10-K/A

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Amendment No. 1 to 

FORM 10-K

S	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended August 31, 2012

or

£	TRANSITION REPORT PURSUANT TO 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

SECURITIES REGISTERED PURSUANT TO 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 £ No S

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 £ No S

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 S No £

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, 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 S No £

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. £

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):

£  Large accelerated filer	£  Accelerated filer
£  Non-accelerated filer (Do not check if a smaller reporting company)	S  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 £  No S

The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of February 29, 2012, based upon the closing price of the common stock as reported by The Nasdaq Stock Market on such date, was approximately $38,035,604. This calculation does not reflect a determination that persons are affiliates for any other purposes.

As of November 13, 2012, 15,927,806 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

Certain portions of the definitive Proxy Statement to be delivered to shareholders in connection with the 2013 Annual Meeting of Shareholders are incorporated by reference into Part III of this Form 10-K to be filed with the Securities and Exchange Commission within 120 days after the close of the fiscal year covered by this annual report.

The Exhibit Index (Item 15) lists several documents incorporated by reference.

EXPLANATORY NOTE

This Amendment No. 1 to the Annual Report on Form 10-K is being filed solely to furnish the Interactive Data files as Exhibit 101, in accordance with Rule 405 of Regulation S-T. No other changes have been made to the Form 10-K, as originally filed on November 15, 2012.

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Item 6. Exhibits

101.INS*	XBRL Instance Document
101.SCH*	XBRL Schema Document
101.CAL*	XBRL Calculation Linkbase Document
101.DEF*	XBRL Definition Linkbase Document
101.LAB*	XBRL Label Linkbase Document
101.PRE*	XBRL Presentation Linkbase Document

* Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Lancaster, State of California, on November 29, 2012.

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

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title
/s/ Walter S. Woltosz	Chairman of the Board of Directors
Walter S. Woltosz	and Chief Executive Officer (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. David L. Ralph	Director
Dr. David L. Ralph
/s/ Harold W. Rosenberger
Harold W. Rosenberger	Director
/s/ Momoko A. Beran	Chief Financial Officer of the Company
Momoko A. Beran	(Principal financial officer and principal accounting officer)

4

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5. SHAREHOLDERS' EQUITY (Details 3) (USD $)	12 Months Ended
	Aug. 31, 2012
Awards outstanding	$ 726,400
Awards exercisable	484,100
StockOptions [Member]
Exercise price low	$ 1.00
Exercise price high	$ 1.50
Awards outstanding	382,700
Awards outstanding weighted average remaining contractual life	4 years 9 months 18 days
Awards outstanding weighted average exercise price	$ 1.07
Awards exercisable	311,900
Awards exercisable weighted average remaining contractual life	4 years 4 months 24 days
Awards exercisable weighted average exercise price	$ 1.08
StockOptionsOne [Member]
Exercise price low	$ 1.51
Exercise price high	$ 3.00
Awards outstanding	154,600
Awards outstanding weighted average remaining contractual life	4 years 1 month 6 days
Awards outstanding weighted average exercise price	$ 1.88
Awards exercisable	199,800
Awards exercisable weighted average remaining contractual life	3 years 1 month 6 days
Awards exercisable weighted average exercise price	$ 1.73
StockOptionsTwo [Member]
Exercise price low	$ 3.01
Exercise price high	$ 4.50
Awards outstanding	185,100
Awards outstanding weighted average remaining contractual life	5 years
Awards outstanding weighted average exercise price	$ 3.26
Awards exercisable	48,400
Awards exercisable weighted average remaining contractual life	5 years 3 months 18 days
Awards exercisable weighted average exercise price	$ 3.08
StockOptionsThree [Member]
Exercise price low	$ 4.51
Exercise price high	$ 6.68
Awards outstanding	4,000
Awards outstanding weighted average remaining contractual life	5 years
Awards outstanding weighted average exercise price	$ 6.68
Awards exercisable	$ 4,000
Awards exercisable weighted average remaining contractual life	5 years
Awards exercisable weighted average exercise price	$ 6.68

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8. GEOGRAPHIC REPORTING (Details) (USD $)	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011
Simulations Plus, Inc.	$ 9,449	$ 8,739
North America
Simulations Plus, Inc.	4,805	4,548
Europe
Simulations Plus, Inc.	2,986	2,606
Asia
Simulations Plus, Inc.	1,633	1,554
South America
Simulations Plus, Inc.	$ 25	$ 31

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6. INCOME TAXES (Details Narrative) (USD $)	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011
Income Tax Disclosure [Abstract]
Interest and penalties	$ 1,300	$ 1,035
Decrease of amount refundable	$ 36,868

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3. PROPERTY AND EQUIPMENT (Details Narrative) (USD $)	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011
Property, Plant and Equipment [Abstract]
Depreciation expense	$ 41,802	$ 21,822

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6. INCOME TAXES (Tables)

12 Months Ended

Aug. 31, 2012

Income Tax Disclosure [Abstract]

Components of the income tax provision

The components of the income tax provision for the years ended August 31, 2012 and 2011 were as follows:

	2012			2011
Current
Federal	$	(872,907	)	$	(623,006	)
State		(177,975	)		(148,171	)
		(1,050,882	)		(771,177	)
Deferred
Federal		114,712			(262,536	)
State		(22,901	)		(21,560	)
		91,811			(284,096	)
Total	$	(1,142,693	)	$	(1,055,273	)

Effective income tax rate

A reconciliation of the expected income tax (benefit) computed using the federal statutory income tax rate to the Company's effective income tax rate is as follows for the years ended August 31, 2012 and 2011:

	2012			2011
Income tax computed at federal statutory tax rate		34.0%			34.0%
State taxes, net of federal benefit		3.3			2.6
Meals & Entertainment		0.1			0.1
Other permanent differences		0.8			(1.0	)
Research and development credit		(8.4	)		(8.2	)
Change in prior year estimated taxes		(0.9	)		0.5
Total		28.9%			28.0%

Components of the Company deferred tax assets and liabilities

Significant components of the Company's deferred tax assets and liabilities for income taxes for the years ended August 31, 2012 and 2011 are as follows:

	2012			2011
Deferred tax assets
Accrued payroll and other expenses	$	79,922		$	91,489
Accrued warranty and service costs		–			18,732
Bad debt allowance		–			99,982
Deferred revenue		56,456			60,486
Property and equipment		32,916			60,626
Research and development credit		261,526			289,357
State taxes		66,902			50,378
Total deferred tax assets		497,722			671,050
Less:  Valuation allowance		–			–
		497,722			671,050
Deferred tax liabilities
State Tax Deferred		(30,663	)		(26,710	)
Capitalized computer software development costs		(1,062,204	)		(1,031,869	)
Total deferred tax liabilities		(1,092,867	)		(1,058,579	)
Net deferred tax liabilities	$	(595,145	)	$	(387,529	)

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10. CUSTOMER RELATIONSHIPS (Details Narrative) (USD $)	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011
Notes to Financial Statements
Amortization of customer relationships	$ 1,871	$ 7,730
Accumulated amortization of goodwill (in Dollars)	$ 128,042	$ 126,172

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5. SHAREHOLDERS' EQUITY (Details Narrative) (USD $)	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011
Fair value of the options	$ 167,124	$ 57,384
Dividend yield	0.41%	0.00%
Fair value of non-vested stock options	$ 292,426	$ 270,387
Weighted average amortizable period	2 years 10 days	2 years 2 months 4 days
Weighted-average remaining contractual life of options	4 years 8 months 12 days	2 years 2 months 5 days
Minimum [Member]
Pre-vest forfeiture rate	5.61%	2.32%
Expected volatility	62.27%	54.71%
Risk-free interest rate	0.82%	1.42%
Expected life	5 years	4 years
Exercise price for options outstanding	$ 1.0
Maximum [Member]
Pre-vest forfeiture rate	6.09%	40.71%
Expected volatility	69.87%	79.91%
Risk-free interest rate	1.01%	2.66%
Expected life	7 years	4 years
Exercise price for options outstanding	$ 6.68

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5. SHAREHOLDERS' EQUITY (Details 1) (USD $)	Jan. 10, 2010
Total Number of Shares Purchased	996,248
Average Price Paid per Share	$ 2.8041
Period 1
Period	04/01/10 to 04/30/10
Total Number of Shares Purchased	86,976
Average Price Paid per Share	$ 2.2237
Remaining Shares Authorized for Repurchase Under the Share Repurchase Plan Phase II	913,024
Period 2
Period	05/01/10 to 05/31/10
Total Number of Shares Purchased	170,101
Average Price Paid per Share	$ 2.3515
Remaining Shares Authorized for Repurchase Under the Share Repurchase Plan Phase II	742,923
Period 3
Period	06/01/10 to 06/30/10
Total Number of Shares Purchased	33,665
Average Price Paid per Share	$ 2.367
Remaining Shares Authorized for Repurchase Under the Share Repurchase Plan Phase II	709,258
Period 4
Period	07/01/10 to 07/31/10
Total Number of Shares Purchased	18,789
Average Price Paid per Share	$ 2.4433
Remaining Shares Authorized for Repurchase Under the Share Repurchase Plan Phase II	690,469
Period 5
Period	08/01/10 to 08/31/10
Total Number of Shares Purchased	10,878
Average Price Paid per Share	$ 2.4283
Remaining Shares Authorized for Repurchase Under the Share Repurchase Plan Phase II	679,591
Period 6
Period	09/01/10 to 09/30/10
Total Number of Shares Purchased	81,070
Average Price Paid per Share	$ 2.6969
Remaining Shares Authorized for Repurchase Under the Share Repurchase Plan Phase II	598,521
Period 7
Period	10/01/10 to 10/31/10
Total Number of Shares Purchased	170,494
Average Price Paid per Share	$ 3.1671
Remaining Shares Authorized for Repurchase Under the Share Repurchase Plan Phase II	428,027
Period 8
Period	11/01/10 to 11/30/10
Total Number of Shares Purchased	146,116
Average Price Paid per Share	$ 2.9523
Remaining Shares Authorized for Repurchase Under the Share Repurchase Plan Phase II	281,911
Period 9
Period	12/01/10 to 12/31/10
Total Number of Shares Purchased	41,214
Average Price Paid per Share	$ 2.5716
Remaining Shares Authorized for Repurchase Under the Share Repurchase Plan Phase II	240,697
Period 10
Period	01/01/11 to 01/31/11
Total Number of Shares Purchased	119,469
Average Price Paid per Share	$ 2.9028
Remaining Shares Authorized for Repurchase Under the Share Repurchase Plan Phase II	121,228
Period 11
Period	02/01/11 to 02/28/11
Total Number of Shares Purchased	117,476
Average Price Paid per Share	$ 3.451
Remaining Shares Authorized for Repurchase Under the Share Repurchase Plan Phase II	3,752

