8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) August 25, 2006

SIMPLETECH, INC.

(Exact name of registrant as specified in charter)

California	000-31623	33-0399154
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

3001 Daimler Street, Santa Ana, California	92705-5812
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (949) 476-1180

N/A

(Former Name or Former Address, if Changed Since Last Report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

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

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

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

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

ITEM 1.01. Entry into a Material Definitive Agreement.

On August 25, 2006, SimpleTech, Inc. (the “Company”) received an incentive package (the “Incentive Package”) from the Malaysian Industrial Development Authority (“MIDA”) to expand certain of the Company’s operations to Malaysia. In order to fully realize the benefits of the Incentive Package, which includes an extended tax holiday, research and development grants and other comprehensive government incentives, the Company will be required to conduct a certain level of manufacturing, engineering and business activities in Malaysia. In addition, the Company is required to commit minimum levels of investment toward these activities and meet other operational criteria in Malaysia.

The foregoing is a summary description of the terms of the Incentive Package and by its nature is incomplete, does not purport to describe in full all provisions of the Incentive Package and is qualified in all respects by the redacted version of the Incentive Package, a copy of which has been filed as an exhibit to this Current Report and is incorporated herein by reference.

ITEM 8.01. Other Events

On August 30, 2006, the Company issued a press release announcing the receipt of the Incentive Package and plans to open a manufacturing facility in Penang, Malaysia.

A copy of the press release is being filed as Exhibit 99.1 to this Current Report on Form 8-K and incorporated herein by reference.

ITEM 9.01. Financial Statements and Exhibits

Exhibit Number	Description of Exhibit
10.1*	Letter, dated August 25, 2006, from Malaysian Industrial Development Authority addressed to SimpleTech, Inc. offering special incentives.
99.1	Press Release of SimpleTech, Inc., dated August 30, 2006, announcing plans to open a manufacturing facility in Penang, Malaysia.

* Portions of this exhibit have been omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission under Rule 24b-2 of the Securities Exchange Act of 1934, as amended. The omitted portions of this exhibit have been separately filed with the Securities and Exchange Commission.

SIGNATURE

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

	SimpleTech, Inc.
Date: August 30, 2006	By:	/s/ Dan Moses
		Dan Moses
		Chief Financial Officer and Executive     Vice President

Exhibit Index

Exhibit Number	Description of Exhibit
10.1*	Letter, dated August 25, 2006, from Malaysian Industrial Development Authority addressed to SimpleTech, Inc. offering special incentives.
99.1	Press Release of SimpleTech, Inc., dated August 30, 2006, announcing plans to open a manufacturing facility in Penang, Malaysia.

* Portions of this exhibit have been omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission under Rule 24b-2 of the Securities Exchange Act of 1934, as amended. The omitted portions of this exhibit have been separately filed with the Securities and Exchange Commission.

EX-10.1

Exhibit 10.1

[Logo]

MIDA

Director General

Our Ref:	130/38329/0840ACI
Date:	25 August, 2006

Mr. Manouch Moshayedi

Chairman and Chief Executive Officer

Simpletech, Inc.

3001 Daimler Street

Santa Ana, California 92707

United States of America

Dear Mr. Moshayedi

OFFER OF SPECIAL INCENTIVES FOR SIMPLETECH, INC. TO UNDERTAKE THE ACTIVITIES OF R&D; DESIGN, DEVELOPMENT AND MANUFACTURE OF MEMORY AND STORAGE PRODUCTS SUCH AS MEMORY MODULES, CARDS, FLASH DRIVES AND HARD DISK DRIVES; GLOBAL CUSTOMER SUPPORT AND SERVICES; AND INTERNATIONAL PROCUREMENT CENTRE IN MALAYSIA

1. I wish to refer to our previous offer letter dated 1 June, 2006 and the company’s request dated 8 July, 2006 to review the offer for the company to undertake the activities of R&D; design, development and manufacture of memory and storage products such as memory modules, cards, flash drives and hard disk drives; Global Customer Support and Services; and International Procurement Centre in Malaysia.

