Renee Bouche - Investor Relations Walt Woltosz – Chairman and Chief Executive Officer John Kneisel - Chief Financial Officer John DiBella - VP, Sales & Marketing Ted Grasela - President.

Analysts:.

Good afternoon. It is Wednesday, November 18, 2015, and on behalf of Simulations Plus, I welcome you to our Fourth Quarter and Fiscal Year 2015 Financial Results Conference Call and Webinar.

Presenting this afternoon will be Chairman and CEO, Walt Woltosz, Chief Financial Officer, John Kneisel, Vice President of Marketing and Sales John DiBella and Company President, Ted Grasela. An opportunity to ask questions will follow today's presentation.

[Operator Instructions] This call is being recorded for playback at our website www.simulaitons-plus.com. Before we begin, I will read the 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 this 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 and filed with the U.S. Securities and Exchange Commission. It is now my pleasure to turn the presentation over to Walt Woltosz, Chairman and CEO of Simulations Plus..

[Indiscernible] over to the other folks here and then give you a wrap up at the end.

Overview, for those of you who might - we are a major provider of software and consulting services for pharmaceutical R&D, all the way from earliest drug discovery, when a chemists first draw us a molecule [indiscernible] and animal testing and to first in human trial then Phase II and III clinical trials and then beyond patent life to supporting generic company, so we pretty well cover everything from the earliest to the latest stages of drug development and delivery to the public.

We are also now developing some new applications in both aerospace and in general healthcare using the machine learning technologies that we’ve developed to do our property prediction for pharmaceutical and other chemicals. Our financial performance has been outstanding, in fiscal year '15 revenues up $6.85 million. That is 59.8% to 18.3 million.

Of course a large part of that was due to the 5.22 million increase from our Buffalo division, acquisition of Cognigen Corporation last year. Now Simulations Plus Buffalo, and $1.63 million was from growth in the California division.

Fourth quarter '15 revenues up by $1.7 million or 85.8% to $33.71 million, again, significant boost there from the Buffalo division, where the fourth quarter revenue in California is typically the weakest quarter in the summer time, it is not quite so true for the Buffalo division, so it really helped our Q4.

Diluted earnings per share for fiscal '15 increased 22.4% to rounded off $0.23 per share compared to $0.18 in fiscal '14. For the highlights of the fourth quarter software renewal rates 99% based on fees, little less than that based on numbers of units, but a lot of those were units that were very cheap academic units.

21 new software clients added, product releases during the fourth quarter huge release in GastroPlus 9.0, adding our first capability to deal with antibodies in biologics module and our capability to deal with dosing through the skin in the dermal module and that module was, development of that module was funded by GSK and they had actually been using it now for about two years in beta test, so it is a well-developed and validated model.

We also enhanced our oral cavity dosing under funding from Merck and that has now been released and also enhanced our connection to our ADMET Predictor, property prediction software, so that now a chemist can load a set of molecular structures with just the structure drawing and have the ADMET Predictor module generate all of the properties needed to run a GastroPlus Simulation, including enzymatic properties and so we can actually predict blood concentration versus time for specific dose for a specific new molecule within reasonable ballpark.

Of course it is not going to be perfect, but it's very, very useful for chemists to be able to put in a structure and get out an estimate of the actual percent absorbed and bioavailability in human. We also released ADMET Predictor 7.2 another major upgrade.

We added some new property predictions, we retrained the metabolism models that we have and again tightened up the integration with GastroPlus as I mentioned above, under GastroPlus. The KIWI software in Buffalo has been improved version 1.3 released. It is now faster and the exporting and comparison of models has been enhanced.

Finally, our consulting services continued to grow both, in California and in Buffalo. We have a funded collaboration with the FDA, that is $200,000 per year for up to three years and our first full year on this one was completed in September and the contract was renewed for the second year.

We met all the milestones that were due during fiscal '15 and we formed a very nice consortium of leading pharmaceutical companies that share data and scientist, knowledge and expertise to make sure that the model is doing what it should and make sure that when this model is finally released it will have the maximum impact on the industry.