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12. DISCONTINUED OPERATIONS (Details) (USD $)	3 Months Ended	12 Months Ended
	Nov. 30, 2011	Aug. 31, 2011
Notes to Financial Statements
Net sales	$ 479	$ 2,981
Cost of sales	265	1,381
Gross profit	214	1,600
Selling, general and administrative	563	1,466
Research and development	55	64
Total operating expenses	618	1,530
Income (Loss) from discontinued operations	(404)	70
Other income		2
Income (Loss) from discontinued operations before income taxes	(404)	72
(Provision for) income taxes	154	(20)
Results from discontinued operations, net of tax	$ (250)	$ 52

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7. CONCENTRATIONS AND UNCERTAINTIES (Details Narrative)	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011
International Sales
Revenue concentration in percentage	49.00%	36.00%
One Customer
Revenue concentration in percentage	10.00%	11.00%
Accounts receivable concentration in percentage	28.00%	36.00%
Another Customer
Revenue concentration in percentage	6.00%	8.00%
Accounts receivable concentration in percentage	22.00%	18.00%
Third Customer
Revenue concentration in percentage		7.00%

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3. PROPERTY AND EQUIPMENT

12 Months Ended

Aug. 31, 2012

Property, Plant and Equipment [Abstract]

Note 3. PROPERTY AND EQUIPMENT

Property and equipment at August 31, 2012 and 2011 consisted of the following:

	2012		2011
Equipment		123,062		39,374
Computer equipment		272,562		255,074
Furniture and fixtures		48,813		48,813
Leasehold improvements		53,898		53,898
		498,335		397,159
Less accumulated depreciation and Amortization		390,925		354,149
Total	$	107,410	$	43,010

Depreciation expense was $41,802 and $21,822 for the years ended August 31, 2012 and 2011, respectively.

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6. INCOME TAXES (Details) (USD $)	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011
Current
Federal	$ (872,907)	$ (623,006)
State	(177,975)	(148,171)
Total State	(1,050,882)	(771,177)
Deferred
Federal	114,712	(262,536)
State	(22,901)	(21,560)
Total Federal	91,811	(284,096)
Total Federal and State	$ (1,142,693)	$ (1,055,273)

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) (USD $)	Aug. 31, 2012
Cash and cash equivalents	$ 12,701,075
Total assets	12,701,075
Level I
Cash and cash equivalents	12,701,075
Total assets	$ 12,701,075

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details)	12 Months Ended
	Aug. 31, 2012
Equipment
Estimated useful lives	5 years
Computer equipment
Estimated useful lives	3 to 7 years
Furniture and fixtures
Estimated useful lives	5 to 7 years
Leasehold improvements
Estimated useful lives	Shorter of life of asset or lease

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6. INCOME TAXES (Details 1)	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011
Income Tax Disclosure [Abstract]
Income tax computed at federal statutory tax rate	34.00%	34.00%
State taxes, net of federal benefit	3.30%	2.60%
Meals & Entertainment	0.10%	0.10%
Other permanent differences	0.80%	(1.00%)
Research and development credit	(8.40%)	(8.20%)
Change in prior year estimated taxes	(0.90%)	0.50%
Total	28.90%	28.00%

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) (USD $)	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011
Numerator
Net income attributable to common shareholders	$ 3,027,884	$ 2,714,641
Denominator
Weighted-average number of common shares outstanding during the year	15,921,196	15,540,047
Dilutive effect of stock options	388,199	542,407
Common stock and common stock equivalents used for diluted earnings per share	16,309,395	16,082,454

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) (USD $)	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011
Amortization of software development costs	$ 668,021	$ 660,893
Advertising costs	79,000	37,000
Amortization of Intellectual property	3,750	0
Accumulated amortization	3,750	0
Amortization of customer relationships	1,871	7,730
Stock-based compensation	181,520	155,252
CustomerRelationships [Member]
Accumulated amortization	$ 128,042	$ 126,172

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Aug. 31, 2012

Summary Of Significant Accounting Policies

Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

Our 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.

Principles of Consolidation

The financial statements of Simulations Plus, Inc. include the accounts of Words+ up to November 30, 2011, the date of sale of the wholly owned subsidiary. All significant intercompany accounts and transactions were eliminated in consolidation. The operations of Words+ are presented as “discontinued operations” in the financial statements.

Revenue Recognition

We recognize revenues related to software licenses and software maintenance in accordance with Financial Accounting Standard Board (“FASB”) Accounting Standard Codification (“ASC”) 985-605, “Software - Revenue Recognition”. Software products revenue is recorded when the following conditions are met: 1) evidence of arrangement exists, 2) delivery has been made, 3) the amount is fixed, and 4) collectability is probable. Post-contract customer support ("PCS") obligations are insignificant; therefore, revenue for PCS is recognized at the same time as the licensing fee, and the costs of providing such support services are accrued and amortized over the obligation period. 

As a byproduct of ongoing improvements and upgrades for the new programs and new modules of software, some modifications are provided to customers who have already purchased software at no additional charge. Other software modifications result in new, additional cost modules that expand the functionality of the software. These are licensed separately. We consider the modifications that are provided without charge to be minimal, as they do not significantly change the basic functionality or utility of the software, but rather add convenience, such as being able to plot some additional variable on a graph in addition to the numerous variables that had been available before, or adding some additional calculations to supplement the information provided from running the software. Such software modifications for any single product have typically occurred once or twice per year, sometimes more, sometimes less. Thus, they are infrequent. The Company provides, for a fee, additional training and service calls to its customers and recognizes revenue at the time the training or service call is provided.

Generally, we enter into one-year license agreements with customers for the use of our pharmaceutical software products. We recognize revenue on these contracts when all the criteria are met.

Most license agreements have a term of one year; however, from time to time, we enter into multi-year license agreements.We generally unlock and invoice software one year at a time for multi-year licenses. Therefore, revenue is recognized one year at a time.

We recognize the revenue from collaboration research and the revenue from grants equally over their terms. However, we recognize the contract study revenue using the percentage of completion method, depending upon how the contract studies are engaged, in accordance with ASC 605-35, Revenue Recognition – Construction-Type and Production-Type Contracts”. 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.

Reclassifications

Certain numbers in the prior year have been reclassified to conform to the current year’s presentation.

Cash and Cash Equivalents

For purposes of the statements of cash flows, the Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.

Accounts Receivable

We analyze the age of customer balances, historical bad debt experience, customer creditworthiness, and changes in customer payment terms when making estimates of the collectability of the Company’s trade accounts receivable balances. If we determine that the financial conditions of any of its customers deteriorated, whether due to customer-specific or general economic issues, an increase in the allowance may be made. Accounts receivable are written off when all collection attempts have failed. The Company also estimated the contractual discount obligation for third party funding such as, Medicaid, and private insurance companies. Those estimated discounts were reflected in the allowance for doubtful accounts and contractual discounts and included in discontinued operations. Although we experienced significant collection problems with our former Words+ subsidiary, we have not had customers fail to pay on the pharmaceutical software and services side of the business, which now represents our entire business after the sale of our former subsidiary on November 30, 2011.

Capitalized Computer Software Development Costs

Software development costs are capitalized in accordance with ASC 985-20, “Costs of Software to Be Sold, Leased, or 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 computer software development costs are comprised primarily of salaries and direct payroll-related costs and the purchase of existing software to be used in the Company's software products.

Amortization of capitalized computer 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 $668,021 and $660,893 for the years ended August 31, 2012 and 2011, respectively. We expect future amortization expense to vary due to increases in capitalized computer software development costs.

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

Property and Equipment

Property and equipment are recorded at cost, less accumulated depreciation and amortization. Depreciation and amortization are provided using the straight-line method over the estimated useful lives as follows:

Equipment	5 years
Computer equipment	3 to 7 years
Furniture and fixtures	5 to 7 years
Leasehold improvements	Shorter of life of asset or lease

Maintenance and minor replacements are charged to expense as incurred. Gains and losses on disposals are included in the results of operations.

Fair Value of Financial Instruments

Assets and liabilities recorded at fair value in the Balance Sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair value. The categories, as defined by the standard, are as follows:

Level Input:	Input Definition:
Level I	Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.
Level II	Inputs, other than quoted prices included in Level I, that are observable for the asset or liability through corroboration with market data at the measurement date.
Level III	Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.

The following table summarizes fair value measurements by level at August 31, 2012 for assets and liabilities measured at fair value on a recurring basis:

	Level I		Level II	Level III	Total
Cash and cash equivalents	$	12,701,075	$	$	$	12,701,075
Total assets	$	12,701,075	$	$	$	12,701,075

For certain of our financial instruments, including accounts receivable, accounts payable, accrued payroll and other expenses, accrued bonuses to officers, and accrued warranty and service costs, the carrying amounts are approximate fair value due to their short maturities.

Advertising

The Company expenses advertising costs as incurred. Advertising costs for the years ended August 31, 2012 and 2011 were $79,000 and $37,000, respectively.

Research and Development Costs

Research and development costs are charged to expense as incurred until technological feasibility has been established. These costs include salaries, laboratory experiment, and purchased software which was developed by other companies and incorporated into, or used in the development of, our final products.

Income Taxes

The Company accounts for income taxes in accordance with ASC 740-10, “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.

Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities.

The California Franchise Tax Board (“FTB”) audited us for the fiscal years ended (“FYE”) August 31, 2007 and 2008. We received refunds as we claimed; however they have now continued their audit to include FYE 2009 and 2010, and are reviewing 2007 and 2008 R&D credits since those credits were carried forward to FYE 2009 and 2010. In March 2012, we also received a notice from the Internal Revenue Service (IRS) that our fiscal year ended August 31, 2008 is subject to their examination. In October 2012, the IRS completed their examination of our 2007 tax filing. The outcome of this examination was a decrease of $36,868 in the amount refundable.

