Simulations Plus, Inc. (NASDAQ: SLP), a leading provider of simulation and modeling software for pharmaceutical discovery and development, today announced that it has entered into a Termination and Non-Assertion Agreement (the “Agreement”) with TSRL, Inc., a Michigan corporation (“TSRL”). Under the terms of the Agreement, the Company and TSRL agreed to terminate that certain Exclusive Software Licensing Agreement dated June 30, 1997 (the “License Agreement”), under which TSRL licensed to the Company certain Software Technology and Databases (as defined in the License Agreement), and pursuant to which the Company paid royalties to TSRL.
Pursuant to the Agreement, TSRL has relinquished any rights and claims to any GastroPlus™ Products (as defined in the Agreement), and to any claims to royalties or other payments under the License Agreement. Pursuant to the Agreement, the Company agreed not to assert any claims against TSRL or its affiliates on account of the development, marketing, sale or use by TSRL or its affiliates of any content licensed by TSRL to the Company pursuant to the License Agreement, provided that the foregoing does not apply to any development, marketing, sale or use of GastroPlus Products by TSRL, its affiliates, licensees, or direct or indirect customers or distributors.
Under the Agreement, the Company will pay TSRL total consideration of $6 million as follows:
- by May 20, 2014, $3.5 million, comprised of cash in the amount of $2.5 million and the issuance of $1 million worth of the Company’s common stock (164,745 shares of the Company’s common stock based upon the April 25, 2014 closing price per share of the Company’s common stock of $6.07 per share),
- $750,000 payable on or before April 25, 2015,
- $750,000 payable on or before April 25, 2016, and
- $1 million payable on or before April 25, 2017.
The Company’s payment obligations described above are non-interest-bearing.
Walt Woltosz, chairman and chief executive officer of Simulations Plus, said, “By concluding this agreement with TSRL, we have ended the royalty payments we have been making on the core GastroPlus™ software program since 1998. Utilizing some of our cash to buy out this agreement allows us to amortize the consideration over its estimated economic life of 10 years at the fixed rate of $600,000 per year. Royalties paid in fiscal year 2013 amounted to approximately $626,000. As we anticipate continued growth in the GastroPlus product line for the foreseeable future, the savings to expenses is expected to increase. After the amortization period is completed, the savings to expenses will be the entire amount that might have been paid under the perpetual agreement. Therefore, using cash up-front is expected to reduce expenses going forward, beginning with the current quarter.”
Mr. John R. Kneisel, chief financial officer of Simulations Plus, added: “This agreement allows the company to move forward with growth and expansion of our product lines without the hindrance of increased royalty expenses based on growing volume of sales.”