Good afternoon. Today is Wednesday, April 13, 2016 and on behalf of Simulations Plus, I welcome you to our Second Quarter Fiscal Year 2016 Financial Results Conference Call and Webinar. Presenting this afternoon will be Chairman and CEO, Walt Woltosz; followed Chief Financial Officer, John Kneisel, Vice President of Marketing and Sales, John DiBella and our President, Ted Grasela. An opportunity to ask questions will follow today's presentation. [Operator Instructions] This call is being recorded for playback at our website www.simulaitons-plus.com. Before we begin today’s presentation, I’ll read the Safe Harbor statements. 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 as filed with the Securities and Exchange Commission. 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 second quarter investor conference call. Highlights for the second quarter, another very good quarter. Software renewal rates 85% based on number of accounts and 91% based on fees. We added 20 new software client sites. We have announced the development of a new product that will be coming out soon, called PKPlus. This is a product that is designed to perform what we call non-compartmental analysis and compartmental analysis for regulatory submissions and we believe this product has the potential to become a significant contributor to revenues and earnings. We are also working on Version 9.5 of GastroPlus having released 9.0 few months back. 9.5 is going to add intramuscular dosing, so we have had dosing through the skin transdermal dosing. Now, this will be injection into a muscle and various muscles around the body have to be treated little differently. And then also enhanced ocular dosing model, and both of these efforts are being supported by two funded research collaboration agreements or RCAs we call them with the Food and Drug Administration. We will also be adding anti-body drug conjugates. This is where an anti-body access a carrier for a small drug molecule and it takes it to the target tissue. And we are adding some new animal physiologies for the additional dosing routes. Additional dosing routes is the dosing routes other than intravenous or oral. So this is a ocular, nasal and pulmonary, transdermal and now as you see intramuscular. We are working on version 8.0 of ADMET Predictor. This is a major overhaul of the user interface, major code refactoring and much tighter integration with MedChem Studio. Both programs will be open from the same opening screen, also both programs will be embedded into single interface and the tight…

All right, thanks, Walt. We will go through the first [ph] quarter first and then we will cover the six months and then go over a few with the slides and graphs. The first three months, here the last three months, the consolidated revenues, as Walt said were up 12.9% or $590,000. $245,000 of this increase was generated by the Buffalo division, which is a 19% increase over the prior year. And revenues from the Lancaster division were up $344,000 or 10.4% for the quarter. Consolidated software and related sales were up 15% and while consulting and analytical revenues increased about 9% for the quarter. Cost of revenues were up $133,000 for the second quarter. Most of this increase is attributable to the first annual bonuses paid to the employees in our Buffalo division. Other than that, there were really no other significant changes in cost of revenues. And cost of revenues as a percentage of revenue remains relatively constant. Our gross profit for the quarter increased 13.3% or $457,000. Gross margin in our Buffalo division was 55% and in Lancaster division was 84%. SG&A for the quarter increased $116,000. The main components of that were commissions to our Japanese and Chinese dealers of about $31,000. We increased our marketing labor during the quarter and the time spent by the scientific personnel on marketing activities was up about $24,000 and advertising was up about the same amount, another $24,000 as we increased our web presence and incurred other advertising related costs. Our professional fees were up this quarter. It’s really the result of the additional costs of being a consolidated entity and other tax and accounting compliance related issues. There were really no major decreases in the quarter. We have spent about $739,000 on research and development costs during this…

John, I think you meant we were down $228,000, you said up.

Oh my fault, read it wrong. Marketing labor increased by $38,000 and the software licenses we expensed another $28,000 and this is really basically due to our outside software licensing that we have just hit another tier, a layer in that tier. And we did have one major decrease which amounted to $228,000 decrease and that relates to the consulting fees that we paid in 2015 related to the Cognigen acquisition and we didn’t really have any of those expenses in this period. For the quarter, we spent $1,360,000 on research and development and $545,000 of this capitalized software and $813,000 was expensed. Moving on to the provision for income taxes, we’ve seen an increase in our income taxes and some people would say that’s a good thing with increased revenue. Our effective tax rate increased to 34% from 31% the prior year that's really due to the increased income and the effect of our R&D credits and other credits have on our tax provisions. Those credits generally tend to stay fairly constant throughout the entire time of the year. Our net income overall was up $752,000 or 50% over the prior year six months, $2.25 million in 2016 and $1.5 million in 2015. And the increase comes from really two main sources, the increased revenues that we had which had high margins, we picked up good bottom line income and the reduced expenses that we had in SG&A in 2016. Overall, EPS went from $0.09 to $0.13 in the period. Moving on to the first slides here, our consolidated revenues showed a consistent growth for the quarters, since the first quarter of last year with Cognigen, you can see the jumps across the board here. Acquisition really shored up our revenues in the fourth quarter of the year. For…