This is a contract for dosing to the eye and in the next bullet point you see the global ophthalmic drugs market was valued at about $16 billion in 2012 and expected to reach $21.6 billion in 2018, so that is a pretty large market that we are adjusting here.

There is significant growth due to an increasing prevalence of eye disorder such as again you see here a diabetic retinopathy and macular degeneration.

Also, we were awarded a second FDA cooperative agreement for different technology, this is looking at long-acting injectable microsphere dosage form, so these are small polymer-based microspheres that contain the drug and they are injected either subcutaneously or intramuscularly and they release drug over a long period of time, sometimes weeks or months, so the FDA has sought a way to improve the model and simulation capability in this area and this one as well as the ophthalmic will both be enhancing the capabilities of our flagship GastroPlus software.

I mentioned we are also looking at other industries, so we have looked at aerospace and continue to do so, we’ve applied the neural network ensemble to several different areas as you see here, presented at three aerospace conferences in 2015 and also in a separate area looking at the ability to analyze images from MRI data to classify patients as either healthy or likely to experience various disease states and we are demonstrating a capability so far that exceeds the accuracy of anything we have seen published by a substantial amount, so we are pretty excited about the potential of this neural network ensemble engine to be applied in other areas, it is an engine that does not really care whether you are working in healthcare or aerospace or some other field, so we are trying to maximize the value that we get back out of the 16-year and the multi-million dollar investment that we have had in developing this engine.

To summarize, we continue to grow seven-year plus profitable trend. I think if you go back 10 or 11 years, it’s probably only one quarter that was not and I think that was a result of our former Words+ subsidiary. The acquisition of Cognigen has been very successful. You will hear more about that from the other folks today.

The integration of Buffalo and California has come along very nicely and we have got some nice synergies that we are realizing.

Our customer base increasing, 22 new software customers in the fourth quarter and a total of 86 in fiscal year '15, with a 90-plus percent renewal rate from our existing customers and we do expect to continue the financial compounded growth that we have based on our annual licensing model.

Our fourth quarter earnings per share increased 114% to $0.015 per share in the fourth quarter. Again, our cash position is strong. We are returning cash to shareholders with our dividend. We are continuing to pay the dividend of $0.05 per share per quarter.

Altogether since 2012, so three years, four years we have distributed approximately $13.7 million in cash dividends back to our shareholders and yet we still have cash at $7.3 million as of yesterday. So I am going to pass control here to our Chief Financial Officer, John Kneisel, let him give his financial overview..

Okay. Great. Thank you, Walt. I appreciate it. We are going to take fourth-quarter first here. Again, as Walt said the revenues are up quite a bit. They are up $1.7 million. Again, $1.4 million of that was from the Cognigen Buffalo acquisition for the year, but the results in California were still good.

Software sales were still up 10.5% for the quarter and our analytical revenues, study revenues were up 94,000 for the quarter, so that is still showing growth. Our gross margin is up 71% and now $2.64 million for the quarter.

Again, much of the growth is coming from Buffalo, but California is still maintaining a very high margin and our consolidated margins have decreased a little bit, but that is basically the result of blending the margins from the consulting revenues in Buffalo compared to the California software sales market.

Our SG&A for the year was up 42%, $449,000. The $470,000 of that increase is from Buffalo, so effectively the Simulations Plus SG&A has had sort of very small decrease in the last quarter of the year. SG&A as a percentage of revenues for the fourth quarter decreased to 41% compared to last year when it was 53%.

Our R&D expenses went up $145,000 for the year and was a little bit higher in the fourth quarter and that is really the combination of just what is expensable and what we capitalize when we are developing our software.

As Walt indicated, our earnings per share were up actually 114% and they were up to $0.03 a share from a $0.01 a share or about a $0.015 a share the prior year. Again, we distributed during this quarter cash dividends of $0.05 a share. Let's go to next slide, Walt.

