to supporting generic companies.

And in addition to being a brilliant very recognized primary leader in model-based drug development, we’re also developing now some new applications in aerospace and general healthcare based on the machine learning technologies that we developed over about the last 16 years. We've had a very, very fine third quarter.

Our revenue is increased by 58.9% to 5.9 million that of course is comparing the combined entity of Simulations Plus and Cognigen this year to last year in the third quarter only Simulations Plus. Both growth in Simulations Plus and the addition of the Cognigen revenue sales helped to boost that up to almost 60% growth.

Our total revenues through the end of the third quarter were 48.6 million and that’s up to 54% over last year.

Our diluted earnings per share increased 36.5% to $0.11 a share compared to the same period last year and the Board just recently met this past week and voted to continue distributing the $0.05 per quarter dividend that we've been paying since about 2012.

Our software renewal rates continue to be very, very high, 99% based on fees, based on actual number of licenses that would be slightly lower but typically when we lose a license its an academic license or something that is not being full retail price, so in terms of fees and renewal rates it’s very high.

We added 21 new software client sites during this past quarter, very pleased with that. Some major product releases GastroPlus 9.0, we've been working on that for quite some time adding some very important new capabilities, the ability to deal with biologics or antibodies, very growing area in pharmaceutical research and development.

Dermal dosing so you may able to simulate those improve the skin. We had developed this in collaboration with one of the top five pharmaceutical companies and they had actually been using it for probably close to two years now with great success and it's now available to all of our customers. And we enhanced our oral cavity dosing.

So the ability to have fast dissolving tablets on top of the tongue or underneath the tongue or having a patch that is adhered to the inside of the cheek it’s called Buccal dosing.

And we have those capabilities earlier in most of those and again we've in the top five pharmaceutical companies providing the [sampling] and the data and their scientists too work with us as they did with adrenal dosing, we've added that capability and we've enhanced our integration with our ADMET Predictor software that allows us to predict [indiscernible] get those from structure drawings.

We did release ADMET Predictor 7.2, we've added some new properties we've retrained the metabolism models with larger and more refined data bases and again [agreeing to our][ph] GastroPlus integration.

The Cognigen product known as KIWI has an upgrade to version 1.3 that was released this past quarter and it’s faster and has some enhanced exploring comparison with the models that can be built through the KIWI interface into the Cognigen secure and validated cloud, and for both Cognigen division and Simulations Plus our consulting services continue grow.

The other growth opportunities I mentioned, the aerospace and general healthcare are shown on this slide, AEROModeller is a prototype program that uses our artificial neural network on some, well machine running technology.

And we presented papers now at several aerospace meeting showing our ability to predict aerodynamic force coefficients for missiles and also to classify missiles from radar tracking data.

We've done three conferences so far this year and we also have seen some new interest as a result of some contacts that we made between NASA and the Air Force in applying this tool to look at, actually a number of problems, but one in particular is combustion instability and liquid rocket motor.

This is a very serious problem they had it on the space shuttle, with the space shuttle main engines back in the 70s before the space shuttle started climbing the 80s and that they were able to solve it. But it's a complex problem, it doesn’t lend itself to do physics based solutions, software program.

So they're more of empirical methods that we use and the artificial neural networks are potentially a way to deal with that.

The MRIModeler, this is recognizing from a magnetic resonance imaging data, disease states or healthy, so that a technician runs an MRI on a patient, they can quickly run the data through, when they finish the scan they'll see whether someone is likely to classified as healthy or having a disease state.

We did have a proposal into the NIH to try to get some funding out of this area that was not funded this time around. We have not gotten the review comments back yet, but the indication to me was that this was not an area that they expected to fund under this particular request for applications.

We're going to find out more about that hopefully next month and we'll be able to report that next time around. And now I'm going to gain control over here to John Kneisel, CFO to review the financials. You should now have control..

Great, thanks Walt. Good afternoon to everyone. Financially it was a very good quarter for both Simulations Plus and its subsidiary Cognigen. I'm going to go over the results for the third quarter and then the nine month periods and then go over some of the graphs. Walt, the slide isn't changing. Can you see if we can move it down? Thank you, Walt.

