SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 2003 or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1937
For the transition period from _________ to _________
Commission file number: 000-21665
SIMULATIONS PLUS, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-4595609
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1220 W. AVENUE J
LANCASTER, CA 93534
(Address of principal executive offices including zip code)
(661) 723-7723
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former Name, Former Address and Former Fiscal Year, if Changed Since
Last Report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
The number of shares outstanding of the Issuer's common stock, par value $0.001
per share, as of July 14, 2003, was 3,411,881.
SIMULATIONS PLUS, INC.
FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED MAY 31, 2003
Table of Contents
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet at May 31, 2003 (unaudited) 1
Consolidated Statements of Operations for the three and nine
months ended May 31, 2003 and 2002 (unaudited) 2
Consolidated Statements of Cash Flows for the nine months
ended May 31, 2003 and 2002 (unaudited) 3
Notes to Consolidated Financial Statements (unaudited) 4
Item 2. Management's Discussion and Analysis or Plan of Operations
General 7
Results of Operations 14
Liquidity and Capital Resources 19
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 2. Changes in Securities 20
Item 3. Defaults upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20
Signature 21
Exhibit - Certifications 22
Item 1. Financial Statements
--------------------
SIMULATIONS PLUS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
May 31, 2003
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents (note 2) $ 103,600
Accounts receivable, net of allowance for
doubtful accounts of $23,643 845,164
Inventory (note 3) 197,352
Prepaid expenses 46,313
------------
Total current assets 1,192,429
------------
Capitalized computer software development costs,
net of accumulated amortization (note 4) 348,588
Furniture and equipment, net (note 5) 83,560
Other assets 10,150
------------
Total assets $ 1,634,727
============
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable 80,682
Accrued payroll and other expenses 246,455
Accrued warranty and service costs 42,698
Current portion of deferred income 18,616
Current portion of capitalized lease obligations 9,551
------------
Total current liabilities 398,002
------------
Deferred income 34,255
Capitalized lease obligations, net of current portion 2,673
------------
Total liabilities 434,930
------------
Shareholders' equity
Preferred stock: $0.001 par value, authorized
10,000,000 shares, no shares issued and outstanding 0
Common stock: $0.001 par value, authorized
20,000,000 shares, issued and outstanding 3,411,881 (note 6) 3,412
Additional paid-in capital 4,659,429
Accumulated deficit (3,463,044)
------------
Total shareholders' equity 1,199,797
------------
Total liabilities and shareholders' equity $ 1,634,727
============
The accompanying footnotes are an integral part of these statements.
1
SIMULATIONS PLUS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three and nine months ended May 31, 2003 and 2002
(Unaudited)
Three months ended Nine months ended
--------------------------- ---------------------------
05/31/03 05/31/02 05/31/03 05/31/02
------------ ------------ ------------ ------------
Net sales $ 1,260,592 $ 1,119,967 $ 3,458,137 $ 3,233,877
Cost of sales 414,299 373,064 1,118,892 1,078,706
------------ ------------ ------------ ------------
Gross profit 846,293 746,903 2,339,245 2,155,171
------------ ------------ ------------ ------------
Operating expenses:
Selling, general & administration 540,183 540,337 1,639,110 1,534,793
Research and development 73,801 94,929 264,984 270,452
------------ ------------ ------------ ------------
Total operating expenses 613,984 635,266 1,904,094 1,805,245
------------ ------------ ------------ ------------
Income from operations 232,309 111,637 435,151 349,926
Other income (expenses):
Interest income 37 1 72 16
Interest expense (3,046) (2,601) (5,674) (12,468)
Gain (loss) on sale of assets (2,312) 0 (2,312) 0
------------ ------------ ------------ ------------
Income before provision for income taxes 226,988 109,037 427,237 337,474
Provision for income taxes 0 0 0 0
------------ ------------ ------------ ------------
Net income $ 226,988 $ 109,037 $ 427,237 $ 337,474
============ ============ ============ ============
Basic net income per common share $ 0.07 $ 0.03 $ 0.13 $ 0.10
============ ============ ============ ============
Diluted net income per common share $ 0.06 $ 0.03 $ 0.11 $ 0.10
============ ============ ============ ============
Basic weighted average # of common
shares outstanding 3,411,390 3,408,331 3,409,527 3,408,331
============ ============ ============ ============
Diluted weighted average # of common
shares outstanding 3,716,906 3,408,331 3,716,906 3,408,331
============ ============ ============ ============
The accompanying footnotes are an integral part of these statements.
2
SIMULATIONS PLUS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended May 31, 2003 and 2002
(Unaudited)
Nine months ended
-----------------------
05/31/03 05/31/02
---------- ----------
Cash flows from operating activities:
Net Income $ 427,237 $ 337,474
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization of furniture and equipment 33,379 43,310
Amortization of capitalized software development costs 114,142 101,034
(Increase) decrease in:
Accounts receivable 83,073 (194,147)
Inventory 11,253 (18,097)
Other assets (6,600) (65)
Increase (decrease) in:
Accounts payable (65,016) (161,905)
Deferred revenue (4,605) (5,836)
Accrued expenses (63,309) 4,471
Accrued payroll for officers (198,916) 24,833
Accrued bonuses (54,057) 0
Accrued warranty and service costs 11,702 (2,186)
---------- ----------
Net cash provided by operating activities 288,283 128,886
---------- ----------
Cash flows from investing activities:
Purchase of furniture and equipment (56,059) (13,105)
Proceeds from the sale of equipment 1,559
Capitalized computer software development cost (161,955) (90,697)
---------- ----------
Net cash used in investing activities (216,455) (103,802)
---------- ----------
Cash flows from financing activities:
Payments on line of credit, net 0 (98,959)
Payments on capitalized lease obligations (8,976) (9,731)
Proceeds from exercise of stock options 4,676 0
---------- ----------
Net cash provided by (used in) financing activities (4,300) (108,690)
---------- ----------
Net increase (decrease) in cash 67,528 (83,606)
Cash and cash equivalents, beginning of period 36,072 166,652
---------- ----------
Cash and cash equivalents, end of period $ 103,600 $ 83,046
========== ==========
The accompanying footnotes are an integral part of these statements.
