Thank you very much, Renée. And just to make sure, are you seeing the full-screen display, or are you seeing the PowerPoint with the small slides on the side?

All right. Well, welcome, everyone, to our Third Quarter Fiscal Year 2012 Conference Call and Webinar.

Just to keep our attorneys happy, I'll read the Safe Harbor statement as usual.

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.

Okay, highlights for the third quarter ended May 31, 19th consecutive profitable quarter. I think it makes about the 39th or 40th out of the 41 or 42.

That's about a 10-year time period. And I think without the Words+ subsidiary, it would be 100% profitable throughout in all of those quarters over 10 years or more.

Sales increased 5%. It is a record third quarter at $2.77 million compared to $2.64 million last year.

That's not a huge increase. But again, we've been making up for collaboration and consulting work that we had last year that we did not have this year, and we're making up for that with software licenses, which are annual licenses rather than short term as the consulting collaboration regimen tends to be.

So that's a good thing. That means with our renewal rate always well above 90%, we can expect to see the continued compounded growth trend that we see with our annual license business model.

Gross profit up 6.8% to $2.33 million from $2.19 million. SG&A is up as we've mentioned earlier with the sale of the Words+ subsidiary at the end of November.

We do have overhead expenses, now that rather than be split between the 2 business entities are entirely -- or almost entirely absorbed by Simulations Plus by the Pharmaceutical business. And you can see some of the costs there.

Health and dental insurance just keeps going up, workers' compensation. We have been spending more on marketing and sales, doing more shows, more travel.

And that's what generates more business after about a 6- to 12-month lead time, typical in our sales cycle. Labor costs go up, contract labor.

And of course, the building lease and related costs now that are all going into SG&A.

There is a small offset from the remaining Words+ staff of about 20%. But that -- rather than offsetting the SG&A, 100% of that gets added to SG&A.

And then their 20% contribution is reported later under Other Income. So it makes the SG&A go up a little bit more than it might otherwise.

R&D investments, up 129%. We are putting a lot into R&D.

Our malaria new chemical entity project, as well as some other things that we're working on, have increased the R&D investments. And this is the expense portion, not including capitalized software development costs.

Expense portion goes up because of the -- I'm seeing the network warning sign here. I hope I'm getting through to everyone.

The expenses for the new chemical entity project are not capitalizable. So those go directly to the R&D expense account, and you're seeing that reflected here.

Now we are investing in -- and we believe that's going to be a very fruitful investment.

Net income reduced 17.5% due to the SG&A increases and R&D investments and also due to an unusual tax calculation that I'll talk about in a few minutes.

Diluted earnings per share affected because of that to 5 -- about 5 -- a little under $0.055 from about a little over $0.065 last year. It looks a little worse because of the rounding.

It looks like it was a $0.02 drop but actually, it was about a $0.013 per-share drop.

First 2 ongoing cash dividends were paid during this quarter, one in March, one in May, for about a -- a total of about $1.6 million. The balance sheet, nonetheless, remains very strong.

Cash increased 30.3% over last year's third quarter to just under $13 million from just under $10 million. Net after the dividend payment of $1.6 million, our cash today is back to $13.3 million.

So we're generating cash at a rate a bit faster than the dividend payouts as we had expected.

Our shareholder's equity increased 13% over last year's third quarter to $15.6 million from $13.8 million. And of course, we continue to have no debt.

And if we can get this slide to change, there we go. And for the 9 months, sales up 6.8%, a record 9 months at $7.81 million roughly from $7.31 million.

Gross profit up about 9.1% to $6.6 million from about $6.1 million. SG&A up a smaller percent over the 9 months than it was over the 3 months, only about 15% up, and again, similar factors as you can see here plus a couple of more factors that entered in prior to the third quarter.

The legal fees for attempted acquisition of the Entelos assets, bankruptcy court back in the first quarter, final payment to our M&A consultants for the sale of our Words+ subsidiary and so on.

As a percent of revenues, SG&A increased to 32.6% from 30.3%. Net income from continuing operations decreased 1% to about $2.5 million from also about $2.5 million, only 1% change there.

Total net income, including the discontinued operations, increased 5.9% to about $2.7 million from about $2.5 million. And diluted earnings per share increased for the 9 months, 6.2% to $0.17 from $0.16, with that rounding off there.

Again, a strong balance sheet, the same items as I covered under the 3-month items.

So here's our income statement. A lot of these is repetitive with what you heard in the previous slides.

I'll just pause here for a second. I'll just emphasize again the actual change in earnings per share was about $0.013 per share, even though the rounding mix, it looks like $0.02 per share.

The provision for taxes was kind of an odd behavior between last year's third quarter and this year's third quarter. During the last year, we had underestimated the amount of R&D tax credits for the first 2 quarters.