2. I am pleased to inform you that the Malaysian Government has reviewed your request and would like to offer the following incentives to Simpletech, Inc. to undertake the activities of R&D; design, development and manufacture of memory and storage products such as memory modules, cards, flash drives and hard disk drives; Global Customer Support and Services; and International Procurement Centre in Malaysia:-

I. Full tax exemption on statutory income for a period of [***]* to undertake the following activities:-

a) Design, development and manufacture of memory and storage products such as memory modules, cards, flash drives and hard disk drives

b) R&D

c) Global Customer Support and Services

subject to the following conditions:-

(i) Investment in fixed assets excluding land must be at least [***]* within a period of [***]* within a period of [***]* starting from Year 2007 as proposed.

(ii) The percentage of R&D expenditure to total gross sales should be at least [***]* on an annual basis. The company has [***]* from its date of operation or commencement of business to comply with this requirement.

(iii) The percentage of science and technical staff having degrees or diplomas with a minimum of five (5) years working experience in related field must be at least [***]* of the total workforce.

(iv) The company has to undertake the activities of Global Customer Support and Services, and International Procurement Centre as proposed.

* Portions of this page have been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission.

II. Full tax exemption on statutory income for a period of [***]* to undertake the activity of International Procurement Centre subject to the following conditions:-

(i) A minimum paid-up capital of RM0.5 million.

(ii) A minimum total of business spending (operating expenditure) of [***]* per year.

(iii) Annual sales turnover of at least [***]*.

(iv) The company is required to export at least [***]* of its annual sales value directly outside the country (including [***]* drop shipment).

(v) The company is allowed domestic sales of not more than [***]* of its annual sales value.

III. Extension of tax exemption period on statutory income for a period of [***]* to undertake the following activities:-

a) Design, development and manufacture of memory and storage products such as memory modules, cards, flash drives and hard disk drives

b) R&D

c) Global Customer Support and Services

d) International Procurement Centre

subject to the additional condition as follows:-

[***]*

* Portions of this page have been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission.

IV. [***]* training grant [***]* of up to the maximum amount of [***]* within [***]*.

V. [***] R&D grant [***]* of up to the maximum amount of [***]* within [***]*.

VI. [***]*

VII. Import duty and sales tax exemption for imported raw materials / components / machinery / equipment. The company shall submit the list of raw materials / components / machinery / equipment to be imported to MIDA.

3. [***]*

We look forward to your acceptance of this offer.

Thank you,

Yours sincerely,

/s/ Datuk R. Karunakaran

(Datuk R. Karunakaran)

Director General

Malaysian Industrial Development Authority

* Portions of this page have been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission.

cc:	Y. Bhg. Datuk Aziyah Bahauddin Secretary Tax Analysis Division Ministry of Finance 6th . & 7th . Floor Federal Government Administrative Centre Presint 2, 62502 Putrajaya
	Y. Bhg. Tan Sri Sidek Hassan Secretary General Ministry of International Trade and Industry 15th . Floor, Block 10 Government Offices Complex Jalan Duta, 50622 Kuala Lumpur

EX-99.1

Exhibit 99.1

Contact:

Investors & Financial Media:

Mitch Gellman

(949) 260-8328

ir@simpletech.com

SIMPLETECH EXPANSION TO MALAYSIA EXPECTED TO IMPROVE GLOBAL

COMPETITIVENESS BY LOWERING ITS OVERALL COST STRUCTURE AND ITS LONG-TERM

EFFECTIVE CORPORATE INCOME TAX RATE

SANTA ANA, CALIF., August 30, 2006 — SimpleTech, Inc. (Nasdaq: STEC), today announced its plan to build a manufacturing facility in Penang, Malaysia. The company selected Malaysia because of its attractive income tax incentive package, proximity to several of the company’s major customers, ease of doing business, availability of low-cost qualified labor, availability of highly-qualified electronics engineering talent, and long track record of supporting the electronics industry. The comprehensive incentive package recently awarded by the government of Malaysia includes an extended tax holiday that will lower the company’s long-term effective income tax rate as operations ramp to meaningful production levels over time.

The company expects that the facility, which will be approximately 200,000 square feet in size, will be operational in the first quarter of 2008. The company estimates that its investment in land, facilities and capital equipment will approximate $28 million during the next five years.

“We look forward to working with the people of Malaysia and appreciate the support of its government in making this milestone happen,” said Manouch Moshayedi, chairman and chief executive officer of SimpleTech, Inc. We look forward to realizing the positive impact of this investment and having it translate to better service and support of our major multinational OEM customers in the region.”

