10-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC  20549

FORM 10-K/A

(Amendment No. 1)

x	ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended August 31, 2009
or
o	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _________ to _________

Commission file number:  001-32046

Simulations Plus, Inc.

(Exact name of registrant as specified in its charter)

California (State or other jurisdiction of incorporation or organization)	95-4595609  (I.R.S. Employer Identification No.)
42505 Tenth Street West Lancaster, CA 93534-7059 (Address of principal executive offices including zip code)	(661) 723-7723 (Registrant’s telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

Title of Each Class Common Stock, par value $0.001 per share Name of Each Exchange on Which Registered NASDAQ Stock Market LLC

COMMON STOCK, PAR VALUE $0.001 PER SHARE

SECURITIES REGISTERED UNDER SECTION 12(G) OF THE ACT:  NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o  No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o  No x

Indicate by check mark whether the registrant (1) 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 filings requirements for the past 90 days. Yes x  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o  No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405)  is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

o Large accelerated filer	o Accelerated filer
o Non-accelerated filer (Do not check if a smaller reporting company)	x  Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o  No x

The aggregate market value of the registrant's common stock held by non-affiliates of the registrant as of November 17, 2009, based upon the closing price of the common stock as reported by The Nasdaq on such date, was approximately $12,000,000. This calculation does not reflect a determination that persons are affiliates for any other purposes.

As of November 17, 2009, 15,596,093 shares of the registrant’s common stock, par value $0.001 per share were outstanding, and no shares of preferred stock were outstanding.

Documents incorporated by reference:  None.

Explanatory Note

Simulations Plus, Inc. (“we,” “us,” “our,” “Simulations” or the “Company”) is filing this amendment (this “Amendment”) to our Annual Report on Form 10-K for the fiscal year ended August 31, 2009 (our “Annual Report”) to voluntarily revise our disclosures in response to comments received from the staff (the “Staff”) of the Securities and Exchange Commission (the “SEC”) in connection with the Staff’s review of our Annual Report. We are only filing the items of our Annual Report that have been revised in response to the Staff’s comments and all other information in our Annual Report remains unchanged, except for the correction of certain typographical errors. Accordingly, this Amendment should be read in conjunction with our Annual Report. Unless otherwise provided, all information contained in this Amendment is as of November 30, 2009, the original filing date of our Annual Report. This Amendment does not reflect events that have occurred after the filing of the Annual Report and does not modify or update the disclosure therein in any way other than as required to reflect the matters set forth herein.

The only changes to our Annual Report are in Item 7, Part III:  Item 10 through Item 14 and Item 15.  In Item 7, the changes are to discuss and quantify sources of material changes.  In Part III, we have included information which was previously omitted from the Annual Report in reliance on General Instruction G(3) to Form 10-K.  Because our Proxy Statement was not filed within 120 days after our last fiscal year end, we are filing the information here.  In Item 15, we have removed several expired Exhibits, and added 2 exhibits without confidentiality clauses.

Pursuant to the Rule 12b-15 of the Securities Exchange Act of 1934, currently dated certifications from our principal executive and principal financial officer, as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, are filed or furnished herewith, as applicable.

Forward-Looking Statements

This document and the documents incorporated in this document by reference contain forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact contained in this document and the materials accompanying this document are forward-looking statements.

The forward-looking statements are based on the beliefs of our management, as well as assumptions made by and information currently available to our management. Frequently, but not always, forward-looking statements are identified by the use of the future tense and by words such as “believes,” expects,” “anticipates,” “intends,” “will,” “may,” “could,” “would,” “projects,” “continues,” “estimates” or similar expressions. Forward-looking statements are not guarantees of future performance and actual results could differ materially from those indicated by the forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by the forward-looking statements.

The forward-looking statements contained or incorporated by reference in this document are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”) and are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. These statements include declarations regarding our plans, intentions, beliefs or current expectations.

Among the important factors that could cause actual results to differ materially from those indicated by forward-looking statements are the risks and uncertainties described under “Risk Factors” in our Annual Report and elsewhere in this document and in our other filings with the SEC.

Forward-looking statements are expressly qualified in their entirety by this cautionary statement. The forward-looking statements included in this document are made as of the date of this document and we do not undertake any obligation to update forward-looking statements to reflect new information, subsequent events or otherwise.

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Simulations Plus, Inc.

FORM 10-K/A

For the Fiscal Year Ended August 31, 2009

Table of Contents

		Page
PART II
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4
Item 9A(T)	Controls and Procedures	12
PART III
Item 10	Directors, Executive Officers and Corporate Governance	13
Item 11	Executive Compensation	16
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	22
Item 13	Certain Relationships and Related Transactions, and Director Independence	23
Item 14	Principal Accounting Fees and Services	24
PART IV
Item 15	Exhibits, Financial Statement Schedules	26
	Signatures	27

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PART II

ITEM 7 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and related notes included in our Annual Report.

Results of Operations

The following sets forth selected items from our statements of operations (in thousands) and the percentages that such items bear to net sales for the fiscal years ended August 31, 2009 (“FY09”) and August 31, 2008 (“FY08”).

	FY09					FY08
Net sales	$	9,143		100.0	%	$	8,968		100.0	%
Cost of sales		2,321		25.4			2,100		23.4
Gross profit		6,822		74.6			6,868		76.6
Selling, general, and administrative		3,896		42.6			3,699		41.3
Research and development		1,114		12.2			991		11.1
Total operating expenses		5,010		54.8			4,690		52.3
Income from operations		1,812		19.9			2,178		24.3
Interest income		94		1.0			185		2.1
Miscellaneous Income		1		0.0			-		-
Gain on sale of assets		-		-			-		-
Gain on currency exchange		120		1.3			83		0.9
Total other income		215		2.4			268		3.0
Net income before taxes		2,027		22.2			2,446		27.3
Provision for income taxes		(615	)	(6.7	)		(721	)	(8.0	)
Net income		1,412		15.4	%		1,725		19.2	%

FY09 COMPARED WITH FY08

Net Sales

Consolidated net sales increased $175,000, or 2.0%, to $9,143,000 in FY09 from $8,968,000 in FY08.  Sales from pharmaceutical software and services increased approximately $246,000, or 4.1%; however, our Words+, Inc. subsidiary’s sales decreased approximately $71,000, or 2.4%, for the year. The revenue from non-software such as contract studies and collaborations increased by $444,000.  However, this increase was offset by a decline in revenues from software licenses by $343,000.

We attribute the decrease in Words+ sales due to decreases in sales of “Freedom” and “TuffTalker Plus”, which were discontinued in FY08, and hardware products such as MessageMates and other input devices.  The decline in revenue from those products by $242,000 outweighed an increase in revenue by $218,000 from the sales of our “Say-it SAM!” and “Conversa” products.

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Cost of Sales

Consolidated cost of sales increased $221,000, or 10.5%, to $2,321,000 in FY09 from $2,100,000 in FY08, and as a percentage of revenue, cost of sales increased 2.4%.  For pharmaceutical software and services, cost of sales increased $275,000, or 34.4%, and as a percentage of revenue, cost of sales increased to 17.0% in FY09 from 13.2% in FY08.  A significant portion of cost of sales for pharmaceutical software products is the systematic amortization of capitalized software development costs, which is an independent fixed cost rather than a variable cost related to sales.  This amortization cost increased approximately $50,000, or 11.7%, in FY09 compared with FY08.  Royalty expense, another significant portion of cost of sales, increased approximately $38,000, or 10.1%, in FY09 compared with FY08.  We pay a royalty on GastroPlus basic software sales but not on its modules or other software sales.  We also pay royalties on the Enslein Metabolism Module in our ADMET Predictor software in accordance with our agreement with Enslein Research, Inc.  The cost of contract studies, which are mainly salaries for scientists, increased as our revenue from study contracts increased, because these activities are not capitalizable software development activities.

For Words+, cost of sales decreased $54,000, or 4.1%, and as a percentage of revenue, cost of sales were almost the same with a slight decrease of 0.8% to 43.9% in FY09 from 44.7% in FY08.

­­­­­

Gross Profit

Consolidated gross profit decreased $46,000, or 0.7%, to $6,822,000 in FY 09 from $6,868,000 in FY08.  We attribute this decrease to the increase in cost of sales in pharmaceutical software and services and the decrease in gross profit from Words+ operations, which outweighed increases in revenue from pharmaceutical software and services.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses for FY09 increased by $197,000, or 5.3%, to $3,896,000, compared to $3,699,000 for FY08.  For Simulations Plus, SG&A expenses increased $124,000, or 5.6%.  The major increases in expenses were trade show and travel expenses due to attending more trade shows, increased air fares, and increased personal vehicle mileage allowances.  Increases in salaries and payroll-related expenses, such as health insurance, 401(K) and payroll taxes, and consultant fees are also added to SG&A. During FY08, we had one-time expenses such as fees paid for tax credit research fees, valuation service fees, and fees paid to the American Stock Exchange for stock splits, while no such expenses were incurred in FY09, resulting in some decreases in SG&A.  However, those decreases did not offset the increases in other expenses mentioned above.

For Words+, expenses increased by $73,000, or 4.9%.  There was a shift in expense from one category to another from FY08 to FY09.  In March 08, we hired a marketing consultant who became an employed sales manager of Words+, increasing salaries and travel expenses while reducing consultant fees.  The other increases were website developing fees, payroll, and payroll-related expenses, such as health insurance, 401(K) and payroll taxes.  Those increases outweighed decreases in commissions and depreciation.

Research and Development

We incurred approximately $1,975,000 of research and development (“R&D”) costs for both companies during FY09.  Of this amount, $674,000 was capitalized and $1,114,000 was expensed as R&D and $187,000 was expensed as cost of sales.  During FY08 we incurred approximately $1,719,000 of research and development costs, of which approximately $728,000 was capitalized and approximately $991,000 was expensed.  The 14.9% increase in research and development expenditure from FY08 to FY09 was increases in salary expenses due to expanding the staff in the Life Sciences Department, as well as salary increases for existing staff in both companies, which was reduced by the amount recorded as a cost of sales for contract studies.

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Income from operations

During FY09, we generated income from operations of $1,812,000, as compared to $2,178,000 for FY08, a decrease of 16.8%.  We attribute this decrease to increases in cost of goods sold, SG&A expenses, and R&D costs, which outweighed the increased revenue generated by sales of pharmaceutical software and study contract services, in addition to a decrease in income from Words+ operations. Our heavier investment in R&D and marketing and sales activities is expected to result in increased sales in the coming quarters.

Other Income and (Expense)

The net of other income over other expense for FY09 decreased by $53,000, or 19.8%, to $215,000, compared to $268,000 for FY08.  This is due to decreased interest income on Money Market accounts, which outweighed gains on currency exchange.

Provision for Income Taxes

Provision for income taxes for FY09 decreased by $106,000, or 14.7%, to $615,000, compared to $721,000 for FY08.  In FY08, we hired a tax credit specialist company, Tax Projects Group, to identify potential unused tax credits.  As a result of several months of research covering the previous 3 tax years (2006, 2005, and 2004); they discovered an additional $276,000 of unused R&D tax credits.  This increase in R&D tax credits allowed us to reduce our income tax provision to as low as 29% in FY08.  In FY09, we had such a credit for the current year’s expenses only. Details are provided in the notes to the financial statements which are part of the Annual Report.

Net Income

Net income for FY09 decreased by $313,000, or 18.2%, to $1,412,000, compared to $1,725,000 for FY08.  We attribute this decrease in net income primarily to increased cost of goods sold, SG&A expenses, and higher R&D costs, which outweighed the increased revenues from pharmaceutical software sales and services.

SEASONALITY

Sales of our pharmaceutical products (“Simulations Plus” in the table below) exhibit minimal seasonal fluctuation, with the first fiscal quarter almost always below average for all quarters, except FY 2005, for the last 12 years.  This unaudited net sales information has been prepared on the same basis as the annual information presented elsewhere in this Annual Report on Form 10-K and, in the opinion of management, reflects all adjustments (consisting of normal recurring entries) necessary for a fair presentation of the information presented.  Net sales for any quarter are not necessarily indicative of sales for any future period.

	Net Simulations Plus Sales (in thousands)
FY	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Total
2009 . . . . . . . . . . . . . . . . . . . . . . . . . .		1,430		1,779		1,985		1,107		6,301
2008 . . . . . . . . . . . . . . . . . . . . . . . . . .		1,438		1,550		1,975		1,092		6,055
2007 . . . . . . . . . . . . . . . . . . . . . . . . . .		824		1,808		1,659		1,465		5,756
2006 . . . . . . . . . . . . . . . . . . . . . . . . . .		199		884		1,096		1,007		3,186
2005 . . . . . . . . . . . . . . . . . . . . . . . . . .		524		410		662		473		2,069
2004 . . . . . . . . . . . . . . . . . . . . . . . . . .		642		742		603		869		2,856
2003 . . . . . . . . . . . . . . . . . . . . . . . . . .		507		582		614		1,403		3,106
2002 . . . . . . . . . . . . . . . . . . . . . . . . . .		390		554		504		595		2,043
2001 . . . . . . . . . . . . . . . . . . . . . . . . . .		221		373		305		282		1,181
2000 . . . . . . . . . . . . . . . . . . . . . . . . . .		151		467		143		174		935
1999 . . . . . . . . . . . . . . . . . . . . . . . . . .		87		93		117		164		461
1998 . . . . . . . . . . . . . . . . . . . . . . . . . .		11		11		13		27		62

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We believe that sales of our disability products (“Words+”) to schools were slightly seasonal, prior to FY06, with greater sales to schools during our third and fourth fiscal quarter (March-May and June-August), as shown in the table below.

	Net Words+ Sales (in thousands)
FY	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Total
2009 . . . . . . . . . . . . . . . . . . . . . . . . . .		704		678		728		732		2,842
2008 . . . . . . . . . . . . . . . . . . . . . . . . . .		545		630		994		744		2,913
2007 . . . . . . . . . . . . . . . . . . . . . . . . . .		632		726		972		772		3,102
2006 . . . . . . . . . . . . . . . . . . . . . . . . . .		620		598		692		759		2,669
2005 . . . . . . . . . . . . . . . . . . . . . . . . . .		543		622		762		757		2,684
2004 . . . . . . . . . . . . . . . . . . . . . . . . . .		497		626		630		598		2,351
2003 . . . . . . . . . . . . . . . . . . . . . . . . . .		571		538		646		624		2,379

LIQUIDITY AND CAPITAL RESOURCES

Our principal sources of capital have been cash flows from our operations.  We have achieved continuous positive operating cash flow over the last seven fiscal years.  We believe that our existing capital and anticipated funds from operations will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for the foreseeable future.  Thereafter, if cash generated from operations is insufficient to satisfy our capital requirements, we may open a revolving line of credit with a bank, or we 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 us, or, if available, that it will be in amounts and on terms acceptable to us. 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.

INFLATION

We have not been affected materially by inflation during the periods presented, and no material effect is expected in the near future.

OFF-BALANCE SHEET ARRANGEMENTS

As of August 31, 2009, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-blance sheet arrangements or other contractually narrow or limited purposes.  As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

We do not have relationships or transactions with persons or entities that derive benefits from their non-independent relationship with us or our related parties.

