Good afternoon. It is Thursday, July 14, 2016 and on behalf of Simulations Plus, I welcome all of you to our Third Quarter Fiscal Year 2016 Financial Results Conference Call and Webinar. Presenting this afternoon will be Chairman and CEO, Walt Woltosz; followed by 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 get started with the presentation, we’ll begin with 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 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 Securities and Exchange Commission. Now it’s my pleasure to introduce you to Walt Woltosz, Chairman and CEO of Simulations Plus.

Thanks, Renee, and thank you everyone who is attending our third quarter earnings conference call. The third quarter highlights are shown here, the software renewal rates 88% on number of accounts and 96% based on the fees or revenues that’s coming out. The reason there is a difference is the smaller accounts are academic or government accounts and typically the academic accounts are the ones that have the largest churn rate of students may be using one of our software programs in their research and when they graduate and move on no one else in the department who is using the software and we don’t get a renewal. But those are such small fees that it’s not a big impact on the fees as you can see. We have added 16 new software clients, product development efforts. A lot of activity going on, particularly our PK Plus where we are expecting to release the beta test version actually today. Finally, expected to have that for a number of months now, but we are finally there, it’s been a lot of work, tremendous effort by a very large group of folks who has been working on those in both Buffalo and Lancaster divisions. This is a new software product that will be used for non-compartmental analysis and compartmental analysis and specifically for regulatory submissions. We believe this has the potential to become a significant contributor to revenues and earnings. We are also finalizing the next release of our flagship GastroPlus software version 9.5. This will add intramuscular dosing, the ability to inject into the muscles and also an enhanced ocular dosing model where we have two FDA research collaboration agreements that are funded by the FDA that are helping in both of these areas. This will also include antibody drug conjugate.…

All right, thanks, Walt. We are going to go over the three months numbers first and then we will cover the year-to-date numbers. So the first slide here, where our consolidated revenues, as Walt said were up 1.2% and $70,000 in the third quarter. These, $123,000 of this increase comes from our Lancaster division, and Buffalo showed a slight decrease of about $53,000 for the quarter. As Buffalo revenues were impacted by a combination of cancellations of consulting contracts that are caused by drug failures and in trials as well as some delayed trials by the sponsors. Our gross profit remained nearly constant increasing about $8,000 for the quarter. The consolidated gross profit as a percentage still remained constant at just over 80% for this quarter. A very healthy, very healthy gross profit number. And looking at SG&A expenses, they increased $74,000, most of this increase came from advertising and professional fees for tax and compliance related issues during the period. There really weren’t many other major increases. We did see a little bit of a decrease in our commissionable revenues, so commissions were down a bit during the quarter. Moving to research and development, that expense really was unchanged from last year. Our R&D spend was up slightly about $23,000 to $25,000 and we continue to put money into research and adding to our end as well as adding to our capitalized software as we improve our products. Income from operations was down slightly of $66,000 for the quarter. This was offset a little bit with our other income coming up about $43,000 as with the dollar strengthened against the Yen and we made $43,000 in comparison to the prior year. Overall, our net income increased $57,000 for the period with a slight decrease in operating income that changed…

Thank you, John. In case we’ve got anyone new to the company online today, what I’ll do first here is briefly describe our solutions and where they fit into the drug development process. In a nutshell, what we do is offer model-driven end-to-end solutions which span from early discovery through clinical development and into regulatory filings post approval. Our Cheminformatics software consisting of the ADMET Predictor, MedChem Studio, and MedChem Designer platforms allow research scientists to design new compounds and virtually screen them across the spectrum of properties helping to prioritize testing that will be done downstream. The simulation software consisting of GastroPlus, DDDPlus, MembranePlus and the new PKPlus platforms help scientists model and predict complex in vitro experiments and then ultimately the in vivo exposure in animals and humans. And the KIWI platform which Ted will talk more about is a cloud-based validated platform for managing and communicating pharmacometric projects and results. These software tools are all complemented by a team of expert scientists who provide model-driven consulting support on a project-by-project basis. Next slide. Diving deeper into the products themselves and sharing some product news. As Walt mentioned earlier, our software development team is working really hard on new releases for all programs. The next version of GastroPlus, the flagship product is expected this summer and will include a new optional add-on feature for intramuscular dosing, also enhancements to our recently released biologics module which we expect will help deliver more sales of that feature going forward. The Cheminformatics development team has been working really, really hard refreshing that ADMET Predictor interface utilizing many of the existing features from our MedChem Studio platform. The optional add-on module that we are adding to ADMET Predictor this MedChem module should lead to increased adoption of the program by medicinal chemist…