Intellectual property

On February 28, 2012, we bought out the royalty agreement with Enslein Research of Rochester, New York. The cost of $75,000 is being amortized over 10 years under the straight-line method. Amortization expense for the fiscal year ended August 31, 2012 was $3,750. Accumulated amortization as of August 31, 2012 was $3,750.

Customer relationships

We purchased customer relationships as a part of the acquisition of certain assets of Bioreason, Inc. in November 2005. Customer relationships was recorded at a cost of $128,042, and is being amortized over 78 months under the sum-of-the-years’-digits method. Amortization expense for the fiscal year ended August 31, 2012 and 2011 amounted to $1,871 and $7,730, respectively. Accumulated amortization as of August 31, 2012 and 2011 were $128,042 and $126,172, respectively.

Earnings per Share

The Company reports earnings per share in accordance with FASB ACS 260-10. Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of common shares available. Diluted earnings per share is computed similarly to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. The components of basic and diluted earnings per share for the years ended August 31, 2012 and 2011 were as follows:

	2012		2011
Numerator
Net income attributable to common shareholders	$	3,027,884	$	2,714,641
Denominator
Weighted-average number of common shares outstanding during the year		15,921,196		15,540,047
Dilutive effect of stock options		388,199		542,407
Common stock and common stock equivalents used for diluted earnings per share		16,309,395		16,082,454

Stock-Based Compensation

The Company accounts for stock options using the modified prospective method in accordance with FASB ACS 718-10, “Compensation-Stock Compensation”. Under this method, compensation costs include: (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 Statement of Financial Accounting Standard (“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. Stock-based compensation was $181,520 and $155,252 for the years ended August 31, 2012 and 2011, respectively, and is included in the statements of operations as Consulting, Salaries, and Research and Development expense.

Recently Issued Accounting Standards

In September 2009, the FASB issued ASU 2009-14 which 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. ASU 2009-14 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. We adopted this standard in the first quarter of fiscal 2011. We believe adoption did not have a material effect on the Company’s financial statements.

In September 2009, the FASB issued ASU 2009-13, “Revenue Arrangements with Multiple Deliverables” (“EITF 08-1”). ASU 2009-13 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. ASU 2009-13 also requires expanded qualitative and quantitative disclosures regarding significant judgments made and changes in applying the guidance. ASU 2009-13 applies to fiscal years beginning after June 15, 2010, with early application permitted. We adopted this standard in the first quarter of fiscal 2011. We believe adoption did not have a material effect on the Company’s financial statements.

In May 2011, the Financial Accounting Standards Board (“FASB”) issued ASU 2011-04, Fair Value Measurement (“ASU 2011-04”), which amended ASC 820, Fair Value Measurements (“ASC 820”), providing a consistent definition and measurement of fair value, as well as similar disclosure requirements between U.S. GAAP and International Financial Reporting Standards. ASU 2011-04 changes certain fair value measurement principles, clarifies the application of existing fair value measurement and expands the disclosure requirements. We adopted this standard in the first quarter of 2012. We believe adoption did not have a material effect on the Company’s financial statements.

In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income (“ASU 2011-05”). ASU 2011-05 requires the presentation of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. We adopted this standard in the first quarter of 2012. We believe adoption did not have a material effect on the Company’s financial statements.

In September 2011, the FASB issued ASU 2011-08, Testing Goodwill for Impairment (“ASU 2011-08”), which amends the guidance in ASC 350-20, Intangibles—Goodwill and Other – Goodwill. ASU 2011-08 provides entities with the option of performing a qualitative assessment before calculating the fair value of the reporting unit when testing goodwill for impairment. If the fair value of the reporting unit is determined, based on qualitative factors, to be more likely than not less than the carrying amount of the reporting unit, the entities are required to perform a two-step goodwill impairment test. We adopted this standard in the first quarter of 2012. We believe adoption did not have a material effect on the Company’s financial statements.

In December 2011, the FASB issued ASU No. 2011-11, "Disclosures about Offsetting Assets and Liabilities." The amendments in this update require enhanced disclosures around financial instruments and derivative instruments that are either (1) offset in accordance with either ASC 210-20-45 or ASC 815-10-45 or (2) subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in accordance with either ASC 210-20-45 or ASC 815-10-45. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. The amendments are effective during interim and annual periods beginning after February 28, 2012. The Company does not expect this guidance to have any impact on its financial position, results of operations or cash flows.

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3. PROPERTY AND EQUIPMENT (Details) (USD $)	Aug. 31, 2012	Aug. 31, 2011
Property, Plant and Equipment [Abstract]
Equipment	$ 123,062	$ 39,374
Computer equipment	272,562	255,074
Furniture and fixtures	48,813	48,813
Leasehold improvements	53,898	53,898
Gross	498,335	397,159
Less accumulated depreciation and Amortization	390,925	354,149
Total	$ 107,410	$ 43,010

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5. SHAREHOLDERS' EQUITY (Details 4) (USD $)	Aug. 30, 2012	Aug. 31, 2011
Equity [Abstract]
Intrinsic Value of Options Outstanding	$ 1,918,904	$ 1,755,674
Intrinsic Value of Options Exercisable	1,447,900	1,348,809
Intrinsic Value of Options Exercised	$ 982,786	$ 1,092,176

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12. DISCONTINUED OPERATIONS (Details 1) (USD $)	Nov. 30, 2011	Aug. 31, 2011
Notes to Financial Statements
Cash and cash equivalents	$ 6	$ 143
Receivables, net	357	603
Inventory	392	392
Prepaid and other current assets	33	57
Capitalized software development costs, net	212	220
Property and equipment, net	91	120
Total Assets	1,091	1,535
Accounts payable	72	116
Accrued payroll and other expenses	109	219
Accrued warranty and service costs	37	44
Total Liabilities	218	379
Net Assets of discontinued operations	$ 873	$ 1,156

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BALANCE SHEETS (USD $)	Aug. 31, 2012	Aug. 31, 2011
Current assets
Cash and cash equivalents	$ 12,701,075	$ 10,181,049
Income tax refund receivable	153,896	259,434
Accounts receivable, net of allowance for doubtful accounts of $0	1,451,864	1,170,861
Contracts receivable	18,893	185,816
Prepaid expenses and other current assets	150,856	123,954
Deferred income taxes	193,712	302,076
Current assets of discontinued operations	0	1,051,637
Total current assets	14,670,296	13,274,827
Long-term assets
Capitalized computer software development costs, net of accumulated amortization of $5,084,690 and $4,416,669	2,479,468	2,188,982
Property and equipment, net (note 3)	107,410	43,010
Intellectual property, net of accumulated amortization of $3,750	71,250	0
Customer relationships, net of accumulated amortization of $128,042 and $126,172	0	1,870
Other assets	18,445	18,445
Non-current assets of discontinued operations	0	340,204
Total assets	17,346,869	15,867,338
Current liabilities
Accounts payable	177,509	176,136
Accrued payroll and other expenses	312,912	276,327
Accrued bonuses to officer	60,000	0
Accrued income taxes	733,233	168,897
Deferred revenue	131,782	141,191
Current liabilities of discontinued operations	0	378,567
Total current liabilities	1,415,436	1,141,118
Long-term liabilities
Deferred income taxes	788,857	656,047
Non-current liabilities of discontinued operations	0	33,558
Total liabilities	2,204,293	1,830,723
Shareholders' equity (note 5)
Preferred stock, $0.001 par value 10,000,000 shares authorized no shares issued and outstanding	0	0
Common stock, $0.001 par value 50,000,000 shares authorized 15,923,019 and 15,572,943 shares issued and outstanding	4,399	4,044
Additional paid-in capital	4,628,366	4,167,650
Retained earnings	10,509,811	9,864,921
Total shareholders' equity	15,142,576	14,036,615
Total liabilities and shareholders' equity	$ 17,346,869	$ 15,867,338

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6. INCOME TAXES (Details 2) (USD $)	Aug. 31, 2012	Aug. 31, 2011
Deferred tax assets
Accrued payroll and other expenses	$ 79,922	$ 91,489
Accrued warranty and service costs		18,732
Bad debt allowance		99,982
Deferred revenue	56,456	60,486
Property and equipment	32,916	60,626
Research and development credit	261,526	289,357
State taxes	66,902	50,378
Total deferred tax assets	497,722	671,050
Less Valuation allowance
Deferred tax asset	497,722	671,050
Deferred tax liabilities
State Tax Deferred	(30,663)	(26,710)
Capitalized computer software development costs	(1,062,204)	(1,031,869)
Total deferred tax liabilities	(1,092,867)	(1,058,579)
Net deferred tax liabilities	$ (595,145)	$ (387,529)