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RECENTLY ISSUED ACCOUNTING STANDARDS

In September 2009, the FASB issued Emerging Issues Task Force (“EITF”) 09-3, “Applicability of AICPA Statement of Position 97-2 to Certain Arrangements That Include Software Elements” (“EITF 09-3”).  EITF 09-3 amends Statement of Position “SOP”) 97-2, “Software Revenue Recognition”, to exclude tangible products containing software components and non-software components that function together to deliver the product’s essential functionality.  EITF 09-3 applies to revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with early application permitted with EITF 08-1.  The company expects to adopt this standard in the first quarter of fiscal 2011.  The company is currently evaluating the impact EITF 09-3 will have on the consolidated financial statements.

In September 2009, the FASB issued Emerging Issues Task Force (“EITF”) 08-1, “Revenue Arrangements with Multiple Deliverables” (“EITF 08-1”).  EITF 08-1 amends EITF 00-21, “Revenue Arrangements with Multiple Deliverables”, to require an entity to use an estimated selling price when vendor-specific objective evidence or acceptable third-party evidence does not exist for any products or services included in a multiple element arrangement.  The arrangement consideration should be allocated among the products and services based upon their relative selling prices, thus eliminating the use of the residual method of allocation.  EITF 08-01 also requires expanded qualitative and quantitative disclosures regarding significant judgments made and changes in applying the guidance.  EITF 08-1 applies to fiscal years beginning after June 15, 2010, with early application permitted.  The company expects to adopt the standard in the first quarter of fiscal 2011.  The company is currently evaluating the impact EITF 08-1 will have on the financial statements.

In June 2009, the FASB issued Statement No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles—a replacement of FASB Statement No. 162 (“FAS 168”). This statement provides for the FASB Accounting Standards Codification to become the single official source of authoritative, nongovernmental generally accepted accounting principles in the United States. FAS 168 does not change GAAP but reorganizes the literature. This statement is effective for interim and annual periods ending after September 15, 2009.

In May 2009, the FASB issued SFAS No. 165, Subsequent Events (“SFAS No. 165”), which provides guidance on events that occur after the balance sheet date but prior to the issuance of the financial statements. SFAS No. 165 distinguishes events requiring recognition in the financial statements and those that may require disclosure in the financial statements. Furthermore, SFAS No. 165 requires disclosure of the date through which subsequent events were evaluated. SFAS No. 165 is effective for interim and annual periods after June 15, 2009. The Company adopted SFAS No. 165 for the annual reporting period ended August 31, 2009.

In April 2008, the FASB issued FSP-FAS No. 142-3, Determination of the Useful Life of Intangible Assets (“FAS 142-3”). FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS 142”). The objective of the Staff Position is to improve the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS No. 141 (Revised 2007): Business Combinations (“SFAS 141R”) and other GAAP. FAS 142-3 is effective for fiscal years beginning after December 15, 2008. Management is currently evaluating the effect on the Company’s consolidated financial positions, results of operations and cash flows.  The Company believes adoption will not have a material impact on the Company’s consolidated financial statements.

In April 2009, the FASB issued FSP-FAS No. 107-1 and APB 28-1, Disclosures about Fair Value of Financial Instruments (“FAS No. 107-1/APB 28-1”). This FSP extends to interim periods certain disclosures about fair value of financial instruments for publicly traded companies and amends APB Opinion No. 28, Interim Financial Reporting, to require those disclosures in summarized financial information at interim reporting periods. This FSP is effective for interim reporting periods ending after June 15, 2009. The Company’s adoption of FAS No. 107-1/APB 28-1 is not expected to have a material effect on the Company’s consolidated financial statements.

8

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. For financial assets and liabilities, SFAS 157 will be effective for the Company in the first fiscal quarter of 2009. As permitted by FSP-FAS 157-2, SFAS 157 is effective for nonfinancial assets and liabilities for the Company during the first fiscal quarter of 2010. Management believes the adoption of SFAS 157 for its financial assets and liabilities will not have a material impact on the Company’s consolidated financial statements and continues to evaluate the potential impact of the adoption of SFAS 157 related to its nonfinancial assets and liabilities.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits companies to choose to measure many financial instruments and certain other items at fair value. SFAS 159 was effective for the Company in the first fiscal quarter of 2009. The Company believes the adoption of SFAS 159 did not have a material impact on the Company’s consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS 141R”), which replaces SFAS 141. SFAS 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any resulting goodwill, and any noncontrolling interest in the acquiree. SFAS 141R also provides for disclosures to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141R will be effective for the Company in first fiscal quarter of 2010 and must be applied prospectively to business combinations completed on or after that date.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements — an amendment of Accounting Research Bulletin No. 51” (“SFAS 160”), which establishes accounting and reporting standards for noncontrolling interests (“minority interests”) in subsidiaries. SFAS 160 clarifies that a noncontrolling interest in a subsidiary should be accounted for as a component of equity separate from the parent’s equity. SFAS 160 will be effective for the Company in the first fiscal quarter of 2010 and must be applied prospectively, except for the presentation and disclosure requirements, which will apply retrospectively. The Company is currently evaluating the potential impact that adoption of SFAS 160 may have on its consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133” (“SFAS 161”), which requires enhanced disclosures about an entity’s derivative and hedging activities. SFAS 161 will be effective for The Company second fiscal quarter of 2009.

CRITICAL ACCOUNTING POLICIES

Our consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America.  Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies.  Critical accounting policies for us include revenue recognition, accounting for capitalized software development costs, and accounting for income taxes.

9

Revenue Recognition

We recognize revenue related to software licenses and software maintenance in accordance with the American Institute of Certified Public Accountants ("AICPA") Statements of Position (SOP) No. 97-2, "Software Revenue Recognition."  Product revenue is recorded when the following conditions are met: 1) evidence of arrangement exists, such as signed Purchase Orders from customers or executed contracts, 2) delivery has been made, such as unlocking the software on the customer’s computer(s), 3) the amount is fixed, and 4) it is collectible.  Post-contract customer support ("PCS") obligations are insignificant; therefore, revenue for PCS is recognized at the same time, and the costs of providing such support services are accrued and amortized over the obligation period.

As a byproduct of ongoing improvements and upgrades to our software, some modifications are provided to customers who have already licensed software during their license term at no additional charge.  We consider these modifications to be minimal, as they are not changing the basic functionality or utility of the software, but rather adding convenience, such as being able to plot some additional variable on a graph in addition to the numerous variables that had been available before. Such software modifications for any single product have been typically once or twice per year, sometimes more, sometimes less. Thus, they are infrequent.  We provide, for a fee, additional training and service calls to our customers and recognize revenue at the time the training or service call is provided.

We enter into one-year license agreements with most of our customers for the use of our pharmaceutical software products.  However, from time to time, we enter into multi-year license agreements.  We unlock and invoice software one year at a time for multi-year licenses. Therefore, revenue is recognized one year at a time.

We recognize contract study revenue either equally over the term of the contract or using the percentage of completion method, depending upon how the contract studies are engaged, in accordance with AICPA SOP 81-1.  To recognize revenue using the percentage of completion method, we must determine whether we meet the following criteria:  1) there is a long-term, legally enforceable contract and 2) it is possible to reasonably estimate the total project costs, and 3) it is possible to reasonably estimate the extent of progress toward completion.

Capitalized Computer Software Development Costs

Software development costs are capitalized in accordance with 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 judgment by management with respect to certain external factors including, but not limited to, technological feasibility, anticipated future gross revenues, estimated economic life, and changes in software and hardware technologies. Capitalized software development costs are comprised primarily of salaries and direct payroll-related costs and the purchase of existing software to be used in our software products.

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 to exceed five years).  Amortization of software development costs amounted to $519,415 and $466,735 for the fiscal years ended August 31, 2009 and 2008, respectively.  We expect future amortization expense to vary due to increases in capitalized computer software development costs.

We test capitalized computer software costs for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable within a reasonable time.

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Income Taxes

We utilize SFAS No. 109, "Accounting for Income Taxes," which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.

The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity’s financial statements or tax returns.  Judgment is required in assessing the future tax consequences of events that have been recognized in our financial statements or tax returns.  Fluctuations in the actual outcome of these future tax consequences could materially impact our financial position or our results of operations.

The Company has adopted Financial Accounting Standards Board (“FASB”) Interpretation No. 48 (“FIN 48”), - “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109”.  FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB statement 109, “Accounting for Income Taxes”, and prescribes a recognition threshold of more likely than not and a measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.  In making this assessment, a company must determine whether it is more likely than not that a tax position will be sustained upon examination, based solely on the technical merits of the position and must assume that the tax position will be examined by taxing authorities.  Our review of prior year tax positions using the criteria and provisions presented in FIN 48 did not result in a material impact on the Company’s financial position or results of operations.

Stock-Based Compensation

The Company accounts for stock options using the modified prospective method in accordance with SFAS No. 123R.  Under this method, compensation costs includes: (1) compensation cost for all share-based payments granted prior to, but not yet vested as of September 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123 amortized over the options’ vesting period, and (2) compensation cost for all share-based payments granted subsequent to September 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123R, amortized on a straight-line basis over the options’ vesting period.

Principles of Consolidation

The consolidated financial statements include the accounts of Simulations Plus, Inc. and its wholly owned subsidiary, Words+, Inc.  All significant intercompany accounts and transactions are eliminated in consolidation.

Estimates

Our consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America.  Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses.  These estimates and assumptions are affected by management’s application of accounting policies.  Actual results could differ from those estimates.  Significant accounting policies for us include revenue recognition, accounting for capitalized software development costs, and accounting for income taxes.

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ITEM 9A(T) – CONTROLS AND PROCEDURES

We are responsible for maintaining disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Disclosure controls and procedures are controls and other procedures designed to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.  In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on our management’s evaluation (with the participation of our principal executive officer and principal financial officer) of our disclosure controls and procedures as required by Rule 13a-15 under the Exchange Act, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of August 31, 2009, the end of the fiscal year covered by this report.

Management's Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal controls over financial reporting, as defined in Exchange Act Rule 13a-15(f). Our internal controls over financial reporting are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal controls over financial reporting based on the framework established by the Committee of Sponsoring Organizations for the Treadway Commission. Based on our evaluation under the framework, including the completion and review of internal review assessment forms and the completion and review of financial reporting information systems and controls checklists in the framework, our management concluded that our internal control over financial reporting was effective as of August 31, 2009.

This annual report does not include an attestation report of our independent registered public accounting firm regarding internal controls over financial reporting. Our management's report was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management's report in this annual report.

No changes were made in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during our most recent fiscal quarter that have materially affected or are reasonably likely to materially affect, our internal controls over financial reporting.

Our management, including our CEO and CFO, does not expect that our disclosure controls or internal controls over financial reporting will prevent all errors or all instances of fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and any design may not succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitation of a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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PART III

ITEM 10 – DRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Nomination of Directors

The Governance and Nominating Committee is charged with making recommendations to the Board regarding qualified candidates to serve as directors. The committee’s goal is to assemble a Board with the skills and characteristics that, taken as a whole, will assure a strong Board with experience and expertise in all aspects of corporate governance. Accordingly, the Governance and Nominating Committee believes that candidates for director should have certain minimum qualifications, including personal integrity, strength of character, an inquiring and independent mind, practical wisdom and mature judgment. In evaluating director nominees, the Governance and Nominating Committee considers the following factors:

(1) The appropriate size of the Board,

(2) Our needs with respect to the particular talents and experience of its directors, and

(3) The knowledge, skills and experience of nominees, including experience in technology, business, finance, administration or public service.

Other than the foregoing, there are no stated minimum criteria for director nominees, although the Governance and Nominating Committee may also consider such other factors as it deems to be in our best interests and those of our stockholders. The Governance and Nominating Committee does, however, believe it appropriate for at least one members of the Board to meet the criteria for an “audit committee financial expert” as defined by SEC rules, and for a majority of the members of the Board to meet the definition of an “independent director” under NASDAQ listing standards. The Governance and Nominating Committee also believes it is appropriate for our Chief Executive Officer and our Corporate Secretary to participate as members of the Board.

The Governance and Nominating Committee identifies nominees by first evaluating the current members of the Board willing to continue in service. Current members of the Board with skills and experience that are relevant to our business and who are willing to continue in service are considered for re-nomination, but the committee at all times seeks to balance the value of continuity of service by existing members of the Board with that of obtaining a new perspective. If any member of the Board does not wish to continue in service, the Governance and Nominating Committee’s policy is not to re-nominate a member for re-election.  The Governance and Nominating Committee identifies the desired skills and experience of a new nominee for the criteria above, and then uses its network of contacts to compile a list of candidates.

We do not have a formal policy concerning stockholder recommendations of director candidates to the Governance and Nominating Committee. The absence of such a policy does not mean, however, that such recommendations will not be considered. To date, we have not received any recommendations from stockholders requesting the Governance and Nominating Committee to consider a candidate for inclusion among the committee’s slate of nominees in our proxy statement. Stockholders wishing to make such a recommendation of a director candidate may do so by sending a written notice to the Governance and Nominating Committee, Attn: Chairman, Simulations Plus, Inc., 42505 10th Street West, Lancaster, CA 93534, naming the proposed candidate and providing detailed biographical and contact information for such proposed candidate.

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NAME	AGE	POSITION WITH THE COMPANY	ELECTED DIRECTOR SINCE
Walter S. Woltosz	64	Chairman of the Board, Chief Executive Officer and President of the Company	1996
Virginia E. Woltosz	58	Secretary and Director of the Company	1996
Dr. David Z. D'Argenio	60	Director	1997
Dr. Richard R. Weiss	76	Director	1997
Wayne Rosenberger	69	Director	2007

WALTER S. WOLTOSZ is a co-founder of the Company and has served as its Chief Executive Officer and President and as Chairman of the Board of Directors since its incorporation in July 1996. Mr. Woltosz is also a co-founder of Words+ and served as its Chief Executive Officer and President from its incorporation in 1981 until the appointment of Jeffrey Dahlen as President of Words+ in 2004.

VIRGINIA E. WOLTOSZ is a co-founder of the Company and has served as its Senior Vice President and Secretary since its incorporation in July 1996 until January 31, 2003. Mrs. Woltosz is also a co-founder of Words+ and served as its Vice President, Secretary and Treasurer from its incorporation in 1981 until January 31, 2003. Mrs. Woltosz retired from the position of Senior Vice President as of January 31, 2003, but remains as Secretary and Treasurer of Simulations Plus.  Virginia E. Woltosz is the wife of Walter S. Woltosz.

DR. DAVID Z. D'ARGENIO has served as a Director of the Company since June 1997.  He is currently Professor of Biomedical Engineering at the University of Southern California ("USC"), and has been on the faculty at USC since 1979. He also serves as the Co-Director of the Biomedical Simulations Resource Project at USC, a project funded by the National Institutes of Health since 1985.

DR. RICHARD R. WEISS has served as a Director of the Company since June 1997.  From October 1994 to the present, Dr. Weiss has acted as a consultant to a number of aerospace companies through his own consulting entity, Richard R. Weiss Consulting Services. From June 1993 through July 1994, Dr. Weiss was employed by the U.S. Department of Defense as its Deputy Director, Space Launch & Technology.