And the third quarter is when our actual tax return gets filed. And that's when you actually get the final calculations from the tax consultants and you know what the credits are really going to be.

As a result, we ended up -- to catch up, we ended up having to take a much larger R&D tax credit in last year's third quarter than we would normally have done. This year's third quarter, we took the normal tax credit, which was a smaller tax credit and resulted in higher income taxes by about $100,000 or $120,000.

Momo will correct me if I'm off too far there. And so it makes it appear that we're less profitable than we were last third quarter, but it's actually just an artifact of the R&D tax credit calculation.

I'm getting some background noise from somebody's microphone.

For the 9 months, same, again, numbers as we had on the previous slide, just a little bit easier to see them in a tabular form here. And these slides will be available to you.

Earnings, again, up for the 9 months and earnings per share up for the 9 months.

Our revenues by fiscal year, you can see the trend that we've had over the past few years. Beginning in 2009, we got very aggressive with marketing and sales.

John DiBella took over running marketing and sales at that time. And we've just done quite well here.

You can see for the first 9 months of this year, we've actually beat the entire fiscal year, the year before last. So we are continuing on this upward trend, and we expect that to continue.

We see no reason that it shouldn't.

Looking at the quarterly -- revenues by quarter, and these are all pro forma, so this is just for Simulations Plus without the Words+ subsidiary. You can see the seasonality that we always experience.

Second and third quarters being the strongest quarters; fourth quarter being the summer, that's June, July and August, the quarter that we're in now, still a nice slope of increasing revenues. And you'll see increasing earnings as well.

But the summer quarter because there's so many vacations and especially because in Europe and in Japan, things get pretty quiet during the summer, this is self-perpetuating. We do use an annual license business model for our software licenses.

So when someone renews in the second quarter -- or when someone licenses in the second quarter, they're going to renew in the second quarter year after year, with a few exceptions that sometimes bump over to the next quarter. But in general, these are faintly consistent patterns, and you can see they've held now for quite a few years.

Gross profit by fiscal year. You can see a steady trend here, 9 months for this year already above a year before last for the entire fiscal year.

Gross profit by fiscal quarter, again, showing the same tendencies -- seasonalities, I should say, as you would see of course for total revenues.

EBITDA by fiscal year, the same trend. Nine-month EBITDA this year, again, ahead of the entire fiscal year 2010.

And EBITDA by fiscal quarter, the same sort of trends that we've seen.

Net income by fiscal year. And so you can see our net income already this year exceeds any other year in history.

We're only 9 months through it, so we definitely -- we already have a record fiscal year. And certainly, that's going to continue with the fourth quarter and especially, now that we've signed 2 collaboration agreements -- funded collaboration agreements that I'll talk about in a minute, which will add to the software licenses.

We've been cruising along for about a year or so with no funded collaboration revenues. And now we'll be adding those to the software licenses, which have in the past made up for the missing collaboration funding and plus added the growth rate that we've seen.

So we would expect to see higher growth rates because of the funded collaborations adding to software licenses.

Our net income by quarter. Again, this is a little bit of an anomaly here for this quarter.

The $870,000 shown here because of the tax situation that I mentioned earlier compared to last year.

Our cash remains strong. As I mentioned, as of today, it's about $13.3 million.

We'll have another dividend payment coming up in August. The board meeting is later this month and the actual dates will be set.

But you can expect about 3 months from the last payment which, I believe, was early in May, May 8 or so. It should be around August 8 or somewhere in that timeframe for the next dividend payment.

Shareholders' equity continues to grow nicely. You can see about a $1.6-million-or-so growth in the shareholders' equity over the last 9 months just during the first 3 quarters.

For a review of our overall products and services, I wanted to add this slide for maybe some of the new folks who are on the call this time. Those of you that have been around for a while are familiar with the products.

We have products that range from the early discovery phase all the way into clinical trials for the pharmaceutical industry. We also have some things that are used across other industries.

The ADMET Predictor program, for example, is used in general chemistry industry -- chemical industry and also in the food industry and cosmetics. And that's true also of the GastroPlus and could be true of the others as well.

I'm showing one product here, MembranePlus, in gray. That is something that we began development of probably, I think, 7 or 8 years ago.

And we had to put it on hold. Well, we brought it up, resurrected it.

It is in development again, and I expect we'll have a release of that new product later this year. MembranePlus is a program that simulates laboratory experiments that measure the permeability of drugs through cell membranes.

And these are very expensive experiments. The interpretation of the data is often difficult.

We had -- one of our Japanese colleagues a few years ago had 26 Japanese country -- companies that measured permeability for the same compounds in supposedly the same experiment and got very different results. They didn't even rank order the same in terms of permeability.