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STATEMENTS OF CASH FLOWS (USD $)	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011
Statement of Cash Flows [Abstract]
Net income	$ 3,027,884	$ 2,714,641
Adjustments to reconcile net income to net cash provided by operating activities
(Income) from Discontinued Operations	(215,922)	(51,996)
Depreciation and amortization of property and equipment	41,802	21,822
Amortization of customer relationships	1,871	7,730
Amortization of capitalized computer software development costs	668,021	660,893
Amortization of Intellectual property	3,750	0
Excess tax benefits from share-based arrangement	22,091	(24,081)
Stock-based compensation	127,738	155,253
(Gain)/Loss from sale of assets	433	(240)
Deferred income taxes	207,617	307,712
(Increase) decrease in
Accounts receivable and Contracts receivable	(114,080)	(449,458)
Income tax refundable	105,538	(33,924)
Prepaid expenses and other assets	(26,902)	(57,969)
Increase (decrease) in
Accounts payable	1,372	57,940
Accrued payroll and other expenses	28,798	30,209
Accrued Bonus	60,000	(60,000)
Accrued income taxes	542,245	(88,683)
Deferred revenue	(9,409)	45,099
Net cash provided by operating activities of continuing operations	4,472,847	3,234,948
Net cash provided by (used in) operating activities of discontinued operations	(688,862)	262,595
Net cash provided by operating activities	3,783,985	3,497,543
Cash flows from investing activities
Proceeds from sale of Words+, Inc.	1,973,096	0
Proceeds from sale of assets	200	240
Purchases of property and equipment	(106,835)	(19,101)
Purchase of royalty	(75,000)
Capitalized computer software development costs	(958,507)	(797,319)
Net cash provided by (used in) investing activities of continuing operations	832,954	(816,180)
Net cash provided by (used in) investing activities of discontinued operations	6,532	(252,945)
Net cash provided by (used in) investing activities	839,486	(1,069,125)
Cash flows from financing activities
Repurchase of common stock	0	(2,048,172)
Excess tax benefits from share-based arrangement	(22,091)	24,081
Dividends	(2,382,994)	0
Proceeds from the exercise of stock options	301,641	144,960
Net cash (used in) financing activities of continuing operations	(2,103,444)	(1,879,131)
Net increase in cash and cash equivalents from continuing operations	3,202,357	539,637
Net increase (decrease) in cash and cash equivalents from discontinued operations	(682,330)	9,650
Net increase in cash and cash equivalents	2,520,027	549,287
Cash and cash equivalents, beginning of year	10,181,049	9,631,762
Cash and cash equivalents, end of period	12,701,075	10,181,049
Supplemental disclosures of cash flow information
Interest paid	3	43
Income taxes paid	$ 457,000	$ 320,232

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4. COMMITMENTS AND CONTINGENCIES (Details Narrative) (USD $)	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011
Rent expense	$ 293,089	$ 288,979
Extend date of the lease		Feb. 02, 2014
Performance bonus	30,000	27,500
Total royalties	601,000	575,000
Simulations Plus
Rent expense		144,490
Words Plus
Rent expense		$ 144,489

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3. PROPERTY AND EQUIPMENT (Tables)

12 Months Ended

Aug. 31, 2012

Property, Plant and Equipment [Abstract]

Property and equipment

Property and equipment at August 31, 2012 and 2011 consisted of the following:

	2012		2011
Equipment		123,062		39,374
Computer equipment		272,562		255,074
Furniture and fixtures		48,813		48,813
Leasehold improvements		53,898		53,898
		498,335		397,159
Less accumulated depreciation and Amortization		390,925		354,149
Total	$	107,410	$	43,010

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5. SHAREHOLDERS' EQUITY (Details) (USD $)	12 Months Ended
	Aug. 31, 2012
Total Amount	$ 2,382,994.1
Under Condition 1
Record Date	Feb. 21, 2012
Distribution Date	Mar. 01, 2012
Number of Shares Outstanding on Record Date	15,813,844
Dividend per Share	$ 0.05
Total Amount	790,692.2
Under Condition 2
Record Date	Apr. 27, 2012
Distribution Date	May 08, 2012
Number of Shares Outstanding on Record Date	15,923,019
Dividend per Share	$ 0.05
Total Amount	796,150.95
Under Condition 3
Record Date	Aug. 07, 2012
Distribution Date	Aug. 10, 2012
Number of Shares Outstanding on Record Date	15,923,019
Dividend per Share	$ 0.05
Total Amount	$ 796,150.95

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5. SHAREHOLDERS' EQUITY (Tables)

12 Months Ended

Aug. 31, 2012

Equity [Abstract]

Details of dividend paid

The Board of Directors declared cash dividend during fiscal year 2012. The details of dividend paid are in the following table:

Record Date	Distribution Date	Number of Shares Outstanding on Record Date		Dividend per Share	Total Amount
02/21/2012	03/01/2012		15,813,844	$0.05	$	790,692.20
04/27/2012	05/08/2012		15,923.019	$0.05	$	796,150.95
08/07/2012	08/10/2012		15,923.019	$0.05	$	796,150.95
Total					$	2,382,994.10

Stock Repurchase

The details of repurchases made under Phase II are listed in the following table:

Period	Total Number of Shares Purchased		Average Price Paid per Share		Remaining Shares Authorized for Repurchase Under the Share Repurchase Plan – Phase II
04/01/10 to 04/30/10		86,976	$	2.2237		913,024
05/01/10 to 05/31/10		170,101	$	2.3515		742,923
06/01/10 to 06/30/10		33,665	$	2.3670		709,258
07/01/10 to 07/31/10		18,789	$	2.4433		690,469
08/01/10 to 08/31/10		10,878	$	2.4283		679,591
09/01/10 to 09/30/10		81,070	$	2.6969		598,521
10/01/10 to 10/31/10		170,494	$	3.1671		428,027
11/01/10 to 11/30/10		146,116	$	2.9523		281,911
12/01/10 to 12/31/10		41,214	$	2.5716		240,697
01/01/11 to 01/31/11		119,469	$	2.9028		121,228
02/01/11 to 02/28/11		117,476	$	3.4510		3,752
Phase II Total		996,248	$	2.8041

*Phase II repurchase program ended on 02/14/2011.

Summary of the stock option transactions

The following table summarizes the stock option transactions.

TRANSACTIONS IN FY 2012 AND 2011

Transactions in FY11  (Incentive Stock Option Plan)	Number of Options			Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Life
Outstanding, August 31, 2010		1,493,902		$	1.13
Granted		20,000		$	3.27
Exercised		(442,300	)	$	0.54
Canceled/Forfeited		(107,066	)	$	1.61
Expired		(6,900	)	$	0.88
Outstanding, August 31, 2011		957,636		$	1.40		5.22
Vested and Exercisable, August 31, 2011		687,102		$	1.27		4.522
Vested and Expected to Vest, August 31, 2011		931,883		$	1.37		5.132

Transactions in FY12  (Incentive Stock Option Plan)	Number of Options			Weighted-Average Exercise Price  Per Share		Weighted-Average Remaining Contractual Life
Outstanding, August 31, 2011		957,636		$	1.40		–
Granted		100,000		$	3.25		–
Exercised		(360,736	)	$	1.22		–
Expired		(7,100	)	$	2.54		–
Outstanding, August 31, 2012		689,800		$	1.74		4.523
Vested and Exercisable, August 31, 2012		467,100		$	1.42		4.071
Vested and Expected to Vest, August 31, 2012		666,789		$	1.71		4.451

Exercise prices for the options outstanding

The weighted-average remaining contractual life of options outstanding issued under the Plan was 4.17 years at August 31, 2012. The exercise prices for the options outstanding at August 31, 2012 ranged from $1.00 to $6.68, and the information relating to these options is as follows:

Exercise Price		Awards Outstanding				Awards Exercisable
Low	High	Quantity		Weighted Average Remaining Contractual Life	Weighted Average Exercise Price	Quantity		Weighted Average Remaining Contractual Life	Weighted Average Exercise Price
$1.00	$1.50		382,700	4.8 years	$1.07		311,900	4.4 years	$1.08
$1.51	$3.00		154,600	4.1 years	$1.88		199,800	3.1 years	$1.73
$3.01	$4.50		185,100	5.0 years	$3.26		48,400	5.3 years	$3.08
$4.51	$6.68		4,000	5.0 years	$6.68		4,000	5.0 years	$6.68
			726,400				484,100

Intrinsic Value of options outstanding and options exercisable

Intrinsic Value of options outstanding and options exercisable

	Intrinsic Value of Options Outstanding		Intrinsic Value of Options Exercisable		Intrinsic Value of Options Exercised
FY11	$	1,755,674	$	1,348,809	$	1,092,176
FY12	$	1,918,904	$	1,447,900	$	982,786

Other Stock Options

Transactions in FY11	Number of Options			Weighted-Average Exercise Price Per Share
Outstanding, August 31, 2010		71,000		$	2.02
Granted		12,000
Exercised		(4,000	)
Outstanding, August 31, 2011		79,000		$	2.29
Exercisable, August 31, 2011		50,950		$	2.15

Transactions in FY12	Number of Options			Weighted-Average Exercise Price Per Share
Outstanding, August 31, 2011		79,000		$	2.29
Granted		10,000		$	4.46
Exercised		(40,800	)	$	1.25
Canceled/Forfeited		(11,600	)	$	4.10
Outstanding, August 31, 2012		36,600		$	3.47
Exercisable, August 31, 2012		17,000		$	3.35

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1. ORGANIZATION AND LINES OF BUSINESS

12 Months Ended

Aug. 31, 2012

Organization And Lines Of Business

Note 1. ORGANIZATION AND LINES OF BUSINESS

Organization

Simulations Plus, Inc. (the “Company”, “we”, “us”, “our”) was incorporated on July 17, 1996. On August 29, 1996, the shareholders of Words+, Inc. exchanged their 2,000 shares of Words+, Inc. common stock for 2,200,000 (Pre-split) shares of Simulations Plus, Inc. common stock, and Words+, Inc. became a wholly owned subsidiary of Simulations Plus, Inc. The Words+ subsidiary was sold effective November 30, 2011, and is treated as “discontinued operations” in the accompanying financial statements.

Lines of Business

The Company designs and develops pharmaceutical simulation software to promote cost-effective solutions to a number of problems in pharmaceutical research and in the education of pharmacy and medical students. The Company also developed and sells a productivity software program called Abbreviate! that was moved from the Words+ subsidiary to Simulations Plus.

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BALANCE SHEETS (Parenthetical) (USD $)	Aug. 31, 2012	Aug. 31, 2011
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 0	$ 0
Accumulated amortization of computer software development costs	5,084,690	4,416,669
Accumulated amortization on intellectual property	3,750	0
Accumulated amortization of customer relationships	$ 128,042	$ 126,172
Preferred stock par value (in Dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock par value (in Dollars per share)	$ 0.001	$ 0.001
Common stock shares authorized	50,000,000	50,000,000
Common stock shares issued	15,923,019	15,572,943
Common stock shares outstanding	15,923,019	15,572,943

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11. EMPLOYEE BENEFIT PLAN

12 Months Ended

Aug. 31, 2012

Employee Benefit Plan

Note 11. EMPLOYEE BENEFIT PLAN

We maintain a 401(k) Plan for all eligible employees. We make matching contributions equal to 100% of the employee’s elective deferral, not to exceed 4% of the total employee compensation. We can also elect to make a profit-sharing contribution. Contributions by the Company to this Plan amounted to $89,258 and $81,074 for the years ended August 31, 2012 and 2011, respectively.