3
SIMULATIONS PLUS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1: GENERAL
------
As contemplated by the Securities and Exchange Commission under Item 310(b) of
Regulation S-B, the accompanying financial statements and footnotes have been
condensed and therefore do not contain all disclosures required by generally
accepted accounting principles. The interim financial data are unaudited;
however, in the opinion of Simulations Plus, Inc. (the "Company"), the interim
data include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement of the results for the interim periods. Results
for interim periods are not necessarily indicative of those to be expected for
the full year.
Note 2: CASH AND CASH EQUIVALENTS
------
The Company maintains cash deposits at banks located in California. Deposits at
each bank are insured by the Federal Deposit Insurance Corporation up to
$100,000. The Company has not experienced any losses in such accounts and
believes it is not exposed to any significant credit risk on cash and cash
equivalents.
Note 3: INVENTORY
------
Inventory is stated at the lower of cost (first-in, first-out basis) or
market and consists of computers and peripheral computer equipment.
Note 4: CAPITALIZED COMPUTER SOFTWARE DEVELOPMENT COSTS
------
Software development costs are capitalized in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 86, "Accounting for the Cost of
Computer Software to be Sold, Leased, or Otherwise Marketed." Capitalization of
software development costs begins upon the establishment of technological
feasibility and is discontinued when the product is available for sale. The
establishment of technological feasibility and the ongoing assessment for
recoverability of capitalized software development costs require considerable
judgement by management with respect to certain external factors including, but
not limited to, technological feasibility, anticipated future gross revenue,
estimated economic life, and changes in software and hardware technologies.
Capitalized software development costs are comprised primarily of salaries and
the purchase of existing software to be used in the Company's software products.
4
Amortization of capitalized software development costs is provided on a
product-by-product basis on the straight-line method over the estimated economic
life of the products, not exceeding three years. Management periodically
compares estimated net realizable value by product with the amount of software
development costs capitalized for that product to ensure the amount capitalized
is recoverable through revenues. Any excess of development costs to expected net
realizable value is expensed at that time.
Note 5: FURNITURE AND EQUIPMENT
------
Furniture and equipment as of May 31, 2003 consisted of the following:
Equipment $ 135,961
Computer equipment 327,855
Furniture and fixtures 52,704
Leasehold improvements 38,215
554,735
Less accumulated depreciation (471,175)
----------
$ 83,560
==========
Note 6: STOCKHOLDERS' EQUITY
------
STOCK OPTION PLAN
In September 1996, the Board of Directors adopted and the shareholders approved
the 1996 Stock Option Plan (the "Option Plan") pursuant to which a total of
250,000 shares of common stock were reserved for issuance. In March 1999, the
shareholders approved an increase in the number of shares that may be granted
under the Option Plan to 500,000. In February 2000, the shareholders approved
the number of shares to be granted under the Option Plan to be 1,000,000 shares.
Furthermore, in December 2000, the shareholders approved an increase in number
of shares that may be granted under the Option Plan to 1,250,000. The Option
Plan terminates in 2006, subject to earlier termination by the Board of
Directors.
As of May 31, 2003, 1,120,928 shares have been issued to various employees at an
exercise price equal to the fair market value of the Company's stock price at
the date of grant with five-year vesting periods. Also, a total of 6,206 shares
have been issued to the Board of Directors at exercise prices ranging from $1.20
to $5.25 with a three-year vesting period. As of today, 4,850 options have been
exercised.
Note 7: REVENUE RECOGNITION
------
The Company recognized revenues related to software licenses and software
maintenance in accordance with the American Institute of Certified Public
Accountants ("AICPA") Statements of Position No. 97-2, "Software Revenue
Recognition." Product revenue is recorded at the time of shipment, net of
estimated allowances and returns. Post-contract customer support ("PCS")
obligations are insignificant; therefore, revenue for PCS is recognized at the
time of shipment, and the costs of providing such support services are accrued
and amortized over the obligation period. The Company provides, for a fee,
additional training and service calls to its customers and recognizes revenue at
the time the training or service call is provided.
5
Note 8: INCOME TAXES
------
The Company uses the liability method of accounting for income taxes pursuant to
SFAS No. 109 "Accounting for Income Taxes."
Note 9: EARNINGS PER SHARE
------
Effective February 28, 1998, the Company adopted SFAS No. 128 "Earnings Per
Share."
Note 10: LINE OF BUSINESS
------
For internal reporting purposes, management segregates the Company into two
divisions as follows for the nine months and three months ended May 31, 2003 and
2002:
May 31, 2003
-----------------------------------------------------------------------------
Simulations
Plus, Inc. Words +, Inc. Eliminations Total
-----------------------------------------------------------------------------
Net Sales 1,703,358 1,754,779 3,458,137
Income (loss)
from operations 549,225 (114,074) 435,151
Identifiable assets 1,857,184 728,126 (950,583) 1,634,727
Capital expenditures 35,231 20,827 56,059
Depreciation and
amortization 109,018 38,503 147,521
-----------------------------------------------------------------------------
May 31, 2002
-----------------------------------------------------------------------------
Simulations
Plus, Inc. Words +, Inc. Eliminations Total
-----------------------------------------------------------------------------
Net Sales 1,448,288 1,785,589 3,233,877
Income (loss)
from operations 475,591 (138,117) 337,474
Identifiable assets 1,317,467 617,008 (589,051) 1,345,424
Capital expenditures 9,570 3,535 13,105
Depreciation and
amortization 122,676 21,668 144,344
-----------------------------------------------------------------------------
6
Item 2. Management's Discussion and Analysis or Plan of Operations
----------------------------------------------------------
FORWARD-LOOKING STATEMENTS
The following discussion should be read in conjunction with the financial
statements and the notes thereto appearing elsewhere in this quarterly report on
Form 10-QSB for the quarter ended May 31, 2003 (the "Form 10-QSB"). In addition
to historical information, this Form 10-QSB contains forward-looking statements.
