Simulations Plus Reports Third Quarter FY2010 Financial Results

Another Record Quarter with Revenues up 15% and Earnings up 30% over Last Year’s Q3

LANCASTER, Calif.--(BUSINESS WIRE)--Simulations Plus, Inc. (NASDAQ: SLP - News ), a leading provider of simulation and modeling software for pharmaceutical discovery and development, today reported financial results for its third quarter of fiscal year 2010 ended May 31, 2010 (3QFY10).

3QFY10 highlights compared with 3QFY09:

• Consolidated revenues increased 14.9% to record $3.1 million from $2.7 million
• Pharmaceutical software and services revenues up 17.1% to $2.32 million from $1.99 million
• Words+ subsidiary revenues up 9.1% to $794,000 from $728,000
• Gross profit up 13.6% to $2.42 million from $2.13 million
• SG&A increased 13.0% to $1.12 million from $0.99 million
• R&D expense decreased 20.4% to $234,000 from $294,000
• Income before income taxes up 25.2% to $1.11 million from $0.89 million
• Net income up 30.0% to $740,000 from $569,000
• Diluted earnings per share $0.044, an increase of 30.8% from $0.034

First nine months FY10 (9moFY10) highlights compared with 9moFY09:

• Consolidated revenues increased 16.5% to record $8.5 million from $7.3 million
• Pharmaceutical software and services revenues up 21.0% to $6.3 million from $5.2 million
• Words+ subsidiary revenues up 5.2% to $2.2 million from $2.1 million
• Gross profit up 17.4% to $6.5 million from $5.5 million
• SG&A increased 9.6% to $3.2 million from $2.9 million
• R&D expense decreased 12.0% to $748,000 from $849,000
• Income before income taxes up 44.6% to $2.7 million from $1.9 million
• Net income up 45.0% to $1.8 million from $1.2 million
• Diluted earnings per share $0.11, an increase of 51.1% from $0.07
• Cash increased to $8.6 million from $7.5 million at the beginning of the fiscal year
• Shareholders’ equity increased 21% to $12.8 million from $10.6 million at the beginning of the fiscal year

Ms. Momoko Beran, chief financial officer of Simulations Plus, said, “We’ve again experienced a new record quarter as well as a new record for the first nine months. Shareholder equity continued to grow to $12.8 million from $10.6 million at the beginning of the fiscal year. Cash increased to $8.6 million as of May 31 from $7.5 million at the beginning of the fiscal year, in spite of spending approximately $603,000, including brokerage fees, to repurchase about 257,000 shares of our stock on the open market. Since May 31, we have repurchased approximately 52,000 additional shares at an average price of $2.39, for about $127,000, including brokerage fees. We are authorized to repurchase a little over 690,000 remaining shares between now and next February, and it is currently our intention to do so. The Company does not disclose the specifics of its repurchase strategy, other than to say that our goal is to buy back as many shares as we can within the constraints imposed on repurchasing, and at prices management determines subject to market conditions.”

Walt Woltosz, chairman and chief executive officer of Simulations Plus, added, “Simulations Plus continues to set the standards for simulation and modeling software used in pharmaceutical research and development. GastroPlus™ Version 7.0 will be released during the fourth quarter, a major upgrade that will add three important market-expanding capabilities for drug-drug interaction, ocular drug delivery, and nasal/pulmonary drug delivery. New versions of ADMET Predictor™ and MedChem Studio™ (formerly ClassPharmer™) will also be released in the fourth quarter, marking the culmination of several man-years of effort that provide major improvements to all of these programs. We continue to receive consulting contracts at a steady pace that serve as evidence of our world-class expertise in absorption and pharmacokinetics. And our search for accretive acquisitions and for talented staff to expand our Life Sciences and Marketing and Sales teams is ongoing.”

About Simulations Plus, Inc.

Simulations Plus, Inc., is a premier developer of groundbreaking drug discovery and development simulation software, which is licensed to and used in the conduct of drug research by major pharmaceutical and biotechnology companies worldwide. We also provide a productivity tool called Abbreviate! for PCs and the Apple iPhone as well as an educational software series for science students in middle and high schools known as FutureLab^™. Our wholly owned subsidiary, Words+, Inc., provides assistive technologies to persons with disabilities, including the computerized communication system used by world-famous theoretical astrophysicist Professor Stephen Hawking. For more information, visit our Web sites at www.simulations-plus.com and www.words-plus.com .

