8-K

UNITED STATES

SECURITIES AND EXCHANGE

COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)

May 1, 2017

Simulations Plus, Inc.

(Exact name of registrant as specified in its charter)

California	001-32046	95-4595609
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

42505 10th Street West, Lancaster, California 93534-7059

(Address of principal executive offices, including zip code)

661-723-7723

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company     ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 1.01 Entry into Material Definitive Agreement.

Stock Purchase Agreement

On May 1, 2017, Simulations Plus, Inc., a California corporation (the “Company”), entered into a Stock Purchase Agreement (the “Agreement”) with DILIsym Services, Inc., a North Carolina corporation (“DILIsym”), the shareholders of DILIsym (the “DILIsym Shareholders”) and Brett A. Howell, the representative of the DILIsym Shareholders (the “DILIsym Shareholders Representative”), each, a “Party,” and collectively, the “Parties.”

Pursuant to the terms of the Agreement, and subject to the satisfaction or waiver of the conditions set forth in the Agreement, the Company shall acquire all of DILIsym’s outstanding capital stock and, in exchange, shall pay to the DILIsym Shareholders: (1) Five Million Dollars ($5,000,000) payable at the Closing (as defined in the Agreement), subject to certain adjustments and holdbacks as provided in the Agreement; and (2) certain Earn-Out (as defined in the Agreement) payments, to be measured by the earnings of DILIsym before income taxes, payable following the Closing, as more particularly described in the Agreement (the “Acquisition”).

Pursuant to the terms and subject to the conditions of the Agreement, at the Closing, DILIsym will become a wholly owned subsidiary of the Company.

In the Agreement, DILIsym has made certain representations and warranties to the Company and the parties agreed to certain covenants. Among the covenants set forth in the Agreement, neither DILIsym, the DILIsym Shareholders nor any of their representatives may participate in any discussions or negotiations with, or provide any information to, any person or entity with respect to any potential acquisition transaction or enter into any agreement with respect to such a transaction. Further, each of the DILIsym Shareholders has agreed to enter into a noncompetition agreement with the Company, each of the officers and directors of DILIsym have agreed to resign immediately prior to the Closing and the DILIsym Shareholders have agreed to take, or cause DILIsym to take, all actions necessary to cancel, rescind and/or exercise all stock options of DILIsym outstanding, whether or not exercisable, whether or not vested as of the Closing, which are outstanding immediately prior to the Closing.

The Agreement includes customary representations, warranties and covenants by the Parties. Each Party has agreed, among other things, (i) to generally conduct its business in the ordinary course consistent with past practice during the interim period between the execution of the Agreement and the Closing (other than agreed actions to be taken in anticipation of the Closing); (ii) not to engage in certain types of transactions during this period; and (iii) to secure all necessary approvals to ratify the Agreement and the Acquisition.

Consummation of the Acquisition is subject to various closing conditions, including, (i) the absence of any law, injunction, judgment or ruling enjoining or prohibiting the Acquisition; (iii) the accuracy of the representations and warranties made by the Parties immediately prior to Closing; (iv) the performance by the parties in all material respects of their covenants, obligations and agreements under the Agreement; (v) the absence of any material adverse changes to the businesses and operations of the Company or DILIsym; and (vi) the completion and delivery of audited financial statements of DILIsym to the Company along with the delivery of a certificate certifying that, among other things, the audited financial statements of DILIsym (A) present fairly in all material respects the financial position, assets and liabilities of DILIsym; (B) are in accordance with the books and records of DILIsym and do not reflect any transactions which are not bona fide transactions; (C) make full and adequate disclosure of, and provision for, all material obligations and liabilities of DILIsym; and (D) do not include any assets or liabilities of any other Person (as defined in the Agreement).

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The Agreement contains customary termination rights for the Parties, including: (i) by mutual consent of the Company and the DILIsym Shareholders’ Representative; (ii) by the Company or the DILIsym Shareholders’ Representative, upon a material breach of any representation, warranty, covenant, or agreement on the part of any other Party, as set forth in the Agreement; (iii) by either the Company or the DILIsym Shareholders’ Representative, if there is any decree, judgment, injunction, or other order of any governmental entity that is final and non-appealable and that restricts, prevents, or prohibits the consummation of the Acquisition; or (iv) by either the Company or the DILIsym Shareholders’ Representative if the Closing shall not have occurred on or before June 30, 2017.