The forward-looking statements contained herein are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
reflected in the forward-looking statements. Factors that might cause such
differences include, but are not limited to, those discussed in the section
entitled "Management's Discussion and Analysis or Plan of Operations." Readers
are cautioned not to place undue reliance on these forward-looking statements,
which reflect management's analysis only as of the date hereof. Simulations
Plus, Inc. undertakes no obligation to publicly revise these forward-looking
statements, or to reflect events or circumstances that arise after the date
hereof. Readers should carefully review the risk factors described in other
documents that the Company has filed and will continue to file from time to time
with the Securities and Exchange Commission.
GENERAL
BUSINESS
--------
Simulations Plus, Inc. (the "Company" or "Simulations Plus") and its wholly
owned subsidiary, Words+, Inc. ("Words+") produce two types of products: (1)
Simulations Plus, incorporated in 1996, develops and produces modeling and
simulation software for use in pharmaceutical research and for education, and
also provides contract research services to the pharmaceutical industry, and (2)
Words+, founded in 1981, produces computer software and specialized hardware for
use by persons with disabilities, as well as a personal productivity software
program called Abbreviate! for the retail market.
DESCRIPTION OF SIMULATION AND MODELING SOFTWARE
-----------------------------------------------
The development of simulation software involves (1) identifying and
understanding the underlying chemistry, physics, biology, and physiology of the
processes to be simulated, (2) breaking those processes down into the lowest
practical level of individual sub-processes at which the behaviors can be
well-represented mathematically, (3) developing appropriate mathematical
relationships/equations, and (4) converting them into computer subroutines. The
software subroutines representing these individual processes are then integrated
into an overall simulation program, with appropriate coordination between
modules and design of user-friendly interface for inputs and outputs. The
predictions of these programs are then compared to known results in order to
calibrate the simulations and to demonstrate the validity of the models as
useful tools for predicting new results.
The types of simulation software produced by the Company are based on the
equations of chemistry and physics that describe or "model" the behavior of
things in the real world.
7
The Company's GastroPlus(TM) pharmaceutical software simulates the movement,
dissolution/precipitation, chemical/metabolic degradation and absorption of
orally-dosed drug compounds in the gastrointestinal tract of humans and several
laboratory animal species, and with additional inputs, it also simulates the
blood plasma concentration-time history of the drug after it reaches the central
circulation. In 2001, the Company completed the development of, and is now
selling licenses for, an important new extension module for GastroPlus called
the Metabolism and Transporter Module. This module extends the basic simulation
to include enzyme-specific metabolism in both the liver and in intestinal walls,
as well as the effects of transporter proteins that line the intestinal tract
and serve to promote or inhibit drug absorption. In 2002, the Company released a
module called PDPlus(TM), which extends the utility of GastroPlus into
pharmacodynamic modeling, which is the modeling of how a drug affects the body
in terms of both therapeutic effect and adverse side effects. This extended the
market for GastroPlus into Clinical Pharmacology departments in addition to the
use it already enjoys in early discovery and middle development. Recent
developments have focused on improving the physiological model within GastroPlus
and adding the ability to simulate enterohepatic recirculation, which occurs
when a drug is absorbed into the blood, but is then removed by the liver and
secreted back into the intestinal tract via the gall bladder, only to be
absorbed again. Such behavior occurs often enough to warrant adding it to the
core simulation.
A second type of software consists of statistically significant models that
allow prediction of various properties of a chemical compound from just its
molecular structure. These models are not simulations, but instead are formed
from a variety of mathematical functions and relationships, including linear,
nonlinear, and artificial neural network models.
The Company's QMPRPlus(TM) program is the second type of program, and it
provides estimates for the values of several important physicochemical
characteristics of new drug-like molecules with only the structures of the
molecules as input. An optional module for this program predicts permeability in
a special line of cells called MDCK cells. This predictive model was developed
under a funded collaboration with the Affymax Research Institute, at that time a
division of Glaxo Wellcome. During 2002, the Company announced the release of a
powerful "4D Data Mining" module for QMPRPlus, which further extends the utility
of the software through enhanced data visualization and statistical analysis.
Both the MDCK module and the 4D Data Mining module are additional-cost options
to the program. Recent developments have included adding a prediction of the
fraction of standard dose sizes that would be absorbed, based on a small
simulation, and the addition of the prediction of ionization constants ("pKa's")
for molecules.
GastroPlus and QMPRPlus are used by almost every major and a number of smaller
pharmaceutical companies in the U.S., Europe, and Japan. The number of licensee
continues to grow each quarter, and revenues reflect the cumulative effect of
annual license renewals added to new sales.
8
The Company is now completing the development of one new core product called
QMPRchitect(TM), and is conducting research toward a new additional-cost module
for GastroPlus called PBPKPlus(TM).
PBPKPlus will be a module for GastroPlus that will enable the program to
simulate the distribution of drug to various tissues in the body, such as brain,
heart, lungs, pancreas, liver, spleen, and reproductive organs. The ability to
integrate such detail into GastroPlus will enable researchers to more accurately
predict the pharmacokinetic effects (what happens to the drug when it gets into
the body) and the pharmacodynamic effects (what happens to the body when the
drug gets into the body) of new drugs and new dosing regimens.
