Good afternoon. It is Tuesday, July 8, 2014, and on behalf of Simulations Plus, I welcome you to our Third Quarter Fiscal Year 2014 Financial Results Conference Call and Webinar. Chairman and Chief Executive Officer, Walt Woltosz, will be presenting this afternoon. Joining Walt, as panelists, are Chief Financial Officer, John Kneisel; and Vice President of Marketing and Sales, John DiBella. An opportunity to ask questions will follow Walt's presentation. You may send your written question using the questions pane on your control panel or you may use the hand-raising icon on your control panel. (Operator Instructions) This call is being recorded for playback at our website, www.simulations-plus.com. It's now my pleasure to turn the presentation over to Walt Woltosz, Chairman and CEO of Simulations Plus.

Thank you, Renee, and welcome everyone to our Third Quarter Fiscal Year 2014 Conference Call and Webinar. As usual, I will read the safe harbor statement to kind of keep our attorneys happy. 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 and filed with the Securities and Exchange Commission. Highlights for the third quarter, this was an outstanding quarter. We broke records all over the place. This was our 27th consecutive profitable quarter, so coming up on seven years of consecutive profitability. Sales, just over $3.7 million, almost 21% increase from $3.1 million. Part of that was due to a $300,000 order that was moved by our customer, one of our major customers from the second quarter to the third quarter in order to synchronize that renewal with all of their other purchases, so we expect that to stay in the third quarter going forward, but even without this order, sales would have been up 11%. Gross profit, a new record, little over $3.5 million versus $2.6 million last year, increase of almost 33%. This was due to a number of factors. Again, the $300,000 order, but also we are no…

There is a question. Okay. Howard Hoffman.

What was the revenue from the 20 new customers?

Well, John DiBella, can you answer that one?

Yes. It was approximately $480,000 from the 20 new customers, so about 12% to 13% of total revenue.

Again from Howard, given the elimination of royalty payments to TSRL for GastroPlus sales, would it be safe to model gross margin in the upper 80% to low 90% area depending on GastroPlus sales for your other offerings, do you pay any royalties and at what rate? The initial effect is probably not going to be huge. Our gross margins tend to run 83% to 84%, pretty consistently they were up this past quarter, because of the drop in the royalties and in the amount of only $25,000 being amortized for the TSRL agreement, but it's going to stay at exactly $150,000 per quarter going forward, so that’s $600,000 per year. Last year, the actual royalty payout and $623,000, so see there is not a huge difference yet, but as the sales continue to grow, the excess there is going to continue to improve. For our other offerings, the only other royalty that we pay right now is a very small royalty to a company that used to be called Accelrys, and I can't remember their new name since they were bought out by Dassault Group recently. That's a very small amount that we pay on the metabolism module in ADMET Predictor. What was the dollar amount of the one-time fees due to negotiating with TSRL agreement? I don't have that at my fingertips, but it was not an expensive one. We will have to get back to you on that one. Since 1Q '14, receivables increased approximately $1.3 million. Why? John Kneisel, do you want to answer that one?

Yes. We actually had a lot of sales. We had about $1.9 million of sales in the month of May, so it jumped receivables up at the end of the period.

I should have guessed that. Those quarter end sales are not unusual. Very often, the customers are waiting till the last minute to get their orders in, and so that happened there. Purchased by the EPA of five licenses of GastroPlus and the ADMET Predictor, can you provide some color as to commercial entities needing your simulation software as the EPA increases their usage of GastroPlus ADMET Predictor. John D, you want to take that one?

Sure. The EPA is the regulatory group that's going to be managing research activities primarily from non-pharma-type companies, and the hope is that their continued use of the software is going to encourage those companies focused on research in industrial chemicals, cosmetics, food ingredients to take a closer look at our software and use it to fill in some of the gaps with respect to toxicity predictions and to also use it to screen some of their compounds internally and prioritize testing, so I think it's going to be very helpful for us to continue with this penetration into the non-pharma markets, especially as it relates to toxicity and screening of new entities.

Thank you, John.

From James Morato, do you have any pre-orders of MembranePlus that you can talk about? John D?

Not yet, but we do have a list of companies that are very interested in evaluating the program when it's ready, so I think there is some pent up demand for testing it out, and as soon as it's ready, we will work with those guys to get things in place.