The revenues increased in this third quarter by 58.9 or $2.2 million to about $5.9 million from the prior year. Cognigen revenues were 64% or $1.4 million of this increase and they were up over 10% by $130,000 from the second quarter of the fiscal year.

Simulations Plus revenues increased 21.4% or $801,000 in the third quarter '15 compared to the same quarter in 2014. Software sales increased by 21.8% aided by an order that carried into this last fiscal quarter from the second quarter before. Our analytical study revenues have increased 49% for the quarter or $52,000.

Gross margin are good, they increased 37.3% or $1.3 million to $4.8 million this quarter in compared to last year. 69% of that increase or $903,000 came from Cognigen which showed a robust 64.6% gross profit in the quarter. Simulations Plus margin for the quarter was 86.4%, it was 7.9% from a year ago at 93.3% in 2014.

However last year the company posted $165,000 royalty expense benefit associated with the renegotiation of our royalty agreement and we only amortized 25,000 of cost of the new agreement in the third quarter last year. The current year, the same amortization was $150,000. Those two items account for the majority of the change in margin that’s in plus.

Basically last year was higher than what would normally been expected. Consolidated gross margin decreased to 81.2% from that high of 93.9% last year, basically the result of the items we just discussed and the blending of the lowered margins are in consulting revenues with Cognigen's gross margins.

Our SG&A increased 34.9% to $421,000 to $1.6 million from $1.2 million prior year. $494,000 of the increase is from Cognigen operating expenses. The Simulations Plus SG&A decreased in the quarter 73,000.

74,000 was increased salaries and then 143,000 was a decrease and consulting cost from the prior year, then 2014 we spent a lot of legal and time on royalty agreements as well as the due-diligence on the Cognigen acquisition. Our total SG&A decreased to 27.3% as a percentage of revenues compared to 32.2% in the prior year.

R&D expense also increased this year by $114,000 or 48% to $348,000. Our other income and expense actually decreased by 42,000 over last year the result of foreign currency fluctuations, mainly in the end.

Our net income increased 41.7% or 545,000 to 1.85 million in the third quarter from 1.3 in 2014, 47% of the increase or 256,000 was earnings from Cognigen. Our EBITDA increased 42.8% to 3.36 in the third quarter versus 2.33 million in third quarter last year.

As Walt said earlier diluted earnings per share was 10.8% or $0.11 a share and we saw 35% increase in the quarter approximately $0.03 a share. Cash dividends of $0.05 were distributed during this fiscal quarter. The nine month highlights for the financial highlights, our revenues were up 54.3% or 5.1 million to 14.6 million from 2014.

Cognigen revenues were 3.8 million representing approximately three quarters of this increase. Simulations Plus revenues were up 14.3% or 1.3 million to 10.8 million year-to-date as of May 31st versus the nine months of 2014. Our analytical study revenues increased 65% or 208,000 to 552,000 in that period, in nine month period.

Our gross margins are up 37% or 3.1 million to 11.4 million from 8.3 to prior year. 73% of the 2.2 million of this increase came from Cognigen which showed year-to-date 58.9% gross profit.

Our Simulations Plus margin for the period was 84.5%, down 3.2% from 87.7% prior year and this decrease comes from higher software amortization costs and the effect of the royalty benefited 2014 and higher amortization of the intangibles that was posted in 2015.

We reviewed the last year that we’ve been under this royalty agreement in essence we’ve saved about a $170,000 from the renegotiation of that agreement.

Consolidated gross margin decreased to 75.4% from the 87.7% and it’s the result again of blending of the margins with consulting revenues that Cognigen with the higher margins of the software business and the effects of the royalty agreement on gross margin. Our SG&A increased 57% to 1.9 million, 81% of that is just the operating cost of Cognigen.

Simulations Plus SG&A increased 366,000 for the nine months but that includes the first quarter our bookings of about $400,000 in consulting fees associated with the Cognigen acquisition increasing about $319,000 for our consulting fees in the period for the year-to-year compared to last year.