This investment will allow SimpleTech to enhance its global competitiveness by improving its overall cost structure. For example, once operations ramp to meaningful production levels, the company expects its operating model to be positively impacted in the following ways:

• Lowered overall long-term effective corporate income tax rate;

• Reduced average production and engineering labor costs;

• Better access to the world’s fastest growing markets;

• Improved supply chain efficiency and reduced lead times since many of our key customers and suppliers have significant operations in Asia; and

• Increased manufacturing efficiency through investments in new state-of-the-art equipment.

Today’s announcement emphasizes the company’s commitment to investing in the necessary capacity for growth and in a manner that will have meaningful impact on its global organization. In addition, it furthers the company’s commitment to its customers in the Asia Pacific region by strategically locating critical functions including sales, manufacturing and logistics. The Malaysia operations will be closely linked to the sales, engineering and logistics offices the company has already established in Taiwan, Hong Kong and Japan.

About SimpleTech, Inc. (Nasdaq: STEC)

SimpleTech, Inc. designs, develops, manufactures and markets custom and open-standard memory solutions based on Flash memory and DRAM technologies, and external storage solutions. Headquartered in Santa Ana, California, the company specializes in developing high-density DRAM memory modules and high-speed, high-capacity solid-state Flash drives and memory cards used in sensitive and highly-volatile environments. For information about SimpleTech, Inc., and to subscribe to the company’s “Email Alert” service, please visit our web site at www.simpletech.com, click “Investors” and then Email Alert.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

This release contains forward-looking statements that involve risks and uncertainties, including, but not limited to, statements concerning our plans to build a manufacturing facility in Penang, Malaysia; expected improvement in global competitiveness, expected lowering of our overall cost structure and long-term effective corporate income tax rate; anticipated date the manufacturing facility will be operational; estimated amount of investment to open the manufacturing facility; expected positive impact of investment and translation into better service and support for our major multinational OEM customers in the region; positive impact on our operating model, reduced average production and engineering labor costs; better access to the world’s fastest growing markets; improved supply chain efficiency and reduced lead times; increase in manufacturing efficiency and our commitment to investing in our growth and our customers. Such forward-looking statements are based on current expectations and involve inherent risks and uncertainties, including factors that could delay, divert or change any of them, and could cause actual outcomes and results to differ materially from current expectations. Important factors which could cause actual results to differ materially from those expressed or implied in the forward-looking statements are detailed under “Risk Factors” in filings with the Securities and Exchange Commission made from time to time by SimpleTech, including its Annual Report on Form 10-K, its quarterly reports on Form 10-Q, and its current reports on Form 8-K. Other factors that could cause our actual results to differ materially from those expressed or implied in the forward-looking statements include the following risks: we may not realize the anticipated tax, cost structure and other benefits from opening a Malaysian facility; the cost of the Malaysian facility is higher than expected; difficulty integrating the Malaysian facility into our overall operations; changes in demand from certain customer segments; the cost of raw materials may fluctuate widely in the future; delays in the qualification process of our products with customers; our backlog may not result in future revenue; slower than expected expansion of our international business; we may not realize the anticipated benefits from any acquisitions of businesses, technologies, or assets we have made and may undertake in the future; excess availability of DRAM or Flash memory could reduce component pricing resulting in lower average selling prices and gross profit; DRAM or Flash memory supply may tighten requiring suppliers to place their customers, including us, on limited component allocation; effects of seasonality; interruptions or delays at the semiconductor manufacturing facilities that supply products to us; higher than expected operating expenses; new and changing technologies limiting the applications of our products; our inability to become more competitive in new and existing markets; our inability to maintain and increase market share; difficulty competing in sectors characterized by aggressive pricing and low margins; higher than anticipated product returns, inventory write-downs, price protection and rebate charges; new customer and supplier relationships may not be implemented successfully; impact of our previously announced stock repurchase program; higher than anticipated capital equipment expenditures; adverse global economic and geo-political conditions, including acts of terror, business interruption due to earthquakes, hurricanes, pandemics, power outages or other natural disasters; and potential impact of high energy prices and other global events outside of our control which could adversely impact consumer confidence and hence reduce demand for our products. The information contained in this press release is a statement of SimpleTech’s present intention, belief or expectation. SimpleTech may change its intention, belief or expectation, at any time and without notice, based upon any changes in such factors, in SimpleTech’s assumptions or otherwise. SimpleTech undertakes no obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events.