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Apr 10, 2007
  |  Press Release

Simulations Plus Reports Second Quarter FY2007 Financial Results

Simulations Plus, Inc. (AMEX: SLP), a leading provider of simulation and modeling software for pharmaceutical discovery and development, today reported preliminary financial results for the second quarter of its 2007 fiscal year (2Q07) ended February 28, 2007.

Ms. Momoko Beran, chief financial officer of Simulations Plus, stated: “Consolidated revenues for 2Q07 set a new record for any quarter at $2,534,000, an increase of 71% from $1,482,000 in the second quarter of fiscal year 2006 (2Q06). The previous quarterly record (4Q03) of about $2,100,000 included a 3-year contract for $1,200,000 that was booked up front. We now book revenues ratably over the life of the license/contract by billing our customers annually, so 2Q07 revenues are based only on revenues earned within 12 months. Revenues from pharmaceutical software and services were up 105% to $1,808,000 from $884,000 in 2Q06. Revenues for our Words+ subsidiary for 2Q07 increased 21.4%, to $726,000 from $598,000 in 2Q06. Consolidated gross profit increased 80.6% to $1,977,000 in 2Q07 from $1,095,000 in 2Q06. R&D expense increased 80.8% to $216,000 in 2Q07 from $120,000 in 2Q06, primarily due to expansions within our Life Sciences staff. Consolidated SG&A increased 36.1% to $936,000 in 2Q07, compared to $688,000 in 2Q06; however, as a percentage of sales, SG&A decreased from 46.4% to 36.9%. Major expense increases were selling expenses, such as commissions to dealers and trade shows, as well as printer/copier rental, salaries, and payroll-related expenses such as health insurance and payroll taxes, which outweighed decreases in professional fees.

“Net income before taxes for 2Q07 increased 185% to $856,000 from $300,000 in 2Q06. Second quarter earnings were impacted by a provision for income taxes of $188,000 that will not actually be paid, but rather will be a write-off from our deferred tax asset. EBITDA increased 148% for the second quarter to $1,120,000 or $0.12 per fully diluted share, as compared with $451,000 or $0.06 per fully diluted share for the second quarter of FY2006. Consolidated net earnings for the quarter increased 169% over last year”s second quarter to $668,000, or $0.07 per diluted share based on 9,014,825 shares, as compared to $248,000, or $0.03 per diluted share for 2Q06, based on 8,180,450 split-adjusted shares. Thus, earnings per share increased by 144%, as compared to the analyst”s estimate of 67%, even with the increase in number of fully diluted shares of over 10%. Cash increased by $1,534,000 to approximately $3,219,000 during the first six months of FY07.”

Ms. Beran continued: “For the first six months of FY2007, consolidated revenues set a new six-month record at $3,990,000, an increase of $1,690,000 or 73.4% from $2,301,000 in the first six months of FY2006. Revenues from pharmaceutical software and services were up 143% to $2,632,000 from $1,083,000 in 2Q06. Revenues for our Words+ subsidiary increased 11.5% in the first six months, to $1,358,000 from $1218,000. In the first six months, consolidated gross profit increased 89.1% to $2,992,000 from $1,582,000; R&D expense increased 84.4% to $400,000 from $217,000, primarily due to expansions within our Life Sciences staff, and SG&A increased 28.6% to $1,693,000, compared to $1,316,000; however, as a percentage of sales, SG&A decreased from 57.2% to 42.4%. Major expense increases were for the same reasons described above for the second quarter.

“Net income before taxes for the first six months of FY2007 increased 1498% to $950,000 from $59,000. The first six months’ earnings were impacted by a provision for income taxes of $209,000 that will not actually be paid, but rather will be a write-off from our deferred tax asset. Consolidated net earnings increased by 1384% to $741,000, or $0.08 per diluted share based on 8,812,656 shares, as compared to $50,000, or $0.01, based on 8,107,420 split-adjusted shares in the first six months of FY2006. Shareholders’ equity at the end of the first six months was $6,607,000, an increase of 16.5% from $5,669,000 at the beginning of the fiscal year.”

Walt Woltosz, chairman and chief executive officer of Simulations Plus, said: “To say that we’re pleased to report these results is an understatement. Halfway through the year, revenues are already about $1.7 million ahead of last year. This is most of the estimated increase of $2 million revenues for the entire year that we provided in our latest guidance. We plan to update our guidance after the end of the third quarter. Our cash position is excellent and we continue to be debt-free. we’re seeking acquisition opportunities, and we’re usually in discussions with one or more potential candidates; however, there can be no assurances that we”ll proceed with any of them. We have just submitted a second $100,000/6-month Phase I Small Business Innovation Research proposal to the National Institutes of Health, and we’re told that the outstanding review we received on the $100,000/6-month proposal we submitted in December means it is very likely to be funded in June, but of course, there are no guarantees.”

Woltosz continued: “Clearly, the excitement level is high at Simulations Plus, and the recognition we’ve received both in the industry and in the stock market over the last four months is satisfying. Recent scientific publications by both universities and our customers attest to the industry-leading position we enjoy with our major software products. We continue to believe that we are in a period of growing recognition on the part of the pharmaceutical industry that software tools like those provided by Simulations Plus are not a luxury; rather, they are an absolute necessity that repay their investment quickly and many times over.”

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