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Document and Entity Information (USD $)	12 Months Ended
	Aug. 31, 2012	Nov. 15, 2012	Feb. 29, 2012
Document And Entity Information
Entity Registrant Name	SIMULATIONS PLUS INC
Entity Central Index Key	0001023459
Document Type	10-K
Document Period End Date	Aug. 31, 2012
Amendment Flag	false
Current Fiscal Year End Date	--08-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Public Float			$ 38,035,604
Entity Common Stock, Shares Outstanding		15,927,806
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2012

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12. DISCONTINUED OPERATIONS

12 Months Ended

Aug. 31, 2012

Discontinued operations:

Note 12. DISCONTINUED OPERATIONS

On November 30, 2011, we sold our interest in Words+, Inc. for $1,973,096 in cash. Words+ operations are now presented as discontinued operations in accordance with accounting rules related to the disposal of long-lived assets.

We recognized a gain of $465,820, net of tax, from this sale, which is included in income from discontinued operations in our statement of operations for the fiscal quarter ended November 30, 2011. The revenue and expenses of discontinued operations for the first fiscal quarter of 2012 and the fiscal year ended August 31, 2011 are as follows:

(in thousands)	Period from 09/01/11 to 11/30/11			For the fiscal year ended 08/31/11
Net sales	$	479		$	2,981
Cost of sales		265			1,381
Gross profit		214			1,600
Selling, general and administrative		563			1,466
Research and development		55			64
Total operating expenses		618			1,530
Income (Loss) from discontinued operations		(404	)		70
Other income		–			2
Income (Loss) from discontinued operations before income taxes		(404	)		72
(Provision for) income taxes		154			20
Results from discontinued operations, net of tax	$	(250	)	$	52

The carrying amount of the assets and liabilities of discontinued operations at August 31, 2011 and just prior to the date of the sale on November 30, 2011 were as follows:

(in thousands)	11/30/11		08/31/11
Cash and cash equivalents	$	6	$	143
Receivables, net		357		603
Inventory		392		392
Prepaid and other current assets		33		57
Capitalized software development costs, net		212		220
Property and equipment, net		91		120
Total Assets		1,091		1,535
Accounts payable		72		116
Accrued payroll and other expenses		109		219
Accrued warranty and service costs		37		44
Total Liabilities		218		379
Net Assets of discontinued operations	$	873	$	1,156

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STATEMENTS OF OPERATIONS (USD $)	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011
Income Statement [Abstract]
Net sales	$ 9,448,608	$ 8,738,739
Cost of sales	1,510,148	1,558,178
Gross profit	7,938,460	7,180,561
Operating expenses
Selling, general, and administrative	3,379,017	3,185,999
Research and development	947,556	464,281
Total operating expenses	4,326,573	3,650,280
Income from operations	3,611,887	3,530,281
Other income (expense)
Interest income	89,265	91,224
Miscellaneous income	76,149	0
Gain on currency exchange	177,790	76,416
Gain on sale of assets	(433)	240
Interest expense	(3)	(43)
Total other income (expense)	342,768	167,837
Income from continuing operations before provision for income taxes	3,954,655	3,698,118
Provision for income taxes (note 6)	(1,142,693)	(1,035,473)
Income from continuing operations	2,811,962	2,662,645
Discontinued operations:
Gain (loss) from discontinued operations, net of tax	(249,898)	51,996
Gain on sale of Words+, net of tax	465,820	0
Results of discontinued operations	215,922	51,996
Net Income	$ 3,027,884	$ 2,714,641
Basic earnings per share:
Continuing operations	$ 0.18	$ 0.17
Discontinued operations	$ 0.01	$ 0
Net basic earning per share	$ 0.19	$ 0.17
Diluted earnings per share
Continuing operations	$ 0.18	$ 0.17
Discontinued operations	$ 0.01	$ 0
Net basic earning per share	$ 0.19	$ 0.17
Weighted-average common shares outstanding
Basic (in Shares)	15,763,674	15,540,047
Diluted (in Shares)	16,151,873	16,082,454

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6. INCOME TAXES

12 Months Ended

Aug. 31, 2012

Income Tax Disclosure [Abstract]

Note 6. INCOME TAXES

The components of the income tax provision for the years ended August 31, 2012 and 2011 were as follows:

	2012			2011
Current
Federal	$	(872,907	)	$	(623,006	)
State		(177,975	)		(148,171	)
		(1,050,882	)		(771,177	)
Deferred
Federal		114,712			(262,536	)
State		(22,901	)		(21,560	)
		91,811			(284,096	)
Total	$	(1,142,693	)	$	(1,055,273	)

A reconciliation of the expected income tax (benefit) computed using the federal statutory income tax rate to the Company's effective income tax rate is as follows for the years ended August 31, 2012 and 2011:

	2012			2011
Income tax computed at federal statutory tax rate		34.0%			34.0%
State taxes, net of federal benefit		3.3			2.6
Meals & Entertainment		0.1			0.1
Other permanent differences		0.8			(1.0	)
Research and development credit		(8.4	)		(8.2	)
Change in prior year estimated taxes		(0.9	)		0.5
Total		28.9%			28.0%

Significant components of the Company's deferred tax assets and liabilities for income taxes for the years ended August 31, 2012 and 2011 are as follows:

	2012			2011
Deferred tax assets
Accrued payroll and other expenses	$	79,922		$	91,489
Accrued warranty and service costs		–			18,732
Bad debt allowance		–			99,982
Deferred revenue		56,456			60,486
Property and equipment		32,916			60,626
Research and development credit		261,526			289,357
State taxes		66,902			50,378
Total deferred tax assets		497,722			671,050
Less:  Valuation allowance		–			–
		497,722			671,050
Deferred tax liabilities
State Tax Deferred		(30,663	)		(26,710	)
Capitalized computer software development costs		(1,062,204	)		(1,031,869	)
Total deferred tax liabilities		(1,092,867	)		(1,058,579	)
Net deferred tax liabilities	$	(595,145	)	$	(387,529	)

We follow guidance issued by the FASB with regard to its accounting for uncertainty in income taxes recognized in the financial statements. Such guidance 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 policy is to include interest and penalties related to unrecognized tax benefits in income tax expense. Interest and penalties totaled $1,300 and $1,035 for the years ended August 31, 2012 and 2011, respectively. We file income tax returns with the Internal Revenue Service (“IRS”) and the state of California. For jurisdictions in which tax filings are prepared, we are no longer subject to income tax examinations by state tax authorities for years through 2006, and by the IRS for years through 2007. As of August 31, 2012, the Company’s tax returns for tax year ends August 31, 2009 and 2010 are under examination by the California Franchise Tax Board. The potential outcome of these examinations cannot be determined as of August 31, 2012. As of August 31, 2012, our 2007 tax filing was also under examination by the IRS. In October 2012, the IRS completed their examination of our 2007 tax filing, the result of which was a decrease of $36,868 in the amount refundable. Our review of prior year tax positions using the criteria and provisions presented in guidance issued by FASB did not resultin in a material impact on the Company’s financial position or results of operations.

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5. SHAREHOLDERS' EQUITY

12 Months Ended

Aug. 31, 2012

Equity [Abstract]

Note 5. SHAREHOLDERS' EQUITY

Dividend

The Board of Directors declared cash dividend during fiscal year 2012. The details of dividend paid are in the following table:

Record Date	Distribution Date	Number of Shares Outstanding on Record Date		Dividend per Share	Total Amount
02/21/2012	03/01/2012		15,813,844	$0.05	$	790,692.20
04/27/2012	05/08/2012		15,923.019	$0.05	$	796,150.95
08/07/2012	08/10/2012		15,923.019	$0.05	$	796,150.95
Total					$	2,382,994.10

Stock Repurchase

On January 10, 2010, the Board of Directors authorized a renewed share repurchase program (Phase II) effective as of February 15, 2010. The renewed program enabled the Company to buy back up to one million shares during a 12-month period.

The details of repurchases made under Phase II are listed in the following table:

Period	Total Number of Shares Purchased		Average Price Paid per Share		Remaining Shares Authorized for Repurchase Under the Share Repurchase Plan – Phase II
04/01/10 to 04/30/10		86,976	$	2.2237		913,024
05/01/10 to 05/31/10		170,101	$	2.3515		742,923
06/01/10 to 06/30/10		33,665	$	2.3670		709,258
07/01/10 to 07/31/10		18,789	$	2.4433		690,469
08/01/10 to 08/31/10		10,878	$	2.4283		679,591
09/01/10 to 09/30/10		81,070	$	2.6969		598,521
10/01/10 to 10/31/10		170,494	$	3.1671		428,027
11/01/10 to 11/30/10		146,116	$	2.9523		281,911
12/01/10 to 12/31/10		41,214	$	2.5716		240,697
01/01/11 to 01/31/11		119,469	$	2.9028		121,228
02/01/11 to 02/28/11		117,476	$	3.4510		3,752
Phase II Total		996,248	$	2.8041

*Phase II repurchase program ended on 02/14/2011.

Stock Option Plan

In September 1996, the Board of Directors adopted, and the shareholders approved, the 1996 Stock Option Plan (the "Option Plan") under which a total of 1,000,000 shares of common stock had been reserved for issuance. In March 1999, the shareholders approved an increase in the number of shares that may be granted under the Option Plan to 2,000,000. In February 2000, the shareholders approved an increase in the number of shares that may be granted under the Option Plan to 4,000,000. In December 2000, the shareholders approved an increase in the number of shares that may be granted under the Option Plan to 5,000,000. Furthermore, in February 2005, the shareholders approved an additional 1,000,000 shares, resulting in the total number of shares that may be granted under the Option Plan to 6,000,000. The 1996 Stock Option Plan terminated in September 2006 by its term.

On February 23, 2007, the Board of Directors adopted and the shareholders approved the 2007 Stock Option Plan under which a total of 1,000,000 shares of common stock had been reserved for issuance.

The following table summarizes the stock option transactions.