For the fiscal year '15 compared to '14, obviously the big change was the acquisition of Buffalo, which occurred effectively on our first day of our fiscal year last year, so there is really a whole year results for them in inside our numbers here. We were up $6.85 million.

Again, Buffalo was $5.2 million of it and that is mostly consulting revenues and again California was up $1.63 million or 14% for the year. Our gross margins were up $4 million. Good portion of that at a 60% margin and sales of Buffalo subsidiary, which provided $3.1 million of that.

In the California, we actually saw our margins down a little bit from the prior year, but that decrease came from higher software amortization costs and the effect of what was a benefit for royalties due to a contract that we had renegotiated the prior year.

Consolidated gross margins are still solid 76.4%, down from 85.8% the prior year, but again that is really effectively the results of blending a consulting model with the software sales model. For the year, SG&A increased 53% or $2.3 million and again $2 million of that was Buffalo normal operations.

Both companies run a fairly lean shop, so we do not really see huge increases unless there is some unusual event that occurs. Last year in our first quarter, we had to payout about $400,000, last year being the first quarter of '15 here.

The payout $400,000 in consulting fees associated with the acquisition, so those costs won't be in this next period, but that did increase creates some increase over the year. Our R&D spend was off over the year slightly about $175,000, but again a little higher portion of that went to expense this year than the prior year.

We saw seeing foreign currency fluctuations during the year, mainly in the yen, where we actually posted a loss or if you want to call an expense in that $238,000 in '15. Partway through the year, we did make a price increase in our Asian market that helped take that impact down. Net income again for the year was up 27% to $3.84 million.

The Buffalo subsidiary provided $684,000 of that increase. Again, diluted earnings per share effectively was up to $0.23 from $0.18 the prior year.

Go to the Slide 3, we had the growth curves, we have been showing obviously the big jump in this year is coming from the acquisition, but even without that on this one we would show really healthy growth, continued growth within Simulations Plus for revenues. Go to the gross profit slide, again, same thing scenario.

We still have high margins gross profit if we can add the income especially in the software market we add a lot of money to the bottom-line. Our net income for the year, you can see in the fourth quarter slide here for 2015, how we jumped to $0.49 per share in the fourth quarter.

Obviously, it is the lower quarter for us, but the recurring and consistent revenues in Buffalo actually helped that jump quite a bit. If you go to our earnings per share slide, thank you. For the three years prior to this year, you can see it was flat.

Some of those costs last year were caused by some of the expenses associated with the acquisition that we had expense while we were in the process of doing that, but we are on track for increasing earnings lost through this time period and just had a one more bubble in there. Last EBITDA slide, again, EBITDA was really strong.

We are now amortizing out an agreement for our royalties with TSRL and then our increased amortization expense on the software has allowed us along with the growth in earnings to keep up moving forward with our EBITDA calculations. On this slide, again, we show where have been.

We have actually put out about $13 million in dividends over the last three-and-a-half years and see the bar chart growth consistent payment of our $0.05 a share in dividends each quarter for the last eight or nine quarters here approximately even though one of them I think was panning lower on one of them and we still maintain high cash balances back at the end of the year, even after putting the $2.1 million out for the Cognigen acquisition at the beginning of the year.

We were at the basically at the same cash level at the end of our fiscal year. Next slide, cash per share strong, again cash is strong as we are just talking about we have got more current liabilities.

Most of that is associated with the TSRL buyout from last year and some additional cost will be paid out for the continuation of the payments on the acquisition from last year. Current ratio dropped effectively, because of that fact, but the cash is still feel numbers really good for us.

Again, one of the numbers we have used been the shareholders equity per diluted share and you can see that that is increasing. Back to you..

Okay.

John, do you want me to make you the presenter or do you - John D?.

Yes. Walt, I think if you just continue with the way we are going that will be fine..

Okay..

Thanks, John. Thanks, Walt. In case, we have anyone new to the Company online, I want to briefly describe our products and services and where they fit in the drug development process. In nutshell, we offer end-to-end solutions, which span from early discovery through clinical development and going into regulatory filings.