H. WAYNE ROSENBERGER has served as a Director of the Company since November 2007. Mr. Rosenberger has been a career banker, holding various senior and executive positions in banking since 1963. From August 1997 to present, Mr. Rosenberger has been Senior Regional Vice President of American Security Bank.  Prior to becoming an independent Director of the Company, Mr. Rosenberger had acted as a member of the audit committee for the Antelope Valley Hospital.

AUDIT COMMITTEE

The Company has an audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act, currently comprised of: Mr. H. Wayne Rosenberger, Dr. Richard R. Weiss and Dr. David Z. D'Argenio. Each member of the Audit Committee of the Company (the “Audit Committee”) is independent as defined under the applicable rules of the SEC and NASDAQ Stock Market LLC (“NASDAQ”) listing standards.  The responsibilities of the Audit Committee, include selecting the Company's independent auditors, reviewing the Company's internal audit procedures, reviewing quarterly and annual financial statements independently and with the Company's independent auditors, reviewing the results of the annual audit and implementing and monitoring the Company's cash investment policy. In addition, the Audit Committee assists the Board in its oversight of corporate accounting and internal controls, reporting practices and the quality and integrity of the financial reports of the Company.  During the fiscal year ended August 31, 2009, the Audit Committee held a total of three meetings. The Board of Directors has determined that Mr. H. Wayne Rosenberger, who serves on the Audit Committee, is an “audit committee financial expert” as defined in applicable SEC rules

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BUSINESS EXPERIENCE OF EXECUTIVE OFFICERS WHO ARE NOT ALSO DIRECTORS:

NAME	AGE	POSITION WITH THE COMPANY	OFFICER SINCE
Momoko A. Beran	57	Chief Financial Officer of the Company, and Words+, Inc.	1996
Jeffrey A. Dahlen	48	President of Words+, Inc.	2003

MOMOKO A. BERAN joined Words+ in June 1993 as Director of Accounting and was named the Company's Chief Financial Officer in July 1996. Prior to joining Words+, Ms. Beran had been Financial Controller for AB Component Systems Inc., which had its headquarters in the U.K. Since February 1, 2003, Ms. Beran has also been the Company's Director of Human Resources and Director of Facilities and Equipment.

JEFFREY A. DAHLEN rejoined the Company in April 2003 as Vice President of Research and Development for Words+ after five years with iAT, a software consulting firm he founded based in Pasadena, California. Mr. Dahlen was promoted to President of Words+, Inc. in April 2004. He is a graduate of Stanford University in Electrical Engineering and has 24 years' experience in both software and hardware design, which includes development of extremely high speed processing hardware with the Jet Propulsion Laboratory at the California Institute of Technology, and over 10 years of software and hardware design and development at Words+.

COMPANY CODE OF ETHICS

Our Code of Ethics is posted on our web site: www.simulations-plus.com.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires our officers, directors, and any persons who own more than 10% of common stock, to file reports of ownership of, and transactions in, our common stock with the SEC and furnish copies of such reports to us. Based solely on our review of the copies of such forms and amendments thereto furnished to us and on written representations from our officers, directors, and any person whom we understand owns more than 10% of our common stock, we found that during our fiscal year ended August 31, 2009: (i) Virginia Woltosz, one of our directors, officers and 10% shareholders, failed to timely file one Form 4 report with the SEC to report one transaction and change in beneficial ownership; (ii) Ronald Creeley, one of our officers, failed to timely file three Form 4 reports with the SEC to report three transactions and changes in beneficial ownership; (iii) David D’Argenio, one of our directors, failed to timely file one Form 4 report with the SEC to report three transactions and changes in beneficial ownership; (iv) Momoko Beran, one of our officers, failed to timely file two Form 4 reports with the SEC to report five transactions and changes in beneficial ownership; (v)  Richard Weiss, one of our directors, failed to timely file two Form 4 reports with the SEC to report two transactions and changes in beneficial ownership; and (vi) Wayne Rosenberg, one of our directors, failed to timely file one Form 4 report with the SEC to report one transaction and change in beneficial ownership. All such transactions have since been reported on Form 4 reports.

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ITEM 11 – EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

The purpose of the Company's compensation program is to attract and retain talented and dedicated professionals to manage and execute the Company's strategic plans and tactical operations. Although the Company's salaries have been and remain significantly lower than those of similar public companies, management and the board of directors believe that the award of options has fairly rewarded loyal, long-term employees who have contributed to the Company's growth and financial success.

The goal of our named executive officer compensation program is the same as our goal for operating the Company - to create long-term value for our shareholders.  Toward this goal, we have designed and implemented our compensation programs for our named executives to reward them for sustained financial and operating performance and leadership excellence, to align their interests with those of our shareholders and to encourage them to remain with the Company for long and productive careers. Most of our compensation elements simultaneously fulfill one or more of our performance, alignment and retention objectives. These elements consist of salary and annual bonus, equity incentive compensation, and 401(k) matching retirement benefits. In deciding on the type and amount of compensation for each executive, we focus on both current pay and the opportunity for future compensation. We combine the compensation elements for each executive in a manner we believe optimizes the executive's contribution to the Company.

DETERMINING COMPENSATION

We rely on our judgment in making compensation decisions, after reviewing the performance of the Company and carefully evaluating an executive's performance during the year against established goals, leadership qualities, operational performance, business responsibilities, and career with the Company, current compensation arrangements and long-term potential to enhance shareholder value.

The CEO's compensation is determined by the Compensation Committee as described below under Employment and Other Compensation Agreements. The salaries of all other officers are determined by the CEO and the Compensation Committee together. Option grants are recommended by the CEO and CFO and approved by the board of directors.

The CEO's bonus had been determined from the original employment agreement at the time of our initial public offering in 1997 and carried forward in subsequent employment agreements through the end of fiscal year 2007. Beginning on September 1, 2007 (fiscal year 2008) the CEO's employment contract was renewed for a period of two years without an annual bonus, at his request and with the agreement of the Compensation Committee.  Effective September 1, 2009, the CEO’s employment contract was renewed for another two years by the Compensation Committee with an annual bonus of up to 10% of his annual salary, and is included in the Company’s 10K as an exhibit.

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Bonuses for all other employees are determined through a calculation of two factors, one for longevity and one for performance, with the greater emphasis on performance. Supervisors provide an evaluation of each employee in five areas: attendance, attitude, productivity, skill level with respect to the position they occupy, and contribution to the Company's profitability. A scoring system is used and bonuses are awarded based on this system and the total budget for bonuses as determined by the CEO and CFO with the approval of the board of directors.

The Company provides 401(k) matching up to 4% of employees' salaries or wages up to the IRS maximum allowable, regardless of their position within the Company.

The Company provides cell phones to the Named Executive Officers and other employees for business communication purpose.  However, the Company allows the personal use of cell phone usage as long as it does not exceed the Company’s allowable minutes and text messages.  In the event the personal usage exceeds over the allowable, the employees are financially responsible for the excess.  There are no other perquisites or other benefits of any kind for any officer or any other employee or director of the Company.

EMPLOYMENT AND OTHER COMPENSATION AGREEMENTS

The Board of Directors renewed its employment agreement with Walter Woltosz commencing September 1, 2007 for two years. That agreement provided for an annual salary of $250,000. Pursuant to such agreement, Mr. Woltosz was entitled to such health insurance and other benefits that are not inconsistent with that which we customarily provide to our other management employees and to reimbursement of customary, ordinary and necessary business expenses incurred in connection with the rendering of services to the Company. The agreement also provided that we could terminate the agreement without cause upon 30 days written notice, and that our only obligation to Mr. Woltosz would be for a payment equal to the greater of (i) 12 months of salary or (ii) the remainder of the term of the employment agreement from the date of notice of termination. Further, the agreement provided that we could terminate the agreement for cause (as defined) and that our only obligation to Mr. Woltosz would be limited to the payment of Mr. Woltosz' salary and benefits through and until the effective date of any such termination.

As part of the agreement with the original underwriter and as partial compensation for the sale of Words+ to Simulations Plus in 1996, commencing with our fiscal year ending 1997 and for each fiscal year thereafter, Walter and Virginia Woltosz were entitled to receive bonuses not to exceed $150,000 and $60,000, respectively, equal to 5% of our net annual income before taxes.  However, under the two-year employment agreement effective as of September 1, 2007, and at his request, Walter Woltosz elected to received no bonus. The bonus to Virginia Woltosz remained the same. The Company's net income before taxes for FY08 was $2,446,177, thus we accrued a bonus in the total amount of $60,000 for Virginia Woltosz.  This bonus was due and payable within 10 days after the filing of the annual report, and was paid on December 13, 2009.

The Compensation Committee renewed its employment agreement with Walter Woltosz commencing September 1, 2009 for two years. The agreement provided for; 1) a base salary of $275,000 per year, 2) options to purchase 50 shares of Common Stock for each $1,000 of net income before taxes at the end of each fiscal year (up to a maximum of 120,000 options – to be adjusted for stock split or reverse split) over the term of agreement, and 3) Bonus not to exceed 10% of salary, or $27,500 per year.  The specific amount of the bonus will be determined by the Compensation Committee.

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SUMMARY TABLE OF NAMED EXECUTIVE COMPENSATION

The following table sets forth certain information concerning compensation paid or accrued for the fiscal years ended August 31, 2009 and 2008 by the Company to or for the benefit of the Company's CEO/President, Chief Financial Officer, Vice President, Sales and Marketing, and President of our Words+, Inc. -subsidiary (the "named executive officers"). No other executive officers of the Company received total annual compensation for the fiscal year ended August 31, 2009 or 2008 that exceeded $100,000.

Name and Principal Position	Fiscal Year	Salary ($)	Bonus ($)	Option Awards ($)	All other compensation ($)	Total ($)
(a)	(b)	(c)	(d)	(f)	(i)	(j)
Walter S. Woltosz	2009	250,000	0	0	0	250,000
Chief Executive Officer	2008	250,000	0	0	0	250,000
Momoko A. Beran	2009	135,000	15,147	6,199	5,400	161,746
Chief Financial Officer	2008	125,000	14,308	22,727	5,000	162,035
Ronald F. Creeley (1)	2009	121,995	3,434	2,381	4,880	132,690
Vice President, Sales	2008	120,793	6,331	15,220	4,832	147,176
and Marketing
Jeffrey A. Dahlen	2009	100,000	1,132	2,326	4,000	107,458
President, Words+, Inc.	2008	100,000	1,700	15,220	4,000	120,920
subsidiary

(1)	Mr Ronald Creeley left the Company on December 25, 2009.
(d)	Amount represents bonus earned during the applicable year.
(f)	Amount represents the stock-based compensation expense recorded by us in fiscal 2009 measured using the Black-Scholes option pricing model at the grant date based on the fair value of the option award.
(i)	Amount represents Company matching for 401(k) Plan.

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SUMMARY TABLE OF DIRECTORS’ COMPENSATION

The Directors’ stipends are currently $5,000 and 4,000 shares of stock options per person per year for their services.  In addition to their stipends, the Company pays $1000 per person per meeting.  Mileage expense to attend those meeting is reimbursed at the rate Internal Revenue Service defines for business use, except for the Directors who are local residents.

Name of Directors	Fiscal Year	Fees earned or paid in cash ($)	Option Awards ($)	All other compensation ($)	Total ($)
(a)	(b)	(c)	(d)	(e)	(g)
Dr. David Z. D’Argenio	2009	11,000	5,895	243	17,138
	2008	8,000	4,913	230	13,143
Dr. Richard R. Weiss	2009	10,000	5,895	0	15,895
	2008	8,000	4,913	0	12,913
Harold W. Rosenberger	2009	11,000	1,634	0	12,634
	2008	6,750*	0	0	6,750

(c)	The Directors’ stipends are $5,000 per year for fiscal years 2009 and 2008, and $1,000 per meeting.
(d)	Amount represents the stock-based compensation expense recorded by us in fiscal 2009 and 2008 measured using the Black-Scholes option pricing model at the grant date based on the fair value of the option awards.
(e)	Mileage expense to attend meeting is reimbursed at the rate set by Internal Revenue Service for business use, except for the Directors who are local residents.
*	Prorated by the service performed.

GRANTS OF PLAN-BASED AWARDS

FOR FISCAL YEAR ENDED

AUGUST 31, 2009

The following table discloses information about option grants to the Named Executive Officers during the year ended August 31, 2009, including hypothetical gains or "option spreads" for the options at the end of their respective ten-year terms, as calculated in accordance with the rules of the SEC. Each gain is based on an arbitrarily assumed annualized rate of compound appreciation of the market price at the date of the grant of 1% and 4% from the date the option was granted to the end of the option term. Actual gains, if any, on option exercises are dependent on the future performance of our common stock, overall market conditions and continued employment.

Name	Grant Date	No. of Securities Underlying Options Granted	Percent of Total Options Granted to Employees in FY09	Exercise Price Per Share	Potential Realizable Value at Assumed Annual Rated of Stock Price Appreciation for Option Term
					1%	4%
Momoko A. Beran	4/7/2009	30,000	12.4%	$ 1.00	$ 3,139	$14,407
Ronald F. Creeley (1)	4/7/2009	2,000	0.8%	$ 1.00	$    209	$     960
Jeffrey A. Dahlen	4/7/2009	1,000	0.4%	$ 1.00	$    105	$     480

(1) Mr Ronald Creeley left the Company on December 25, 2009.

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OUTSTANDING EQUITY AWARDS

AT FISCAL YEAR END

AUGUST 31, 2009

The following table provides a summary of all outstanding equity awards for named officers at the end of fiscal year 2009.

Name (a)	Number of securities underlying unexercised options (#) Exercisable (b)	Number of securities underlying unexercised options (#) Unexercisable  (c)	Option exercise price ($) (e)	Option expiration date (f)
Walter Woltosz	30,000	-0-	1.2375	07/20/2011
Virginia Woltosz	30,000	-0-	1.2375	07/20/2011
Momoko Beran	160,000	-0-	0.5625	11/23/2009
	160,000	-0-	0.7500	04/17/2010
	40,000	-0-	0.4075	08/09/2010
	60,000	-0-	0.4075	12/01/2010
	140,000	-0-	0.3500	05/03/2011
	20,000	-0-*	1.1050	06/22/2015
	40,000	-0-*	1.1250	07/20/2016
	10,000	8,000	3.0200	01/21/2018
	30,000	30,000	1.0000	04/07/2019
Ronald Creeley (1)	172,000	-0-	0.5625	11/23/2009
	160,000	-0-	0.7500	04/17/2010
	40,000	-0-	0.4075	08/09/2010
	60,000	-0-	0.4075	12/01/2010
	140,000	-0-	0.3500	05/03/2011
	20,000	-0-*	1.1050	06/22/2015
	40,000	-0-*	1.1250	07/20/2016
	5,000	4,000	3.0200	01/21/2018
	2,000	2,000	1.0000	04/07/2019
Jeffrey Dahlen	65,000	-0-	1.1500	04/16/2014
	5,000	4,000	3.0200	01/21/2018
	1,000	1,000	1.0000	04/07/2019

(b)	Stock options are vested over 5 years – 20% vesting on each anniversaries of the date of grant.
(c)	*Options granted prior to September 1, 2006 were vested in full effective as of August 31, 2006 when we adopted SFAS No. 123R “Accounting for Stock-Based Compensation.”
(1)	Mr Ronald Creeley left the Company on December 25, 2009.