And it has a lot to do with the conditions of the experiment. MembranePlus will simulate that so that you can input the experimental conditions and understand why the experimental conditions in one company might favor one drug over another in terms of higher permeability and yet the same -- supposedly same experiment but with some different conditions in another company might have them reversed in terms of which one is higher.

So these experiments are thousands of dollars per compound. And so by having a tool that allows the scientist to either before the experiment set up the conditions the most ideal way for a particular drug, or after the experiment to determine what that experiment is really telling them, we believe that is going to be a valuable tool.

ADMET Predictor is our program that takes the structures of molecules like this little drawing that you see on the left up here. And from that structure, it calculates a lot of different numbers we call descriptors -- around 400 descriptors that would allow the program to break this molecule down into some individual characteristics that can then be fitted to particular properties, such as how soluble is the drug, how permeable is it, will it go through the blood-brain barrier, does it bind to proteins in the blood, is it going to be toxic in any of about 30 or more different ways that we are able to predict to date and so on.

And so this is a very valuable tool because the chemist can sit at his computer and draw these molecules that never existed in the universe and run them through ADMET Predictor and get predictions for about 140 different properties in just a matter of seconds. And this means the chemist and medicinal chemist who's trying to design that molecule can change what's on that molecule.

We see an oxygen here with a hydrogen attached. Well, you might decide, "Well, I'm going to take that oxygen off of there and just leave a carbon on the end of that like I have over here and see if that's any better for different properties that I'm looking at."

And so they can do that manually by adjusting the structure, or they can use computer software that automatically generates thousands to even millions of molecules that run them through ADMET Predictor. And it will calculate those properties at the rate of about 200,000 compounds per hour on PC, just a normal high-speed personal computer.

So it's a phenomenal tool. It's very fast.

It's always judged best in accuracy in the published comparison studies and the scientific literature and very, very powerful tool for screening out that molecules. If I'm going to generate 1 million molecules using a piece of software and I can predict 140 things about each one of those millions before lunch, then I can throw out the vast majority of them because most of them will have quite a few things that will be not desirable to take them forward.

And you never even have to make that molecule. You can just draw it and you never have to synthesize the molecule.

So you save months of time and expense to get rid of the worst compounds and then hone in on the best.

MedChem Studio and MedChem Designer. These are tools used in both data mining, where in actual pharmaceutical research, they will make a bunch of these molecules, run them through laboratory tests to see how well they can bind to a specific target protein that's a target for a certain drug, just as we've done in our malaria new chemical entity product -- project.

We designed molecules to see if they would bind to a certain enzyme and inhibit the growth of the malaria parasite. Well, in typical high-throughput screening, there may be thousands or tens of thousands or even more of these molecules that are run through these experiments in test tubes or small wells.

You've probably seen videos of these. And the data that comes out of that is what is often fed into MedChem Studio, so that we mine that data and we find out what is it about structures that bind well to the target compared to those that don't.

Maybe there's a part of the substructure, like this ring, and then this link over here to an oxygen and maybe over here to this carbon. Maybe that little part of the molecule is common to a series of molecules that all bind very well to the target.

We call that a substructure. And we're looking for the largest possible substructure that can create a class of those molecules.

So maybe out of 10,000 molecules, you find a few hundred that share a certain part of the molecule, and that whole class looks like it's a pretty active class. Well, that maybe tells you something about how the small molecule binds into the large protein.

MedChem Designer is a tool that allows the user to design these molecules. It's a sketching program, but it can call ADMET Predictor as also MedChem Studio can.

And so as the chemist is adjusting the molecular structure, they can click on the button for ADMET Predictor and see the 140 properties of that new molecule as he makes some changes to the different atoms.

He can also, now, click on another button that will call ADMET Predictor and it will generate the predicted metabolites. So once this molecule goes into an animal or a human or into certain cells in the laboratory, enzymes can change this molecule.

They might remove or add a group like this OH group here. They might break the molecule at a certain point.

And now you've got a new molecule, the metabolite, which may itself be an active molecule against the target. Or it could have some serious adverse effects.

Many toxicities caused by drugs are not caused by the parent molecule, but they're caused by the metabolites of the molecule. So now the chemist has the ability, not only to assess the 140 properties for the parent, but also to predict the structures of the different metabolites and which enzymes would cause them to be metabolized and then predict the 140 properties for each one of those metabolites to see if there's some adverse properties of those.

Very powerful combination, and this is what we used to design the malaria molecules.

GastroPlus, our flagship product, is the simulation program that simulates how drugs are absorbed in the gastrointestinal tract. It also has the capability of simulating drug absorption through the eye, ocular absorption, or through nasal and pulmonary absorption for inhaled products.