Okay, thanks John. And apologies in advance to the audiences as I’ve come down with a cold over the last few days and sound more nasally than usual. In case we have anyone new to the company on the call today, I just want to briefly describe our products and services and where they fit into their drug development process. In a nutshell we offer end-to-end solutions which span from early discovery going all the way through clinical development and regulatory filings. Our of Cheminformatics software which consists of the ADMET Predictor, MedChem Studio, and MedChem Designer platforms allow research scientists to design new compounds and virtually screen them across the spectrum of properties really helping to prioritize testing as you go downstream. The simulation software which consists of the GastroPlus, DDDPlus, MembranePlus and new PKPlus platforms help scientists model and predict complex in vitro experiments and ultimately the in vivo exposure seen in animals and humans. And KIWI is a cloud-based validated platform for managing and communicating pharmacometric projects and results. And all of these software tools from discovery going through development are complemented by a team of expert scientists who can provide consulting support project-by-project basis. Next slide. Diving a little bit deeper into the products themselves. Walt’s already talked about our software development team being very hard at work on new releases of all programs. The next version of GastroPlus which is the flagship product is expected sometime this spring and will include a new optional add-on feature for intramuscular dosing and also enhancements to our recently released biologics module which we expect will help deliver more sales of that feature. The Cheminformatics development team as Walt mentioned has been really hard at work on refreshing the ADMET Predictor interface utilizing a lot of the existing features…

Thanks very much, John. So I’d like to walk through the activities that Buffalo division has been engaged in over the past three months and in particular talk a little bit about what’s happened with the KIWI contract that we have. So just to provide an overview and remind everyone about what we're doing in Buffalo, we primarily provide consulting services for pharmaceutical industry and so one of the reasons why we were eager for the merger with Simulations Plus was to realize some of the strategic and synergistic benefits of being able to apply programs like GastroPlus to clinical pharmacology problems which has happened later in development. And over the past six months, as I have talked previously during these calls, we look forward to remarkably strong collaborations between our groups and have really been working hard to identify new and innovative ways of using modeling and simulation to bring value to our clients. So the way that we will get consulting projects is that they actually help to shape management thinking about modeling and simulation and then also help to shape the regulatory decision-making process because those models are then submitted to regulatory authorities and help to contribute to the discussion that goes on about whether a drug should be allowed on the market and how it should be dosed. So the successful projects that we engage in actually help to drive additional consulting efforts as well as software sales. This is a little brief overview of some of the projects that we've been involved in health. Things are changing. What we've been doing in Buffalo is merging the science and software that’s in GastroPlus that we used to perform physiologically based pharmacokinetic modeling with so-called systems pharmacology models that lets us provide much more mechanistic insight into…

Thank you, Ted, John and John. So to summarize, second quarter revenues up 12.9%, second quarter net income, up 18% and diluted earnings per share [Technical Difficulty] 16.9%. For the six months, revenues, up 15.5%, net income, up by 50% and diluted earnings per share up 49%. Both divisions are performing very well. The synergies we expected are being realized and they are resulting in expanded consulting activities especially in the area of clinical pharmacology taking a look now at physiologically-based pharmacokinetic or PBPK analysis. And so we’re addressing the regulatory agency interests that were brought to the forefront about two years ago when the FDA and some European regulatory agencies both held full day meetings specifically on the topic of applying PBPK modeling into clinical pharmacology. A five-year $4.7 million contract that Buffalo recently was awarded by a major research foundation is the largest single contract in the company's history. So a very exciting development here and it offers a potential as Ted has explained for additional such contracts with other organizations. Our software sales continue our strong growth trend. You can see the bar charts and see the slope on those quarter after quarter and year-over-year. There was a recent report by Grand View Research that indicates that the global market for computational biology is expected to reach over $4.2 billion by 2020. Now, that includes proteomics, genomics and the type of work that we do. They did mention that North America is the largest regional market at 58%, that was in 2013. I think John DiBella’s chart showed us around mid-50% sales in North America. So very consistent with that. Asia Pacific seems the fastest growth market with the combined -- estimated combined annual growth rate of about 28%. And our activities in China, India, Korea, Japan have reflected growth in those markets. Interestingly, this report listed five key players [indiscernible] and Simulations Plus. So we’re quite surprised and honored to be the five that they listed. One of the five that they listed and we certainly believe that Simulations Plus continues to lead the trend towards greater use of modeling and simulation and drug development. And so with that, we’ll stop now and take any questions.