QMPRchitect will allow users to build their own ensemble artificial neural
network models using a highly sophisticated, state-of-the-art model-building
engine that automates the process of finding the most effective artificial
neural network models for a particular database, using the fast descriptor
engine that is part of QMPRPlus to generate the inputs needed to build the
model. In-house testing of QMPRchitect has demonstrated a reduction in the time
required to build very high quality ensemble artificial neural network (i.e.,
multiple artificial neural networks whose outputs are averaged) from 60-90 days
to as little as a single day. This significant reduction in both labor and
calendar time is expected to revolutionize artificial neural network model
building for structure-to-property predictions. Initial customer presentations
in the U.S., Europe, and Japan have received very enthusiastic responses.
Although the company expected to complete the development of QMPRchitect in the
third quarter, a rewrite of the software to eliminate the dependence on a
third-party software supplier and to speed up the program was undertaken in
mid-May. This effort has been successful, resulting in complete elimination of
the need for any third-party software, as well as eliminating the costs
associated with them. In addition, the speed of the program has been enhanced
significantly, with run times reduced by a factor of 40-50 over the previous
version for the largest data sets.
The Company's award-winning FutureLab(TM) science experiment simulations for
middle school and high school students incorporate the equations of chemistry
and physics for each experiment (optics, electrical circuits, gravity, universal
gravitation, ideal gases, etc.), and allow students to design and conduct their
own experiments in a virtual laboratory environment. Although development of
FutureLab software was discontinued in 1998, low-level sales have continued
through distributors in the U.S., U.K. Australia, and New Zealand.
PRODUCTS
--------
The Company's pharmaceutical software products provide cost-effective solutions
to a number of critical problems in pharmaceutical research, and also serve in
the education of pharmacy and medical students. The Company's pharmaceutical
software products and services to date are focused on the area of pharmaceutical
research known as ADMET (Absorption, Distribution, Metabolism, Elimination, and
Toxicity). The Company released its first pharmaceutical software product,
GastroPlus, in August 1998 and immediately received enthusiastic interest from
researchers in large pharmaceutical companies such as Astra, Glaxo Wellcome,
9
Pfizer, Pharmacia, The Roche Group, SmithKline Beecham and Zeneca. Since then,
the majority of the world's largest pharmaceutical companies and a steadily
growing number of smaller companies have licensed the software. Some of these
companies have merged to become single companies (e.g., AstraZeneca and
GlaxoSmithKline, Pfizer and Parke-Davis, and soon, Pfizer and Pharmacia), which
give the appearance of fewer customers, but the Company's software is licensed
on an annual basis by geographic location, so no actual loss in sales has
resulted from these mergers. In fact, several of these mergers have resulted in
increased licenses and new geographic locations as divisions who had the
software demonstrate its use to those who did not.
The Optimization Module for GastroPlus was released in November 1998. Two
additional modules, IVIV Correlation and PKPlus(TM) were released in November
2000. The Metabolism and Transporter Module was released in June 2001. The
PDPlus(TM) Module was released during the 4th quarter of last fiscal year.
The majority of new sales now include these additional extra-cost modules,
contributing significantly to the company's demonstrated revenue and earnings
growth. GastroPlus has now become the "gold standard" for simulation of oral
drug absorption and pharmacokinetics, and is in use throughout the industry in
the U.S., Japan, and Europe. Recent sales have included a number of drug
delivery companies (companies that design the actual tablet or capsule for a
drug compound that was developed by another company). Although these companies
are considerably smaller than the pharmaceutical giants, they can realize
significant savings in cost and time through accurate simulation of their drug
delivery technologies. The Company believes this part of the industry, which
includes hundreds of companies, represents major growth potential for
GastroPlus.
QMPRPlus (Quantitative Molecular Property Relationships), which can be used as a
companion program to GastroPlus or by itself, takes as inputs the structures of
molecules, and provides estimates for human intestinal permeability,
octanol-water partition coefficient (logP), solubility, diffusivity, blood-brain
barrier penetration, plasma protein binding, and volume of distribution. The
ability to predict these properties prior to running wet lab experiments allows
screening of undesirable compounds much faster and at much lower cost than using
traditional experimental methods.
Most of the estimated parameters generated by QMPRPlus are inputs to GastroPlus.
QMPRPlus thereby extends the utility of GastroPlus into early drug discovery,
during which pharmaceutical companies may not have even made many of the
molecules that have been identified as potential drug candidates. By providing
estimates of physicochemical properties from structure alone, QMPRPlus, by
itself or coupled with GastroPlus, allows researchers to rank order large
numbers of candidate compounds in terms of their potential for human intestinal
absorption. Because pharmaceutical companies are dealing with many millions of
compounds per year, and because the area of ADMET has become a bottleneck, ultra
high throughput screening on the computer ("IN SILICO") is becoming not just a
convenience, but a necessity.