Well, thank you, John. Good afternoon everyone. I am going to talk about the activities of Buffalo in terms of consulting as well as activities that we have ongoing with the KIWI platform. So, I think that we’ve emphasized on numerous occasions, strategic and synergistic benefits of the Cognigen acquisition and we continue to find new and very interesting and important projects to work on that required collaborations between Buffalo and Lancaster scientists and we continue to find new ways of using modeling and simulation to address some of the really interesting problems that clients present to us. And these projects are important, because they help to shape management and a regulatory decision-making process, because for some of the companies that we work with especially the smaller biotech companies modeling and simulation is a new sort of decision-making activity and these projects are helping to drive not only additional consulting projects, but also software sales. As an overview of where we are in terms of our consulting projects, so far in fiscal year 2016, we’ve worked with 27 companies on 48 drugs in 85 different projects. We picked up eight new companies so far in 2016 and 11 new projects just in this third quarter. We had eight projects that we were already working on that expanded in scope and as John Kneisel had mentioned previously, we had two projects that were delayed, we will still be working on them at some point in the future because of slow enrollment of patients into the trial. And disappointingly had three projects that cancelled really at sort of the last minute while we were just getting started to work on them because the company found that the trials had failed and they were not going to go forward with those projects. So…

Thank you, Ted. So just to summarize again, you’ve heard the numbers several times and read them on Q, but the third quarter was the strongest quarter in our history for both revenues and earnings. Percentage gains don’t look as high as we are used to because of the very strong third quarter last year that were compared to, but we did manage to beat it and nine months of course exceeding all of the years by a very substantial margin. Both divisions are performing well. The synergies are working out very nicely just really what we had expected two years ago when we first combined the two divisions. We are addressing regulatory agency interest, so, the regulatory agencies now are really pushing simulation and modeling and model-based drug development. It’s nice to see that finally happening after 20 years. Again, this month is our 20 year anniversary for Simulations Plus. And what a change it has been since 1996 when you hardly heard anybody talking about simulation and modeling at some of the major scientific meetings, we are now at significant sessions and threads at those meetings. The contract that Ted mentioned, the $4.7 million contract is the largest in our history and we believe that has the potential to have additional such contracts with the same foundation for other disease areas and also with other organizations. Software sales, the strong foundation that we have based on the annual license business model with built-in compounded growth has been a very successful pricing and business model now for a decade or more, actually plus the two now. The global market, according to the Grandview Research report is supposed to reach over $4 billion by 2020. Now that includes a lot of different things. I don’t think we will see more…

Hi Walt. Howard Halpern sent a very lengthy question. It’s actually multiple parts. The first part is, can you provide an overall update on where the capabilities and desire stands for biotechnology, pharmaceutical and consumer products companies to use biosimulation to meet their future needs?

John Di, do you want to take that?