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OPTION EXERCISES AND STOCK VESTED

FOR FISCAL YEAR ENDED

AUGUST 31, 2009

The following table discloses certain information regarding the options held at August 31, 2009 by the Chief Executive Officer and each other named executive officer.

	Shares Acquired on Exercise	Value Realized (b)	Number of Options at August 31, 2009		Value of Options at August 31, 2009 (a)
			Exercisable	Unexercisable	Exercisable	Unexercisable
Walter S. Woltosz	-0-	-0-	30,000	-0-	$ 16,875*	$ -0-
Virginia E. Woltosz	-0-	-0-	30,000	-0-	$ 16,875*	$ -0-
Momoko Beran	67,000	$63,900	592,000	38,000	$707,375	$24,000
Ronald F. Creeley (1)	88,000	$76,880	633,000	6,000	$764,000	$4,000
Jeffrey A. Dahlen	-0-	-0-	66,000	5,000	$42,250	$1,600

(a)	Based on a per share price of $1.80 at August 31, 2009 less applicable option exercise prices.
(b)	The value realized represents the difference between the aggregate closing price of the shares on the date of exercise less the aggregate exercise price paid.
(1)	Mr Ronald Creeley left the Company on December 25, 2009.
*	Granted at $1.2375, 110% of market price of the issue date.

COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis provided above.  Based on its review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Amended 10K.

Compensation Committee

David D’Argenio (Chair)

Richard Weiss

Harold Rosenberger

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During fiscal year 2009, the Compensation Committee consisted of David D’Argenio, Richard Weiss, and Harold Rosenberger.  All members of the Compensation Committee were independent directors, and no member was an employee or former employee.  During Fiscal year 2009, none of our executive officers served on the compensation committee or board of directors of another entity whose executive offer served on our Compensation Committee.

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ITEM 12 – SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

EQUITY COMPENSATION PLAN INFORMATION

The following table provides a summary of Equity Compensation Plan Information.

Equity Compensation Plan Information (1)
Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)	(b)	(c)
Equity compensation plans approved by security holders	2,714,536	$   0.91	306,000
Equity compensation plans not approved by security holders	0	0	0
Total	2,714,536		306,000

(1)	The Company is authorized to issue stock options under the following compensation arrangement:
	a.	4,000 shares per year per person to Directors as a part of their annual stipends.
	b.	50 shares for each $1,000 of net income before taxes at the end of each fiscal year (up to a maximum of 120,000 options) to CEO over the term of the current employment agreement.

The following table sets forth certain information regarding beneficial ownership of our Common Stock as of August 31, 2009 by (i) each person who is known to own beneficially more than 5% of the outstanding shares of our Common Stock, (ii) each of our directors and executive officers, and (iii) all directors and executive officers of the Company as a group:

Beneficial owner (1), (2)	Amount and Nature of Beneficial ownership	Percent of Class
Walter S. and Virginia E. Woltosz (3)	7,035,847	41.21%
Momoko Beran (4)	866,752	5.08%
Ronald F. Creeley (5)	694,595	4.07%
Jeffrey A. Dahlen (6)	261,000	1.53%
Dr. David Z. D'Argenio (7)	39,012	*
Dr. Richard R. Weiss (8)	30,012	*
H. Wayne Rosenberger (9)	2,100	*
All directors and officers as a group	8,929,318	52.30%

*     Less than 1%

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(1)Such persons have sole voting and investment power with respect to all Shares of Common Stock shown as being beneficially owned by them, subject to community property laws, where applicable, and the information contained in the footnotes to this table.

(2)The address of each director and executive officer named is c/o the Company, 42505 Tenth Street West, Lancaster, California 93534-7059.

(3)Own an aggregate of 6,975,847 plus 60,000 shares of common stock underlying an option exercisable within the 60 days of August 31, 2009.

(4)Owns 274,752 shares of common stock acquired from the exercise of options granted under the 1996 and 2007 Stock Option plans, plus 592,000 shares of common stock underlying an option exercisable within the 60 days of the date of August 31, 2009.

(5)Owns 61,595 shares of common stock, plus 633,000 shares of common stock underlying an option exercisable within the 60 days of August 31, 2009.  Mr Ronald Creeley left the Company on December 25, 2009.

(6)Owns 195,000 shares of common stock, plus 66,000 shares of common stock underlying an option exercisable within the 60 days of August 31, 2009.

(7)Owns 19,412 shares of common stock, plus 19,600 shares of common stock underlying an option exercisable within the 60 days of the date of the original Annual Report.

(8)Owns 10,412 shares of common stock, plus 19,600 shares of common stock underlying an option exercisable within the 60 days of August 31, 2009.

(9)Owns 2,100 shares of common stock underlying an option exercisable within the next 60 days of August 31, 2009..

Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") requires the Company's directors and executive officers and beneficial holders of more than 10% of the Company's Common Stock to file with the Commission initial reports of ownership and reports of changes in ownership of the Company's equity securities.

ITEM 13 – CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Transactions with Related Persons

There are no existing or proposed transactions in which the Company was or is to be a participant that would be required to be disclosed pursuant to Item 404(d) or Regulation S-K.

Independence of the Board of Directors

Our common stock is traded on NASDAQ.  The Board of Directors has determined that a majority of the members of the Board of Directors qualify as “independent,” as defined by the listing standards of NASDAQ.  Consistent with these considerations, after review of all relevant transactions and relationships between each director and nominee, or any of his or her family members, and the Company, its senior executive management and its independent auditors, the Board of Directors has determined further that all of our directors are independent under the listing standards of NASDAQ, except for Walter Woltosz, and Virginia Woltosz.  In making this determination, the Board of Directors considered that there were no new transactions or relationships between its current independent directors and the Company, its senior management and its independent auditors since last making this determination.

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Audit Committee.  The Audit Committee is currently comprised of: Mr. H. Wayne Rosenberger, Dr. Richard R. Weiss and Dr. David Z. D'Argenio. Each member of the Audit Committee is independent as defined under the applicable rules of the SEC and NASDAQ listing standards.

Compensation Committee.  Our compensation committee is currently comprised of the following, each of whom is independent as defined under the applicable rules of the SEC and NASDAQ listing standards: Mr. H. Wayne Rosenberger, Dr. Richard R. Weiss and Dr. David Z. D'Argenio.

ITEM 14 – PRINCIPAL ACCOUNTING FEES AND SERVICES

The firm of Rose, Snyder & Jacobs, CPAs served as the Company’s independent public accountants for the fiscal year ended August 31, 2009 and have been selected by the Audit Committee to serve again for the fiscal year to end August 31, 2010.

Under the procedures established by the Audit Committee, all auditing services and all non-audit services performed by Rose, Snyder & Jacobs are to be pre-approved by the Audit Committee, subject to the de minimus exception provided under Section 202 of the Sarbanes-Oxley Act.  All of the services provided by Rose, Snyder & Jacobs were pre-approved by the Audit Committee.

Audit Fees

Aggregate fees, including out-of-pocket expenses, for professional services rendered by the full time employees of Rose, Snyder & Jacobs in connection with the audit of the Company’s consolidated financial statements as of and for the year ended August 31, 2008 and for reviews of the interim consolidated financial statements during the year ended August 31, 2008 were $79,270.

Aggregate fees, including out-of-pocket expenses, for professional services rendered by the full time employees of Rose, Snyder & Jacobs in connection with the audit of the Company’s consolidated financial statements as of and for the year ended August 31, 2008 and for reviews of the interim consolidated financial statements during the year ended August 31, 2008 were $74,010.

Audit-Related Fees

Aggregate fees, including out-of-pocket expenses, for professional services rendered by Rose, Snyder & Jacobs for audit-related services for the year ended August 31, 2009 were $0.

Aggregate fees, including out-of-pocket expenses, for professional services rendered by Rose, Snyder & Jacobs for audit-related services for the year ended August 31, 2008 were $0.

Tax Fees

Aggregate fees, including out-of-pocket expenses, for professional services rendered by Rose, Snyder & Jacobs in connection with tax compliance, tax advice and corporate tax planning for the year ended August 31, 2009 were $0.

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Aggregate fees, including out-of-pocket expenses, for professional services rendered by Rose, Snyder & Jacobs in connection with tax compliance, tax advice and corporate tax planning for the year ended August 31, 2008 were $15,880.

All Other Fees

Rose, Snyder & Jacobs received no additional fees for services for the year ended August 31, 2009. During the year ended August 31, 2008, Rose, Snyder & Jacobs received no additional fees

Audit Committee Pre-Approval Policies and Procedures

The Audit Committee has considered whether the provision of services covered in the preceding paragraphs is compatible with maintaining Rose, Snyder & Jacobs’s independence. At their regularly scheduled and special meetings, the Audit Committee considers and pre-approves any audit and non-audit services to be performed for the Company by its independent registered public accounting firm. For the fiscal year ended August 31, 2009, those pre-approved audit, audit-related and tax services represented approximately 94%, 6% and 0%, respectively.

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PART IV

ITEM 15 – EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) (1)Financial Statements. The consolidated financial statements were included in the Annual Report.

(2)Financial Statement Schedules. All financial statement schedules have been omitted since the information is either not applicable or required or was included in the financial statements or notes included in the Annual Report.

(3)List of Exhibits required by Item 601 of Regulation S-K.  See part (b) below.

(b)Exhibits.  The following exhibits are filed as part of this report.  Those exhibits marked with a (†) refer to management contracts or compensatory plans or arrangements.

EXHIBIT NUMBER	DESCRIPTION
3.1	Articles of Incorporation of Simulations Plus, Inc. (1)
3.2	Amended and Restated Bylaws of Simulations Plus, Inc. (1)
4.1	Articles of Incorporation of Simulations Plus, Inc. (incorporated by reference to Exhibit 3.1 hereof) and Bylaws of Simulations Plus, Inc. (incorporated by reference to Exhibit 3.2 hereof)
4.2	Form of Common Stock Certificate (1)
4.3	Share Exchange Agreement (1)
10.1	Simulations Plus, Inc. 1996 Stock Option Plan (the “Option Plan”) and forms of agreements relating thereto (1) (†)
10.24	Exclusive License Software Agreement by and between Simulations Plus, Inc. and Therapeutic Systems Research Laboratories dated June 30, 1997. (2)
10.34	OEM/Remarketing Agreement between Words+, Inc. and Eloquent Technology, Inc. (7)
10.41	Technology Transfer Agreement with Sam Communications, LLC. (7)
10.43	Lease Agreement by and between Simulations Plus, Inc. and Venture Freeway, LLC. (4)
10.45	Employment Agreement by and between the Company and Walter S. Woltosz (5) (†)
10.46	Simulations Plus, Inc. 2007 Stock Option Plan (the “2007 Option Plan”) (6) (†)
21.1	List of Subsidiaries (7)
31.1	Rule 13a-14(a)/15d-14(a) – Certification of Chief Executive Officer (CEO). (7)
31.2	Rule 13a-14(a)/15d-14(a) – Certification of Chief Financial Officer (CFO). (7)
32	Section 1350 – Certification of CEO and CFO. (7)

	(1)	Incorporated by reference to the Company’s Registration Statement on Form SB-2 (Registration No. 333-6680) filed on March 25, 1997.
	(2)	Incorporated by reference to the Company’s Form 10-KSB for the fiscal year ended August 31, 1997.
	(3)	Incorporated by reference to the Company’s Registration Statement on Form S-8 (Registration No. 333-91592) filed on June 28, 2002.
	(4)	Incorporated by reference to the Company’s Form 10-KSB for the fiscal year ended August 31, 2006.
	(5)	Incorporated by reference to the Company’s Form 10-K for the fiscal year ended August 31, 2009.
	(6)	Incorporated by reference to the Company’s Form 10-Q for the fiscal quarter ended November 30, 2009.
	(7)	Filed herewith.
(c)	Financial Statement Schedule. See Item 15(a)(2) above.

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SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Lancaster, State of California, on March 1, 2010.

SIMULATIONS PLUS, INC.
By	/s/ Momoko A. Beran
	Momoko A. Beran
	Chief Financial Officer

In accordance with Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on.

Signature	Title
/s/ Walter S. Woltosz	Chairman of the Board of Directors and Chief Executive Officer
Walter S. Woltosz	(Principal executive officer)
/s/ Virginia E. Woltosz	Secretary and Director of the Company
Virginia E. Woltosz
/s/ Dr. David Z. D’Argenio	Director
Dr. David Z. D’Argenio
/s/ Dr. Richard R. Weiss	Director
Dr. Richard R. Weiss
/s/ Harold W. Rosenberger	Director
Harold W. Rosenberger
/s/ Momoko A. Beran	Chief Financial Officer of the Company
Momoko A. Beran	(Principal financial officer and principal accounting officer)

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EX-10.34

EXHIBIT 10.34

OEM/REMARKETING AGREEMENT

THIS OEM/REMARKETING AGREEMENT (this "Agreement") is effective as of the 6th day of July, 2000, by and between Eloquent Technology, Inc., a New York corporation having offices at 2389 North Triphammer Road, Ithaca, NY 14850 (hereinafter "Supplier"), and Words +, Inc., a California corporation having principal offices at 1220 W. Avenue J, Lancaster, CA 93534 (hereinafter "OEM").

WITNESSETH:

WHEREAS, Supplier produces a certain text-to-speech computer software program known as ETI-Eloquence, and related application software, tools, documentation and utilities, all of which Supplier is willing to provide to OEM on the terms and conditions set forth herein; and

WHEREAS, OEM intends to integrate ETI-Eloquence with or otherwise offer ETI-­Eloquence in conjunction with other software programs currently owned, or to be developed or acquired by OEM in the future, so as to create EZ-Keys for Windows and Talking Screen, the OEM Product (hereinafter "OEM Product"), and to market such OEM Product to end-users;

NOW, THEREFORE, in consideration of the premises hereof, and the mutual obligations herein made and undertaken, the parties hereto agree as follows:

1. Definitions. For the purposes of this Agreement, the definitions set forth in this Section shall apply to the respective capitalized terms:

1.1 "Class A Programs." The run-time software modules required at execution time for conversion of text-to-speech, and associated Documentation, which run­time modules and Documentation are listed on Exhibit A.

1.2 "Class B Programs." Those software components, including Documentation, that are designed for use by developers in integrating Class A Programs with other software and which consist of all software components and Documentation other than those listed in Exhibit A. All software components and Documentation that are not listed as Class A Programs on Exhibit A are Class B Programs.

1.3 "Documentation." All printed or machine-readable instructions, help files, manuals, diagrams, or specifications pertaining to the Programs.

1.4 "End-User." A customer to whom is offered a license to use one copy of OEM Product for this single person's own use, without a right to resell or relicense the OEM Product.

1.5 "End-User License Agreement," or "Sublicense." The form of agreement under which is granted to an End-User the right and license to use Class A Programs as part of OEM Product.

1.6 "Enhancement(s)."  Computer program modifications or additions, other than Maintenance Modifications, that may be integrated with the Programs or offered separately by Supplier and that alter the functionality of Programs or add new functions thereto. Enhancements may be

(a) a "Minor upgrade" which fixes bugs and may add minor functionality;

(b) a "Major upgrade" by which major functionality is added;

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(c) "Add-Ons", modules which provide added functionality, such as a new language.

1.7 "Maintenance Modification(s)." Computer software changes to be integrated with the Programs to correct any errors therein, but that do not substantially alter the functionality of the Programs or add new functions thereto.