10
In 1998, the Company executed a License Agreement with Therapeutic Systems
Research Laboratories, Inc. ("TSRL"), Ann Arbor, Michigan, to obtain exclusive
rights to TSRL's technology and database, including data from nearly 60
laboratory experiments to measure the intestinal permeability of drug compounds
in human and/or rat small intestines. As a part of this License Agreement, the
Company is also entitled to ongoing consulting assistance in the development and
further enhancement of the GastroPlus absorption simulation model from TSRL
staff, including Dr. Gordon Amidon. The Company believes that the strategic
advantage of exclusive access to TSRL's database, technology and expertise,
combined with the Company's now well-developed expertise in absorption,
pharmacokinetics, and pharmacodynamics simulation, have resulted in GastroPlus
becoming the de facto standard for oral drug absorption simulation and analysis
within the pharmaceutical industry. The Company is aware that other companies
have developed competitive software; however, based on customer feedback,
management believes there is no significant competition for GastroPlus at this
time. The Company believes that the addition of the Metabolism and Transporter
Module last year, the recently released PDPlus module, and ongoing upgrades of
the core simulation are advances in the state-of-the-art of oral drug
absorption, pharmacokinetics, and pharmacodynamics analysis. The PBPKPlus module
now in development will further extend the utility of GastroPlus within the
industry. The Company's recognized expertise in oral absorption and
pharmacokinetics is evidenced by the fact that Company staff members have been
invited speakers at over 30 prestigious scientific meetings worldwide in the
past two years, and they continue to be invited to present at a variety of
meetings worldwide. The Company conducts contracted studies for a number of
customers who prefer to have the studies run by the Company's scientists rather
than to acquire the software and train someone to use it.
CONTRACT RESEARCH SERVICES
--------------------------
The Company offers contract research services to the pharmaceutical industry in
the area of gastrointestinal absorption, pharmacokinetics, and related
technologies. The Company continues to perform study contracts for a variety of
pharmaceutical and biotechnology companies. These studies provide an additional
source of revenue for the Company, as well as a means to introduce the Company's
software products to new customers. These studies are also beneficial to the
Company to validate and enhance its products by studying actual data in the
pharmaceutical industry. The company recently completed two study contracts to
analyze drugs that are now in clinical trials. A services contract with a major
pharmaceutical company was recently signed. This company has numerous software
licenses, but desires additional consultation assistance from Company scientists
with certain complex simulation problems.
PHARMACEUTICAL SIMULATIONS SOFTWARE PRODUCT DEVELOPMENT
-------------------------------------------------------
In the area of simulation software for pharmaceutical research, the Company is
pursuing the development of additional modules for GastroPlus and the new
QMPRchitect core program. Although all of our development work cannot be
disclosed for competitive reasons, some of our development efforts include:
11
(1) PBPKPlus(TM) Module
-----------------------
The PBPKPlus Module for GastroPlus is in early development now. This module will
enable researchers to predict the amount of drug that reaches different body
tissues and organs, enabling more accurate estimation of therapeutic and adverse
effects for different dosing regimens. This is an important new capability
because it opens up the market to researchers who deal in later stage clinical
trials, and who routinely perform PBPK (physiologically based pharmacokinetic)
and PD (pharmacodynamic) analyses. Until now, these analyses were performed
using models that treated absorption and its related processes with simplified
models - often so simplified that calculations were in error. With PBPKPlus
integrated with the sophisticated absorption model in GastroPlus, researchers
will be able to perform more accurate simulations and analyses to better
understand how a drug partitions from the blood into different tissues and
organs. Without the ability to predict these effects, clinical trial costs can
soar when trials must be repeated to determine proper dosing levels. The Company
expects to release this additional-cost module later this year.
(2) Multiple Particle Size Dissolution Model
--------------------------------------------
The current dissolution model in GastroPlus uses a single "effective" particle
size. While this model has well represented most tablets, capsules, and
suspensions we have dealt with to date, formulation researchers know that real
dosage forms do not consist of particles that are all one size. Instead, there
is a distribution of particle sizes over some range from smaller than the
average size to larger than the average size. Smaller particles dissolve faster
than larger particles. For some drugs, this results in dissolution behavior that
is not well modeled with a single effective particle size. This new model will
allow formulation researchers to assess the effects of different particle size
distributions on dissolution and absorption.
(3) DDDPlus(TM)
---------------
The DDDPlus project was originally begin in 2000, and has proceeded at a slow
pace since, in between other higher priority projects. DDDPlus (Dose
Disintegration and Dissolution Plus) will simulate the in vitro disintegration
and dissolution of various forms of capsules and tablets, and will include the
effects of a variety of formulation excipients (additives that are not the
actrive drug, but which give a capsule or tablet desirable roperties such as
longer shelf life, better large-scale processing behavior, better disintegration
and dissolution, etc.). This tool will be a valuable asset for formulation
scientists as they search for optimum formulations that provide desirable
properties at minimum cost.
(4) QMPRPlus(TM) upgrades
-------------------------
We continue to add new molecular descriptors and new predicted ADMET properties
to QMPRPlus(TM). Last year we completed the development of a new,
additional-cost "4D Data Mining" module.
12
The number of molecular descriptors has been increased in beta versions of
QMPRPlus by about 25%. These new descriptors include over 60 electrotopological
indices that the Company believes will be valuable in building new models for
pharmacokinetic and metabolism properties, as well as certain other descriptors
that will be described at a later date. The company is now finalizing the next
release of QMPRPlus, which will offer an additional-cost module for the predict
of fraction absorbed at doses of 1, 10, 100, and 1000 milligrams. The next
release will also offer another additional-cost module for the prediction of
ionization constants ("pKa's") - an important property for which very few
predictive software programs exist. The integration of pKa prediction with the
other properties predicted by QMPRPlus will enhance its value and convenience
and provide smoother transition from QMPRPlus to GastroPlus for early drug
discovery.
(5) QMPRchitect(TM)
-------------------
QMPRchitect is now in final testing and documentation. This new core product
will allow researchers to build their own ensemble artificial neural network
models from their own data using a highly sophisticated, state-of-the-art
process for identifying critical descriptors and training ensemble artificial
neural network models in the most efficient way. Users can have such new models
included in the output of QMPRPlus along with the existing predicted ADME
properties. Through the automation provided in the proprietary software for this
module, we have demonstrated a reduction in the time to build high quality
ensemble artificial neural network models from many weeks to hours or days. The
company has received strong indications of interest from customers for this new
capability. The Company expects to release this new core product during the
fourth fiscal quarter.