Thank you, John. Are the two NCE project results valued as assets in the balance sheet? If not, why not? If so, what are they valued at? No, we haven't put those into the balance sheet. These are projects where our goal here was simply to demonstrate how powerful the software tools that we have really are, so basically taking what I would call a bold step to kind of stick our necks out and tell the world even before the molecules were synthesized that we were going to do this when we would report the results and let the chips fall where they may, and in both cases we hit what we would call homeruns. Now, none of these molecules will ever be a drug in and of itself. These are what we call lead molecules, and this is the way the industry works, but typically the way you get to a lead molecule is much more time-consuming and much more expensive than what we have been able to achieve using our software, and of course I have to give credit to the folks that generated some initial data that was out in the public domain that we could use as a basis for training our models for activity for the last project. For example, we had to train our models using our ADMET Modeler, our neural network technology to be able to predict the likely activity against both COX-2 and COX-1 enzymes, and then use those models to evaluate. I guess, we hit as many as 2 million new molecules that we went through and screened for various reasons. They either didn't get the target strongly enough or they had toxicity problems or solubility problems or a variety of other problems that our software predicted, so we threw…

Walt, we had a couple of questions that came in by e-mail.

Well, can you read those, I can't show that on my screen for a moment.

Sure. No problem. Question was the tax rate was 37.4% however quite a bit higher than before is that due to [Jerry Brown]. What were the other factors at work? What's the expected tax rate for the year?

We spread our R&D credits out over the year, so when we have a really high profit quarter, the rates will come up a little bit grants is (Inaudible) to be around 33% for this fiscal year when we get done at this point. There was another question John DiBella. I think this one was for you. Demonstration products in the company generated attractive results. How much of an impact do you have on your existing customers and producing other orders?

I think he is referring to the NCE for a proof-of-concept projects. If so, we just had a webinar, the first one for COX-2 design project. About three or four weeks ago, we had to close to 200 people registered over 100 and 110, 122 participated live, number of people have been requesting some evaluations of the software after hearing about it. We've also gotten a number of new quote requests to add some features from existing clients. I think it's been received well and we've only just started really with the promotion and advertising of this second project. The plan is now to do some submissions of abstract to different conferences and I think eventually publish some work as well, so it's moving in the right direction.

Okay. Then there is one more question. I think, Walt, this one is probably for you. It appears as though much of the company's sales efforts are directed to tradeshows and other professional gatherings wouldn't it improve results to have open offices in Europe, Asia, and East Coast or where the potential buyers are concentrated?

Well, actually that's a marketing and sales question, but we have a dealer in Japan that we work with for the past 15, 16 years. He is doing a good job. We have a dealer in China. The way I see it, opening an office implies having a location, having the overhead expense to the location and then having a person who understands what we do, how we do it and is able to go out there and represent it. As I have answered this question before, this is a very technical sale. We really need to have someone who can go out stand in front of a group of 15 to 25 or 30 PhDs all experts in their own areas and be able to tell what we do, why we do it, and pretty well answer all of the questions. You can't answer everything. Nobody can, but you got to be able to really understand the various products and how they work and that's not something where you can just go out and hire someone because have the PhDs chemistries - we will train you for a couple of months, so you go out and do all this. It takes much, much longer especially with the Gastro Plus product, so our approach has been and it's successful to bring people into our life sciences team, let them gain the experience through working on the products either as developing additional software, through using the products in some of our consulting studies, through helping to present the training courses and it takes a year to two years typically for someone ready to go out there on their own and represent the company at the various scientific meetings or the customer site. The model we have seems to be working quite well. I don't relish the idea of having actual employees in foreign countries. It turns out that our representative in Japan and China are not employees. They are independent, so to open a sales office implies and - I would rather find an independent distributor if there was one. We did try one out in New England a few years ago, I didn't really work out. I don't think he ever sold anything that I can remember, so we think the model we have is working well.

I don't have any more questions on that list.

Okay. I don't see any more questions on the webinar. With that, I thank you and I will turn it back to Renee.

Thank you, all. Great quarter, great presentation. This concludes today's conference call and webinar. If you missed any part of today's presentation, the replay will be available at our website, www.simulations-plus.com. Thank you for joining us and have a wonderful afternoon.