Our commission expenses to our Japanese and Chinese dealers were up by 62,000 the result of increased sales in those markets and we also saw an increase in the payroll expenses due to increased benefit cost annual salary increases and little bit associated with additional administrative time associated with the Cognigen integration activities.

As a percentage of revenues, SG&A was slightly up 0.6%. But those one-time costs that we posted, the consulting fees represented about 2.7% of sales for the nine months, so without those SG&A would have been approximately 33.6% of sales.

Our R&D spend year-over-year is approximately 1.8 million it’s been fairly constant however the expense portion of our R&D increased 230,000 in this period compared to last year.

Other income and expense decreased by 114,000 for the nine months versus last year as altered result of foreign currency fluctuations and this last quarter we actually made a 5% increase in our prices in our mainly Asian market we don’t anticipate this increase to have much of an effect on sales.

Net income for the nine months increased 19.6% or 549,000. 421,000 of the increase is from Cognigen and during the period some first [ph] again paid out $400,000 in onetime expenses, bottom line effect of those we believe is about $274,000.

Diluted earnings per share were 19.6% or $0.20 a share for the nine months, an increase of 14.6%, approximately $0.03 over the same period in 2014. We'll go through a few graphs here. The left side of the graph is the quarterly numbers and we've added the year-to-date over on the right side.

You can see the consistent quarter over quarter growth and the expansion of revenues, coupled with high gross margins in the mid-80s in Sim Plus and 50s in the Cognigen, the potential from bottom line growth is outstanding. As would be expected as gross margins climb our revenues climb, our gross margins climb.

Worth noting that many of our cost-to-goods are fairly fixed so the potential for the bottom line growth is high with the gross in revenues pulled [ph] at us and Plus and at Cognigen. Except for the first quarter of 2015 where we incurred a majority of Cognigen acquisition cost we continue to see good income growth quarter-to-quarter this year.

Diluted earnings per share, again the effect of the onetime cost can be seen in the first quarter, but we can see that we've made up year to date for those costs and Cognigen earnings per share -- contributions from Cognigen earnings per share is at bests $0.20 for the end of the three quarters this year.

Our consolidated EBITDA, we've seen a substantial increase in EBITDA for the current fiscal year as we're amortizing the cost of the renegotiated royalty agreement to the amortization expense of intangibles and the amortization expenses of intangibles at the Cognigen subsidiary.

As of May 31st, we're sitting with $6.4 million worth of cash in the bank, we're currently about $7.7 million. We’re at a good strong cash position which has allowed us to make the -- renegotiate agreements and make acquisitions without really affecting the financial strength of the company.

We've got it to a healthy 6.9 times current ratio and our stockholder's equity is about 70% of the balance sheet, well-funded company.

This next slide gives us sort of a financial picture where the company's used its cash to give back to shareholders for their investment and where we strategically used the funds, we've got back early on, we made a large payout in dividends back in the end of 2012, taking advantages of some tax benefits and then we spent money on TSRL agreement, the renegotiation of that agreement and for the Cognigen deals.

Each time we start to crawl back up and refund the company with cash out of operations. I will now turn the discussion back over to John DiBella our Vice President of Sales and Marketing. John D, you should have control..

Thank you John K, thank you Walt and hello everyone. Good afternoon. I will be giving a relatively short update on some of the highlights of the sales and marketing efforts for this third quarter. As Walt alluded to earlier in the presentation it was quite the busy quarter for product releases.

GastroPlus the flagship product had a major release come out in May. We're really excited to get this one out into customer and prospect hands.

This release included several new optional add-on modules that serve as additional revenue opportunities for us and also allow us to penetrate new market that we couldn’t reach last year or with previous versions of GastroPlus.

Some of those new features, again Walt mentioned them briefly at the beginning include PBPK models for biologics for large molecules. This is going to help us penetrate a little bit further into the biopharmaceutical market.

Also new models for dermal drug delivery and intraoral or oral cavity drug delivery which should help us reach out a little bit better to some drug development groups. One of the other highlights is also kind of tied in with the release that came out in May also for ADMET Predictor.