DISABILITY PRODUCT DEVELOPMENT
------------------------------
The Company's wholly owned subsidiary, Words+, Inc. has been an industry
technology leader for over 20 years in introducing and improving augmentative
and alternative communication and computer access software and devices for
disabled persons and intends to continue to be at the forefront of the
development of new products. The Company will continue to enhance its major
software products, E Z Keys and Talking Screen, as well as its growing line of
hardware products. The Company announced the release of its new version of E Z
Keys for the new Microsoft XP operating system at the "Technologies for Persons
with Disabilities Conference" in Los Angeles in late March 2002. The Windows XP
version of the Company's Talking Screen software has just been completed at the
time of this writing. The Company will also consider acquisitions of other
products, businesses and companies that are complementary to its existing
augmentative and alternative communication and computer access business lines.
13
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED MAY 31, 2003 AND 2002.
The following table sets forth the Company's consolidated statements of
operations (in thousands) and the percentages that such items bear to net sales:
(Due to rounding, the numbers appearing in the following table may not foot;
please refer to the Company's consolidated statements of operations.)
Three Months Ended
---------------------------------------------------------------
05/31/03 05/31/02
------------------------------ -----------------------------
Net sales $1,260 100.0% $1,120 100.0%
Cost of sales 414 32.9 373 33.3
--------------- -------------- ------------- ---------------
Gross profit 846 67.1 747 66.7
--------------- -------------- ------------- ---------------
Selling, general and administrative 540 42.9 540 48.2
Research and development 74 5.9 95 8.5
--------------- -------------- ------------- ---------------
Total operating expenses 614 48.7 635 56.7
--------------- -------------- ------------- ---------------
Income from operations 232 18.4 112 10.0
Interest expense (3) (0.2) (3) (0.3)
Loss on sale of assets (2) (0.2) 0 0
--------------- -------------- ------------- ---------------
Net income $227 18.0% $109 9.7%
=============== ============== ============= ===============
NET SALES
Consolidated net sales increased $140,000, or 12.5%, to $1,260,000 in the third
fiscal quarter of 2003 from $1,120,000 in the third fiscal quarter of 2002.
Simulations Plus, Inc.'s sales from pharmaceutical and educational software
increased approximately $110,000, or 21.9%; and Words+ net sales for the third
quarter increased approximately $30,000, or 4.9% compared to the third quarter
of fiscal 2002. The increase in the pharmaceutical software sales is
attributable to a combination of additional license sales to existing customers,
new customers, new modules, and four major upgrades to existing products.
Management attributes the increase in Words+ sales primarily to a contract with
Intel to develop a Windows XP-compatible version of the 1985 Words+ Equalizer
software for Professor Steven Hawking and an increase in TuffTalker sales with
the new Windows XP version of our Talking Screen software.
COST OF SALES
Consolidated cost of sales increased $41,000, or 11.0%, to $414,000 in the third
fiscal quarter of 2003 from $373,000 in the third fiscal quarter of 2002. The
percentage of cost of sales decreased by 0.4%. For Simulations Plus, the cost of
sales decreased $1,000, or 0.2%. Cost of sales as a percentage of revenues
decreased by 3.0%. Management attributes the decrease in the cost of sales
primarily to a decline in royalty expense due to the fact that more sales were
generated from additional modules for GastroPlus, and sales of QMPRPlus, which
are not subject to the royalty that is paid on the core GastroPlus product,
compared to the sales mix in the third fiscal quarter of 2002. For Words+, the
cost of sales increased $42,000 or 14.3%; and in term of the percentage of cost
14
of sales, it increased by 4.4%. Approximately $19,000 in Production wages was
understated erroneously in the 3rd fiscal quarter of 2002. It was posted into
the account of General & Administrative salaries & wages. Restating this error,
the percentage of cost of sales for the 3rd fiscal quarter of 2002 would be
51.1%, resulting in a 1.4% increase, which reflects the changes in product mix
sold. The percentage of sales generated by product items with lower profit
margins was greater than for items with higher profit margins.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
There was no change in consolidated selling, general and administrative expenses
between the third fiscal quarters of 2003 and 2002. For Simulations Plus,
selling, general and administrative expenses increased $43,000, or 25.1%
primarily due to increases in travel expense, investor relations fees, which
began in the last fiscal quarter of this year, a transfer of administrative
personnel wages from Words+ to Simulations Plus for internal tracking purposes,
and payroll-related expenses such as 401(k) and payroll taxes. For Words+,
expenses decreased $43,000, or 11.7%, due to decreases in administrative
personnel wages, depreciation expense, travel expense, trade shows, and building
repairs. Although there were increases in commission expense and insurance
expense, overall decreases in expenses outweighed increases.
RESEARCH AND DEVELOPMENT
The Company incurred approximately $149,000 of research and development costs
for the two companies during the third quarter of 2003. Of this amount, $75,000
was capitalized and $74,000 was expensed in this period. In the third quarter of
2002, the Company incurred $129,000 of research and development costs, of which
$34,000 was capitalized and $95,000 was expensed. The increase of $20,000, or
15.5%, in research and development expenditure from the third quarter of 2002 to
the third quarter of 2003 was primarily due to a new hire and a small increase
in wages and payroll-related expenses.
INTEREST EXPENSE
Interest expense for the third fiscal quarters of 2003 and 2002 were the same.
Interest expenses represent payments for long-term leases.
NET INCOME (LOSS)
The consolidated net income for the three months ended May 31, 2003 increased by
$118,000, to a profit of $227,000 in the third fiscal quarter of 2003 compared
to a profit of $109,000 in the third fiscal quarter of 2002. Management
attributes this increase primarily to strong increases in sales, while
maintaining fixed costs such as selling, general and administrative expenses.
