Simulations Plus Reports Third Quarter FY2006 Financial Results

Division: Simulations Plus

Simulations Plus, Inc. (AMEX: SLP), a leading provider of ADMET absorption simulation and neural net structure-to-property prediction software for pharmaceutical discovery and development, today reported its financial results for the third fiscal quarter of its 2006 fiscal year ended May 31, 2006.

Ms. Momoko Beran, chief financial officer of Simulations Plus, stated: “Consolidated revenues for the third quarter were $1,788,000, an increase of 25.6% from $1,424,000 in the third quarter of fiscal year 2005, which had set the previous record for third quarters. Revenues from pharmaceutical software and services were $1,097,000, an increase of 65.5% from $663,000 in the third quarter of fiscal year 2005. Revenues for our Words+ subsidiary decreased 9.2% to $692,000 from $762,000 in the third quarter of fiscal year 2005. SG&A increased by approximately 23.3% to $795,000 in the second quarter of fiscal 2006, compared to $645,000 in the second quarter of fiscal year 2005, primarily as a result of costs associated with our acquisition of certain secured assets of Bioreason, Inc. in November 2005, as well as salary increases, increases in health insurance, moving expenses to move to our new building, and recruiting costs. In addition, with this quarter, we have now begun to accrue annual bonuses to officers on a quarterly basis, while in the past it was reflected only at the end of the fiscal year when the final earnings were known. Net income before taxes increased 106.3% to $460,000 from $223,000 in the third quarter of fiscal year 2005. Third quarter earnings were also impacted by a provision for income taxes of $74,000 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 123.1% to $386,000, or $0.09 per diluted share, as compared to net earnings of $173,000, or $0.04 per diluted share for the third quarter of fiscal year 2005.”

“For the first nine months, revenues were $4,089,000, an increase of 16.1% over $3,523,000 for the first nine months of fiscal year 2005. Sales of pharmaceutical software licenses and services were $2,179,000, an increase of 36.5% over $1,596,000 in the first nine months of fiscal year 2005, while Words+ sales were $1,910,000, a decrease of 0.9% from $1,927,000 in the previous fiscal year. Net income before taxes increased 103.5% for the first nine months compared to last fiscal year. Net earnings for the first nine months were $436,000, or $0.11 per diluted share, an increase of 112.7% over $205,000, or $0.05 per diluted share for the first nine months of fiscal year 2005. Shareholders’ equity at the end of the first nine months increased 13.6% to $5,401,000, as compared to $4,753,000 for the third quarter of fiscal year 2005. It’s worth noting that although Words+ sales were very slightly lower, the profitability of Words+ increased 31.5% from $108,000 to $142,000 for the first nine months.”

Walt Woltosz, chairman and chief executive officer of Simulations Plus, noted: “Clearly, we’re very pleased to report another record quarter and substantial growth over last year. We believe that Simulations Plus is poised with the right kinds of software products at the right time in the industry, when adoption of simulation and modeling tools appears to be on an upswing. In addition to the encouragement provided by the FDA’s Critical Path Initiative, the state-of-the-art capabilities of modern simulation and modeling software make it almost imperative for pharmaceutical, biotech, generic, and drug delivery companies to use these powerful tools to avoid the extreme waste that has been typical of pharmaceutical research and development in the past. Simulations Plus continues to refine our existing software product line as well as to look for new opportunities both inside and outside the company to expand our offerings both in number and in scope. We are currently hiring several additional scientists in order to handle our growing consulting business, to increase our marketing and sales capabilities, and to expand our R&D efforts.”

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