Our cheminformatics software consisting of the ADMET Predictor, MedChem Studio, MedChem Designer platforms allow research scientists design new compounds and virtually screen them across the spectrum of properties helping to prioritize testing.

The simulation software consisting of the GastroPlus, DDDPlus, MembranePlus and new PKPlus platforms help scientists model and predict complex in-vitro experiments and ultimately the in-vivo exposure in animals and humans.

The software tools are going to be complemented by a team of expert scientists who can provide consulting support on a project-by-project basis. Next slide, diving a little bit deeper into the products and sales, our software development team is working very hard on new releases of all tools scheduled for 2016.

The next version of GastroPlus, the flagship product is expected in the spring and will include a new optional add-on feature for intramuscular dosing and also enhancements to our recently released biologics module, which we expect will help deliver more sales of FD during the future.

The cheminformatics development team has been hard at work on refreshing the ADMET Predictor and MedChem Studio interfaces, which based upon some initial feedback is being very well received. We are also adding an optional add-on module to the new ADMET Predictor, which we expect will lead to increase sales of the tool.

The simulation tools for in-vitro experiments, DDDPlus for dissolution and MembranePlus for permeability absorption, will have new versions coming in 2016.

Some features of note here include new optional add-on modules to predict properties from chemical structure and tighter integration with the GastroPlus package, which we hope will increase the exposure of the products to a larger audience and lead to more licenses down the line.

Then finally, as some of you know from prior press releases, we are adding a new standalone program to our software portfolio 2016, PKPlus.

This program is targeted to scientists who perform routine PK modeling in the pre-clinical or clinical settings and we designed the program's workflow and interface in collaboration with our colleagues in Buffalo to help automate many of the tasks, which are required for submitting necessary reports for regulatory filings.

Based upon some initial feedback, there has been significant - for this potential low-cost higher volume tool and we are really excited to get it released early next year. Next slide, John has already discussed the Company's strong performance in fiscal year 2015, and here I would like to just simply describe a few highlights.

The software revenue growth for the year was 11.5% and this was due to the strong renewal rates and also new license sales.

As you can see from that bar chart on the right side of the slide, we had a 17% increase in the number of license units and this was driven by a number of commercial industry companies becoming brand-new clients and also some non-profit organizations as well.

Additionally, the PDPK, the physiologically based pharmacokinetic consulting revenue doubled in fiscal year 2015, which was driven by a combination of increased marketing and sales efforts and also our ability to handle the increased demand by having several scientists in the Buffalo office now trained on the approaches.

For the year, software license revenue as you can see from that pie chart was 67% of the total, with consulting and training making up the remaining 33%. Next slide, we saw an approximately 12% increase in the number of new software clients in 2015.

As a reminder, our definition of a new client consists of either a brand-new Company or organization, which has never license before or an existing client that has added licenses in new departments or research sites.

Next slide, Simulations Plus, we have said this for a number of years, it is more true than ever today is becoming a global Company and this is evident from the breakdown of software revenue by geographical location.

As you can see here, all major territories saw double-digit growth and we will continue to invest in all of these territories through attendance at conferences and also hosting educational workshops in the U.S., Europe and Asia in 2016.

Next slide please? Then finally in terms of marketing activities, the big news is the work that we have done to rebrand Simulations Plus as an end-to-end provider of modeling and simulation services, with offices in California and New York. As part of this rebranding, we have redesigned our Company logo and we have updated marketing materials.

Over the next few months, we are going to be spending some time working on a revamp of the website itself. We are going to continue our heavy travel schedule going into 2016.

As you can see in the fourth quarter, which is usually a pretty slow travel month as it consists of the summer period, we attended and presented at numerous conferences and also hosted a number of on-site training seminars, including two at the FDA and one at the EPA.

The 2016 workshop schedule as I just mentioned is going to be very ambitious, but we have identified education and training as a key driver for continued expansion and growth with respect to licensing of our technology.