15
COMPARISON OF NINE MONTHS ENDED MAY 31, 2003 AND 2002.
The following table sets forth the Company's consolidated statements of
operations (in thousands) and the percentages that such items bear to net sales:
(Due to rounding, the numbers appearing in the following table may not foot;
Please refer to the Company's consolidated statements of operations.)
Nine Months Ended
------------------------------------------------------------
05/31/03 05/31/02
--------------------------- -----------------------------
Net sales $3,458 100.0% $3,234 100.0%
Cost of sales 1,119 32.4 1,079 33.4
----------- --------------- ------------- ---------------
Gross profit 2,339 67.6 2,155 66.6
----------- --------------- ------------- ---------------
Selling, general and administrative 1,639 47.4 1,535 47.5
Research and development 265 7.7 270 8.3
----------- --------------- ------------- ---------------
Total operating expenses 1,904 55.1 1,805 55.9
----------- --------------- ------------- ---------------
Income from operations 435 12.6 350 10.8
Interest expense (6) (0.2) (13) (0.4)
Loss on sales of assets (2) (0.1) 0 0
----------- --------------- ------------- ---------------
Net income $427 12.3% $337 10.4%
=========== =============== ============= ===============
NET SALES
Consolidated net sales increased $224,000 or 6.9%; to $3,458,000 for the nine
months ended May 31, 2003 compared to $3,234,000 for the nine months ended May
31, 2002. Simulations Plus, Inc.'s sales increased approximately $255,000, or
17.6%; however Words+, Inc.'s sales decreased approximately $31,000, or 1.7% for
the nine months ended May 31, 2003. Management attributes the increase in
pharmaceutical software sales partially to a Roche order in November for a new
product package called the "ADME Partners" program, which provides virtually
unlimited licenses for the use of GastroPlus, QMPRPlus and all modules coupled
with product training and consultation for one year. Additionally, the average
order size has increased with new orders and renewals from existing customers
due to additional module licenses. Management attributes the decrease in Words+
sales primarily to the delay in development of Talking Screen for Windows XP,
which was completed at the end of the second quarter of FY03, as well as overall
slowing in the economy during this time period. The company began receiving
revenue from Talking Screen in the 3rd fiscal quarter of 2003.
COST OF SALES
Consolidated cost of sales increased $40,000, or 3.7%, to $1,119,000 in the
third fiscal quarter of 2003 from $1,079,000 in the third fiscal quarter of
2002. As a percent of total revenues, cost of sales decreased by 1.0%. For
Simulations Plus, the cost of sales decreased $1,000, or 0.5%. As a percent of
revenues, cost of sales decreased by 2.2%. A significant portion of the cost of
sales was amortization of capitalized software development costs, which produced
16
a 2.4% decrease; however, this decrease was partially offset by an increase in
royalty cost. For Words+, the cost of sales increased $41,000, or 4.6%.
Expressed as a percentage of sales, the change in cost of sales for Words+
between the nine months operations ended May 31, 2003 and 2002 was an increase
of 3.1%. Management attributes this percentage increase for Words+ primarily to
decreased sales of higher margin items and increased sales of lower margin items
during the first nine months of FY 2003. It is also due to the fact that sales
through governmental funding (e.g., Medicare, Medicaid) increased in proportion
to total sales. Governmental funding requires significant discounts, resulting
in a higher cost of sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Consolidated selling, general and administrative expenses increased $104,000, or
6.8%, to $1,639,000 for the nine months ended May 31, 2003 from $1,535,000 for
the nine months ended May 31, 2002. For Simulations Plus, selling, general and
administrative expenses increased $193,000, or 38.8% primarily due to increases
in commissions paid in accordance with an exclusive alliance agreement, new
investor relations and public relations services, transfer of administrative
personnel wages from Words+, general increases in salaries over last year,
payroll related expenses, and health insurance expenses. These increases
outweighed decreased expenses for depreciation and legal/accounting fees. For
Words+, expenses decreased $89,000, or 8.6%, due primarily to transfer of
administrative personnel wages to Simulations Plus, payroll related expenses,
decreases in travel expenses, trade shows, catalogs, depreciation expense, and
building repairs. These decreases outweighed increases in commission expenses,
health insurance, rent and utilities.
RESEARCH AND DEVELOPMENT
The Company incurred approximately $427,000 of research and development costs
for both companies for the nine months ended May 31, 2003. Of this amount,
$162,000 was capitalized and $265,000 was expensed in this period. In the same
period of 2002, the Company incurred $354,000 of research and development costs,
of which $84,000 was capitalized and $270,000 was expensed. The increase of
$73,000, or 20.6% in research and development expenditures for the nine months
ended May 31, 2003 compared to the same period of 2002 was due to a new hire,
payroll increases for existing staff members, and costs associated with a
project to develop a Windows XP version of our 1985 Equalizer software under
contract with Intel for Professor Steven Hawking.
INTEREST EXPENSE
Interest expense for the nine months ended May 31, 2003 decreased by $7,000, or
53.8%, to $6,000 for the nine months ended May 31, 2003 from $13,000 for the
nine months ended May 31, 2002. This decrease is attributable primarily to a
decrease in interest on the Company's revolving line of credit, and the
completion of payments on one lease.
17
NET INCOME
Net income for the nine months ended May 31, 2003 increased by $90,000, or
26.7%, to $427,000 for the nine months ended May 31, 2003 compared to $337,000
for the nine months ended May 31, 2002. Management attributes this increase
primarily to the significant increase in pharmaceutical software and services
revenues while maintaining expenses relatively low with respect to revenue
increases.