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995 – With the exception of historical information, the matters discussed in this press release are forward-looking statements that involve a number of risks and uncertainties. Words like “believe,” “expect” and “anticipate” mean that these are our best estimates as of this writing, but that there can be no assurances that expected or anticipated results or events will actually take place, so our actual future results could differ significantly from those statements. Factors that could cause or contribute to such differences include, but are not limited to: our ability to maintain our competitive advantages, acceptance of new software and improved versions of our existing software by our customers, the general economics of the pharmaceutical industry, our ability to finance growth, our ability to continue to attract and retain highly qualified technical staff, our ability to identify and close acquisitions on terms favorable to the Company, and a sustainable market. Further information on our risk factors is contained in our quarterly and annual reports as filed with the Securities and Exchange Commission.

SIMULATIONS PLUS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
May 31, 2010 (Unaudited) and August 31, 2009 (Audited)
ASSETS
						May 31, 2010			August 31, 2009
Current assets
	Cash and cash equivalents					$	8,583,193		$	7,473,485
	Accounts receivable, net of allowance for doubtful accounts
		and estimated contractual discounts of $394,428 and $447,073					2,164,277			1,888,904
	Contracts receivable						169,346			79,565
	Income tax refund receivable						524,151			-
	Inventory						408,741			325,926
	Prepaid expenses and other current assets						101,332			158,738
	Deferred income taxes						384,492			338,516
			Total current assets				12,335,532			10,265,134
Capitalized computer software development costs,
	net of accumulated amortization of $4,321,641 and $3,843,743						2,154,995			1,942,893
Property and equipment, net							44,340			53,220
Customer relationships, net of accumulated amortization of $115,574 and $104,728							12,468			23,314
Other assets							18,445			18,445
				Total assets		$	14,565,780		$	12,303,006
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
	Accounts payable					$	281,387		$	199,218
	Accrued payroll and other expenses						520,463			552,431
	Accrued bonuses to officers						60,000			60,000
	Accrued warranty and service costs						40,731			43,236
	Accrued income taxes						247,614			-
	Deferred revenue						191,922			82,190
		Total current liabilities					1,342,117			937,075
Long-Term liabilities
	Deferred income taxes						432,761			795,140
			Total liabilities				1,774,878			1,732,215
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
		50,000,000 shares authorized
		15,852,464 and 15,700,382 shares issued and outstanding on May 31, 2010
		and August 31, 2009, respectively.					4,324			4,172
	Additional paid-in capital						5,981,591			5,572,411
	Retained earnings						6,804,987			4,994,208
			Total shareholders' equity				12,790,902			10,570,791
				Total liabilities and shareholders' equity		$	14,565,780		$	12,303,006

SIMULATIONS PLUS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended May 31,
(Unaudited)
		Three months ended								Nine months ended
		2010				2009				2010				2009
Net sales		$	3,118,936			$	2,713,524			$	8,505,707			$	7,303,536
Cost of sales			699,402				582,954				2,006,766				1,768,804
Gross profit			2,419,534				2,130,570				6,498,941				5,534,732
Operating expenses
Selling, general, and administrative			1,117,557				989,165				3,210,649				2,929,578
Research and development			234,318				294,284				747,741				849,484
Total operating expenses			1,351,875				1,283,449				3,958,390				3,779,062
Income from operations			1,067,659				847,121				2,540,551				1,755,670
Other income (expense)
Interest income			27,433				20,105				73,479				73,098
Interest expense			-				-				(303	)			-
Miscellaneous income			1,000				514				1,231				557
Gain on sales of property and equipment			969				-				1,993				-
Gain on currency exchange			14,955				20,233				130,149				70,449
Total other income (expense)			44,357				40,852				206,549				144,104
Income before provision for income taxes			1,112,016				887,973				2,747,100				1,899,774
Provision for income taxes			(371,903	)			(318,840	)			(936,321	)			(650,846	)
Net income		$	740,113			$	569,133			$	1,810,779			$	1,248,928
Basic earnings per share		$	0.05			$	0.04			$	0.11			$	0.08
Diluted earnings per share		$	0.04			$	0.03			$	0.11			$	0.07
Weighted-average common shares outstanding
Basic			16,023,000				16,051,133				15,832,791				16,222,867
Diluted			16,830,281				16,925,581				16,499,813				17,194,349