1.8 "Marketing Territory." The Marketing Territory shall be the world.

1.9 "Object Code." Computer programs assembled or compiled in electronic binary form on software media, which are readable and usable by machines, but not generally readable by humans without reverse-assembly, reverse-compiling, or reverse-engineering.

1.10 "OEM Product." A combination of ETI-Eloquence with OEM's Software Product, to be offered by OEM, together with related services, to End-Users.

1.11 "Programs." The Class A Programs and/or the Class B Programs, including all Maintenance Modifications and Enhancements thereto.

1.12 "Source Code." A computer program written in a higher-level programming language, sometimes accompanied by English language comments. Source Code is intelligible to trained programmers and may be translated to Object Code for operation on computer equipment through the process of compiling.

2. OEM Certification. OEM hereby certifies and agrees that, in consideration of the benefits of this Agreement, OEM will add significant value to, and enhance the functionality and/or capability of, the Class A Programs by combining the Class A Programs with other computer equipment and/or computer software programs to produce the OEM Product, and shall offer such OEM Product and related services, including training, installation assistance, and other forms of customer support. OEM further certifies and agrees that it will market the Class A Programs solely as pan of OEM Product and that OEM Product will be marketed by OEM for its own account in the normal course of its business solely to its dealers and to End-Users having no affiliation or control relationship with OEM. In the event that any of the foregoing representations and undertakings prove untrue at any time during the term of this Agreement, Supplier shall have the right to terminate this Agreement as to any or all further shipments to OEM or as to any or all further copying and distribution of Programs by OEM in the manner prescribed in Section 14 hereof.

3. Supplier's Responsibilities. Subject to the terms and conditions of this Agreement, Supplier shall:

3.1 Deliver one copy of the Programs to OEM;

3.2 Grant OEM the rights and licenses in the Programs as set forth in Section 5 hereof;

3.3 Warrant the Programs as set forth in Section 12 hereof;

3.4 Indemnify OEM as set forth in Section 13 hereof;

3.5 Furnish to OEM without additional charge, any Minor Upgrade to the Programs which may be released during the term of this Agreement (although Supplier shall have no duty to release any Enhancement) and this Agreement shall be deemed to be a license of all Minor Upgrades, but shall not be deemed to compel Supplier to grant a license of any Major Upgrade or Add-On. If Supplier elects to grant such a license, it shall be governed by the terms of this agreement.

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3.6 Supply the ETI logo in photo-ready format or on a disk, for use in the OEM product, upon request by OEM.

4. OEM's Responsibilities. Subject to the terms and conditions of this Agreement, OEM shall:

4.1 Combine the Class A Programs with other equipment and/or computer software programs independently developed or procured by OEM so as to create the OEM Product, such combination to be accomplished in such a way as to limit to the maximum extent reasonably possible the use of the Class A Programs by the End-User to their use within OEM Product and not to permit the End-User to separately access the functionality of the Class A Programs;

4.2 Market, sell, and deliver OEM Product to End-Users in the Marketing Territory;

4.3 Present Supplier's End-User License Agreement to all ETI-­Eloquence customers;

4.4 Pay royalties for licenses granted, as set forth in Exhibit B and Section 11 hereof;

4.5 Protect Supplier's proprietary rights in Programs as set forth in Section 6 hereof;

4.6 Provide reseller exemption certificates to Supplier as set forth in Section 10 hereof;

4.7 Keep confidential the terms of this Agreement, including but not limited to the Royalty Schedule as set forth in Exhibit B to this Agreement.

5. Licenses Granted.

5.1 Supplier hereby grants to OEM the following rights and licenses:

5.l.a. Class A Programs. Supplier hereby grants to OEM a nonexclusive, nontransferable right and license to copy and to distribute copies of Class A Programs, solely for use as part of the OEM Product and not as a separate product, directly or through the intermediary of distributors of OEM, to End-Users in the Marketing Territory during the term of this Agreement. No modification or preparation of derivative works of ETI-Eloquence whatsoever is permitted.

5.l.b. Class B Programs. Supplier hereby grants to OEM a nonexclusive, nontransferable right and license to use the Class B Programs, for internal use only, for purposes of adaptation and integration of the Class A Programs to OEM Product.

5.l.c. Version Lx Programs. Supplier hereby grants to OEM a nonexclusive, nontransferable right and license to copy and to distribute ETI-Eloquence Version 1.x (General American English) only to those End Users using hardware or an operating system incapable of supporting the Current version, and solely for use as part of the OEM Product and not as a separate product, and only directly or through the intermediary of Distributors, to End-Users in the Marketing Territory during the term of this Agreement. No modification or preparation of derivative works of ETI-Eloquence Version Lx whatsoever is permitted. Because ETI-­Eloquence Version Lx is no longer supported by Supplier, OEM accepts this right and license with respect to ET[-Eloquence Version 1.x "as is" with no warranties of any kind and agrees that Supplier shall have no obligation of technical support for ETI-Eloquence Version I .x, pursuant to section 8 of this Agreement or otherwise.

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5.2 Supplier further grants to OEM a nonexclusive, nontransferable right and license to use the Class A Programs for marketing and demonstration purposes and for the training of End Users or distributors of OEM.

5.3 The license granted in this Section 5 is provided by Supplier in cooperation with International Business Machines Corporation ("IBM").

6. Confidentiality of Information; Protection and Security.

6.1 OEM shall use all reasonable efforts to protect and defend the proprietary nature of the Programs, Including Enhancements and any derivative works of the Programs. Except as expressly provided otherwise in this Agreement, OEM shall not copy, modify, transcribe, store, translate, sell, lease, or otherwise transfer or distribute any of the Programs, including Enhancements, in whole or in part, without prior authorization in writing from Supplier.

6.2 All Programs incorporated into OEM Product shall be marked with such copyright, patent, or other notices, proprietary legends, or restrictions as Supplier may require.

6.3 OEM and Supplier may from time to time exchange confidential or proprietary information. Each shall take reasonable steps to keep confidential and shall not disclose to any other party, or use except in furtherance of the purposes of this Agreement, any such information which is received in a writing marked "Confidential".

7. Expenses. It is expressly understood and agreed that neither party is under any obligation or requirement to reimburse the other party for any expenses or costs incurred by that party in the performance of its responsibilities under this Agreement. Any costs or expenses incurred by either party shall be at that party's sole risk and upon its independent business judgment that such costs and expenses are appropriate.

8. Technical Support. Supplier shall use commercially reasonable efforts to provide the support services for the Programs as specified in Exhibit C ("Support Services").

9. Title.

9.1 Title to all of Supplier's Software Programs (including any Maintenance Modifications or Enhancements) shall at all times remain and vest solely with Supplier or its licensors. OEM agrees that it will not claim or assert title to any such materials or attempt to transfer any title to End-Users or any third parties.

9.2 The following copyright notice shall be placed on the documentation of the OEM Product and such notices shall be retained on the copies made by OEM: "This product uses the ETI-Eloquence text-to-speech system which contains material copyrighted by Eloquent Technology, Inc. and/or International Business Machines Corporation". Supplier agrees to take such reasonable steps as may be necessary to preserve the copyrights to the Supplier's Programs and any associated Documentation.

10. Reseller Exemption Certification. OEM hereby certifies that it either holds or will acquire prior to offering for resale a valid Reseller Exemption Certificate issued by each taxing jurisdiction or entity in the Marketing Territory where such certificate is required as a condition for the avoidance of applicable sales or use taxes, covering any Programs to be licensed or sublicensed under this Agreement. Prior to any shipment of OEM Product under this Agreement, OEM will provide Supplier with a copy of each such certificate, thereby entitling OEM to be treated by Supplier as exempt from collection of tax on Programs in each jurisdiction or entity from which a certificate is obtained. OEM shall promptly notify Supplier of any additions, deletions, or changes to such certificates. OEM shall indemnify and hold harmless Supplier from and against any taxes, duties, tariffs, or other assessments levied by or on behalf of any taxing jurisdiction or entity that fails to issue, or disputes the validity or coverage of, any such exemption certificates.

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11. Payment and Audit.

11.1 OEM shall pay royalties to Supplier quarterly, in accordance with the schedule of royalties attached hereto as Exhibit B, not later than thirty (30) days following the end of each calendar quarter.

11.2 Within thirty (30) days after the end of each calendar quarter, OEM shall submit to Supplier a report, in a form to be supplied by Supplier, which details the number of End Users to which the OEM Product was licensed during the quarter (hereinafter "Royalty Report"). A Royalty Report shall be submitted for every calendar quarter during the term of this Agreement even if no End Users are licensed to use the OEM Product during the quarter. The Royalty Report shall be certified by an authorized representative of OEM.

11.3 Supplier, upon reasonable written notice, may at its election and at its own expense cause an audit of OEM's books and records of sales by a firm of licensed public accountants to confirm the accounting; provided, however, that if such an audit shows that the royalty payments actually made are less than 95% of the amounts shown to be due, the cost of the audit shall be paid by the OEM.

11.4 All payments due under this agreement shall be paid in United States dollars by check to:

Accounts Receivable Eloquent Technology, Inc. 2389 N. Triphammer Rd. Ithaca, NY 14850 USA

or by wire transfer to the following account (or such other account as supplier may specify):

Bank: M & T Bank Phone: (607) 257-2224 Address: 2248 N. Triphammer Road, Ithaca, NY 14850 - USA Account Number: O15296353 (Eloquent Technology, Inc.) Bank Routing/Transit Code: 022000046

11.5 In the event that any national government imposes any income or equivalent taxes on any part of the payments required by this Agreement to be made by OEM to Supplier and requires OEM to withhold taxes from such payment, OEM may deduct such taxes from such payments. Tax receipts indicating payments or withholding of taxes on behalf of Supplier shall be promptly submitted to Supplier. OEM shall cooperate with Supplier in a determination of the propriety of imposition of any such tax.

12. Disclaimer of Warranties.

12.1 OEM acknowledges that it has had a full opportunity to evaluate the Programs, and accepts the Programs "as is" without warranty of any kind.

12.2 SUPPLIER DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES AS TO THE SUITABILITY OR MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY PRODUCTS OR PROGRAMS FURNISHED HEREUNDER OR FOR ANY OEM PRODUCT PREPARED BY OEN.  IN NO EVENT SHALL SUPPLIER BE LIABLE FOR ANY LOST OR ANTICIPATED PROFITS, OR ANY INCIDENTAL, EXEMPLARY, SPECIAL, OR CONSEQUENTIAL DAMAGES, REGARDLESS OF WHETHER SUPPLIER WAS ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

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12.3 No action arising or resulting from this Agreement, regardless of its form, may be brought by either party more than one year after the cause of the action arises.

13. Indemnification.

13.1 Supplier hereby indemnifies and holds harmless OEM from and against any claims, actions, or demands alleging that the Programs infringe any United States patent, United States trademark, or the copyright or other trade secret right of any third party. OEM shall permit Supplier to replace or modify any affected Programs so to avoid infringement, or to procure the right for OEM to continue use and remarketing of such items. If neither of such alternatives is reasonably possible, the infringing items shall be returned to Supplier and Supplier's sole liability shall be to refund amounts paid therefore by OEM. Supplier shall have no obligation hereunder for or with respect to claims, actions, or demands alleging infringement that arise by reason of combination of non-infringing items with any items not supplied by Supplier.

13.2 OEM hereby indemnifies and holds harmless Supplier from and against any and all claims, actions, or demands arising with respect to any OEM Product, with the sole exception of those matters for which Supplier bears responsibility under Section 13.1 hereof.

13.3 The foregoing indemnities are conditioned on prompt written notice of any claim, action, or demand for which indemnity is claimed; complete control of the defense and settlement thereof by the indemnifying party; and cooperation of the other party in such defense.

14. Term and Termination.

14.1 This Agreement shall remain in effect for a period of one (1) year from the date set forth above and shall be automatically renewed for subsequent one (1) year terms unless either party provides written notice to the other that they wish to terminate this Agreement at least sixty (60) days before the end of a term. In the event that such notice is given by either party, this Agreement shall terminate on the last day of the term during which the notice is given.

14.2 Supplier may terminate this Agreement if OEM at any time fails to comply with the certification required under Section 2 hereof.

14.3 Should either party commit a material breach of its obligations hereunder, or should any of the representations of either party in this Agreement prove to be untrue in any material respect, the other party may, at its option, terminate this Agreement, by 30 days' written notice of termination, which notice shall identify and describe the basis for such termination. [f, prior to expiration of such period, the defaulting party cures such default, termination shall not take place, provided, however, that Supplier may terminate this Agreement upon 10 days' written notice for breach of the obligation to pay royalties as provided by section 11.1 of this Agreement.

14.4 Supplier may, at its option and without notice, terminate this Agreement, effective immediately, should OEM (1) admit in writing its inability to pay its debts generally as they become due; (2) make a general assignment for the benefit of creditors; (3) institute proceedings to be adjudicated a voluntary bankrupt, or consent to the filing of a petition of bankruptcy against it; (4) be adjudicated by a court of competent jurisdiction as being bankrupt or insolvent; (5) seek reorganization under any bankruptcy act, or consent to the filing of a petition seeking such reorganization; or (6) have a decree entered against it by a court of competent jurisdiction appointing a receiver, liquidator, trustee, or assignee in bankruptcy or in insolvency covering all or substantially all of such party's property or providing for the liquidation of such party's property or business affairs.

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14.5 Termination of this Agreement shall not relieve either party of the obligations incurred hereunder pursuant to Sections 4.7, 6, 9, 11, 12, and 13 hereof, which Sections shall survive such termination.

14.6 On termination of this Agreement, (1) OEM shall immediately discontinue marketing OEM Product containing any Programs which are licensed under this Agreement, and (2) at Supplier's option, return to Supplier or destroy all Programs delivered to OEM, including all copies thereof.

15. Limitation of Representations and Use of Name by OEM.

15.1 OEM shall make no representations concerning Supplier or any Programs, including any Maintenance Modifications without prior authorization in writing from Supplier.

15.2 OEM shall not license, sublicense, reproduce, reference, or distribute the Programs except under the trade name or trademark of Supplier without the prior written approval of Supplier, which consent shall not be unreasonably withheld. Supplier does not warrant or represent that the trademarks "ETI-Eloquence", "Elocutor", "OLEcutor", "Olecutor" and "EloqTalk" will be available for use in every jurisdiction where OEM may distribute OEM Product.

15.3 OEM shall as soon as reasonably possible submit to Supplier for review any advertising, promotion, or publicity in which the trade name or trademarks of the Supplier are used, or which is otherwise undertaken pursuant to this Agreement. Supplier shall have the right to require, at its discretion, the correction or deletion of any misleading, false, or objectionable material from any such advertising, promotion, or publicity.

16. Independent Contractor Status. OEM is an independent contractor under this Agreement, and nothing herein shall be construed to create a partnership, joint venture, or agency relationship between the parties hereto with the sole exception that OEM acts as a licensing agent of Supplier with respect to Class A Programs as provided herein. OEM shall have no authority to enter into agreements of any kind on behalf of Supplier, and shall have no further power or authority to bind or obligate Supplier in any manner to any third party.

17. Compliance With Law. Each of the parties shall comply with all applicable laws and regulations of governmental bodies or agencies in its performance under this Agreement.