18
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of capital have been cash flows from its
operations and a bank line of credit. The Company has available a $500,000
revolving line of credit from a bank. Interest is payable on a monthly basis at
the bank's prime rate plus 1.5%. At May 31, 2003, the outstanding balance under
the revolving line of credit was zero. The revolving line of credit is secured
by the Company's assets consisting of tangible personal property (except goods
in transit) located or domiciled at the Company's address.
Beginning in August 1998, certain executive officers and managers accepted
reduced salaries on a temporary basis in order to protect the cash assets of the
Company. The unpaid portions of salaries were accrued and were repaid at time as
management deemed the Company's cash flow and cash reserves were sufficient to
make such payments without adverse effects to the Company's financial position.
All such accrued and unpaid salaries due to the Company's executive officers
were repaid as of May 31, 2003.
The Company believes that existing capital and anticipated funds from operations
will be sufficient to meet its anticipated cash needs for working capital and
capital expenditures for the foreseeable future. Thereafter, if cash generated
from operations is insufficient to satisfy the Company's capital requirements,
the Company may have to sell additional equity or debt securities or obtain
expanded credit facilities. In the event such financing is needed in the future,
there can be no assurance that such financing will be available to the Company,
or, if available, that it will be in amounts and on terms acceptable to the
Company. If cash flows from operations became insufficient to continue
operations at the current level, and if no additional financing was obtained,
then management would restructure the Company in a way to preserve its
pharmaceutical and disability businesses while maintaining expenses within
operating cash flows.
19
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
In the normal course of business, the Company is subject to
various lawsuits and claims. The Company believes that the
final outcomes of these matters, either individually or in the
aggregate, will not have a material effect on the financial
statements. The Company is not involved in any such litigation
at this time.
Item 2. Changes in Securities
---------------------
None.
Item 3. Defaults Upon Senior Securities
-------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None.
Item 5. Other Information
-----------------
None.
Item 6. Exhibits and Reports on form 8-K
--------------------------------
(a) Exhibits
None
(b) Reports on Form 8-K
None.
20
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: July 14, 2003 Simulations Plus, Inc.
By: /s/ Momoko Beran
--------------------------
Momoko Beran
Chief Financial Officer
21
STATEMENT PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
BY
PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
REGARDING FACTS AND CIRCUMSTANCES RELATING TO EXCHANGE ACT FILINGS
I, Walter Woltosz, certify that:
--------------
1. I have reviewed this quarterly report on Form 10-QSB of May 31, 2003;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 45 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this annual
report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: July 14, 2003
/s/ Walter Woltosz
--------------------------------
Walter S. Woltosz
Chief Executive Officer
22
STATEMENT PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
BY
PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
REGARDING FACTS AND CIRCUMSTANCES RELATING TO EXCHANGE ACT FILINGS
I, Momoko Beran, certify that:
------------
1. I have reviewed this quarterly report on Form 10-QSB of May 31, 2003;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 45 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this annual
report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: July 14, 2003
/s/ Momoko Beran
--------------------------------
Momoko A. Beran
Chief Financial Officer
23
Item 6 (a) - Exhibit
Regulation FD Disclosure
On July , 2003, Simulations Plus, Inc. (the "Company" "we," us" or
"our") filed our Quarterly Report on Form 10-QSB for the fiscal quarter ended
May 31, 2002 (the "Report") with the Securities and Exchange Commission (the
"Commission"). In connection with the filing of the Report, we have furnished
the certifications set forth below to the Commission, to accompany the Report,
as required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002:
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Walter S. Woltosz, Chief Executive Officer of Simulations Plus, Inc.
(the "Company"), do hereby certify, in accordance with 18 U.S.C. Section 1350,
as created pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) the Quarterly Report on Form 10-QSB of the Company for the third
quarter ended May 31, 2003 (the "Report") fully complies with the
requirements of Section 13(a) or 15(d), as applicable, of the
Securities Exchange Act of 1934, as amended; and
(2) the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of
the Company.
Simulations Plus, Inc.
Dated: July 14, 2003 By: /s/ Walter S. Woltosz
-------------------------
Walter S. Woltosz
Chief Executive Officer
The foregoing certification is being furnished herewith solely to accompany the
Report, pursuant to 18 U.S.C. 1350, and is not being filed for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be
incorporated by reference into any filing of the Company with the Securities and
Exchange Commission, whether filed prior to or after the furnishing of the
foregoing certification, regardless of any general or specific incorporation
language in any such filing.
24
Item 6 (a) - Exhibit
Regulation FD Disclosure
On July , 2003, Simulations Plus, Inc. (the "Company" "we," us" or
"our") filed our Quarterly Report on Form 10-QSB for the fiscal quarter ended
May 31, 2003 (the "Report") with the Securities and Exchange Commission (the
"Commission"). In connection with the filing of the Report, we have furnished
the certifications set forth below to the Commission, to accompany the Report,
as required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002:
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Momoko A. Beran, Chief Financial Officer of Simulations Plus, Inc.
(the "Company"), do hereby certify, in accordance with 18 U.S.C. Section 1350,
as created pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) the Quarterly Report on Form 10-QSB of the Company for the third
quarter ended May 31, 2003 (the "Report") fully complies with the
requirements of Section 13(a) or 15(d), as applicable, of the
Securities Exchange Act of 1934, as amended; and
(2) the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of
the Company.
Simulations Plus, Inc.
Dated: July 14, 2003 By: /s/ Momoko Beran
-------------------------
Momoko A. Beran
Chief Financial Officer
The foregoing certification is being furnished herewith solely to accompany the
Report, pursuant to 18 U.S.C. 1350, and is not being filed for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be
incorporated by reference into any filing of the Company with the Securities and
Exchange Commission, whether filed prior to or after the furnishing of the
foregoing certification, regardless of any general or specific incorporation
language in any such filing.
25