This was a relatively minor but really important release for the program. What we were able to do here is upgrade some of the models that work very closely with GastroPlus and what we did in the GastroPlus program is integrate those models and incorporate them as part of an additional add-on module.

We see this driving revenue for both products as we continue to promote this really strong marriage that we can offer between quantitative structure activity relationship modeling, QSAR modeling and the PDPK technology in GastroPlus.

A major release of ADMET Predictor is expected in the fall and the focus here is going to be on making some significant improvements to our user interface. We think that this is going to be a big hit with both existing clients and also new prospects.

MedChem Studio and MedChem Designer, they still serve as important products in our overall software suite. And as part of that ADMET Predictor release that's coming this fall we were able to cherry pick a significant portion of the code developed inside of that MedChem Studio program and apply it to this update.

It's been about 15 months since our last release for the MedChem Studio, MedChem Designer programs, these -- the sales, the revenue for these products, specifically MedChem Studio continues to hold relatively well compared with last year. And then we continue to make in-roads with both the DDDPlus and MembranePlus programs.

These programs focus on some different in vitro experiments. DDDPlus focusing on the simulation of in vitro dissolution and MembranePlus focusing on the simulation of in vitro permeability. And both of these programs have a high degree of synergy with the GastroPlus tool.

And so the idea and the message that we are trying to promote with these products is how these tools can be used in combination with GastroPlus. We are working hard on a new release of DDDPlus and there's going to be some new features there that will be treated as optional add-ons.

And then with MembranePlus, we've seen a few sales of the product over this first release. We’ve also received some valuable feedback from prospects who have tested the software and asked us to make a few tweaks before they bring in the licenses to assist with their research.

So we are making some good I think headway with both of these tools especially as they relate to GastroPlus. Now across the board again it's been alluded both by Walt and by John K, be it new license sales, renewals, consulting work, the sales performance overall was really strong.

Some of the highlights here, we only lost a couple of very small non-profit licenses in Q3. You can see the 99% renewal rates in terms of fees. So that's really indicating that there were just a couple of highly discounted licenses that did not renew. New license revenue was very strong with 21 companies licensing in Q3.

Among these, we saw major regulatory agencies, including the Chinese SFDA, U.S. FDA, U.S. EPA, ad licenses in new divisions which is really important. And then also we saw a number of commercial industrial companies in Taiwan, Korea and our first one in Brazil also licensed.

Of these 21 new software clients, 13 of these are commercial or industrial companies that were brand new customers to the software. It's also been alluded a few times and I think Ted is going to talk about this more at the end as a result of some of the increased efforts, cross promoting, consulting services across companies.

We saw a significant rise in the PVPK consulting revenue. This PVPK consulting is defined as consulting more which would involve our GastroPlus software primarily.

And we have been able to get a few scientists at Cognigen trained on this technology and approach and they've been able to handle some of this consulting work, also our consulting team being able to handle some additional studies as well.

In the upper right bar chart we see that there was a significant rise in the number of license units in Q3 and just as a reminder a license unit according to our definition represents a license to the base package for one of our programs. So if a client adds modules to a base license, it is not considered a new unit.

A vast majority of these units are installed on a network server and treated as floating seats and we estimate that there are approximately three to four scientists using the program per floating seat. So the user base is anywhere from around 1,500 to 2,000 scientists around the world.

And then in the lower bar chart in the lower right corner, 74% of the consolidated revenue for this third quarter came from software and training with the remaining 26% coming from the overall consulting business. Here we see the number of new customers compared with years passed.

So far in 2015 we've seen a greater than 10% increase in the number of new customers when compared with fiscal year 2014.

And just as a reminder the definition of a new customer here is going to be a completely new company that is never been exposed or licensed our software in the past or it could be an existing customer which is now adding licenses to new territories or for completely new departments within the company.

Here we see the breakdown in software sales in Q3 across territories. While North America still represents the majority of software license revenue, we’re seeing a higher percentage coming from Asian companies and Asian territories while Europe continues to be a strong market for us.