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

The Nominating Committee of the Company’s Board of Directors (the “Board”) nominated Dr. Daniel Weiner to fill the vacancy on the Board that had been vacated upon the retirement of Dr. David D’Argenio on November 28, 2016. The Board unanimously voted to appoint Dr. Weiner to join the Board effective May 1, 2017. He will hold this position until the next annual meeting of the Company’s shareholders or until his successor is elected and qualified, subject to his earlier resignation or removal. Dr. Weiner was chosen for his extensive expertise and his experience in quantitative systems pharmacology software development and model-based drug development, along with his many years of executive management experience. It is expected that Dr. Weiner will be named as a member of the Audit Committee as well as the Nominations and Compensation committees of the Board. There is no arrangement or understanding between Dr. Weiner and any other person pursuant to which Dr. Weiner was selected as a director of the Company.

Dr. Weiner also serves on the Board of Directors of DILIsym. Dr. Weiner owns 5,000 shares of DILIsym’s common stock (less than one percent of DILIsym’s outstanding shares). At the closing of the Acquisition, Dr. Weiner will receive approximately $64,000 in consideration of the sale of his shares of DILIsym to the Company. Dr. Weiner does not have any other direct or indirect material interest in any existing or proposed transaction to which the Company is or may become a participant required to be disclosed by Item 404(a) of Regulation S-K under the Securities Exchange Act of 1934, as amended. Other than the Company’s formal plan for compensating its directors for their services, whereby each independent director receives $2,000 per meeting of the Board attended, 5,000 non-qualified stock options per fiscal year, and an annual stipend of $9,000, there are no plans, contracts or arrangements or amendments to any plans, contracts or arrangements entered into with Dr. Weiner in connection with his election to the Board, nor are there any grants or awards made to Dr. Weiner in connection therewith.

Item 7.01 Regulation FD Disclosure

On May 1, 2017, the Company issued a press release announcing that it has entered into the Agreement with DILIsym. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated herein by reference.

On May 1, 2017, the Company issued a press release announcing that Dr. Weiner had been appointed to the Board effective May 1, 2017. A copy of the press release is attached hereto as Exhibit 99.2 and incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

(d)       Exhibits

99.2 Press release Dated May 1, 2017

99.2 Press release Dated May 1, 2017

The information in this Current Report on Form 8-K furnished pursuant to Item 7.01, including the exhibit thereto (the “Item 7.01 Information”) is not deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (“Exchange Act”), or otherwise subject to the liabilities of that section, and such information is not incorporated by reference into any registration statements or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof, regardless of the general incorporation language contained in such filing, except as shall be expressly set forth by specific reference to this filing.

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By providing the Item 7.01 Information, the Company makes no admission as to the materiality of the Item 7.01 Information. The Item 7.01 Information is intended to be considered in the context of the Company’s filings with the Securities and Exchange Commission (the “SEC”) and other public announcements that the Company makes, by press release or otherwise, from time to time. The Company undertakes no duty or obligation to publicly update or revise the Item 7.01 Information, although it may do so from time to time as its management believes is appropriate. Any such updating may be made through the filing of other reports or documents with the SEC, through press releases or through other public disclosure

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

This Current Report on Form 8-K may contain forward-looking statements that are made pursuant to the safe harbor provisions of Section 21E of the Exchange Act. The forward-looking statements in this Current Report on Form 8-K are not historical facts, do not constitute guarantees of future performance and are based on numerous assumptions which, while believed to be reasonable, may not prove to be accurate. Any forward-looking statements in this Current Report on Form 8-K do not constitute guarantees of future performance and involve a number of factors that could cause actual results to differ materially, including risks more fully described in the Company’s most recently filed Quarterly Report on Form 10-Q and Annual Report on Form 10-K. The Company assumes no obligation to update any forward-looking information contained in this Current Report.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	SIMULATIONS PLUS, INC.
By:	/s/ John R. Kneisel
	John R. Kneisel Chief Financial Officer

Date: May 1, 2017

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EX-99.1

Exhibit 99.1

 

For Further Information:

Simulations Plus, Inc.

42505 10^th Street West

Lancaster, CA 93534-7059

CONTACT:
Simulations Plus Investor Relations	Hayden IR
Ms. Renée Bouché	Mr. Cameron Donahue
661-723-7723	651-653-1854
renee@simulations-plus.com	cameron@haydenir.com

For Immediate Release:

May 1, 2017

Simulations Plus to Acquire DILIsym Services, Inc.