TRANSACTIONS IN FY 2012 AND 2011

Transactions in FY11 (Incentive Stock Option Plan)	Number of Options			Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Life
Outstanding, August 31, 2010		1,493,902		$	1.13
Granted		20,000		$	3.27
Exercised		(442,300	)	$	0.54
Canceled/Forfeited		(107,066	)	$	1.61
Expired		(6,900	)	$	0.88
Outstanding, August 31, 2011		957,636		$	1.40		5.22
Vested and Exercisable, August 31, 2011		687,102		$	1.27		4.522
Vested and Expected to Vest, August 31, 2011		931,883		$	1.37		5.132

Transactions in FY12 (Incentive Stock Option Plan)	Number of Options			Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Life
Outstanding, August 31, 2011		957,636		$	1.40		–
Granted		100,000		$	3.25		–
Exercised		(360,736	)	$	1.22		–
Expired		(7,100	)	$	2.54		–
Outstanding, August 31, 2012		689,800		$	1.74		4.523
Vested and Exercisable, August 31, 2012		467,100		$	1.42		4.071
Vested and Expected to Vest, August 31, 2012		666,789		$	1.71		4.451

The fair value of the options, including options to outside board members, granted during the year ended August 31, 2012 is estimated at $167,124. The fair value of these options was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions for the fiscal year ended August 31, 2012: dividend yield of 0.41%, pre-vest forfeiture rate of 5.61% to 6.09%, expected volatility of 62.27% to 69.87%, risk-free interest rate of 0.82% to 1.01%, and expected life of 5.0 years to 7.0 years. The total fair value of non-vested stock options as of August 31, 2012 was $292,426 and is amortizable over a weighted average period of 2.03 years.

During the previous fiscal year ended August 31, 2011, the fair value of the options granted is estimated at $57,384. The assumptions were dividend yield of 0%, pre-vest forfeiture rate of 2.32% to 40.71%, expected volatility of 54.71% to 79.91%, risk-free interest rate of 1.42% to 2.66%, and expected life of 4.0 years. The total fair value of non-vested stock options as of August 31, 2011 was $270,387 and is amortizable over a weighted average period of 2.18 years.

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which do not have vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Because our employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.

The weighted-average remaining contractual life of options outstanding issued under the Plan was 4.17 years at August 31, 2012. The exercise prices for the options outstanding at August 31, 2012 ranged from $1.00 to $6.68, and the information relating to these options is as follows:

Exercise Price		Awards Outstanding				Awards Exercisable
Low	High	Quantity		Weighted Average Remaining Contractual Life	Weighted Average Exercise Price	Quantity		Weighted Average Remaining Contractual Life	Weighted Average Exercise Price
$1.00	$1.50		382,700	4.8 years	$1.07		311,900	4.4 years	$1.08
$1.51	$3.00		154,600	4.1 years	$1.88		199,800	3.1 years	$1.73
$3.01	$4.50		185,100	5.0 years	$3.26		48,400	5.3 years	$3.08
$4.51	$6.68		4,000	5.0 years	$6.68		4,000	5.0 years	$6.68
			726,400				484,100

Intrinsic Value of options outstanding and options exercisable

	Intrinsic Value of Options Outstanding		Intrinsic Value of Options Exercisable		Intrinsic Value of Options Exercised
FY11	$	1,755,674	$	1,348,809	$	1,092,176
FY12	$	1,918,904	$	1,447,900	$	982,786

Other Stock Options

As of August 31, 2012, the outside members of the Board of Directors hold options to purchase 79,000 shares of common stock at exercise prices ranging from $0.38 to $6.68.

Transactions in FY11	Number of Options			Weighted-Average Exercise Price Per Share
Outstanding, August 31, 2010		71,000		$	2.02
Granted		12,000
Exercised		(4,000	)
Outstanding, August 31, 2011		79,000		$	2.29
Exercisable, August 31, 2011		50,950		$	2.15

Transactions in FY12	Number of Options			Weighted-Average Exercise Price Per Share
Outstanding, August 31, 2011		79,000		$	2.29
Granted		10,000		$	4.46
Exercised		(40,800	)	$	1.25
Canceled/Forfeited		(11,600	)	$	4.10
Outstanding, August 31, 2012		36,600		$	3.47
Exercisable, August 31, 2012		17,000		$	3.35

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4. COMMITMENTS AND CONTINGENCIES (Tables)

12 Months Ended

Aug. 31, 2012

Commitments and Contingencies Disclosure [Abstract]

Future minimum lease payments

Future minimum lease payments under non-cancelable operating leases with remaining terms of one year or more at August 31, 2012 were as follows:

Years Ending  August 31,
2013		286,601
2014		121,362
	$	407,963

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13. SUBSEQUENT EVENTS

12 Months Ended

Aug. 31, 2012

Subsequent Events [Abstract]

Note 13. SUBSEQUENT EVENTS

On October 26, 2012, our board of directors declared the next quarterly cash dividend of $0.05 per share to our shareholders. The dividend will be distributed on Wednesday, November 13, 2012, for shareholders of record as of Friday, November 8, 2012.

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9. RELATED PARTY TRANSACTIONS

12 Months Ended

Aug. 31, 2012

Related Party Transactions [Abstract]

Note 9. RELATED PARTY TRANSACTIONS

As of August 31, 2012, included in bonus expenses to officers was $87,500, of which $60,000 was accrued bonus representing 5% of the Company’s FY12 net income before bonuses and taxes, not exceeding $60,000, paid to the Corporate Secretary, Virginia Woltosz, as an annual bonus as part of the terms of the sale of Words+ to Simulations Plus in 1996. The other $27,500, paid in December 2011, was FY2011 performance bonus to Walter Woltosz, our President/Chief Executive Officer.

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7. CONCENTRATIONS AND UNCERTAINTIES

12 Months Ended

Aug. 31, 2012

Concentrations And Uncertainties

Note 7. CONCENTRATIONS AND UNCERTAINTIES

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash, cash equivalents and trade accounts receivable. The Company holds cash and cash equivalents at banks located in California, with balances that often exceed FDIC insured limits. Historically, the Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents. However, considering the current banking environment, the Company is investigating alternative ways to minimize its exposure to such risks. While the Company may be exposed to credit losses due to the nonperformance of its counterparties, the Company does not expect the settlement of these transactions to have a material effect on its results of operations, cash flows or financial condition.

Revenue concentration shows that International sales accounted for 49% and 36% of net sales for the years ended August 31, 2012 and 2011, respectively. Two customers accounted for 10% (one is a dealer account representing various customers) and 6% of net sales for the year ended August 31, 2012. For the year ended August 31, 2011, three customers accounted for 11% (one is a dealer account representing various customers), 8% and 7% of net sales.

Accounts receivable concentration shows that two customers comprised 28% (a dealer account representing various customers) and 22% of accounts receivable at August 31, 2012, and two customers comprised 36% (a dealer account representing various customers) and 18% of accounts receivable at August 31, 2011.

We operate in the computer software industry, which is highly competitive and changes rapidly. Our operating results could be significantly affected by our ability to develop new products and find new distribution channels for new and existing products.

The majority of our customers are in the pharmaceutical industry. During the current economy downturn, we have seen consolidation in the pharmaceutical industry. Although we have not seen any significant reduction in revenues to date, continued consolidation and downsizing in the pharmaceutical industry could have an impact on our revenues and earnings going forward.

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8. GEOGRAPHIC REPORTING

12 Months Ended

Aug. 31, 2012

Geographic Reporting

Note 8. GEOGRAPHIC REPORTING

Prior to the sale of Words+ on November 30, 2011, the Company operated in two business segments, which consisted of the pharmaceutical software and consulting services business and the augmentative communication devise business. Upon the sale of Words+ on November 30, 2011, the Company ceased operations in the augmentative communication devise business. The results of this segment are presented as discontinued operations in the accompanying financial statements. The pharmaceutical software segment, which represents the Company’s ongoing business, is presented as continuing operations.

The Company allocates revenues to geographic areas based on the locations of its customers. Geographical revenues were as follows for the fiscal years ended August 31, 2012 and 2011:

	August 31, 2012
(in ‘000)	North America	Europe	Asia	South America	Total
Simulations Plus, Inc.	4,805	2,986	1,633	25	9,449

	August 31, 2011
(in ‘000)	North America	Europe	Asia	South America	Total
Simulations Plus, Inc.	4,548	2,606	1,554	31	8,739

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10. CUSTOMER RELATIONSHIPS

12 Months Ended

Aug. 31, 2012

Customer Relationships

Note 10 . CUSTOMER RELATIONSHIPS

The Company purchased customer relationships as a part of the acquisition of certain assets of Bioreason, Inc. in November 2005. Customer relationships was recorded at a cost of $128,042 and is being amortized over 78 months under the sum-of-the-years’-digits method. Amortization expense for the years ended August 31, 2012 and 2011 amounted to $1,871 and $7,730, respectively. Accumulated amortization was $128,042 as of August 31, 2012.

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4. COMMITMENTS AND CONTINGENCIES (Details) (USD $)	Aug. 31, 2011
Commitments and Contingencies Disclosure [Abstract]
2013	$ 286,601
2014	121,362
Total	$ 407,963

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11. EMPLOYEE BENEFIT PLAN (Details Narrative) (USD $)	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011
Notes to Financial Statements
Contribution by employer in benefit plan	$ 89,258	$ 81,074

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Aug. 31, 2012

Accounting Policies [Abstract]

Property and Equipment estimated useful lives

Depreciation and amortization are provided using the straight-line method over the estimated useful lives as follows:

Equipment	5 years
Computer equipment	3 to 7 years
Furniture and fixtures	5 to 7 years
Leasehold improvements	Shorter of life of asset or lease

Assets and liabilities recorded at fair value

The categories, as defined by the standard, are as follows:

Level Input:	Input Definition:
Level I	Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.
Level II	Inputs, other than quoted prices included in Level I, that are observable for the asset or liability through corroboration with market data at the measurement date.
Level III	Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.