In the Asian market we continue to see growth coming from the non-Japanese countries and we’re committed to still investing in Korea, India and China especially.

And then finally in terms of marketing activities for this third quarter, first of we’re really happy to announce that there were some additions to the marketing and sales team that should have a very meaningful impact on our abilities to promote our software and our services to existing but more importantly new markets.

We now have a person who is devoted to coordinating marketing activities across companies and campaigns throughout the year. And as was mentioned in the previous press release we were able to transition one of our scientist to the position of Business Development Manager with the focus on chemistry products and services.

As usual we had a very busy month on the road, traveling to an average of five conferences per month and presenting on various projects and this travel schedule will continue for the remainder of the year.

We also conducted a number of training workshops to full capacity in Europe, Asia and North America in Q3 and we have several others which are scheduled coming up here in the fall.

And I think it's been mentioned a number of time by both Walt and Ted that education of scientists on our tools and technology remains a major focus for us and this is going to continue in 2016.

And then finally our digital marketing efforts continue where we see increased engagements and followers for our company pages and posts on various channels also that last bullet there is a really important but underrated marketing tool and that is the mention of our products in peer review publications.

In Q3 alone there were 15 such articles which were published and most importantly all of them came from our client as the primary authors. With that I will hand it back to Ted and pass it on to Walt and Ted. .

Good afternoon everyone. This is Ted Grasela, President of the combined Simulations Plus and Cognigen. And I wanted to give you an overview of Cognigen itself and then also some information about some of the other activities within Simulations Plus.

So I think the most important message that I have to deliver is that we’re beginning to realize the strategic and synergistic benefits of the Cognigen acquisition.

It’s been mentioned already that some of our scientists have been trained in GastroPlus, and we've recently completed training of computer program NONMEM that we use for our analysis and that there has been excellent collaborations between the scientists from the two companies and it's very important as part of those collaborations they have been identifying new and innovative ways of using modeling in Simulations to solve client problems and this is allowing us to tackles projects in ways that are different than we would have done in the past, and certainly our clients are appreciating the new ways in which we’re thinking about issues that they have and helping them to advance their research and development programs.

One of the things that we've concentrated more on since the acquisition is our social media presence and use of email blasts and we have found them to be quite helpful in simulating interest focusing particularly on modeling in simulations, our data assembly services and then also KIWI functionality.

We've also had an enhanced presence at national, international scientific meetings and I'll talk a little bit about that in the context of KIWI on the next slide. So to just give you first an update on Cognigen sales.

In the third quarter of fiscal year 2015 at the end of the quarter we have about 48 active projects in this quarter we've acquired two new clients, people that we've not worked with them in the past. We picked up 14 projects that were new to Cognigen or expansions in scope of work that we were already performing.

So that’s an important opportunity for us too, as we work with clients to recognize that what were originally doing might be expanded to deal with more complicated issues and we have the ability to implement a change and work scope for those types of projects.

About 25% of the projects that we work on get submitted to regulatory agencies and we work with clients and assist them in preparing those regulatory interactions and arguing for the decisions that the client is hoping that will be made on the basis of modeling and simulations efforts.

As we look beyond the third quarter and into the fourth quarter, right now we have six new clients or new clients in the pipeline and we already know that for new projects and expansions and scope there is going to be about 12 of those in the next quarter.

We have three KIWI licenses that have been acquired by clients, we have six prospects, people who are asking for demonstrations, enhanced demonstrations of the software.

We recently attended a modeling meeting in Crete and had a very successful meeting in terms of the number of people who were asking for demonstrations and each of these demonstrations takes between 30 and 60 minutes and so we were able to maintain interest in the program over that period of time.

Right now we're working on the next version of KIWI, which is targeted for October the 15th to coincide with another meeting of these modelers, gives us another chance to give more demonstrations.

I just wanted to say a couple of words about KIWI to try to convey why this is an important tool to Cognigen itself but also why we think that there should be interest in this program.

In performing modeling and simulation analysis in research and development, it can get quite messy because you have -- we have data and information that’s coming from a lot of different groups that all have to be incorporated into the modeling project and so careful synthesis and communication of results is absolutely essential.