18. No Assignment. OEM represents that it is acting on its own behalf and is not acting as an agent for or on behalf of any third party, and further agrees that it may not assign its rights or obligations under this Agreement without the prior written consent of Supplier, which consent shall not be unreasonably withheld. The sale or transfer of a controlling interest in OEM shall be considered an assignment for the purposes of this paragraph. Permission shall not be withheld for the sole purpose of raising royalty rates paid to Supplier by OEM or its assignee, but it is expressly understood that Supplier in its sole discretion may withhold consent to an assignment if Supplier believes that the effect of the assignment might be to give access to the licensed Programs to a competitor of Supplier.

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19. Notices. All notices and other communications required or permitted to be given under this Agreement shall be in writing and shall be considered effective when transmitted by fax and (1) transmitter has received a signal indicating correct receipt of the fax transmission and/or (2) a copy of the writing has been placed in the hands of a recognized international or overnight courier service, addressed to the party, prepaid.

20. Governing Law. All questions concerning the validity, operation, interpretation, and construction of this Agreement will be governed by and determined in accordance with the laws of the State of New York, without application of its conflicts of laws principle.

21. Arbitration. Should any dispute occur between the parties arising out of or related to this Agreement, the dispute shall be settled and determined by arbitration under the then current rules of the American Arbitration Association. Any award in arbitration may be entered with and enforced by a court of competent jurisdiction.

22. No Waiver. Neither party shall by mere lapse of time without giving notice or taking other action hereunder be deemed to have waived any breach by the other party of any of the provisions of this Agreement. Further, the waiver by either party of a particular breach of this Agreement by the other party shall not be construed as, or constitute, a continuing waiver of such breach, or of other breaches of the same or other provisions of this Agreement.

23. Force Majeure. Neither party shall be in default if failure to perform any obligation hereunder is caused solely by supervening conditions beyond that party's control, including acts of God, civil commotions, strikes, labor disputes, and governmental demands or requirements.

24. Severability. If any provision of this Agreement shall be held illegal, unenforceable, or in conflict with any law of a federal, state, or local government having jurisdiction over this Agreement, the validity of the remaining portions or provisions hereof shall not be affected thereby.

25. No Conflict of Interest. Each of the parties represents and warrants that it has full power and authority to undertake the obligations set forth in this Agreement and that it has not entered into any other agreements, nor will it enter into any other agreements, that would render it incapable of satisfactorily performing its obligations hereunder, or place it in a position of conflict of interest, or be inconsistent or in conflict with its obligations hereunder.

26. Scope of Agreement. Each of the parties hereto acknowledges that it has read this Agreement, understands it, and agrees to be bound by its terms. The parties further agree that this Agreement is the complete and exclusive state of agreement and supersedes all proposals (oral or written), understandings, representations, conditions, warranties, covenants, and all other communications between the parties relating thereto, except for any Non-Disclosure Agreement in effect between the parties. This Agreement may be amended only by a writing that refers to this Agreement and is signed by both parties.

27. Parties bound. This Agreement shall bind and inure to the benefit of the parties, their successors and assigns.

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed by their authorized representatives on the date first set forth above:

ELOQUENT TECHNOLOGY, INC.	WORDS +, Inc.
By:	By:
/s/ Sudan Hertz	/s/ Walter Woltosz
Dr. Susan Hertz, President	Walter Woltosz, Chief Executive Officer

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Exhibit A

Class A programs:

sapicore.exe

ecicore.exe

eci5.dll

etisvr5.dll

enu5.ui1

esp5.uil

fra5.uil

frc5.uil

mex5.ui1

enusapi.exe

enueci.exe

engsapi.exe

especi.exe

frasapi.exe

fraeci.exe

frcsapi.exe

fi-ceci.exe

mexsapi.exe

mexeci.exe

enu5.syn

esp5.syn

fra5.syn

frc5.syn

mex5.syn

regsvr32.exe

reg.exe

Class A documentation:

enuref.hlp

enuref.cnt

enugen.hlp

enusapi.hlp

enusapi.cnt

enulex.hlp

espref.hlp

espref.cnt

espgen.hlp

espsapi.hlp

espsapi.cnt

esplex.hlp

frare£hlp

fraref.cnt

fragen.hlp

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frasapi.hlp

frasapi.cnt

fralex.hlp

frcrcf.hlp

frcref.cnt

frcgen.hlp

frcsapi.hlp

frcsapi.cnt

frclex.hlp

mexref.hlp

mexref.cnt

mexgen.hlp

mexsapi.hlp

mexsapi.cnt

mexlex.hlp

Version 1.x

Class A Programs

ENGSYN32.DDL

ENGSYS32.DLL

ECI32D.DLL

CW3215.DLL

MAINDICT.TXT

ROOTDICT.TXT

ENGSYN16.DDL

ENGSYN16.DLL

ECID.DLL

BC450RTL.DLL

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Exhibit B

Royalty Schedule

ETI-Eloquence Version 5.x

For each copy of the Version 5.x Class A Programs licensed, OEM shall pay to Supplier a royalty, in United States dollars, as follows:

copies	Royalty
1 -200	$50.00
201 -500	$35.00
501 - 1,000	$25.00
1,001 and above	$18.00

An up-front payment of US $3,000 will be required at the time of the signing of the OEM Licensing Agreement. This up-front payment will be considered a prepayment toward royalties due.

ETI-Eloquence Version 1.x

For each copy of the Version 1.x Class A Programs licensed, OEM shall pay to Supplier a royalty of US $12.

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Exhibit C

Support Services

Supplier shall provide support to OEM only for the current version of the Programs, and for the immediately preceding version of the Programs for a period of six (6) months following the release of the current version of the Programs, as follows:

1. Telephone Support. Supplier shall make available personnel trained in the use of the Programs to provide telephone support to assist OEM in integrating the Programs into the OEM Product ("Telephone Support"). Telephone Support will be available to OEM from 9:00 am to 5:00 pm Eastern Standard Time, excepting Saturday, Sunday and United States federal holidays during the term of this Agreement. Supplier will not be obligated to provide a toll free number for Telephone Support.

2. Support Charges.

2.1 There shall be no charge to OEM for the first five (5) hours of Telephone Support which is provided within ninety (90) days after the delivery of the Programs to OEM by Supplier ("Initial Support Period").

2.2 OEM shall pay Supplier at the rate of $100.00 per hour for all Telephone Support provided by Supplier outside the Initial Support Period or in excess of five (5) hours.

2.3 OEM shall be responsible for its own expenses, including telephone charges, incurred as a result of Telephone Support provided by Supplier.

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EX-10.41

EXHIBIT 10.41

TECHNOLOGY TRANSFER AGREEMENT

This Technology Transfer Agreement (the “Agreement”) is made as of the 19th day of December, 2003 is by and between Sam Communications, LLC, a Nevada limited liability company (“Seller”), with its principal place of business at 117 N. 4th Street #564, Las Vegas, NV 89101, and Simulations Plus, Inc., a California Corporation (“Buyer”), with its principal place of business at 1220 W. Avenue J, Lancaster, California 93534.

WITNESSETH

WHEREAS, Seller owns all right, title, and interest in and to the Software Technology (as defined in Section 1 below), and the Hardware Technology (as defined in Section 1 below) the functional specifications for which are set forth in Exhibit “B” attached hereto;

WHEREAS, Seller owns the Marks (as defined in Section 1 below), including, without limitation, “Say-it! SAM”, and logo associated therewith;

WHEREAS, Seller owns the Domain Names (as defined in Section 1 below) that use the Marks, including, without limitation, “sayitsam.com”; and

WHEREAS, Buyer desires to purchase all rights, title, and interest of Seller in and to the Software Technology, Hardware Technology, the Marks and the Domain Names as well as ongoing support from Seller in accordance with the terms and conditions of this Agreement.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Buyer, intending to be legally bound, hereby agree as follows:

Section 1.DEFINITIONS

Say-it! SAM Software. “Say-it! SAM Software” means all speech output communication computer programs for personal digital assistants (“PDAs”), palmtop computers, tablet computers, notebook computers and desktop computers based on the Say-it! SAM software programs provided by Seller to Buyer for evaluation, and the support software, including, but not limited to the Installer and Layout Designer programs described in Exhibit B.

Software Technology. “Software Technology” means the Say-it! SAM Software, including all source codes for all computer platforms and operating systems and all intellectual property associated therewith developed by Seller and known as Say-it! SAM as currently embodied in the operating versions of such software provided by Seller to Buyer for evaluation, including such additional modifications listed in Exhibit A which Seller agrees to perform in a timely manner as part of this agreement, and all future enhancements to the Software Technology that may be developed by Seller pursuant hereto, with the consent of Buyer or pursuant to a separate written agreement between Buyer and Seller.

Hardware Technology. “Hardware Technology” means the modified PDA sleeve for all Compaq iPAQ PDAs that are compatible with the CompactFlash Expansion Pack for the iPAQ 3800, 3900, 5100 and 5500 series, including, but not limited to all circuitry, design, manufacturing know-how and related intellectual property that provides amplified sound output from a PDA running the Say-it! SAM software or other sound-generating software. Nothing in this Agreement shall preclude Buyer from developing its own hardware technology to replace the Hardware Technology being acquired from Seller.

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Support: “Support” means the ongoing maintenance of the Software Technology to correct bugs or design flaws that may be discovered as the product is used in the field or through in-house testing by Buyer.

Purchased Assets.  “Purchased Assets” means, collectively, the Software Technology, the Hardware Technology, the Marks and the Domain Names.

Marks.  “Marks” means the trademarks, service marks, trade names, brand names, logos, slogans and trade references, in each case whether registered, under application or otherwise, owned by Seller that include the sequential letters "sayitsam”, together with (i) any licenses with respect thereto; (ii) the goodwill and the business appurtenant thereto; (iii) any rights, claims or chose in action, related to or deriving from any of the foregoing; and (iv) any file histories, correspondence, application documents, search reports, documents concerning the prosecution history, enforcement or maintenance of rights, or restrictions on use, with respect to the trademarks, service marks, trade names, brand names, logos, slogans and trade references set forth in this Section, including without limitation any such documents with respect to applications or registrations abandoned on or before the Acceptance Date.

Development: “Development” means the addition of new functionality or features to the Software Technology that extend or enhance its utility and market appeal.

Domain Names.  "Domain Names" means all Internet domain names registered to Seller that include the sequential letters "sayitsam”, including, without limitation, “sayitsam.com.”  "Domain Names" shall also be deemed to include (i) all goodwill associated therewith and inhering therein, (ii) originals of all files, correspondence and other records relating to or reflecting Seller's registration of the Domain Names or any and all right and interest therein, (iii) all claims of Seller against any third parties relating to the Domain Names and all documentation and records relating to such claims, (iv) any and all intellectual property and any other proprietary rights associated therewith existing at any time under the laws of any jurisdiction anywhere in the world, including, without limitation, any trademark, service mark, trade name, brand name and/or copyright rights relating thereto, all registration and pending applications to register such rights, together with all such rights inhering in or protecting names and marks derivative of or similar to the Domain Names and the right to register any of the foregoing anywhere in the world, and (v) any and all rights of Seller pertaining to the Domain Names arising under its agreements with any and all domain name registrars, including without limitation Network Solutions, Inc.

Acceptance Date. “Acceptance Date” means December 23, 2003.

Section 2.CONVEYANCE OF RIGHTS

Subject to the following terms and conditions, Seller, effective as of the Acceptance Date, hereby sells, transfers, and conveys to Buyer all rights and title to the Purchased Assets, free and clear of all claims, mortgages, pledges, liens, security interests, or other encumbrances of any character.

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Section 3.DELIVERY OF PHYSICAL OBJECTS & OTHER ACTIONS

3.1Seller, on or before the Acceptance Date, shall deliver to Buyer (1) a master copy of the Software Technology in source code and executable form for each computer platform and operating system, which shall be in a human readable form suitable for copying; and (2) all system and user documentation pertaining to the Software Technology and Hardware Technology, including design or development specifications, technical papers, presentations, schematics, specialized manufacturing instructions, error reports, and related correspondence and memoranda. Seller shall retain a copy of the source code only for the purposes of performing software maintenance and development of enhancements under this Agreement.

3.2Promptly following the date hereof, Seller shall, from time to time, take all steps reasonably requested by Buyer, and execute such documents as reasonably requested by Buyer, to promptly transfer the Domain Names from Seller to Buyer.

Section 4.REPRESENTATIONS AND WARRANTIES OF SELLER

Seller hereby represents, warrants and covenants to Buyer on and as of the date hereof, unless stated to the contrary below, and on and as of the Acceptance Date as follows:

4.1Seller is a limited liability company duly organized and in good standing under the laws of the State of Nevada.  Seller has the power to own or lease its properties and to carry on its business in the places where such properties are now owned, leased or operated, and such business is now conducted.

4.2Seller has all requisite power and authority, and has obtained the consents, approvals and authorizations necessary to enter into and perform this Agreement and consummate the transactions contemplated hereunder.  All necessary notices, consents and actions by Seller (including any necessary notices, consents or actions of the members of Seller) have been obtained.  This Agreement has been duly executed and delivered by Seller and is a valid and binding obligation of Seller, enforceable in accordance with its terms.

4.3Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, shall conflict with or result in a breach of or constitute or result in (a) a default under any of the terms, conditions or provisions of Seller’s Articles of Organization or Operating Agreement, (b) a violation under any law, rule, or governmental regulation to which Seller is subject or result in a default under any judgment, order, injunction, ruling or decree of any court or governmental authority by which Seller is bound, or any regulation or ruling of any governmental body or authority, (c) the breach or default of any contract or agreement to which Seller is a party or by which it is bound or to which any of the Purchased Assets is subject (or result in the imposition of any lien or encumbrance upon any of the Purchased Assets); (d) the triggering of any rights of first refusal, preferential purchase, or similar rights; or (e) the creation or imposition of any lien, charge or encumbrance under any law, judgment, order or decree binding on Seller.

4.4Seller has, good and indefeasible title to all of the Purchased Assets, free and clear of all claims, mortgages, pledges, liens, security interests, or other encumbrances of any character.  The Software Technology and Hardware Technology was developed internally by Seller or acquired by Seller, and was not misappropriated from another.  Upon delivery of the Purchased Assets, good and valid title to the Purchased Assets, free and clear of all mortgages, liens, claims, pledges, security interests or other encumbrances, will pass to Buyer.

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4.5There are no actions at law or in equity, or arbitration proceedings, or claims or investigations of which Seller has received notice, pending or to Seller’s knowledge threatened, or state of facts existing, which gives Seller any reasonable basis to anticipate any such action, proceeding, claim or investigation.  There are no proceedings, pending or to Seller’s knowledge threatened, against Seller and related to the Purchased Assets by or before any governmental board, department, commission, bureau, instrumentality or agency, or state of facts existing which gives Seller any reasonable basis to anticipate any such proceeding; and Seller is not subject to any judgment, order or decree entered in any lawsuit or proceeding that has had, or that can be reasonably be expected to have, an adverse effect on the Purchased Assets or on its ability to enter into this Agreement.