Then finally to help with the continued promotional aspects, we do have a robust social media presence and continue to explore other digital marketing opportunities, which is complemented by our webinar series that is scheduled on an ongoing basis and also the publication of peer-reviewed journal or journal articles that come out.

Now I would like to invite Ted Grasela to give an update on the Buffalo operations..

Thanks very much, John.

Can you hear me?.

Yes. Not well, but we can hear you. .

Thanks very much, John. What I would like to do is give an update on the activities of the Buffalo office and talk about how we been expanding our reach into the pharmaceutical industry in terms of consulting services as well as product offerings.

Next slide; one of the important reasons for agreeing to the merger with Simulations Plus was that we saw that there were going to be very important strategic and synergistic benefits of being able to have strong collaborations between the Buffalo scientists in Lancaster.

In fact those benefits of this collaborations are being realized as you have seen from some of the financial results that John Kneisel reported previously.

As part of those collaborations, we have been identifying new and innovative ways of using modeling and simulation to bring valuable insights to our clients' research and development programs and that is helping them be successful in their programs as well as creating new opportunities for us to work with those clients.

Similar to what John was describing about social media efforts we have been employing flow as email blast that emphasize the fact that we are now working together with the Lancaster group in terms of providing modeling and simulation services and also ancillary services like data assembly as well as promoting our KIWI software, which I will talk about a minute.

We have also been attending the number of national and international scientific meetings that have proven very valuable as opportunity to demonstrate our software as well as to promote our consulting services. As of today, we are currently working with 20 different companies on 49 different projects.

Of those projects 15 started in the first quarter of the fiscal year 2016. In addition, we have seen expanding scope of projects with three companies where the initial efforts were value and companies decided to pursue additional questions and give us additional work.

We have picked up seven new companies that we had not worked with in the past, over the past year. The most common therapeutic areas that we are working in and that really reflect the interest and activities of the pharmaceutical industry are concerned with oncology then neurology, immunology and then a smattering of other therapeutic areas.

Importantly, about 25% of our projects result directly in some sort of regulatory interaction. Of course, over time that number can be higher as drug development programs are successful and eventually comes time for submission to regulatory agencies.

Interestingly during this past year, we have had four contracts for helping our clients to improve their processes and those initiatives are designed to enhance the impact of modeling and simulations within our client companies and that actually indicates a growing commitment to modeling and simulation at pharmaceutical companies.

They are looking to get the results from these modeling efforts as quickly as possible and the process improvement initiatives are designed to speed up the delivery of those results.

In 2015, we presented 17 posters and publications that describe the clinical pharmacology modeling and simulation analyses and methodologies that we use at different scientific meetings.

Now, I mentioned that we have had good synergy with our colleagues in Lancaster and Buffalo, and I just wanted to give you a feel for some of the kinds of projects that we are doing now that we would not have been able to do without access to the tools that we have available now.

In one case, for example, we were asked to investigate the feasibility of designing new formulations of a drug to match the drug concentrations that are needed to meet therapeutic needs for that medicine. In other words, be able to balance the efficacy and safety outcomes of that product.

We been given the opportunity to design clinical programs for inhaled therapies that will improve data input into GastroPlus and the idea here is that if we can improve the data that we are putting into the program, we can improve the predicted performance of the program.

We are also leveraging GastroPlus's ability to predict intracellular drug concentrations, and that's helping us to build new and more predictive models of drug safety and efficacy, we have found that these modeling and simulation efforts that we do are very important for improving interdisciplinary communications, so I had already mentioned that we have been asked to redesign research and development processes to help expedite that process.

Now, I thought it would be interesting and useful to sort of paint a picture about how the bigger community, the bigger scientific community and the pharmaceutical industry is adapting to modeling and simulation.

What you are seeing here is an announcement for a symposium that was held this past summer sponsored by The Brookings Institution, and the overall topic of the symposium was on improving productivity in the pharmaceutical industry. The symposium was very well attended by industry, academic scientists as well as senior leaders from the FDA.