It is the leading program of its type in the field, very complex program, very sophisticated program. We conduct many training courses for GastroPlus, both basic training, we began earlier this year, and advance training that we began about 2 years ago.

And those training courses are a separate profit setter and have been well attended and very, very well reviewed.

DDDPlus is a program somewhat like MembranePlus. It simulates laboratory experiments.

But in the case of DDDPlus, it simulates laboratory experiments for how tablets and capsules are dissolved in the laboratory experiment. And so this, again, is a way of either designing the experiment or analyzing the data that comes from the experiment.

And finally, we offer consulting services and collaborations. Consulting, we distinguish as working on a specific drug project with a drug company.

We've done a number of consulting contracts over the years with top 5 pharma, who actually have GastroPlus. These almost always involve GastroPlus at this point.

But even though they have GastroPlus and have been running it for 10 years, they don't run it the way we do. We run it all the time.

We see very many complex analyses. And so when they get into trouble and have data they don't understand or just get overloaded and need some help, they'll give us a call and we'll do the consulting work.

The collaborations are different. That's not where we're working on a specific drug project, but more where someone says, "Hey, you know, I like your GastroPlus program a lot, but it doesn't do absorption through the skin.

So how about if we pay you to add that, and we'll guide how we want it to look and feel. But we'll fund you to do that."

And so we're doing that right now. And another company said, "You know, we've got a pretty nice model in GastroPlus for absorption in the oral cavity."

That's lingual, meaning on top of the tongue; sublingual, underneath the tongue, like a nitroglycerin tablet is typically put under the tongue; or what they call a buccal patch, which is something that sticks to the inside of your cheek. And so that's the oral-cavity dosing.

And another very large pharmaceutical company a few months ago said, "We'll pay you to enhance that model. We've -- we're very interested in that.

And so we'll fund a collaboration. We'll provide data and expertise from our own scientists to work with you to enhance that capability in GastroPlus."

So those are the 2 new funded collaborations that we have ongoing now. We've just begun those within the last month.

And so you'll see the first financial impact in the fourth quarter.

Recent enhancements. Because all of our major programs, GastroPlus, MedChem Studio and MedChem Designer, can now link into ADMET Predictor in the background, we had to coordinate the releases of these.

And so you see all 3 of these new releases announced here, 4 of them actually, were done in May. And GastroPlus, we expanded the drug-drug interaction module.

We expanded the pharmacodynamic modeling. That's what happens to your body when the drug gets into your body, so how do you respond in terms of the therapeutic response or perhaps even an adverse affect.

We expanded the ocular delivery model and the nasal and pulmonary delivery models. And that was a major release.

It took, I think, over a year since the last major release of 7.0 but a lot of very, very nice improvements now in our flagship program.

ADMET Predictor. Again, quite a number of new changes and especially in how it links back to MedChem Designer and MedChem Studio for the metabolite prediction and property prediction that's used in either of those 2 programs.

MedChem Designer and MedChem Studio, and again, some major changes. Quite a few downloads of our MedChem Designer program, which is a free program, over 3,000 of those have been downloaded in the past about 12 months, I think, since we brought that up around a year.

That's a free program. That's the one that allows you to draw the molecule.

And then if you want to have all the 140 predictions of ADMET Predictor, you need to license that. We did quite a bit in the MedChem Studio to improve the processing speed.

And we added the -- this should be taken off to be available soon. I didn't update my slide there.

That is available now in these new releases, prediction of the metabolite structures.

DDDPlus, not a lot of work on that one. We've been focused so much on the other programs that we've just done some minor maintenance.

The last release of that was 4.0 in July -- in June, sorry, of 2011.

In marketing and sales, we've just added our first field salesperson, Anu Sharma, who is someone with a significant amount of experience in sales of chemical design software. She has been a medicinal chemist in the industry, has been a salesperson for one of the other companies.

And so we're very glad now to have someone to work more on the -- what we call the cheminformatics tools. These are the ADMET Design Suite, which is MedChem Studio, MedChem Designer and ADMET Predictor.

She just began July 1. So we're expecting to see some impact there on the cheminformatics side here in the coming months.

Our conferences and scientific meetings are, of course, where we get most of our leads. During the third quarter alone, we did 17 meetings in the U.S., Europe and Asia.

We had a total of 18 posters, presentations and publications during the first 3 quarters of the new year, something like 80 over the last 4 or 5 years. Different meetings and publications -- I'm sorry, not meetings, different publications, posters, and presentations.

So we're quite active in getting out there and telling the story.

I mentioned the training workshops. We began basic GastroPlus workshops, did the first one in March of this year.

I think it was in Boston, very well attended and very well reviewed. And we're adding our first cheminformatics training workshop.