Summary of fair value measurements by level

The following table summarizes fair value measurements by level at August 31, 2012 for assets and liabilities measured at fair value on a recurring basis:

	Level I		Level II	Level III	Total
Cash and cash equivalents	$	12,701,075	$	$	$	12,701,075
Total assets	$	12,701,075	$	$	$	12,701,075

Components of basic and diluted earnings per share

The components of basic and diluted earnings per share for the years ended August 31, 2012 and 2011 were as follows:

	2012		2011
Numerator
Net income attributable to common shareholders	$	3,027,884	$	2,714,641
Denominator
Weighted-average number of common shares outstanding during the year		15,921,196		15,540,047
Dilutive effect of stock options		388,199		542,407
Common stock and common stock equivalents used for diluted earnings per share		16,309,395		16,082,454

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8. GEOGRAPHIC REPORTING (Tables)

12 Months Ended

Aug. 31, 2012

Geographic Reporting Tables

Geographical revenues

The Company allocates revenues to geographic areas based on the locations of its customers. Geographical revenues were as follows for the fiscal years ended August 31, 2012 and 2011:

	August 31, 2012
(in ‘000)	North America	Europe	Asia	South America	Total
Simulations Plus, Inc.	4,805	2,986	1,633	25	9,449

	August 31, 2011
(in ‘000)	North America	Europe	Asia	South America	Total
Simulations Plus, Inc.	4,548	2,606	1,554	31	8,739

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9. RELATED PARTY TRANSACTIONS (Details Narrative) (USD $)	12 Months Ended
	Aug. 31, 2012
Related Party Transactions [Abstract]
Bonus expenses to officers	$ 87,500

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5. SHAREHOLDERS' EQUITY (Details 5) (Other Stock Options, USD $)	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011
Other Stock Options
Outstanding - beginning balance	79,000	71,000
Granted	10,000	12,000
Exercised	(40,800)	(4,000)
Canceled/Forfeited	(11,600)
Outstanding - ending balance	36,600	79,000
Exercisable	17,000	50,950
Outstanding - beginning balance	$ 2.29	$ 2.02
Granted	$ 4.46
Exercised	$ 1.25
Canceled/Forfeited	$ 4.1
Outstanding - ending balance	$ 3.47	$ 2.29
Exercisable	$ 3.35	$ 2.15

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STATEMENTS OF SHAREHOLDERS' EQUITY (USD $)	Common Stock	Additional Paid-In Capital	Retained Earnings / Accumulated Deficit	Total
Beginning Balance, Amount at Aug. 31, 2010	$ 4,304	$ 5,891,268	$ 7,150,280	$ 13,045,852
Beginning Balance, Shares at Aug. 31, 2010	15,833,006
Exercise of stock options, Amount	416	144,545		144,961
Exercise of stock options, Shares	415,776
Stock-based Compensation		155,252		155,252
Stock Repurchases, Amount	(676)	(2,047,496)		(2,048,172)
Stock Repurchases, Shares	(675,839)
Declaration of Dividend		24,081		24,081
Net income			2,714,641	2,714,641
Ending Balance, Amount at Aug. 31, 2011	4,044	4,167,650	9,864,921	14,036,615
Ending Balance, Shares at Aug. 31, 2011	15,572,943
Exercise of stock options, Amount	355	301,286		301,641
Exercise of stock options, Shares	354,863
Stock-based Compensation		181,521		181,521
Deferred tax adjustments - Change in prior year tax refund		(36,868)		(36,868)
Deferred tax adjustments - Current deferred tax adjustments		14,777		14,777
Declaration of Dividend			(2,382,994)	(2,382,994)
Net income			3,027,884	3,027,884
Ending Balance, Amount at Aug. 31, 2012	$ 4,399	$ 4,628,366	$ 10,509,811	$ 15,142,576
Ending Balance, Shares at Aug. 31, 2012	15,927,806

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4. COMMITMENTS AND CONTINGENCIES

12 Months Ended

Aug. 31, 2012

Commitments and Contingencies Disclosure [Abstract]

Note 4. COMMITMENTS AND CONTINGENCIES

Leases

We lease approximately 13,500 square feet of space under a five-year term with two (2), three (3)-year options to extend the lease. The base rent is $18,445 per month plus common area maintenance fees. The base rental rate increases at 4% annually. Rent expense, including common area maintenance fees, was $293,089 for the year ended August 31, 2012 and $288,979, of which $144,490 was recorded as Simulations Plus rent expense and $144,489 was recorded as Words+ (a former subsidiary) rent expense for the year ended August 31, 2011. During the year ended August 31, 2011, the Company exercised its option to extend the term of the lease to February 2, 2014.

After the sale of Words+, we entered into a month to month sublease agreement commencing January 1, 2012 under which Words+ pays 20 percent of the monthly rent we pay to our landlord, plus 20% of facility-related operating expenses. We report our gross lease expense under Selling, General and Administrative expense; however, the sublease payments received from Words+ are reported under Other Income.

Future minimum lease payments under non-cancelable operating leases with remaining terms of one year or more at August 31, 2012 were as follows:

Years Ending August 31,
2013		286,601
2014		121,362
	$	407,963

On October 30, 2006, the Company entered into an equipment lease agreement. In this agreement, the Company leased a Ricoh Copier/Printer for 36 months with the option of earlier termination with a 60-day written notice. On October 30, 2009, we renewed the same agreement for another 36 months with an increment of 1 cent per copy on color printing which reflects their material cost. On April 17, 2012, we entered into a new lease agreement with ARC, a successor of former leasing company, for 36-month under the same term as the existing agreement.

Employment Agreement

On July 22, 2011, the Company entered into an employment agreement with its President/Chief Executive Officer that expires in August 2013. The employment agreement provides for an annual base salary of $300,000 per year, and a performance bonus in an amount not to exceed 10% of Employee’s salary, or $30,000 per year, at the end of each fiscal year. The specific amount of the bonus to be awarded will be determined by the Compensation Committee of the Board of Directors, based on the financial performance and achievements of the Company for the previous fiscal year. The agreement also provides Employee stock options, exercisable for five years, to purchase fifty (50) shares of Common Stock for each one thousand dollars ($1,000) of net income before taxes at the end of each fiscal year up to a maximum of 120,000 options over the term of the agreement. The Company may terminate the agreement upon 30 days' written notice if termination is without cause. The Company's only obligation would be to pay its President the greater of a) 12 months salary or b) the remainder of the term of the employment agreement from the date of notice of termination. 

For fiscal year 2012, the Compensation Committee awarded a $30,000 performance bonus to Walter Woltosz, our President/Chief Executive Officer, and was paid in September 2012.

For fiscal year 2011, the Compensation Committee awarded a $27,500 performance bonus to Walter Woltosz. The bonus for FY2011, which was 100% of the previous year’s contract bonus amount, was paid in December 2011.

License Agreement

In 1997, the Company entered into an agreement with Therapeutic Systems Research Laboratory ("TSRL") to jointly develop a computer simulation software program of the absorption of drug compounds in the gastrointestinal tract. Upon execution of a definitive License Agreement on July 9, 1997, TSRL received an initial payment of $75,000, and thereafter, the Company is obligated to pay a royalty of 20% of the net sales of the basic GastroPlus software without additional modules.

In September 2007, we entered into an agreement with Enslein Research, Inc. (“Enslein”) to jointly create a new metabolism module as part of ADMET Predictor. The fee for the exclusive license to the Enslein Data, in the form of a royalty, is 50% of the gross sales revenues of the ADMET Predictor Enslein Metabolism Module, and a $50,000 bonus at the time the cumulative revenue from ADMET Predictor Enslein Metabolism Module sales reaches $250,000. On February 28, 2012, we signed a buyout agreement with Enslein for $75,000, and are amortizing its cost over 10 years after this date.

We also have a royalty agreement with Accelrys (the original agreement with Symyx in March 2010) for Metabolite Database access for developing our Metabolite module which was renamed as Metabolism module when we released ADMET Predictor version 6 on April 19, 2012. Under this agreement, we pay 25% of revenue derived from the sale of Metabolism/Metabolite module.

For the years ended August 31, 2012 and 2011, we incurred total royalties of approximately $601,000 and $575,000, respectively.

Legal Matters

We are not a party to any litigation at this time and we are not aware of any pending litigation of any kind.

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12. DISCONTINUED OPERATIONS (Tables)

12 Months Ended

Aug. 31, 2012

Discontinued Operations Tables

Revenue and expenses of discontinued operations

The revenue and expenses of discontinued operations for the first fiscal quarter of 2012 and the fiscal year ended August 31, 2011 are as follows:

(in thousands)	Period  from 09/01/11  to 11/30/11			For the fiscal year ended 08/31/11
Net sales	$	479		$	2,981
Cost of sales		265			1,381
Gross profit		214			1,600
Selling, general and administrative		563			1,466
Research and development		55			64
Total operating expenses		618			1,530
Income (Loss) from discontinued operations		(404	)		70
Other income		–			2
Income (Loss) from discontinued operations before income taxes		(404	)		72
(Provision for) income taxes		154			20
Results from discontinued operations, net of tax	$	(250	)	$	52

Carrying amount of the assets and liabilities of discontinued operations

The carrying amount of the assets and liabilities of discontinued operations at August 31, 2011 and just prior to the date of the sale on November 30, 2011 were as follows:

(in thousands)	11/30/11		08/31/11
Cash and cash equivalents	$	6	$	143
Receivables, net		357		603
Inventory		392		392
Prepaid and other current assets		33		57
Capitalized software development costs, net		212		220
Property and equipment, net		91		120
Total Assets		1,091		1,535
Accounts payable		72		116
Accrued payroll and other expenses		109		219
Accrued warranty and service costs		37		44
Total Liabilities		218		379
Net Assets of discontinued operations	$	873	$	1,156

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5. SHAREHOLDERS' EQUITY (Details 2) (Incentive Stock Option Plan, USD $)	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011
Incentive Stock Option Plan
Outstanding - beginning balance	957,636	1,493,902
Granted	100,000	20,000
Exercised	(360,736)	(442,300)
Canceled/Forfeited		(107,066)
Expired	(7,100)	(6,900)
Outstanding - ending balance	689,800	957,636
Vested and Exercisable	467,100	687,102
Vested and Expected to Vest	666,789	931,883
Outstanding - beginning balance	$ 1.40	$ 1.13
Granted	$ 3.25	$ 3.27
Exercised	$ 1.22	$ 0.54
Canceled/Forfeited		$ 1.61
Expired	$ 2.54	$ 0.88
Outstanding - ending balance	$ 1.74	$ 1.40
Vested and Exercisable	$ 1.42	$ 1.27
Vested and Expected to Vest	$ 1.71	$ 1.37
Weighted-Average Remaining Contractual Life
Outstanding	4 years 6 months 8 days	5 years 2 months 19 days
Vested and Exercisable	4 years 0 months 26 days	4 years 6 months 8 days
Vested and Expected to Vest	4 years 5 months 12 days	5 years 1 month 18 days

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Aug. 31, 2012

Accounting Policies [Abstract]

Use of Estimates

Our 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.