One of the major themes of this meeting was the importance of modeling and simulation and improving research and development productivity and the need to better recognize the value of these tools and designing more informative clinical trials.

Now, in the current paradigm that we have, pharmaceutical companies are required to conduct two large clinical trials and each of those trials has to demonstrate the safety and efficacy of the potential new medicine. Then as you can imagine, the conduct of those two trials is very expensive.

During the symposium, FDA leaders recognized that properly designed drug development programs that rely in part on insights from clinical pharmacology, modeling and simulation activities, might actually allow for streamlining this development programs and allow for companies to get approval based on one clinical trial and supported evidence, so this slide shows the headline of an article that ran in an industry newsletter called the pink sheet that cover this meeting.

As you can imagine, if we can eliminate one trial we can greatly reduce the cost of drug development. At Simulations Plus, we are committed to advancing the tools and ideas that are required for this revolutionary shift in drug development practice.

One of the issues that we have in the industry is that the performance of modeling and simulation can be quite messy and we have data and inputs coming from many different groups and careful synthesis and communication of the modeling results, is essential to realizing the value of those analyses.

Now, the industry has come to gain enormous computing power by using cloud technology, but it currently lacks tools for harnessing that power.

In order to address that, and as modeling and simulation becomes more important to research and development, we recognize that harnessing the power of cloud computing and helping companies to organize their modeling and simulation activities as well as helping them to coordinate communications between their scientists and eventually regulatory agencies are going to be increasingly important.

In order to meet this need, we have design KIWI to support both, the organization and communication of modeling and simulation activities in a secured validated environment that is responsive to the needs of modelers and their management. Over the past year, we have been busy promoting KIWI.

We currently have six proposals out for companies that are investigating the technology. We have been very successful at attending the scientific meetings that are frequented by the scientists who are in our target audience. In June, we attended a meeting in Crete and had 10 demonstrations of KIWI.

In October, we went to another meeting and we are able to give 12 demonstrations. We continue to develop a new functionality for KIWI and we are targeting the release of the new version in December 2015.

This new version is going to expand the visualization toolkit that scientists use to guide model development and then the next release is currently targeted for July of 2016. Within that version, we will be implementing tools to identify the critical path for model development.

We have enhanced communication tools and we are moving forward with implementing an electronic notebook in the program. The Buffalo office is strong and growing. Our revenue and earnings are up and we have been contributing to the overall growth of Simulations Plus.

We are expanding our consulting efforts through enhanced marketing and sales and realizing the synergies with the Lancaster office for PBPK modeling clinical pharmacology and we have been promoting the KIWI software platform by attending a variety of meetings giving demonstrations. Thank you..

Thank you, Ted. As you can see, California and Buffalo divisions both have been performing well. We are realizing the synergies that we expected to with the acquisition last year.

I think, with our first full year under our belts, we are very pleased with how the teams have been working together both, in the physiologically-based pharmacokinetic modeling for clinical pharmacology, but also in the development of our new PKPlus software, the Buffalo scientists in Lancaster scientists have been working quite well as a team in that effort.

Software sales continue our strong growth trends. The annual license business model continues to be very profitable method for us to do our sales and has become standard in the industry. I believe, we are actually first to propose an annual license back in 1998.

Some people kind of rock back on their heels, but it seems to be the way just about everyone is doing software licensing. Our traditional products are doing well, the new PKPlus software, we are very excited about that. We think the potential here is quite high.

It is going to take a little time to build out the course, but there is a potentially large user base for this type of software out in the industry and the fact that we are looking at some other industries now to expands a little more into aerospace and some general healthcare applications of our machine learning engine gives us another potential growth area.

Just to reiterate, fiscal year '15 revenue was up $6.85 million to $18.3 million, it is 50-something percent and a significant part from Buffalo, but also excellent both from California. The fourth quarter up by $1.7 million, very have a very large part of that from Buffalo, but also see growth in California, but it is normally the weakest quarter.