4.6All tax returns and reports of Seller required by law to have been filed have been duly filed, and all taxes due and owing with respect to the time periods for such returns, have been paid in full.  There are no liens for any taxes upon any of the Purchased Assets.  Seller is not a party to any pending action or proceeding, and to Seller’s knowledge, there is no action or proceeding threatened by any government or authority that subjects or might subject Seller, or any of the Purchased Assets, to any claim or lien relating to the payment of taxes.

4.7No representation or warranty made by Seller in this Agreement contains any untrue statements or a material fact or omits to state any material fact necessary to make the statements herein not misleading.

4.8Seller has the complete and unrestricted power and the unqualified right to sell, transfer, convey, assign and deliver the Purchased Assets to Buyer.

4.9Seller has no knowledge of any third-party asserting common law rights or any other rights to use in any of the Marks. Seller has not granted any license or other right to use or interest in the Software Technology or Hardware Technology to any third party.

4.10Neither the use, manufacture, modification, copying, disposition, marketing, license, sublicense, sale, advertising, furnishing, distribution, performance, public display or intended use of any of the Purchased Assets infringes or misappropriates any intellectual property right of any other person. There is no pending, and to the knowledge of Seller, there is no threatened, claim, demand, or litigation contesting the validity, ownership or right of Buyer (or Seller) to use, possess, license, sublicense, copy, modify, make derivative works of, sell, distribute, perform, display publicly, market, advertise or dispose of any Purchased Assets, nor has Seller received any written notice asserting that any Purchased Assets or the proposed use, possession, license, sublicense, copying, modifying, making derivative works of, sale, distribution, performance, public display, marketing, advertising or disposition thereof conflicts or will conflict with the rights of any other party, nor, to Seller’s knowledge, is there any reasonable basis for any such assertion.  Seller has not received notice from any person claiming that any of the Purchased Assets or the use thereof constitutes unfair competition or trade practices under any law, including notice of a third party patent or other intellectual property rights from a potential licensor of such rights.

4.11Without limiting the generality of any other representation contained herein, all personnel, including employees, agents, consultants, and contractors, who have at any time directly contributed to or participated in the conception and development of the Purchased Assets (i) have been employees of Seller, acting within the scope of their employment, or (ii) have been parties to a "works-made-for-hire" arrangement or agreement with such Seller, in accordance with applicable federal and state law, that has accorded Seller full, effective, exclusive, and original ownership of all tangible and intangible property and rights thereby arising, have executed appropriate instruments of assignment, in favor of Seller as assignee that have conveyed to Seller full, effective, and exclusive ownership of all tangible and intangible property and rights thereby arising.

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4.12On and after the Acceptance Date, other than pursuant to this Agreement, there are no and will be no royalties, honoraria, fees or other payments payable by Buyer to any third person by reason of the ownership, use, possession, license, sublicense, copying, modifying, making derivative works of, sale, distribute, performance, public display, marketing, advertising or disposition of any of the Purchased Assets by Buyer on or after the Acceptance Date, except an agreement with Possum Controls, LTD, the terms of which are described in Exhibit C.

4.13No third party possesses any copy of any source code to any Software Technology.  Seller has taken commercially reasonable actions to protect each item of Purchased Assets.  The consummation of the transaction contemplated hereby will not result in Buyer being bound by any non-compete or other restriction on the operation of any business of Buyer or the granting by Buyer of any rights or licenses to any of the Purchased Assets.  Seller has not disclosed the source code for any of the Purchased Assets or other confidential information constituting, embodied in or pertaining to the Purchased Assets to any person or entity, except pursuant to effective nondisclosure agreements, and Seller has taken commercially reasonable measures to prevent disclosure of such source code.

4.14The Software Technology and Hardware Technology are fully eligible for protection under applicable copyright law and have not been forfeited to the public domain.

4.15Seller is acquiring the Securities (as defined in Section 8.1) as principal for its own account for investment purposes only and not with a view to or for distributing or reselling such Securities or any part thereof.  Seller is acquiring the Securities hereunder in the ordinary course of its business.  Seller does not have any agreement or understanding, directly or indirectly, with any person to distribute the Securities.

4.16At the time Seller was offered the Securities, it was, and at the date hereof it is, an “accredited investor” as defined in Rule 501(a) under the Securities Act.  Seller has not been formed solely for the purpose of acquiring the Securities.

4.17Seller, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment.  Seller has a preexisting personal or business relationship with Buyer or any of its officers, directors or controlling persons, or by reason of Seller’s business or financial experience has such knowledge and experience in financial and business matters that Seller is capable protecting its own interests in connection with this investment.

4.18Seller is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.

4.19Seller acknowledges that it has received and reviewed Buyer’s Form 10-KSB for the Fiscal Year ended August 31, 2003.

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4.20Seller is not acquiring the Securities as a result of or subsequent to any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.

4.21Seller understands and acknowledges that (i) the Securities are being offered and sold to it without registration under the Securities Act in a transaction that is exempt from the registration provisions of the Securities Act and (ii) the availability of such exemption, depends in part on, and Buyer will rely upon the accuracy and truthfulness of, the foregoing representations and Seller hereby consents to such reliance.

Section 5.REPRESENTATIONS AND WARRANTIES OF BUYER

5.1Buyer represents and warrants to Seller that it is a corporation duly organized, validly existing and in good standing under the laws of the State of California, and it has the corporate power and is authorized under its Articles of Incorporation and its Bylaws to carry on its business as now conducted;

5.2Buyer represents and warrants to Seller that it has performed all corporate actions and received all corporate authorizations necessary to execute and deliver this Agreement and to perform its obligations hereunder;

5.3Buyer represents and warrants to Seller that the execution of this Agreement will not result in any violation or default of or conflict with: (i) Buyer’s Articles of Incorporation or Bylaws; (ii) the provisions of any other agreement to which it is a party or to which it is bound; or (iii) any law, judgment, or regulation of any governmental authority; and

5.4Buyer represents and warrants to Seller that there are no persons who are entitled to any notice of the transaction contemplated hereunder or whose consent is required for the consummation of the transaction contemplated hereunder.

Section 6.WARRANTY

In addition to Seller’s representations and warraties contained in Section 4:

6.1Seller represents and warrants to Buyer that the Software Technology and Hardware Technology provided by Seller to Buyer conform in all material respects to the functional specifications set forth in Exhibit B.

6.2Among the remedies available to Buyer at law or in equity for breach of the foregoing warranties, Buyer can require Seller to correct any material nonconformance to such specifications within ten (10) days of Seller receiving notice from Buyer.

Section 7.CONFIDENTIALITY

7.1Seller shall hold in confidence and not at any time disclose (except on a confidential basis to their employees who need to know and who have signed a confidentiality agreement) all Proprietary Information received from Buyer in the same manner and to the same extent as it holds in confidence its own Proprietary Information (but in no event shall Seller use less than a reasonable degree of care), and shall not use any such Proprietary Information except for the purposes contemplated by this Agreement. As used in this Agreement, “Proprietary Information” shall mean all confidential and proprietary information, including but without limitation, components, drawings, data, plans, programs, specifications, techniques, processes, algorithms, inventions or other information or material owned, possessed or used by Buyer which is at any time so designated by such party in writing, whether by letter or by the use of a proprietary stamp or legend, prior to the time any such Proprietary Information is disclosed Seller, or which, under the circumstances surrounding disclosure, should reasonably be considered by Seller to be confidential. In addition, information which is orally disclosed to the other party shall constitute Proprietary Information if identified as such at such time to be confidential (or which, under the circumstances surrounding disclosure, should reasonably be considered by Seller).  “Proprietary Information” includes “trade secrets” as defined in Uniform Trade Secrets Act, if any, as adopted in the applicable jurisdiction.  Proprietary Information may take the form of documentation, drawings, specifications, software, technical or engineering data, and other forms, and may be communicated orally, in writing, by electronic or magnetic media, by visual observation and by other means.

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7.2Seller shall take all reasonable steps to safeguard the Software Technology and Hardware Technology so as to insure that no unauthorized person shall have access to them, and that no persons authorized to have access shall make any unauthorized copy. Seller shall promptly report to Buyer any unauthorized disclosure or any use of the Software Technology or Hardware Technology of which it becomes aware and shall take such further steps as reasonably may be requested by Buyer to prevent unauthorized use thereof.

7.3Notwithstanding the obligations herein, the obligations herein shall not be applicable to information which: (i) was in the possession of the receiving party free of any obligation of confidence or was in the public domain at the time the furnishing party communicated it to the receiving party, through no fault of the receiving party; (ii) was rightfully communicated to the receiving party free of any obligation of confidence or entered the public domain subsequent to the time the furnishing party communicated it to the receiving party, through no fault of the receiving party; (iii) was developed by employees or agents of the receiving party independently and without knowledge of, or access to, any information which the furnishing party has disclosed in confidence to the receiving party or to any third party, provided that the receiving party shall have the burden of so establishing; (iv) is released from confidential treatment by written consent of the disclosing party; (v) is disclosed to the receiving party by a third party with the legal right to do so; or (vi) is required to be disclosed pursuant to any legal proceeding.

Section 8.PAYMENT

8.1In consideration of the acquisition of all of the rights and assets which make up the Software Technology and Hardware Technology acquired pursuant to this Agreement, Buyer shall issue to Seller thirty-five thousand (35,000) shares of Simulations Plus, Inc. restricted common stock (the “Securities”).

8.2In consideration of the ongoing Support (as described in Sections 10.2 and 10.3), Buyer shall pay to Seller a royalty (the “Royalty”) of two hundred fifty dollars (U.S.$250.00) for each copy of the Say-it! SAM speech output software sold, exclusive of dealer demo units and units provided to assistive technology evaluation centers at less than 80% of the customary retail price.  The Royalty will be computed on the calendar quarter basis, with the Royalty for each quarter payable in full not later than 45 days following the close of that quarter.  Subject to the following, the Royalty shall be paid until such time, if any, as the Royalty is terminated as provided in Section 13.  Nothing herein shall require Buyer to use any efforts to sell the Say-it! SAM speech output software sold, and Seller expressly acknowledges that Buyer may cease selling the Say-it! SAM speech output software at any time.  Buyer disclaims that any level of sales will be achieved or that any amount of Royalty will be payable by Buyer to Seller at any time.

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Section 9.RECORDS AND AUDIT

Buyer shall maintain complete and accurate records relating to the net revenues received by Buyer for the Software Technology and Hardware Technology. Such records shall include information sufficient to determine the royalties due to Seller. Buyer agrees to allow Seller’s certified public accountants to audit Buyer’s records pertaining to the Software Technology and Hardware Technology and verify the accuracy of the royalties due to Seller. Any such audit shall be permitted by Buyer within twenty (20) days of Buyer’s receipt of Seller’s written request to audit. Such audit shall be conducted during normal business hours at a time mutually agreed upon by Buyer and Seller. Buyer’s accounting information shall be kept confidential by the auditors, and Buyer may require that Seller’s accountants enter into a written confidentiality agreement reasonably acceptable to Buyer. Such audits will not exceed one (1) per twelve (12) month period. In the event that Buyer does not agree with the results of the audit performed by Seller’s certified public accountant, then Seller and Buyer will mutually choose an independent third party certified public accountant who will audit Buyer’s records relating to the net revenues received by Buyer. The determination of that third party certified public accountant shall be conclusive and binding upon the Seller and the Buyer. If it is determined that there was no underpayment by the Buyer of the Royalty for the period subject to the audit, the Seller shall bear the entire expense of its certified public accountant and, if applicable, the Buyer’s certified public accountant and the third party certified public accountant. If it is determined that there was an underpayment of the Royalty for the period subject to the audit but that the underpayment was equal to or less than five percent (5%) of the total Royalty which should have been paid for such period, then each party shall be responsible for the cost of its own certified public accountant and the cost of the third party certified public accountant shall be borne in equal shares by the Seller and the Buyer. If it is determined that there was an underpayment of the Royalty for the period subject to the audit and if such underpayment was more than five percent (5%) of the total Royalty which should have been paid for such period, then the Buyer shall be responsible for the cost of its certified public accountant, the Seller’s certified public accountant, and, if applicable, the third party certified public accountant.

Section 10.DELIVERY, INSTALLATION AND SUPPORT

10.1Technical Support. Seller will deliver and provide installation instructions for the Software Technology and Hardware Technology with the program documentation at a time mutually agreed upon by the parties. Seller will provide ongoing technical support to Buyer relating to the development of the Software Technology and Hardware Technology for a period of five (5) years following the date of this Agreement.

10.2Seller Maintenance Support. Seller agrees to provide maintenance Support and enhancements for the Software Technology and Hardware Technology. All revisions, updates, maintenance and Support of the Software Technology and Hardware Technology shall be provided to Buyer when such products or services are available.  All such revisions, updates, maintenance and Support shall be the property of Buyer, and Seller hereby assigns to Buyer all of its interest, if any, in such revisions, updates, maintenance and Support.  Without limiting the generality of the foregoing, Seller agrees that Buyer shall be the copyright owner of all copyrightable works of every kind and description (hereinafter collectively referred to as “Works of Authorship”) created, authored, or developed by Seller during the course of its performance of its obligations under Sections 10.1 and 10.2.  Seller acknowledges that all Works of Authorship created at the direction of or for Buyer, or relate to in any way to the Purchased Assets (or the development thereof), are “works made for hire,” as that term is defined in the United States Copyright Act (17 U.S.C., §101).  To the extent that any such Works of Authorship are deemed not to fall within the statutory definition of  “works made for hire,” Seller agrees and hereby does assign all of its right, title and interest in and to the copyright, and related intellectual property rights in such Works of Authorship.  Seller hereby irrevocably and forever waives, and agrees never to assert, any Moral Rights in or to the Works of Authorship which Seller may now have or which may accrue to Seller’s benefit under U.S. or foreign copyright laws and any and all other residual rights and benefits which arise under any other applicable law now in force or hereafter enacted.  The term "Moral Rights" shall mean any and all rights of paternity or integrity of the Works of Authorship and the right to object to any modification, translation or use of the Works of Authorship, and any similar rights existing under the judicial or statutory law of any country in the world or under any treaty, regardless of whether or not such right is denominated or referred to as a moral right.

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10.3           Marketing and Consulting Services. (a) Seller will provide reasonable assistance at mutually agreeable times and places in creating worldwide visibility at national and international symposia and one-on-one visibility with leaders within the field of augmentative communication and assistive technology. Seller will provide engineering after-market support, consulting and other related services to Buyer at mutually agreeable times.

10.4 Expense Reimbursement. Buyer will reimburse Seller for all out-of­-pocket expenses reasonably incurred by Seller, and approved in advance by Buyer, in providing the marketing support and consulting services described in Section 10.3.

Section 11.INJUNCTIVE RELIEF

Seller agrees that in the event of a breach of this Agreement as a result of the unauthorized use of the Software Technology, Hardware Technology or dissemination of information regarding the Software Technology and Hardware Technology, including disclosure of Proprietary Information, Seller shall be irreparably injured and shall be without an adequate remedy at law.  Therefore, in the event of such a breach, or threatened or attempted breach of any of the provisions hereof, Buyer shall be entitled to enforce the provisions of this Agreement and shall be entitled, in addition to any other remedies which are available to it at law or in equity, if any, to a temporary and/or permanent injunction and a decree for the specific performance of the terms of this Agreement, without the necessity of showing actual or threatened harm and without being required to furnish a bond or other security.