Sure, I’ll comment and then I let you or Ted provide some additional insight. The desire is, I think stronger than ever for the use of biosimulation. I think that we are starting to see quite a bit of adoption of the approaches much more from a mechanistic standpoint in the preclinical and clinical pharmacology areas and we are also starting to see quite a bit of interest from the non-pharma biotech spaces. We’ve been very fortunate to identify several agrochemical and consumer product companies to partner with on the promotion of the technology that we offer and that has led to a significant amount of interest from other groups in those marketplaces who are requesting more information demonstration and so on. I think Walt has on this summary slide a note about the research – or from a research report about the expected growth in biosimulation and biosimulation use and I would say that we expect to chunk of that going forward.

Okay.

Would you want to continue with it?

Well, Howard’s question goes on. Given the revenues for the nine months have increased by over 9%, should we be concerned by a 15% decrease in new customers 54 [indiscernible] 64?

John Di, I think that’s for you again.

Yes, no, I don’t think that that’s the – that’s anything to be concerned about. I don’t have the details in front of me, but I believe that the decrease in the number of new customers is due mostly to a really high number of non-profit organizations that license in 2015. So that led to a really high number we reported. It’s more important I think to focus on the number of software units that are licensed and also the revenue growth numbers which are up 10% both categories through the first nine months. So I am not concerned about the fact or of new customers reporting down a little bit.

Okay, Howard just goes on to ask, you mentioned a healthy pipeline of consulting projects entering 4Q fiscal year 2016. How many projects do you anticipate working on during the quarter and what are the prospects entering fiscal year 2017?

Well

I assume that’s for Ted.

Sorry, go ahead, Ted.

Okay, I wanted to just pick up on what John was saying before about the overall marketplace. What we see in the consulting projects is really a virtuous cycle where the more senior managers and leaders of drug development teams see the results of modeling and simulation efforts, the more they want them. And it’s reflected – that desire is reflected in the cup of new projects not only from new companies but also recurring business from existing customers and we have a very healthy return customer set of activities. In terms of Buffalo consulting activities, we do have a really good pipeline. There is a total of 39 proposals that we’ve put out to different companies where a really a healthy mix of small biotech companies, medium pharma companies as well as large pharma. So we try to mitigate risk by making sure that we have that healthy mix of customers with products at many different stages of completion. In terms of the number that we expect for the next quarter and into 2017, I can only say that we do have a healthy pipeline and we are very optimistic about the future.

Okay, Ted. He goes on to ask, Howard, about the $4.7 million KIWI contract. He has asked, what should we begin seeing in terms of revenue and expenses and in fiscal year 2017 from this contract?

Yes, so we’ve been very deliberate over this past quarter in really understanding what the needs are of the scientists that we are going to be serving with the platform and we’ve had extensive conversations both internally as well as with anticipated customers about what their needs are. That planning and design activity is going to continue for a little bit going forward and we will start thinking about who are the people we are going to hire. How we are going to get this work done as quickly as possible. So a lot of that is in flux right now. But we are just continuing to make really good progress on the plans and plans for the future.

Okay. Howard’s last question is, what type of interest and from what type of customers are you seeing for your new product release PK Plus and upgrade for ADMET Predictor and GastroPlus.

John Di?

Yes, so, PK Plus is interesting because that program is going to be applicable to any scientist that is doing any sort of in vivo PK, in vivo pharmacokinetic type activity. We’ve actually had a number of folks of course within the pharmaceutical biotech spaces asking for more information on the product. But we’ve also seen a lot of people from the non-pharma markets which surprised me initially but then I came to appreciate the fact that folks in safety research, in toxicology, they are going to be doing a lot of preclinical animal testing work and they need to do some assessment of the exposure levels in the pharmacokinetic parameters of these compounds. So, the PK Plus interest and the type of customers who are requesting more information, it’s coming across markets, it’s going to be any scientist who is going to be really doing any type of in vivo PK activity. The upgrades for ADMET Predictor and GastroPlus, we’ve always had with ADMET Predictor really, really good underlying science. The best predictive models on the market and we’ve always lagged a little bit in comparison to the competition with regards to some user interface type features and fortunately now we’ve got a really slick interface that is exciting a lot of people. We are actually seeing quite a bit of interest from medicinal chemists. That’s a pretty large market in the pharmaceutical space that we have been missing with the program before. And so we hope that with the ability to now visualize the results in a better way, we will be able to target that group a little bit better. Also the synergies between GastroPlus and ADMET Predictor is something that we’ve been heavily promoting over the last couple of years especially and we hope that the upgrades to GastroPlus, the synergy with ADMET Predictor will allow us to promote some of these new features earlier into discovery with GastroPlus and maybe a little bit later into development with ADMET Predictor.