So this will be dealing with our cheminformatics tools, the ADMET Design Suite. And our first one will be in the fall in Boston again.

Boston and Cambridge has become a very bustling area for pharmaceutical research and not hard to get to from other companies on the eastern seaboard.

We continue with our strategic digital marketing initiatives. This is Facebook, LinkedIn and things like that, our HTML emails.

I mentioned our collaborations. We are about one year into our 5 year collaboration with the FDA, Center for Food Safety and Applied Nutrition, and beginning to build toxicity models.

And we put out our first toxicity model with the release of ADMET Predictor 6.0. It was a rat cancer model -- rat carcinogenicity model.

We consider -- continue doing the consulting studies. This exposes software to new groups, as well as reinforcing the relationships that we have with our larger customers, where they have the software and again, the 2 funded collaborations that I mentioned.

These are both approximately one-person year each, one full-time equivalent each for most of the year. I think they're both just under a year.

We believe that the industry shift that we've been observing, this continuing software tools are constantly gaining wider acceptance. We see more and more companies.

We have 13 new customers just during the third quarter. And this is both completely new companies, as well as new departments within existing large customers, which are also considered new customers.

Our food safety collaboration, I mentioned, we have a very large amount of data for many, many substances, over 70,000 substances that can be in foods either as additives or contaminants. I won't dwell on this unless there's some questions.

But basically, this says take the structures that the FDA has where they have actually measured certain toxicity. Usually only a few hundred to maybe a few thousand have been measured against any one toxicity, which means most of these 70,000 molecules were not measured for that toxicity.

So you take the ones that have been measured, build a predictive model using ADMET Predictor and it's built in the ADMET Modeler and then predict the remaining ones. And then the worst ones, you'll go out and test to verify that they are really, in fact, are as bad as the predictions say.

The malaria project. We talked about this before.

We said, "We believe in our tools. We believe in ADMET Predictor, MedChem Studio, MedChem Designer and GastroPlus."

And so we decided last year -- almost a year ago, to put our money where our mouth is. We said, "We're going to actually make some molecules.

We're going to design them, and we're going to make them. And we're going to test them and see if we're really as good as we think these tools really are."

Prior to this quarter, 5 molecules were received and were tested. And all 5 showed potency at less than 1 micromolar concentration for the drug-sensitive strain.

That's the one that responds to current drugs. And additional testing was done against the drug-resistant strain, that's resisting current medications.

And again, 2 of those molecules showed a potency below 1 micromolar, 1 millionth of a mole, which is a pretty low concentration. And there are drugs on the market that are higher than 1 micromolar effective concentration.

But the goal is usually to get down in the, what we call, the nanomolar range. That's less than a millionth.

That's a billionth, a nanomolar.

While we received 4 new molecules and finally just got the results yesterday on those, all 4 are also active although not as powerful and not as active as the ones that we have here. But what's really remarkable is that we now have 9 molecules, and every single one of them hit the target to some degree.

Some not as potent as others, but they all affected the growth of the parasite.

GlaxoSmithKline, we did have a question from one of our investors, who mentioned that the GlaxoSmithKline product called RTS,S. This is a -- this is not a small chemical molecule.

This is an antibody type or biologic, we call it a protein. And these are in Phase III trials.

And it's looking very good. They've seemed to reduce the risk of children experiencing clinical malaria by 39% to 62%.

That's outstanding. On the other hand, there is still the remaining 51% to 38% that were not prevented from getting malaria.

This is a vaccine. So it's taken to prevent malaria.

So there's still those who contract malaria and for whom an alternative treatment would be needed. And that's where something like the molecules that we have designed would come in.

Now these are the molecules we've designed would never be the actual drug. They are what's called lead compounds or lead candidates.

And lead candidates are something that gives the medicinal chemist a head start to say, "All right. I'm getting close, but I still need to modify these molecules to get everything the way I need it to be."

In the case of our molecules and the most active molecules are metabolized at a pretty fast rate. So you'd have to keep taking the medication very frequently, which is not desirable.

And so we need to modify those structures. We're now going to go out to some of the organizations that fund malaria research and propose that perhaps they would like to fund taking these molecules further and work with us perhaps even on some other therapeutic targets besides malaria.

So in summary, for the third quarter and the 9 months, the financial performance continues our profitable trend. The higher SG&A that we have was expected after the sales of Words+, and we're feeling that the sales of Words+ on the other hand is simplified and focus the business.

Our margins increased about 10%, reporting and auditing much simpler. Instead of waiting until the very last day, we're coming in a few days earlier now with the our 10-Qs, because it is a little bit easier to do just the one company.

We are continuing to invest both in expanding our Life Sciences team and in our projects like the new chemical entity for malaria project. We have 2 new PhD's that will be starting in August.