Our diluted earnings per share increased 22.4% to I rounded off to $0.23 per share compared to $0.18 per share. That is the conclusion of our presentation.

We will open it up now for questions and should I turn it back to you Renee to read the questions?.

Operator:.

Sure, Walter. I will read the questions. No, I can take care of that..

Okay. .

Howard Halpern has been working hard this afternoon. He has a number of questions.

His first question at the start of fiscal year '16, how much larger is the consulting pipeline versus fiscal year 2015?.

I do not know that we have made that public yet. If you mean at the end of fiscal '15, we can talk about that, but the first quarter '16 there is nothing public yet. I guess, we will have to talk about as of the end of the fiscal '15.

John D or Ted, do you want to talk about that?.

Well, I do not mind commenting on something that I had mentioned earlier, which is that because of the fact that you have done a pretty good job promoting the consulting services and also even more importantly gotten a few folks over in Buffalo trained up on doing PBPK modeling, we did see a pretty significant increase in consulting revenue for 2015 and we expect that I think to continue as we head into the New Year.

It is this opportunity for us to have more resources in place to handle the requests that are coming is going to set us up very nicely..

Thank you, John.

Ted, any comments on that?.

The only think that I would add is that the overall tone of the industry is one of more and more modeling and simulation and I presented about the symposium that happened over the summer and that is just part of a growing feeling that many of the concerns that the industry has about productivity are hopefully going to be addressed by some of the software products that we have as well as consulting services..

Thank you.

Next question, Renee?.

Our next question is, what is the initial interest level for the standalone PKPlus application and what is the long-term potential for this application?.

Okay. Good question. PKPlus was first presented to the public at our Japan user meeting in October. I gave them an overview of what we were planning to release in the near future and then we presented again to our western user meeting at the AAPS Conference, American Association of Pharmaceutical Scientists conference just a week or two after that.

In both cases, the interest was very high. There is a large population of people that do this type of analysis, probably close to 10,000 people around the world use this type of analysis and things that they do, but at the moment there is really a one dominant program that seems to be recognized as being acceptable to the regulatory agencies.

In fact, other programs can be used, but there is a perception that only this one program has all of the validations and audit trails and all that that is needed, so now there is going to be a choice and we believe that choice is going to be very much appreciated by the industry..

Okay. Thank you, Walt. Howard's next concerns hiring, excluding the Cognigen acquisition, how many new hires did you have in fiscal year '15.

Do you have a hiring plan for fiscal year 2016?.

John K, do you know - remember the number of new hires for a fiscal '15?.

Yes. We are about the same number of employees this year. We have been up and down one or two in Lancaster. We have another one joining us relatively shortly and we have a pipeline of a couple of additional PhDs that we are working on..

Thank you, John..

Okay.

Howard's next question, can you describe the customer base for DDDPlus and MembranePlus? What type of growth do you hope to achieve?.

John D, do you want take that one?.

Currently the customer base for DDDPlus and MembranePlus is pretty small. It is approximately 5% of the GastroPlus customer base. As mentioned earlier, we will be releasing new versions of both products and I think we have identified what were some of the gaps with those tools currently.

If we can execute on these new feature developments and also execute on the promotion of the increased synergies with GastroPlus, we hope to see I think these programs reach a quarter or more of the GastroPlus customer base.

There is really, I think, a lot of interest in both programs and it has just trying to educate people on their proper use and ultimately how information flows from one program to the other..

Thanks, John..

James [Morato] [ph], sent the question. He asks does your PKPlus product overlap with any of your other products. Do you expect it to cannibalize sales at all from your other products? Thanks..

Actually PKPlus has been a module within GastroPlus for about 15 years. Over those years, we repeatedly had requests from different customers to make it a standalone product. Maybe we should have given it more priority sooner, but it is not the same capability as the standalone product.

It is a much more condensed quick and dirty way of generating pharmacokinetic models, where they standalone PKPlus is a substantial program built on its own database architecture, which is not the case in the PKPlus module within GastroPlus.