Accretive acquisition to expand Simulations Plus offerings by adding leading
provider of drug-induced liver injury (DILI) software and consulting services

LANCASTER, CA, May 1, 2017 – Simulations Plus, Inc. (NASDAQ: SLP), a leading provider of simulation and modeling software for pharmaceutical discovery and development, today announced that it has entered into a Stock Purchase Agreement (the “Agreement”) with DILIsym Services, Inc. of Research Triangle Park, North Carolina.

Pursuant to the Agreement, upon closing, DILIsym Services, Inc. (“DILIsym Services”) will become a wholly owned subsidiary of Simulations Plus, Inc. (“Simulations Plus”) and will continue to operate under the DILIsym Services name. This accretive acquisition will result in the total number of Simulations Plus employees increasing from 68 to 79, and is expected to add more than $3 million to the revenues of the combined company in the coming fiscal year 2018.

Walt Woltosz, chairman and chief executive officer of Simulations Plus said, “This is an exciting step forward for both Simulations Plus and DILIsym Services. The combination will significantly strengthen our software and consulting services efforts, and bolster our management team as well. I am pleased that the existing management team of DILIsym Services will remain with the company. The officers of DILIsym Services will be Dr. Brett Howell, who will serve as president, Dr. Scott Siler, who will serve as chief scientific officer, and Dr. Bud Nelson, who will serve as director of operations. In the aggregate, these three leaders have more than 50 years of relevant experience. I will remain as Chairman and CEO of Simulations Plus, overseeing all three divisions (Simulations Plus, DILIsym Services, and Cognigen Corporation). In addition, Professor Paul Watkins, M.D., of the University of North Carolina, internationally recognized as the foremost authority on drug-induced liver injury, will continue as the director of the DILI-sim Initiative Consortium and chairman of the Initiative’s Scientific Advisory Board. This consortium is an international group of twelve pharmaceutical companies that fund the ongoing development of the DILIsym® software.”

Dr. Brett Howell added, “Drug-induced liver injury (DILI) is a rare adverse drug reaction and is the leading cause for acute liver failure in the United States. It is also the most common factor that compels regulatory actions related to drugs, such as denial of approval or restriction of indications for using a drug. It is a prime area of concern for the U.S. Food and Drug Administration and other regulatory agencies worldwide. The DILIsym® software is the most advanced mechanistic mathematical model of drug-induced liver injury, simulating the mechanistic interactions and events from drug administration through the progression of liver injury and regeneration. DILIsym Services scientists have supported our customers to present results of DILIsym simulations to several regulatory agencies. We are excited to join Simulations Plus and take advantage of the various synergies that exist between the organizations.”

John Kneisel, chief financial officer of Simulations Plus, added, “We expect this deal will be immediately accretive to both revenues and earnings, and will not affect our ability to continue to distribute dividends. Of course, the Board of Directors determines the dividend each quarter and has the option of continuing, increasing, decreasing, or eliminating it at any time to meet the cash needs of the business.”

The Agreement

The Agreement calls for the acquisition of DILIsym Services by Simulations Plus with DILIsym Services becoming a wholly owned subsidiary of Simulations Plus following the closing of the acquisition, which is subject to final due diligence and other closing conditions. The closing date of the proposed acquisition is anticipated to be June 1, 2017.

Under the terms of the Agreement, Simulations Plus will pay the shareholders of DILIsym Services cash consideration of up to $10 million, comprised of $5 million up front plus an earn-out of up to an additional $5 million over the next three years, based on the profitability of the DILIsym Services division. The Agreement provides that $1 million of the total up-front consideration will be held back for 18 months to satisfy any indemnifiable claims that may arise pursuant to the terms of the Agreement.

Excel Partners, an investment bank with offices in New York and Los Angeles, acted as exclusive financial advisor to Simulations Plus in connection with this transaction. Procopio, Cory, Hargreaves & Savitch LLP served as legal counsel to Simulations Plus in connection with this transaction.

About Simulations Plus, Inc.

Simulations Plus, Inc., is a premier developer of groundbreaking drug discovery and development simulation and modeling software that is licensed to and used in the conduct of drug research by major pharmaceutical, biotechnology, agrochemical, and food industry companies worldwide. Simulations Plus is headquartered in Southern California and trades on the NASDAQ Capital Market under the symbol “SLP.” For more information, visit our Web site at www.simulations-plus.com.