We are continuing other interviews. We basically know that we're sitting on a fair amount of cash, and we're going to put it to work as we have with the malaria project and some of the other initiatives that we haven't made public yet, but also by continuing to hire smart people.

We have the philosophy that if someone shows promise, that they're a bright person and they're motivated and have the right personal chemistry to get along with other folks, we'll hire them and find something for them to do. We certainly have enough things on our strategic planning list that we have not been able to get to that we can support a number of new folks.

And we have more room in the building now since we have a few empty offices left from the move out of some of the Words+ folks.

Also our Life Sciences team, as -- for those of you who have been around a while know, they support our marketing and sales efforts. We have a small marketing and sales group, but our scientists get out there.

They go to these shows. These 60 or 70 shows a year that we're doing are done primarily by the scientists with support from -- or to support the marketing and sales staff.

And so as the new scientist comes on board and gets up to speed and is able to properly describe and understand our products, then they start taking part. And we have even more people that are able to go out there and expand the sales effort.

Our new field sales manager was at it again. So we've expanded the marketing sales team there.

We're spending more of our staff time, which means the scientists up here are marketing and sales. And so that does increase SG&A.

But then 6 to 12 months downstream, that's where we see the increase in sales typically.

I mentioned the new training workshop, the fact that we're globally recognized as a leader for scientific expertise, innovation, as well as customer support. And we continue our strong cash position and no debt.

Okay, I went in a little bit longer than I intended to. So I'll now go immediately into questions and answers.

And I always have a problem with reading these questions, so I'm going to see if I can make this work.

First question, malaria drug, how substantive is this?

Well, I think I've explained that already. These are lead molecules.

And the point is we've generated these lead molecules at a small fraction of the time and cost that would normally be required. And every single one of them inhibited the parasite to some degree, some of them at a very healthy potency that would be the kind required for a drug, some of them not quite so strong.

But the fact that 9 out of 9 molecules that were tested inhibited the target is quite remarkable, especially for a small software company that's never done this before. To give you an idea, we began with a database that was produced by GlaxoSmithKline.

That database was generated by testing over 2 million molecules against the malaria parasite, out of which, about 13,000 or about 0.7% inhibited the growth of the target at a reasonable level. So 0.7% out of 2 million and we hit it with a 100% of the molecules that we designed and built.

Next question. The quarter was a bit light.

Are there any signs of a broader sales slowdown occurring in your markets?

No, I wouldn't say that. I mean, there are -- in the industry, as you well know, there are changes going on.

But what we've typically seen is even with the companies that are consolidating, the license fees go up. They're adding more modules, they're adding more programs.

There is one site that was announced it's going to be closing, the Roche Nutley site in Nutley, New Jersey. I don't know yet when that's going to exactly take place and where those folks will go.

One of the good things about something like that is sometimes we get to pick up some good employees and bring them on to Simulations Plus. But they may relocate to other locations on the East Coast.

What were consulting revenues in the quarter? And what, if anything, can you do to grow that business?

I'm going to need some help on that one, either Momo or John.

The consulting revenue, as a percentage of the total revenue, was only around -- approximately 0.3%.

Okay. So that's one of our lowest quarters for consulting.

Consulting is a cyclical business. When someone -- it's kind of like the restaurant business.

You never know when someone is going to walk through the door and place an order. And so we are continuing with our shows.

One of the banner ads that we use -- the pull-up displays that we use emphasizes our consulting capabilities. And so it's one of those things.

You just keep going out there and getting the message out that you do this sort of thing. And sooner or later, you get people to call you.

It's very difficult to predict the consulting level of the business because it is an on-demand kind of business.

Let's see. In the past, you mentioned auxiliary revenue opportunities coming from your basic training courses.

Are you making any traction here?

Yes, we are. Every one of our training courses has been well attended.

We did -- let's see, we did our first GastroPlus in Cambridge, Massachusetts, across the river from Boston in March. We did 2 -- was it 2 or 3 in China, John?

Two.

Two?

Yes, one in Beijing, one in Shanghai.

Yes. And then we did advanced training courses in Germany, as well as in Durango, Colorado, all in the last 12 months.

So yes, we are definitely making traction. And although we started out with the advanced GastroPlus training courses to make sure that those who obtained this software knew how to use it and knew which modules they needed, we began that way.

But we quickly realized that, gee, we're bringing in folks who already have licensing software. Maybe we should also bring in folks who haven't licensed it and give them the basic training so they would want to license it.

And so yes, we're gaining traction there, not only making a profit off the training, but also increasing our licenses. When you see these new licenses, new customers, 13 in the last quarter, for example, and I think similar numbers in previous quarters, some of those are coming from training courses.