Section 12.ASSIGNMENT

Seller shall not have the right to assign this Agreement without the prior written consent of Buyer, which consent may be given or withheld in Buyer’s sole discretion.  Buyer shall have the unrestricted right to assign this Agreement, in whole or in part.  When assigned as permitted herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties hereto.

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Section 13.TERMINATION

Seller’s right to receive the Royalty and Seller’s agreement to perform its obligations set forth in Sections 10.1, 10.2 and 10.3, may be terminated by Buyer upon written notice to Seller in accordance with the following:

(a)if Seller breaches this Agreement and such breach continues for a period of 10 days following written notice from Buyer to Seller;

(b)immediately upon the death or legal incapacity of Patrick Jen; or

(c)immediately if Seller breaches Section 7.

Section 14.INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES

14.1Indemnifciation

(a)Seller will indemnify, defend, and hold harmless Buyer from any and all claims, actions, liabilities, damages, costs, and expenses, including reasonable attorneys’ fees and expenses, that Buyer may ever suffer or incur as the result of (a) the material breach or inaccuracy of any material representation or warranty made herein by Seller, (b) the failure or refusal of Seller to comply with any of its obligations hereunder, or (c) any claim based upon or arising out of any liability or obligation, contracted or otherwise, of Seller in connection with the Purchased Assets.

(b)Seller will indemnify, defend, and hold harmless Buyer from any and all claims, actions, liabilities, damages, costs, and expenses, including reasonable attorneys’ fees and expenses, arising out of any third-party claims of infringement of any patents, copyrights, licenses, trademarks, service marks, or any other property right.

(c)Seller will defend, indemnify, and save Buyer harmless from any money judgement, costs, and attorneys’ fees awarded or in settlement to the extent such are due to a claim that the Purchased Assets as provided by Seller infringe an intellectual property right, copyright or trade secret right of any third party.

(d)Seller shall indemnify Buyer against all liability, loss, damage, and expense (including but not limited to, reasonable attorneys’ fees and costs) resulting from injury or death of any person, or loss of or damage to tangible real or tangible personal property, to the extent that such liability, loss, damage, or expense was proximately caused by Seller’s negligent act or omission, or willful act or omission, or those of its agents, employees, or subcontractors, in connection with the provision or use of the Purchased Assets.

14.2The representation and warranties of Seller contained herein shall survive until the expiration of the applicable statute of limitations.

Section 15.FURTHER ASSURANCES

At any time and from time to time after the date hereof, at Buyer’s request and without further consideration, Seller shall execute and deliver such other instruments of sale, transfer, conveyance, assignment and confirmation and take such action as Buyer may reasonably deem necessary or desirable in order more effectively to convey to Buyer, and to confirm Buyer’s title to, all of the Purchased Assets, to put Buyer in actual possession and operating control thereof and to assist Buyer in exercising all rights with respect thereto.

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Section 16.REFORMATION, SEVERABILITY AND SURVIVAL

The provisions of this Agreement have been negotiated by sophisticated parties with equal bargaining power and the parties agree that such provisions are fair, reasonable and necessary under the circumstances. The provisions set forth herein are intended as separate covenants and if any of these provisions should ever be adjudicated to exceed the limitations permitted by applicable law in any jurisdiction, then such provisions shall be deemed reformed in such jurisdiction to the maximum limitations permitted by applicable law. If any one of such provisions is declared invalid for any reason whatsoever, and if any one of such provisions cannot be reformed as aforesaid, such ruling shall not affect the validity of the remainder of the provisions. The other provisions shall remain in effect as if the provisions had been executed without the invalid provisions. The parties hereby declare that they intend that the remaining provisions continue to be effective without any that have been declared invalid and not reformed as aforesaid.

Section 17.GOVERNING LAW AND VENUE

This Agreement shall be governed by, and construed in accordance with, the internal substantive laws of the State of California, without regard to choice of law or conflicts of law principles. Each of the parties hereto recognizes and hereby irrevocably consents to the exclusive jurisdiction over it or him, as the case may be, of the Federal District Court for the Central District of California or the Superior Court of California, County of Los Angeles, in connection with any action or proceeding (whether it be for contract or tort, at law or in equity, or otherwise) arising out of or relating in any way to this Agreement, or any other document relating hereto or delivered in connection with the transactions contemplated hereby.

Section 18.REPRESENTATION BY COUNSEL

Each party hereto represents and agrees with the others that it has been represented by, or had the opportunity to be represented by, independent counsel of its own choosing, and that it has had the full right and opportunity to consult with its respective attorneys, that to the extent, if any, that it desired, it availed itself of this right and opportunity, that each party is fully aware of the contents thereof and its meaning, intent and legal effect, and that its authorized officer is competent to execute this Agreement and has executed this Agreement free from coercion, duress or undue influence.

Section 19.NOTICES

All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been delivered three business days after having been mailed in a general or branch U.S. post office and enclosed in a registered or certified post­paid envelope; one business day after having been sent by overnight courier; when telecopied on a business day, or otherwise on the next succeeding business day thereafter; and, in each case, addressed to the respective parties at the addresses stated below or to such other changed addresses the parties may have fixed by notice as provided herein:

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To the Seller:	Sam Communications, LLC 117 N. 4th Street #564 Las Vegas, NV 89101 Telephone (619) 804-2288 Facsimile (619) 789-5059
To the Buyer:	Simulations Plus, Inc. 1220 W. Avenue J Lancaster, CA 93534 Attention: Walter S. Woltosz, Chairman and CEO Telephone (661) 723-7723 Facsimile (661) 723-5524
With a copy to (not in lieu of notice to Buyer)
	Jeffrey Berg, Esq. Jenkens & Gilchrist, LLP 12100 Wilshire Blvd. Suite 1500 Los Angeles, CA  90025 Telephone         (310) 820-8800 Facsimile (310) 820-8859

Section 20.FEES AND COSTS

Except as otherwise provided herein, in the event of any claim or controversy relating to this Agreement or the breach of this Agreement and any action or proceeding brought by Seller or Buyer against the other (whether it be for contract or tort, at law or in equity, or otherwise) the substantially prevailing party in such action or proceeding will be entitled to recover from the other its reasonable costs and expenses incurred in taking or defending such action or proceeding, including the appeal of such action, and including reasonable fees of attorneys and other technical advisors.

Section 21.CAPTIONS

The captions used in this Agreement are solely for the convenience of the parties hereto and such captions do not constitute a part of this Agreement.

Section 22.COUNTERPARTS

This Agreement may be executed by the parties in two or more counterparts, each of which together shall constitute one and the same instrument.

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Section 23.ENTIRE AGREEMENT

23.1This Agreement sets forth the entire agreement of the parties hereto with respect to the transactions contemplated hereby. This Agreement may not be amended except by an instrument in writing signed by the parties hereto, and no claimed amendment, modification, termination or waiver shall be binding unless in writing and signed by the party against whom or which such claimed amendment, modification, termination or waiver is sought to be enforced.

23.2This Agreement merges and supersedes all prior and contemporaneous agreements, assurances, representations, and communications between the parties hereto.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date shown above.

Seller: Sam Communications, LLC	Buyer: Simulations Plus, Inc.
By:  /s/ Patrick Jen                                                 Name: Patrick Jen Title: President                                                       Date: December 23, 2003	By:  /s/ Walt Woltosz                                                Walter Woltosz, Chairman & CEO Date: December 23, 2003

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EXHIBIT A

SOFTWARE TECHNOLOGY MODIFICATIONS

The following modifications to the Software Technology will be made by Seller and are incorporated into the Software Technology purchased by Buyer:

1. Single switch scanning: The Software Technology will be modified by Seller to enable users to operate the speech output device by means of a single input switch closure, following industry standard methods for:

Row-column interrupted and directed scanning

Linear interrupted and directed scanning

Group interrupted and directed scanning

2. Dedicated version: The Software Technology will be modified by Seller to enable operating the speech output device as a dedicated unit, unable to execute customary PDA functions, in accordance with requirements for funding by Medicare and state Medicaid programs.

3. Other platforms: The Software Technology will be modified by Seller to operate on Windows XP and Windows CE (Pocket PC) operating systems for larger computers, including, but not limited to, notebook computers, desktop computers, palmtop computers, and tablet computers. Changes to the software will include, for example, modifications to take advantage of the larger displays on such computers by allowing increased numbers of symbols per page.

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EXHIBIT B

FUNCTIONAL SPECIFICATION

PURPOSE

The purpose of the Say-it! SAM software is to provide speech output and other sounds through a device consisting of a computer platform running the Say-it! SAM software. The Say-it! SAM software provides the user with both text-to-speech and recorded speech output which can be selected by graphic symbols and/or text, using a variety of input methods. The computer platform can be a handheld, tablet, palmtop, notebook, desktop, or other computer, running Windows CE, PocketPC, Windows XP, or another operating system.

FUNCTIONS

In order to accomplish its purpose, the Say-it! SAM software performs the following general functions:

Layouts, Pages and Cells

- Allows the user to select a screen display layout from a list. A layout is a set of one or more pages. A page consists of one or more cells. Multiple cells are arranged in rows and columns. Each cell is an area of the screen which may contain graphics (symbols, photographs, etc.), text, or both.

- Provides a means for the user to select a cell on a page. The user can select a cell by touching a touch screen, or by other methods, such as scanning with one or more switches.

- When a cell is selected, the device performs a programmable function specific to that cell. Selecting the cell can result in speaking a message on a voice synthesizer, playing a recorded sound file, jumping to another page, jump to an on-screen keyboard, or a combination of these and other programmable functions. Cells can also be used in series to build messages from simpler message elements.

- Provides a textbox which displays spoken messages and other feedback to the user.

- Provides a navigation bar whenever a page is shown, which contains a number of cells that implement commonly-used functions, such as speaking the contents of the textbox, clearing the textbox, jumping to the home page or another page, and opening the setup menus.

- Allows the user to customize the look and feel of pages and cells with respect to color, borders, font style, positioning of graphics and letters, and other properties.

-  Provides for pages to be password-protected.

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Media

- Manages voice synthesizer software, and speaks messages associated with selected cells or typing on a keyboard. Manages a list of alternative spellings for words which the voice synthesizer would mispronounce.

- Manages voice and sound recordings, in .wav and other formats, and plays the recording associated with selecting cells.

- Provides a silent mode, for displaying textbox messages instead of speaking them.

- Manages libraries of symbols and photographs, in .gif, .jpg, .bmp and other formats, which can be placed on cells.

Keyboard and Text

- Provides an on-screen keyboard. The keyboard can be used by the user to create text messages, or can be used in the menus. Text messages can be created in the textbox from a combination of cell selections and keyboard selections.

- Provides text-based word prediction based on the user’s selections. Word prediction incorporates first-word prediction, next-word prediction, and word completion algorithms. The user can accept or ignore the predicted words.

- Provides text-based abbreviations based on the user’s selections.

- Provides text-based phrase prediction based on the user’s selections. The user can accept or reject the predicted phrases.

- Provides text-based automatic insertion of punctuation.

 Menus

- Allows the user to build new layouts, or select from a list of layouts.

- Allows the user to build new pages, or add pages to a layout from libraries of layouts.

- Allows the user to create new cell contents, or place existing graphic and text content onto cells.

- Allows the user to associate programmable functions with each cell.

- Allows the user to backup and restore layouts.

- Allows the user to manage lists of words, abbreviations, phrases, and alternative pronunciations.

- Allows the user to customize the cell-selection process, such as the touch screen and single-switch parameters.

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- Allows the user to selectively turn on and off or fine-tune the various text features, such as word prediction, abbreviation expansion, phrase prediction, and automatic punctuation.

- Allows the user to customize the programmable features of the computing device, such as the hardware buttons.

- Provides for the user to be locked out from changing the layout or the menu settings.

Utilities

- Provides a utility for installing and uninstalling the Say-it! SAM software on a computer platform. Also provides for updates to the Say-it! SAM software and media to be installed.

- Provides a layout designer utility for designing and testing layouts on a secondary computer platform.

- Provides a layout manager utility for synchronizing and transferring layouts between the primary and secondary platform.

- Provides a utility for generating license key files. The license key file must be present on the computer platform in order for the Say-it! SAM software to execute. Each license key file is specific to one computer platform, and will not unlock the Say-it! SAM software on another computer platform.

- Provides a limited-capability demonstration version

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EXHIBIT C

POSSUM CONTROLS, LTD DISTRIBUTION

In order to honor an agreement between Seller and Possum Controls, LTD (“Possum”) of the United Kingdom, Buyer agrees to offer Possum an option (“Option”) to purchase Say-it! SAM Communicator packages, less the PDA, for the existing Compaq iPAQ PDAs (3900, 5100, and 5500 series) for a period of two (2) years, at the following prices:

For orders of less than 10 units, USD$810.00, per unit

For orders of 10 or more units, USD$770.00, per unit

If Possum elects to accept the Option within 30 days, then Possum shall be granted exclusive distribution rights within the U.K. for a period of five (5) consecutive years, provided that reasonable sales goals, to be negotiated between Buyer and Possum with 60 days of acceptance and that said are maintained by Possum.

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EX-21.1

EXHIBIT 21.1

List of Subsidiaries

The following is a list of subsidiaries of the Company as of August 31, 2009.

Name	Where incorporated
Words+, Inc.	California, United States

EX-31.1

EXHIBIT 31.1

RULE 13a-14(a) CERTIFICATION

SIMULATIONS PLUS, INC.

a California corporation

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Walter S. Woltosz, certify that:

1.	I have reviewed this Annual Report on Form 10-K of Simulations Plus, Inc., a California corporation;
2.	Based on my knowledge, this 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 report;
3.	Based on my knowledge, the financial statements, and other financial information included in this 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 report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	(a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;
	(b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	(c)	evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	(d)	disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
	(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information; and
	(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated: March 1, 2010	By:	/s/ Walter S. Woltosz
		Walter S. Woltosz
		Chief Executive Officer (Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

RULE 13a-14(a) CERTIFICATION

SIMULATIONS PLUS, INC.

a California corporation

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Momoko A. Beran, certify that:

1.	I have reviewed this Annual Report on Form 10-K of Simulations Plus, Inc., a California corporation;
2.	Based on my knowledge, this 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 report;
3.	Based on my knowledge, the financial statements, and other financial information included in this 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 report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	(a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;
	(b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	(c)	evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	(d)	disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
	(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information; and
	(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated: March 1, 2010	By:	/s/ Momoko A. Beran
		Momoko A. Beran
		Chief Financial Officer (Principal Financial Officer)

EX-32

EXHIBIT 32

CERTIFICATIONS PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

In connection with the Annual Report of Simulations Plus, Inc., a California corporation (the “Company”), on Form 10-K for the year ended August 31, 2009, as filed with the Securities and Exchange Commission, and as amended (the “Report”), Walter S. Woltosz, Chief Executive Officer of the Company and Momoko A. Beran, Chief Financial Officer of the Company, respectively, do each hereby certify, pursuant to 18 U.S.C. § 1350, that to his/her knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/       Walter S. Woltosz                                

Walter S. Woltosz

Chief Executive Officer

March 1, 2010

/s/      Momoko A. Beran                                

Momoko A. Beran

Chief Financial Officer

March 1, 2010

(A signed original of this written statement required by Section 906 has been provided to Simulations Plus, Inc. and will be retained by Simulations Plus, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.)