Principles of Consolidation

The financial statements of Simulations Plus, Inc. include the accounts of Words+ up to November 30, 2011, the date of sale of the wholly owned subsidiary. All significant intercompany accounts and transactions were eliminated in consolidation. The operations of Words+ are presented as “discontinued operations” in the financial statements.

Revenue Recognition

We recognize revenues related to software licenses and software maintenance in accordance with Financial Accounting Standard Board (“FASB”) Accounting Standard Codification (“ASC”) 985-605, “Software - Revenue Recognition”. Software products revenue is recorded when the following conditions are met: 1) evidence of arrangement exists, 2) delivery has been made, 3) the amount is fixed, and 4) collectability is probable. Post-contract customer support ("PCS") obligations are insignificant; therefore, revenue for PCS is recognized at the same time as the licensing fee, and the costs of providing such support services are accrued and amortized over the obligation period.

As a byproduct of ongoing improvements and upgrades for the new programs and new modules of software, some modifications are provided to customers who have already purchased software at no additional charge. Other software modifications result in new, additional cost modules that expand the functionality of the software. These are licensed separately. We consider the modifications that are provided without charge to be minimal, as they do not significantly change the basic functionality or utility of the software, but rather add convenience, such as being able to plot some additional variable on a graph in addition to the numerous variables that had been available before, or adding some additional calculations to supplement the information provided from running the software. Such software modifications for any single product have typically occurred once or twice per year, sometimes more, sometimes less. Thus, they are infrequent. The Company provides, for a fee, additional training and service calls to its customers and recognizes revenue at the time the training or service call is provided.

Generally, we enter into one-year license agreements with customers for the use of our pharmaceutical software products. We recognize revenue on these contracts when all the criteria are met.

Most license agreements have a term of one year; however, from time to time, we enter into multi-year license agreements.We generally unlock and invoice software one year at a time for multi-year licenses. Therefore, revenue is recognized one year at a time.

We recognize the revenue from collaboration research and the revenue from grants equally over their terms. However, we recognize the contract study revenue using the percentage of completion method, depending upon how the contract studies are engaged, in accordance with ASC 605-35, Revenue Recognition – Construction-Type and Production-Type Contracts”. 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.

Reclassifications

Certain numbers in the prior year have been reclassified to conform to the current year’s presentation.

Cash and Cash Equivalents

For purposes of the statements of cash flows, the Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.

Accounts Receivable

We analyze the age of customer balances, historical bad debt experience, customer creditworthiness, and changes in customer payment terms when making estimates of the collectability of the Company’s trade accounts receivable balances. If we determine that the financial conditions of any of its customers deteriorated, whether due to customer-specific or general economic issues, an increase in the allowance may be made. Accounts receivable are written off when all collection attempts have failed. The Company also estimated the contractual discount obligation for third party funding such as, Medicaid, and private insurance companies. Those estimated discounts were reflected in the allowance for doubtful accounts and contractual discounts and included in discontinued operations. Although we experienced significant collection problems with our former Words+ subsidiary, we have not had customers fail to pay on the pharmaceutical software and services side of the business, which now represents our entire business after the sale of our former subsidiary on November 30, 2011.

Capitalized Computer Software Development Costs

Software development costs are capitalized in accordance with ASC 985-20, “Costs of Software to Be Sold, Leased, or 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 computer software development costs are comprised primarily of salaries and direct payroll-related costs and the purchase of existing software to be used in the Company's software products.

Amortization of capitalized computer 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 $668,021 and $660,893 for the years ended August 31, 2012 and 2011, respectively. We expect future amortization expense to vary due to increases in capitalized computer software development costs.

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

Property and Equipment

Property and equipment are recorded at cost, less accumulated depreciation and amortization. Depreciation and amortization are provided using the straight-line method over the estimated useful lives as follows:

Equipment	5 years
Computer equipment	3 to 7 years
Furniture and fixtures	5 to 7 years
Leasehold improvements	Shorter of life of asset or lease

Maintenance and minor replacements are charged to expense as incurred. Gains and losses on disposals are included in the results of operations.

Fair Value of Financial Instruments

Assets and liabilities recorded at fair value in the Balance Sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair value. The categories, as defined by the standard, are as follows:

Level Input:	Input Definition:
Level I	Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.
Level II	Inputs, other than quoted prices included in Level I, that are observable for the asset or liability through corroboration with market data at the measurement date.
Level III	Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.

For certain of our financial instruments, including accounts receivable, accounts payable, accrued payroll and other expenses, accrued bonuses to officers, and accrued warranty and service costs, the carrying amounts are approximate fair value due to their short maturities.

Advertising

The Company expenses advertising costs as incurred. Advertising costs for the years ended August 31, 2012 and 2011 were $79,000 and $37,000, respectively.

Research and Development Costs

Research and development costs are charged to expense as incurred until technological feasibility has been established. These costs include salaries, laboratory experiment, and purchased software which was developed by other companies and incorporated into, or used in the development of, our final products.

Income Taxes

The Company accounts for income taxes in accordance with ASC 740-10, “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.

Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities.

The California Franchise Tax Board (“FTB”) audited us for the fiscal years ended (“FYE”) August 31, 2007 and 2008. We received refunds as we claimed; however they have now continued their audit to include FYE 2009 and 2010, and are reviewing 2007 and 2008 R&D credits since those credits were carried forward to FYE 2009 and 2010. In March 2012, we also received a notice from the Internal Revenue Service (IRS) that our fiscal year ended August 31, 2008 is subject to their examination. In October 2012, the IRS completed their examination of our 2007 tax filing. The outcome of this examination was a decrease of $36,868 in the amount refundable.

Intellectual property

On February 28, 2012, we bought out the royalty agreement with Enslein Research of Rochester, New York. The cost of $75,000 is being amortized over 10 years under the straight-line method. Amortization expense for the fiscal year ended August 31, 2012 was $3,750. Accumulated amortization as of August 31, 2012 was $3,750.

Customer relationships

We purchased customer relationships as a part of the acquisition of certain assets of Bioreason, Inc. in November 2005. Customer relationships was recorded at a cost of $128,042, and is being amortized over 78 months under the sum-of-the-years’-digits method. Amortization expense for the fiscal year ended August 31, 2012 and 2011 amounted to $1,871 and $7,730, respectively. Accumulated amortization as of August 31, 2012 and 2011 were $128,042 and $126,172, respectively.

Earnings per Share

The Company reports earnings per share in accordance with FASB ACS 260-10. Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of common shares available. Diluted earnings per share is computed similarly to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.

Stock-Based Compensation

The Company accounts for stock options using the modified prospective method in accordance with FASB ACS 718-10, “Compensation-Stock Compensation”. Under this method, compensation costs include: (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 Statement of Financial Accounting Standard (“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. Stock-based compensation was $181,520 and $155,252 for the years ended August 31, 2012 and 2011, respectively, and is included in the statements of operations as Consulting, Salaries, and Research and Development expense.

Recently Issued Accounting Standards

In September 2009, the FASB issued ASU 2009-14 which 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. ASU 2009-14 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. We adopted this standard in the first quarter of fiscal 2011. We believe adoption did not have a material effect on the Company’s financial statements.

In September 2009, the FASB issued ASU 2009-13, “Revenue Arrangements with Multiple Deliverables” (“EITF 08-1”). ASU 2009-13 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. ASU 2009-13 also requires expanded qualitative and quantitative disclosures regarding significant judgments made and changes in applying the guidance. ASU 2009-13 applies to fiscal years beginning after June 15, 2010, with early application permitted. We adopted this standard in the first quarter of fiscal 2011. We believe adoption did not have a material effect on the Company’s financial statements.

In May 2011, the Financial Accounting Standards Board (“FASB”) issued ASU 2011-04, Fair Value Measurement (“ASU 2011-04”), which amended ASC 820, Fair Value Measurements (“ASC 820”), providing a consistent definition and measurement of fair value, as well as similar disclosure requirements between U.S. GAAP and International Financial Reporting Standards. ASU 2011-04 changes certain fair value measurement principles, clarifies the application of existing fair value measurement and expands the disclosure requirements. We adopted this standard in the first quarter of 2012. We believe adoption did not have a material effect on the Company’s financial statements.

In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income (“ASU 2011-05”). ASU 2011-05 requires the presentation of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. We adopted this standard in the first quarter of 2012. We believe adoption did not have a material effect on the Company’s financial statements.

In September 2011, the FASB issued ASU 2011-08, Testing Goodwill for Impairment (“ASU 2011-08”), which amends the guidance in ASC 350-20, Intangibles—Goodwill and Other – Goodwill. ASU 2011-08 provides entities with the option of performing a qualitative assessment before calculating the fair value of the reporting unit when testing goodwill for impairment. If the fair value of the reporting unit is determined, based on qualitative factors, to be more likely than not less than the carrying amount of the reporting unit, the entities are required to perform a two-step goodwill impairment test. We adopted this standard in the first quarter of 2012. We believe adoption did not have a material effect on the Company’s financial statements.

In December 2011, the FASB issued ASU No. 2011-11, "Disclosures about Offsetting Assets and Liabilities." The amendments in this update require enhanced disclosures around financial instruments and derivative instruments that are either (1) offset in accordance with either ASC 210-20-45 or ASC 815-10-45 or (2) subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in accordance with either ASC 210-20-45 or ASC 815-10-45. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. The amendments are effective during interim and annual periods beginning after February 28, 2012. The Company does not expect this guidance to have any impact on its financial position, results of operations or cash flows.