Any progress being made in terms of receiving funds for malaria research from the Bill & Melinda Gates Foundation?

No, we are actually in a process now of putting together a proposal. We'll be going to the Gates foundation, undoubtedly to GlaxoSmithKline, maybe to 1 or 2 other groups and seeing if -- now that we've demonstrated what can be done with these tools and with our internal chemistry expertise, seeing if we can get some of that external funding.

I feel pretty optimistic about that, but you never know until you actually get together with the folks, make your presentation and your proposal and then see where you go from there.

Organic growth rate of licensing has been about 15%. Will this continue or accelerate?

Well, I think my guess, and it's strictly a guess, is that it is going to at least continue. And now that we've added Anu in the cheminformatics side, I would hope that it would accelerate.

We -- as we look at the untapped markets that we have, I truly believe the cheminformatics side of the business is just scratching the surface. There is more competition there.

There are probably 15 to 20 competitors for ADMET Predictor, for example. But the advantage we have is we consistently come out #1 in predictive accuracy.

We just, again, demonstrated how well the tools work by going out, designing some brand-new molecules, getting them synthesized and tested and getting 100% hit rate. That's got to open eyes and it does.

I was in Japan in May, for example, and we visited, oh gosh, probably 15 companies. And I think probably about 10 of those wanted to know how did we do it, how did we do the malaria project and have the success we had.

So people are standing up and taking notice. Again, our sales cycle is 6 to 12 months.

In Japan, it's much longer because of the fiscal year mentality that they have. They work on an April 1 to March 31 fiscal year.

So if they like what you have this year, you just might get an order after next April 1. If they've already made their budget for next year, it might be the April 1 after that.

It's an interesting culture, but that's how it works.

What is the value in time period for the 2 new collaborations recently announced?

It's about a year, maybe 10 months to a year. And the value is about one full-time equivalent.

The full-time equivalent is in the couple of hundred thousand to $250,000 range in the pharmaceutical industry.

Given the number of conferences attended over the last 2 years, how large is your database of potential customers?

Gosh, I don't know. John, can you comment our database of potential customers?

I don't have exact numbers, but it's a very healthy pipeline. There's no question.

And I do know that it has increased by about maybe 20% over the past year. So going to these conferences has definitely helped us to fill and maintain a very healthy pipeline.

But I don't have the number of potential customers. There's a lot.

Okay. I'm sure it's in the thousands, whether it's in the tens of thousands, I wouldn't know.

I don't think it's that many.

Yes, but certainly in the thousands.

Okay, how many new customers were added in the quarter?

13. I covered that.

Can you achieve double-digit revenue growth in fiscal year '13, given the addition of the 2 new collaboration agreements?

I believe, without a doubt, double-digit growth in earnings. Whether we can get double-digit growth in software, I think so, because we're hitting about 15% already in software growth.

So I'd say, absolutely I would expect that. We're doing it already.

It's just that it's not reflected in the top line because we had to make up the collaboration and the consulting revenue that we didn't have in previous like quarters.

Do you anticipate R&D expense to remain in the $230,000 to $260,000 per quarter?

Probably up and down. It's one of these things when you're doing something like the malaria project, you generate your molecules, you go out for quotes, you select your contractor and depending on their success rate, they may hit you with a bill in a certain quarter or they may delay until they're their successful and hit you in the next quarter.

So you may have a quarter that dips down and another one that several bills come in at once. So -- but I think that's a reasonable number.

What is the next step for the NCE program and what might it cost?

Well, the next step right now is to put together a proposal of some sort and go to the Gates Foundation, go to GSK, go to -- we pick our targets, whoever we think might be interested in funding this type of project, whether it's for malaria or TB or Parkinson's or any number of other diseases. And there are quite a number of foundations that deal with various diseases.

And then see if we can bring in some outside funding. If we can, that could be quite substantial.

The Gates Foundation last year funded, I think, it's University of South Florida, it was a small university in Florida, to the tune of about $5.5 million to work on some malaria molecules. And as I recall, what I read, their progress was no greater, if as much as what we've made already in our project.

That doesn't say by any means that we're going to suddenly get a $5.5 million check out of the Gates Foundation. But it does say that they fund this type of work.

And we're doing this type of work in a way that's unique. And you might consider it high risk, high payoff.

I think the risk is not super-high risk. I think because of the nature of the tools, the risk has been reduced and the payoff could be quite substantial.

So that -- I believe this capability of designing new molecules for specific targets is something that has a tremendous potential, and I really plan to push that. Doing another project, like another target, let's say, we choose a different target, maybe tuberculosis or Parkinson's or something, where we have a known protein target and some high-throughput screening data that we can use to start with, it probably would cost about the same as what we've done.