Thank you, John. Donald [Indiscernible] has a couple of questions. Why your accounts receivable up nearly $3 million since August? Will these accounts be seen as revenues in the next quarter?

I am looking for the slide John to help you answer that. John K, but I don’t see a balance sheet slide. So where is it? I don’t see accounts receivable. I am not sure which slide that came up of that. John K, do you want to talk about that? John Kneisel?

Yes, Walt, I was muted. At the end of August last year, we actually, August, that last quarter being our low quarter of the year. We actually did a great job of collecting money before the end of the year. So we are about $600,000 or $800,000 lower in accounts receivable than we normally would have been. So the numbers are a little bit skewed and as we come up in the quarters – our third quarter is always generally the highest receivable quarter for the year. So it’s just a little bit of a normal ebb and flow of cash flow and how good people pay or don’t pay in a very short period of time. On the second half of the question that will the accounts be seen as revenues in the next quarter, our receivables are already recognized revenues and for the majority of them, very few that we’ve actually sent receivables out under a contract where we have the ability to bill for the contract. So that’s – those are already recognized revenues.

So that’s part of our $8.9 million in cash that we have now?

Yes, well, not the current receivables at the end of the period, but it is – yes, some of it is collected out, but he is talking specifically about will the revenues be seen in the next quarter, no those are already previously recognized revenues.

Okay.

Okay, [Indiscernible] has another question concerning PK Plus or actually after PK Plus, now the PK Plus modeling development is nearing completion but subject to areas will now be targeted for development for example aero modular et cetera?

Okay, well, PK Plus version 1 is nearing completion, but we have other things we want to do with PK Plus. So there will be some ongoing developments there and then we will end up with some time available from our team that’s been working so hard on PK Plus for about a year now to get back to looking at the aerospace applications and healthcare applications, those are things that we want to take a look at, but in any of our software programs, GastroPlus, ADMET Predictor, PK Plus, DDDPlus, MembranePlus, we always have ideas that could not be incorporated in the most recent release. So, as soon as we get a release out, we are already starting to work on the next release. It’s kind of truism in the software industry, that software is not evolving and improving, it’s probably dying. And we are certainly not going to let that happen with any of our programs. So continued reclinement and expanding of capabilities of the programs we have already. I mentioned the two FDA proposals that are in that total $1 million of R&D over the next two years. If we were to win both of those and those are both directed forward improvement to GastroPlus. So there is no shortage of things to work on. A lot of it is continuing to refine existing products and then hopefully again getting into some new areas in aerospace and generalized healthcare.

Okay and what appears to be our last question is from Mike Challenger [Ph]. He asks what is the price or range of prices for KIWI?

I am not sure if we’ve published ever.

Yes, I was going to say, I didn’t want to get into the specifics of the pricing right now. But I would say that in total, the prices are based on a number of users and we have some installations where there is a single user and others where it’s a global pharmaceutical company with multiple users, stations in different countries around the world. So it’s quite a bit, but I don’t want to get into the specifics right now.

Thanks, Ted. Hey, Renee.

That appears to be the last of the questions. I don’t see anybody raising a hand. So I think that pretty much concludes our question and answer period. So this concludes today’s conference call and webinar. If you missed any part of today’s presentation, replay will be available at our website www.simulations-plus.com. Thank you all for joining us today. Enjoy your afternoon and have a splendid summer.