Again the co-validation, the ability to import and export all the different data file types that clinical pharmacologist use to feed this type of program to do the non-compartmental analysis and compartmental, the reporting capabilities, the audit trail, all of that is completely unique to the standalone product, so it is a different product and we do not see it cannibalizing any sales at all from the other products..

Okay. Thank you, Walt. [Scott Bilado] [ph] has a question concerning housekeeping.

Could you tell us how the capitalized software will flow back through the income statement? Over how long does it flow back?.

Walt, I will take that one..

Yes. Please. Thanks..

We use a five-year amortization period for our capitalized software unless there is some other indicator that it’s shorter period of time, so what we capitalize comes back out over the five years following the release date for that version of the software. I think that hopefully answers the question.

There is also another one on software amortization, [indiscernible] amortization exceeded spending in the fourth quarter. Is that relationship likely to continue? I do not think so. That is a little bit of a function of just what we were actually working on in the fourth quarter, but it does go up and down over time..

Okay. Thank you, John. I believe, we have somebody who would like to ask a question. [Jordan Viel] [ph] has raised his hand, so I am going to un-mute his line and allow the question to be asked. Jordan, you are un-muted, but you need to be sure to have your audio pin entered. Okay.

[Jordan Viel] [ph] is no longer raising hand, so that may be the end of our questions. Okay. Walter Ramsley [ph] just sent a question.

Walter Ramsley asks what was the geographic revenue breakdown in the fourth quarter and for the year?.

Let me go back up to that slide.

John D, do you want to answer that?.

Well, this slide here shows the numbers for software PBPK consulting for the year and I do not believe those numbers changed very much in Q4. John K would have a little bit more information, I think, on that, but I do not expect that they had changed very much from the percentages that you see here..

Yes. John, there is not much of a significant change among the areas that I would recall off hand going back into the detail here..

That it appears to be the last question..

Okay. If there is nothing else, I want to congratulate the teams in California and in New York and those that are in a few other states for just a fantastic job they been doing fiscal year '15.

Obviously a banner year, and with the growing pains that inevitability come from putting two cultures together between Buffalo and New York, it has just been a fantastic marriage and I believe that we are in the right place at the right time at the right offerings and capabilities to address the needs that the regulatory agencies see for physiologically-based pharmacokinetics in clinical pharmacology and that also the PKPlus and KIWI.

Our products offer potential for a significant continued growth. I would also like to congratulate our marketing and sales team, great job for everyone on the team, as well as our scientific team, our administrative team.

They are now going to be an accelerated [ph] five it appears after February 28 and we are having to deal with more complex issues with Sarbanes Oxley, so John Kneisel our Chief Financial Officer and others have taken on the challenge that is going to come with that and increase our overhead a little bit, but something we just have to do.

Thanks to everyone for a great job and I will turn it back to Renee now to close..

Walter, there is actually one more questions Donald Borcea [ph] has asked.

Could you discuss the recent FDA arrangement in the current quarter?.

Okay. Sure. This was a proposal we submitted last spring and it was just awarded. This is to look at modeling and simulation for long-acting injectable microspheres. These are very tiny spherical particles made from different polymers that contain the drug.

When you inject these either into subcutaneous tissue or into muscle, the polymer degrades slowly and by controlling the polymer mixture, the ratio of different polymers used, you can control that release rate, so that you can release the drug over a long period of time weeks or sometimes even months.

This is a very different kind of simulation, Donald, we dealt with before.

The act of dissolution, decomposition of the polymer is a different physical and chemical process that we have to model, so it is a challenge and this is why the FDA decided to put up a $600,000 into this over three years and we are very pleased that they selected us to this particular project..

Okay, Walt. Thank you. Just before I sign off, I want to remind everybody we have two investor conferences coming up in December. John DiBella will be presenting at the LD MICRO Main events on December 2nd, and also he will be presenting at the Benchmark Micro Cap Discovery Conference in Chicago on December 10th.

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