Just about everyone has heard about cloud computing and the enormous computing power that the industry now has access to, but with KIWI we're making a statement that we're lacking the tools for harnessing that power.

So this shows a schematic of KIWI and what we're conveying here is that users from anywhere in the world using a web browser come in through the firewall and access a variety of different modules within the KIWI program, the scientist use these modules to prepare modeling and simulation analysis, to manage the results and to communicate important findings.

These modules in submitting a job -- the projects are then sent to the grid which is essentially NONMEMs validated cloud processing capabilities and then those results come back and are stored and then subsequently managed and analyzed using the various KIWI modules.

This KIWI program has become very important to Cognigen itself and it's one of the reasons why we're able to achieve some of the gross margins that we are able to achieve because of the efficiency and effectiveness of the communication capabilities that we have built.

Also wanted to mention an update on one of the collaborations that Simulations Plus has with the FDA office of generic drugs. Those of you who were on previous calls know that the company was awarded a $200,000 co-operative agreement to develop improved modeling and simulation capabilities for dosage forms that are designed to be applied to the eye.

While we have completed the first three quarters of this three year funded collaboration and we are on target to meet all of the milestones that we need to meet in order to continue with that funding.

Importantly during this period of time we've established a consortium of leading pharmaceutical companies to ensure the scientific integrity of the improved model and to maximize the impact on the industry.

The reason why this is important came out in a recent report that the global ophthalmic drug market was valued at $16 billion in 2012 and it's expected to reach an estimated value of $21 billion in 2018. This is driven by the significant growth in diseases of the eye. We're seeing things like diabetic retinopathy and macular degeneration.

And it is expected that as pharmaceutical companies develop drugs or as generic companies trying generic replacements for existing drugs that the enhanced capabilities of our program will be an important part of both the development strategy for those drugs and then also for the regulatory review of the subsequent submissions that go into regulatory agencies.

So in summary the Simulations Plus and its wholly owned subsidiary Cognigen continue to grow. We're in a seven year plus profitable trend and we have discovered the strategic value of the acquisition and we’re seeing that manifested in additional consulting projects and ideas for future software.

Our customer base is increasing, as you’ve heard from John DiBella we have 21 new software customers, 64 new customers in the year-to-date with the 90 plus percent renewal rate which translates of course into future continuing revenue.

Our earnings per share increased 36.5% for the quarter and as John Kneisel pointed out we have a very strong cash position and are return in cash to the shareholders.

The company continues to take dividends of $0.05 per quarter and cash dividends totaling approximately $11 million have been distributed since 2012 and yet our cash remains at 7.7 million as of today. Thank you very much and we would be happy to entertain any questions..

Hi Ted, we have a few questions in from Howard [Halpern][ph].

The first question, as the larger company what do you see as your opportunities for growth?.

Thank you, Howard. Well, certainly just in terms of -- there is lot of different answers to that question, so just in terms of having two groups of scientists one, who has focused on pre-clinical model development and a little bit into clinical development and the scientist from Cognigen who have focused primarily on clinical development.

We are seeing the world through two different sets of eyes now and that has allowed us to see the potential to answer these problems that we really didn’t know how to tackle in the past with these different tools and it’s allowed us to really think differently when clients contact us and propose a problem to us.

We have a bigger and expanded tool kit and of course that leads to in the very least new consulting revenue but then also the opportunity to have introduced them to our software products and lead to the company to buy the software so that they can solve these problems for themselves in the future.

For many new clients who approach us now about projects we have had a Simulations Plus scientist and a Cognigen scientist sit on the presentation of the idea and this has really further enhanced our ability just to see things in different ways and to propose different ideas to the client..

Okay.

Howard has another question, considering that regulatory agencies worldwide are increasing their adoption of Simulation software products has there been any changes in your sales cycle for ADMET Predictor and GastroPlus?.

John DiBella would you like to answer that?.

I’d be happy to.