About DILIsym Services, Inc.

DILIsym Services, Inc. was founded in 2015 in Research Triangle Park, North Carolina, and is the leading provider of drug-induced liver injury simulation software and related consulting services to the pharmaceutical industry. The company spun out of the former Hamner Institutes, acquiring all of the intellectual property, software, documentation, and other materials for the DILIsym® software. The company’s other products include MITOsym® for simulating in vitro mitochondrial function, SimPops™ for evaluating the impact of patient variability, and a new product in development called NAFLDsym™ for the study of nonalcoholic fatty liver disease – a worldwide disease with few available treatment options. For calendar year 2016, its most recent fiscal year, DILIsym Services, Inc. revenues were just over $3 million with net earnings of approximately $720,000. More information is available on the company’s Web site at https://www.dilisym.com.

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

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EX-99.2

Exhibit 99.2

 

For Further Information:

Simulations Plus, Inc.

42505 10^th Street West

Lancaster, CA 93534-7059

CONTACT:
Simulations Plus Investor Relations	Hayden IR
Ms. Renée Bouché	Mr. Cameron Donahue
661-723-7723	651-653-1854
renee@simulations-plus.com	cameron@haydenir.com

For Immediate Release:

May 1, 2017

Dr. Daniel Weiner joins Simulations Plus Board of Directors

World-renowned scientist, FDA consultant, and experienced manager to reinforce SLP board

LANCASTER, CA, May 1, 2017 – Simulations Plus, Inc. (Nasdaq: SLP), a leading provider of simulation and modeling software for pharmaceutical discovery and development, today announced that Dr. Daniel Weiner, an expert on pharmacokinetic modeling and pharmacodynamics, has become a member of its Board of Directors effective today, filling the vacancy created when Dr. David D’Argenio retired from the board last year.

Walt Woltosz, chairman and chief executive officer of Simulations Plus, said: “We’re excited to announce that Dr. Daniel Weiner has become a member of the Simulations Plus Board of Directors effective today. Dr. Weiner brings decades of directly relevant experience in pharmaceutical software development and is world renown for his work in pharmacokinetics and pharmacodynamics.”

Dr. Weiner has extensive drug development experience and has served as an expert consultant to the U.S. Food and Drug Administration (FDA) on pharmacokinetic modeling and bioequivalence assessment. Prior to his previous tenure with Certara/Pharsight as a Senior Vice President and Chief Science Officer, Dr. Weiner held several management positions with Merrell Dow Pharmaceuticals; Statistical Consultants, Inc.; Syntex Development Research; Quintiles; and IVAX Research. Dr. Weiner graduated from the University of Kentucky with a doctoral degree in Mathematical Statistics, with emphasis on compartmental modeling. He is the original designer/author of the WinNonlin family of PK/PD Modeling Software now used by over 1,000 institutions. He is the co-author of Pharmacokinetic and Pharmacodynamic Data Analysis: Concepts and Applications, now in its fifth edition. Dr. Weiner is an Adjunct Associate Professor with the Division of Pharmacotherapy and Experimental Therapeutics in the School of Pharmacy, University of North Carolina, and an Affiliate Professor of Pharmacometrics, Center for Translational Medicine in the School of Pharmacy at the University of Maryland.

Regarding his new appointment, Dr. Weiner stated, “Simulations Plus is a leader in the development of software products and providing consulting services that utilize quantitative systems pharmacology (QSP) to support model-based drug development (MBDD), concepts for which I am a passionate advocate. I have been very impressed with the quality of the science and scientists at Simulations Plus, and the solid corporation that Walt and his team have built. I am both honored and pleased to accept a position on the Board of Directors, and look forward to assisting the company in its endeavors.”

About Simulations Plus, Inc.

Simulations Plus, Inc. is a premier developer of drug discovery and development software as well as a leading provider of both preclinical and clinical pharmacometric consulting services for regulatory submissions. The company is a global leader focused on improving the ways scientists use knowledge and data to predict the properties and outcomes of pharmaceutical and biotechnology agents. Our software is licensed to and used in the conduct of drug research by major pharmaceutical and biotechnology companies and regulatory agencies worldwide. Our innovations in integrating new and existing science in medicinal chemistry, computational chemistry, pharmaceutical science, biology, and physiology into our software have made us the leading software provider for physiologically based pharmacokinetic modeling and simulation. For more information, visit our website at www.simulations-plus.com.

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