We have two questions here from Howard, Walt, Howard Halpern. His first question is given the most recent five-year $4.7 million contract, how important do you anticipate the KIWI offering to be in the future?

Well, this is the first time contract of this sort and again, we think this will set an example, it’s going to build the capabilities that we have in Buffalo for doing this type of data management and consolidation and providing access to it globally through our own proprietary cloud. Ted, do you want to comment any more on that?

Sure. I think Howard you can tell from the enthusiasm in my voice that we’re very excited about this. We've had a lot of hope and dreams for KIWI and what it could represent in the future and so this represents an important validation of the way that we were thinking about communicating complicated modeling and simulation results and enabling interdisciplinary collaboration which really is the big deal to unlock the needed productivity growth in the industry. So we’re just very excited about it and we think that as we add capabilities to the software that others will take notice and we’ll be able to get more customers for it.

Thank you, Ted.

And Howard had a follow-on question, how will the revenue from the $4.7 million contract be recognized?

Ted, do you want to answer that?

Sure. So we’re still working that out right now. We think more or less it's going to be a linear recognition over the life of the contract there. Money is in there for hardware and software licensing that we’re going to need and so we’re in the process of doing all of the necessary development of plans and so forth. So we will have to see how that actually works out.

I think considering the upfront investment in some hardware, it might be just a little bit frontloaded, but it's probably not that significant. We will buy the hardware it wants and then perform. So after that, it will be the labor.

Exactly, thank you.

And Howard has another question, this is concerning PK Plus, once PK Plus is released, what type of sales cycle do you anticipate?

John DiBella, do you want to take that one?

Sure. I will offer some thoughts. I expect the sales cycle for PK Plus to be a bit shorter than what it is for our research software. The equations in PK Plus and the results that are generated from the program are relatively straightforward. So I think we will be spending the majority of time during a client’s evaluation period, highlighting the usability and the workflow aspects and less time focused on the accuracy of the results that are being generated. Also, PK Plus is going to be a low-cost product and we have strategically priced it at a level, which requires only a very small number of approvals within a company. So I think that the evaluation period is going to be focused a little bit more on usability aspects, which makes our lives a little bit easier when companies really want to test the accuracy of models, utilizing their own data, that part should be relatively straightforward and then the way in which we priced it, the approval process should also be a lot faster than it is for some of our higher priced research tools.

Thanks, John. As John pointed out, the science side of this type of software is nowhere near as complex as physiologically based pharmacokinetic modeling. All of the equations in PK Plus is on two pages in the manual, it's really more how do you deal with -- how do you have validation that every possible option or setting that you have is going to work properly and give the right numbers, how do you have the appropriate audit trails, so that you can go back sometime later and say all right, we are looking at this report, where did this number come from, who ran this analysis, what were the model settings that they used and so on. And so the program scientifically, you could do all of this in Microsoft Excel and in fact one of the ways we validated is to write the same equations in the Microsoft Excel and then run all of the possible scenarios in that program and some other programs and in PK Plus to make sure that all the numbers agree within like .0001% or some tiny number. So it's really more the data handling, the workflow, the convenience, the program is pretty well point in -- it is a very little typing needed, which will enhance the potential for typing errors and so it's just a very smooth integration and workflow of the type of work that is done with this type of program. And there are thousands and thousands and thousands of other licenses for typically a small handful of other programs that are out there. We believe that the functionality we put into PK Plus will really make it stand out from the crowd and the pricing is we’re not giving it away, but it is very attractive pricing.

I don't see any other questions. Okay, I don't see anything else, Renee. I'll hand it back to you.

All right. Well, thank you, Walt and all of you gentlemen for this excellent presentation today. With that, we conclude today's conference call. If you missed any part of today's presentation, a replay will be available at our website www.simulations-plus.com. And thank you all for joining us today.