Simulations Plus Reports First Quarter FY2007 Financial Results

Keywords: financial results, investor relations, net income
Division: Simulations Plus

Simulations Plus, Inc. (AMEX: SLP), a leading provider of simulation and modeling software for pharmaceutical discovery and development, today reported its preliminary financial results for the first quarter of its 2007 fiscal year (1Q07) ended November 30, 2006.

Ms. Momoko Beran, chief financial officer of Simulations Plus, stated: “Consolidated revenues for 1Q07 were $1,456,000, an increase of 78% from $819,000 in the first quarter of fiscal year 2006 (1Q06) and a new record for first quarters. Revenues from pharmaceutical software and services were up 314% to $824,000 from $199,000 in 1Q06. Revenues for our Words+ subsidiary for 1Q07 increased 2.0% to $632,000 from $620,000 in 1Q06. Gross profit increased 108% to $1,015,000 in 1Q07 from $487,000 in 1Q06. R&D expense increased 90% to $184,000 in 1Q07 from $97,000 in 1Q06, primarily due to expansion of our Life Sciences staff. Consolidated SG&A increased 20.4% to $757,000 in 1Q07, compared to $629,000 in 1Q06; however, as a percentage of sales, SG&A decreased from approximately 177% to approximately 53%. The major increases in expenses were selling expenses, such as commissions to dealers and trade shows, as well as printer rental, salaries, and payroll-related expenses such as health insurance and payroll taxes, which outweighed decreases in professional fees.

“Net income before taxes for 1Q07 increased $335,000 to $94,000 compared with a loss of $241,000 in 1Q06. First quarter earnings were impacted by a provision for income taxes of $21,000 that will not actually be paid, but rather will be a write-off from our deferred tax asset. Consolidated net earnings for the quarter increased to $73,000, or $0.01 per diluted share, as compared to a loss of $199,000, or $0.03 per diluted share for 1Q06, which means our trailing twelve months earnings increased from about $0.08 to about $0.12 per share. Cash at the end of 1Q07 was approximately $2,103,000, up from $932,000 at the end of 1Q06. With receivables due in the next few weeks, we expect cash to exceed $3 million in the very near future.”

Ms. Beran continued: “We’re now half way through our second fiscal quarter, which will end on February 28. Pharmaceutical software and services revenues for the quarter are already ahead of last year’s second quarter. It appears at this time that our earlier guidance of an expected increase in total revenues of approximately one million dollars for FY07 over FY06 will be achieved in the first two quarters alone. We expect to provide updated guidance after the end of the second quarter.”

Ron Creeley, vice president of marketing and sales of Simulations Plus, noted: “A significant portion of 1Q07 pharmaceutical software and services revenues is due to new business, either as new companies or as new departments within existing large customers. We believe the adoption of simulation and modeling tools by medium and smaller companies is an indicator of the growing recognition by the thousands of such companies in the industry of the need for these tools in their research and development activities.”

Walt Woltosz, chairman and chief executive officer of Simulations Plus, said: “Fiscal year 2007 is off to the strongest start in our history, and it continues the trend of record-setting quarters from last year. The recent activity in the stock market indicates that we are finally being valued on our growth potential rather than on a trailing basis. We are focusing on growth, and that comes in one of two ways – selling more of what we have, and having more products and services to sell. Our more aggressive marketing and sales activities over the past 18 months are producing results, and we will continue to be aggressive in that area. We are on the lookout for additional accretive acquisition opportunities like the Bioreason and Sage Informatics deals we did last year, but recognizing that such deals don’t come along every day, we are also working on developing new products and product extensions internally. With our strong and continually improving cash position, we’ve made an investment in expanding our Life Sciences team to enable more rapid development of such new capabilities. This is partially reflected in the increase in R&D expense of almost $90,000 for the first quarter. We expect to add additional staff as we can identify and hire talented personnel who fit into the elite team we now have. I wish all of our shareholders could meet the employees of Simulations Plus and Words+ to see for themselves what a remarkably talented and dedicated group of people we have in every department.”

Simulations Plus, Inc. and Subsidiary

Consolidated Balance Sheet

(Unaudited)

November 30, 2006

ASSETS
Current assets
Cash and cash equivalents $ 2,102,782
Accounts receivable, net of allowance for doubtful accounts
and estimated contractual discounts of $32,711 1,214,114
Current portion of contracts receivable, net of discounts of $2,242 186,138
Inventory 233,906
Prepaid expenses and other current assets 56,897
Current portion of deferred tax 190,034
Total current assets 3,983,871
Capitalized computer software development costs ,
net of accumulated amortization of $2,534,905 1,400,231
Property and equipment , net 102,278
Contracts receivable , net of discounts of $161 47,219
Customer relationships, net of accumulated amortization of $36,156 91,886
Deferred tax 889,816
Other assets 18,445
Total assets $ 6,533,746
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable $ 140,548
Accrued payroll and other expenses 373,561
Accrued bonuses to officers 10,430
Accrued warranty and service costs 34,852
Deferred revenue 157,173
Total current liabilities 716,564
Long Term deferred revenue 62,501
Total liabilities 779,065
Commitments and contingencies
Shareholders’ equity
Preferred stock, $0.001 par value
10,000,000 shares authorized
no shares issued and outstanding –
Common stock, $0.001 par value
20,000,000 shares authorized
7,449,496 shares issued and outstanding 3,802
Additional paid-in capital 5,287,207
Retained Earnings 463,672
Total shareholders’ equity 5,754,681
Total liabilities and shareholders’ equity $ 6,533,746

Simulations Plus, Inc. and Subsidiary

Consolidated Statements of Operations

For the Three Months Ended November 30, 2006 and 2005

(Unaudited)

2006 2005
Net sales $ 1,456,451 $ 818,815
Cost of sales 441,440 331,597
Gross profit 1,015,011 487,218
Operating expenses
Selling, general, and administrative 756,777 628,756
Research and development 183,627 97,222
Total operating expenses 940,404 725,978
Income (Loss) from operations 74,607 (238,760)
Other income (expense)
Interest income 15,928 3,481
Miscellaneous income 358 50
Gain (Loss) on currency exchange 2,972 (5,302)
Total other income (expense) 19,258 (1,771)
Income (Loss) before income taxes 93,865 (240,531)
Benefit from (provision for) income taxes
Benefit from (provision for) income tax (20,650) 42,000
Total benefit from (provision for) income taxes (20,650) 42,000
Net income (loss) $ 73,215 $ (198,531)
Basic earnings (loss) per share $ 0.01 $ (0.03)
Diluted earnings (loss) per share $ 0.01 $ (0.03)
Weighted-average common shares outstanding*
Basic 7,444,551 7,298,668
Diluted 8,548,560 7,298,668
* The number of shares at November 30, 2005 have been retroactively restated
to reflect a 2-for-1 stock split that occurred on August 14, 2006.