I think we've put on the area of around $120,000 in the malaria project, not counting our time. That's the actual outside expenses and then add to that our time.

So under $200,000 for sure, probably significantly under that total.

What was the tax cost for selling software in India?

Well, the Indian government is flat. I think it's a 10% tax on anything that's sold there.

And you cannot charge a customer for that. They just basically say, "If you're going to sell software in our country, we're going to charge you 10% of your retail cost as a government tax."

Is that right, Momo, 10%?

Actually, 20%.

20%. Oh, my gosh.

Well, it's -- what are you going to do? Either don't sell there, thumb your nose at them or you just take your 80% and be happy that you got a -- at least, you got a sale in India.

It's a very -- it's the only country that's doing that to us. But what can you do?

What is your view on how drug development may be impacted by implementation of the health care law?

I really don't know. That's something I've been trying to discern whether it's going to have a significant effect or not.

Certainly, if the drug companies are not able to recoup their R&D costs because -- or to some level because of lower drug costs. Already we're at a point where a blockbuster drug, a really good drug like Lipitor or Viagra or think of other blockbuster drugs, has to pay for all of the other drugs that failed in development.

And you've probably seen publications that say the average drug development program is $1 billion to $1.5 billion in 10 to 15 years. But it turns out that -- I believe it was Forbes did a study and said, "Well, rather than looking at what it costs to develop drug X, let's look at how much each company spent over 1.5 decade or 2 decades," I think it was.

And then -- more than that, I think it was maybe 20 or 30 years. And then how many new drugs actually got to market?

And what they found was that the smallest cost was on the order of $3.5 billion to $4 billion. And that was, I think, Amgen or Genentech, one of them.

The largest cost, as I recall, was AstraZeneca. The average cost for a new AstraZeneca drug over that time period was $12.5 billion.

Well, if the health care program ends up not allowing companies to charge enough for the successful drugs to make up for all the failures that are so prevalent in this field, this is such a difficult field. There is far more failures.

Out of every 5,000 drugs that comes out of discovery, you might get one that makes it as an approved drug. And out of every drug that's approved, I've heard 2 different statistics, 1 out of 23 and 1 out of, I think, 12 ever pay for their own development costs in their entire marketing history.

And so you can see, it's a very tough business to be in. And most people have no idea how tough it is.

And of course, we all don't want to pay $50 a pill for a special drug. But if you realize the economics of the industry, you realize it's just unsustainable unless you can recoup those very, very expensive development costs in a very risky business.

Do you have an estimate for SG&A expense as a percent of sales going forward?

I'm going to guess it's going to be about where we're looking now, which is in the 30% to 32%, I believe it was, on the 9-month basis. That's just a guess, but I think that's probably as good a guess as any at this point in time.

Malaria project. Is this purely a demonstration project?

Or can -- will it serve to help lever up consulting?

Again, it is a demonstration, not only of the software, but also of our own expertise in using our software to design something. So I would hope to see some consulting on the discovery side.

There is more and more consulting on the discovery side being outsourced. So hopefully, we'll be able to benefit from that.

How long do you think it would take to see revenue from the NCE compounds you already have? And do you plan to try and create more NCE compound?

We won't get any revenue from these specific compounds. In other words, we're not going to be able to sell these particular compounds.

What we might be able to do is patent molecular structures and other similar structures that could be derived from them. And then that may turn out to be a source of revenue.

But we're not there yet. I won't make any promises.

Can you give an idea of what kind of revenue collaboration deals will provide and when?

Yes, I've done that.

When was the last time you raised prices on ADMET Predictor and GastroPlus? And what percent was the increase?

It was in January of 2010, if I remember right. Momo or John, correct me.

And that was in the 10% to 15% range. Is that right?

That sounds right, yes.

Okay. And that's the last question I have.

Okay. We'll hold 1 minute and see if any other questions come in.

Do we still have attendees? I still see 29 attendees are listed.

I'm looking to see if anybody has got their hand raised on line. I don't see any.

And we've gone about an hour now. So -- well, thank you, all, those who did hang in for the hour.

It was a long call this time. And I appreciate your interest in Simulations Plus.

The company remains financially strong, scientifically very strong, very well respected. You're going to see the growth.

I think we're quite confident that we're doing the right thing at the right time for what the pharmaceutical industry needs. And we're starting to get into some other industries like the food industry, cosmetics and chemistry.

This recording will be available online, and I think Renée has a summary now that will give you the information. Thank you very much.

Actually, I'm filling in for Renée. Thank you, Walt.

That concludes today's conference call and webinar. If you missed any part of today's presentation, the playback will be available at our website, www.simulations-plus.com.

Thanks so much for joining and have a great day.