I think overall the sales cycles itself, it still remained relatively the same as what we have historically seen I believe that the shift maybe in that the budget approval tends to be a little bit easier, however there is still an issue with respect to management wanting scientist to go through the evaluation process to make sure that they feel comfortable utilizing the tools to identify if there are any gaps in the types of data that the company is currently generating and to see what might be lacking in terms of training or understanding of the tools themselves.

So that evaluation process that needs assessment process is still relatively the same, but there is definitely an acceptance of what this technology can do and so from a budgetary standpoint those approvals tend to be a little bit faster than what we’ve seen previously..

Thank you, John. Howard’s next question is for an update regarding Cognigen penetrating the clinical pharmacology departments using ADMET Predictor and GastroPlus..

Yes, this is going to continue to be an important focus for us and we’ve begun to line up the clinical pharmacology meetings that we’re going to be attending during this upcoming fiscal year and developing strategies for highlighting the value of ADMET Predictor for example and helping to predict drug-drug interactions and other sorts of concerns that are important to clinical pharmacologist, but also as we’ve talked about in the past this marriage of ADMET Predictor and GastroPlus we think is going to be an important and unique marketing point for the company.

So we continue to get interested, we continue to propose the use of this software for different issues that arise in the clinical pharmacology group..

Thank you, Ted.

Howard’s next question is whether there are any acquisition or assets purchases to enhance our growth opportunities?.

Walt, would you like to take that one?.

Sure, we're always shopping. We've got money in the bank. We're always looking, there's nothing on the near horizon at the moment but we’re certainly keeping our eye out for something that is of the right size, the right technology, the right personal chemistry with the principles. Nothing I can talk about publicly at this point though, sorry..

Thank you Walt, Kevin Tracey has a question, a comment actually. First congratulations on the great performance, in the past you've talked about the pricing of GastroPlus being substantially below competitive products, despite your belief you have a superior product.

You also mention on the first quarter call that you're experimenting with pricing for new customers.

Can you give us an update on how you're thinking about pricing?.

John DiBella would you like to tackle that one?.

Absolutely. We continue to track the competitors and get as much intelligence as we can on how much they're charging for software. We did identify that a price change was warranted and did introduce a very small one, really starting at the beginning of this calendar year.

And our plan is to assess the software license fees, really on an every other year basis.

We've come to learn that purchasing agents do appreciate some stability in license fees at least across a two year period, so we've respected some of their wishes and will continue to investigate pricing and analyze where we're going to go on an every other year basis..

Okay, thank you John, Kevin Tracey's next question is concerning how the software renewals are priced.

He asks if they're priced at consistent or discounted or are there price increases on the renewals?.

Did you want to take that again, John?.

Absolutely. So one thing with the software licensing model that we've had since day one is that there is no perpetual license or main license package which is purchased and then companies have a decision to purchase maintenance or upgrades on an as needed basis.

Our software is really a subscription based model that’s licensed usually on an annual basis. When customers come back and renew the software before their current licenses expire we do offer typically a 10% to 15% discount on the post year fees and those then tend to be fixed during the duration of their license term..

Thank you John, Kevin Tracey's next question is on whether we can elaborate on what our new head of business development is working on..

John?.

Three for three. I'd be happy to.

So Michael Wallace again was mentioned in the press release has transitioned over from his former role as team leader of ChemInformatic Studies where he provided quite a bit of assistance to marketing actually back then in his old role while also leading the team that was responsible for building a lot of the models in the ADMET Predictor software, travelling to conferences and presenting work and so on.

Since he's been in the marketing and sales group officially for the last six weeks or so his primary task besides getting up to speed on the sales process, negotiations, contracts and so on has really been on the messaging aspect.

So he is critically analyzing what it is that we promote on the website and the brochures, at the exhibit booths with respect to our individual products but more importantly he's been tasked to try and identify where we should be highlighting the synergies especially in that ChemInformatics package really highlighting the bundling aspects.

So that's his primary responsibility at this time..

Thank you John, Donald Borcea has a couple of questions. His first question is are the results from the malaria and Cox 2 experiment still being used as promotional tools and are there any other plans for these results..

Walt, would you mind taking that question?.

I was just about to, thank you. Yes, we still talk about it, we don't have any plans to further develop the molecules that we had there.

Again we're not a pharmaceutical company, the purpose of these two experiments was to illustrate what could be done very quickly and very cost effectively using basically our ADMET design suite which is ADMET Predictor, MedChem Studio, MedChem Designer and also supported by GastroPlus.

So we talk about it, I talk about it almost everywhere I go and I'm sure the other folks do as well.

But right now we’re saying, we’ve spent the money on making investment, we proved that the software works and now having our new business development person fulltime in marketing and sales we hope to continue to push that and make sure people understand what can be done with these products..

Thank you, Walt.

Donald's next question is what level of security exists regarding potential of pirating the software programs?.

Walt do you want to take that one as well, please?.

We switched our licensing software about two years ago. I guess we began with some of the programs and now we've got all of the programs migrated over to an industry standard program that's a little more expensive than what we’re using in the past but quite secure, very flexible, it's known as Flexera.

So it's a very flexible system in terms of allowing us to license different numbers of different modules to a customer. So this is helping on the sales side, is where our customer might say I want GastroPlus but I only need two of the metabolism modules and one of the IVIVC module but I want three of the optimization module and things like that.

In the past we just had to say sorry, you have to take the same number of optional modules for all of them which was restriction on sales because people did not pay as much, so they figured they’d just take fewer licenses and get along.

But that is -- I would say level of security, I can't put a new numerical number on that for certain level of confidence but this is an industry standard security system and licensing system that's used throughout. On our ADMET Predictor software, all of the models that we build internally are encrypted model, so they are in encrypted files.

Certainly the NSA can break through any of this stuff, but I don’t think any of the pharmaceutical customers or competitors have the capability to get through it..

Thank you Walt. And what appears to be our last question is from Tom [Steren][ph]. He asks, do any universities currently use your tools in training its students.

And if not, do you see any opportunity in such an approach?.

Let me take that one. Tom [Steren] is someone that I have known since I was in high school back in Rochester, New York assuming this is the same Tom [Steren] and I believe it probably is. John DiBella can give us an actual count, but yes we have quite a few universities we provide software to.

I know it's over a 100 or so and John D can give us a better count on that, universities around the world. The training was supplemented by us actually paying visits to some of these universities I have done a couple of this year myself, one in the University of Florida and one at a university in Tennessee.

And so we support the universities, some of the universities are reference sites, so they actually use the software in graduate research and publish their results in the peer review journal which is a very helpful.

John D, you want to comment on that a little more?.

No I think you've kind of hit it where the number of universities that do utilize it for teaching had or researches probably over or around a 100 and one thing that we certainly do is offer free teaching licenses.

So if a professor is interested in utilizing the tools as part of a class, we definitely work with them to try and get licenses in place and in some cases work with them a little bit on the syllabus, provide them some examples that they can utilize to get some of the lessons across to the students..

Thank you John.

And we have another question from this may be a pseudonym, I am not sure, Adam [Stockmeister][ph] and his question is with regards to the legacy Simulations Plus revenue growth, is this due to an increase in market penetration or a growth in the cost of the average license or both?.

John DiBella would you like to answer that one?.

Sure. Thanks for the question Mr. [Stockmeister]. The increase in license fees this year is really small to be perfectly frank. Not all module saw price increase and those did saw a low single digit percentage increase.

So the increase in software license revenue is primarily driven by market penetration and market penetration some of it due to the changes in the license fees. And then a third aspect is some of the new features that we've added. We have seen a few sales of that biologics module of the dermal delivery module and also MembranePlus.

So it's going to be really a combination of those three items. But the changes in the license fees themselves I think it's going to be the smallest component. .

Well thank you John. That appears, there's got one, oh, Adam [Stockmeister] has sent his thanks as well. It appears to be the last question. Any comment..

Okay. Thank you everyone for attending and we look forward to talking with you again at the end of the next quarter..

Thank you Ted. This concludes today's conference call and webinar. If you missed any part of today's presentation, a replay will be available at our website www.simulations-plus.com. Again thank you for joining us and may you have a wonderful afternoon and summer..