<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-QSB

         [x]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                  SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended February 29, 2008 or

         [ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                  SECURITIES EXCHANGE ACT OF 1937

                  For the transition period from _________ to _________

                        Commission file number: 001-32046

                             SIMULATIONS PLUS, INC.
                 (Name of small business issuer in its charter)

         CALIFORNIA                                             95-4595609
(State or other jurisdiction of                              (I.R.S. Employer
 Incorporation or Organization)                             identification No.)


                             42505 10TH STREET WEST
                            LANCASTER, CA 93534-7059
           (Address of principal executive offices including zip code)

                                 (661) 723-7723
                (Issuer's telephone number, including area code)


Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.

Yes [x]           No [ ]

The number of shares outstanding of the Issuer's common stock, par value $0.001
per share, as of April 10, 2008, was 16,228,900.



<PAGE>


                             SIMULATIONS PLUS, INC.
                                   FORM 10-QSB
                FOR THE QUARTERLY PERIOD ENDED FEBRUARY 29, 2008

                                Table of Contents

                          PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements (Unaudited)                                  Page
                                                                           ----
     Consolidated Balance Sheet at February 29, 2008 (unaudited)             2

     Consolidated Statements of Operations for the three months
         and six months ended February 29, 2008 and February 28, 2007
         (unaudited)                                                         4

     Consolidated Statements of Cash Flows for the six months
         ended February 29, 2008 and February 28, 2007 (unaudited)           5

     Notes to Consolidated Financial Statements (unaudited)                  7

Item 2.  Management's Discussion and Analysis or Plan of Operations

     General                                                                16

     Results of Operations                                                  21

     Liquidity and Capital Resources                                        25

Item 3.  Quantitative and Qualitative Disclosures about Market Risk         26

Item 4.  Controls and Procedures                                            26

                           PART II. OTHER INFORMATION

Item 1.  Legal Proceedings                                                  27

Item 2.  Changes in Securities                                              27

Item 3.  Defaults upon Senior Securities                                    27

Item 4.  Submission of Matters to a Vote of Security Holders                27

Item 5.  Other Information                                                  28

Item 6.  Exhibits and Reports on Form 8-K                                   28

Signature                                                                   29
Exhibit - Certifications

                                       1


<PAGE>
<TABLE>
<S>     <C>

                                             SIMULATIONS PLUS, INC. AND SUBSIDIARY
                                                        CONSOLIDATED BALANCE SHEET
                                                              at February 29, 2008
                                                                       (Unaudited)
----------------------------------------------------------------------------------


                                     ASSETS

CURRENT ASSETS
     Cash and cash equivalents                                          $5,507,079
     Accounts receivable, net of allowance for doubtful accounts
         and estimated contractual discounts of $124,562                 1,964,747
     Inventory                                                             281,385
     Prepaid expenses and other current assets                             215,061
     Deferred tax asset                                                    160,300
                                                                        ----------
            Total current assets                                         8,128,572

CAPITALIZED COMPUTER SOFTWARE DEVELOPMENT COSTS,
     net of accumulated amortization of $3,094,379                       1,680,475

PROPERTY AND EQUIPMENT, net (note 3)                                       111,695
CUSTOMER RELATIONSHIPS, net of accumulated amortization of $72,935          55,107
OTHER ASSETS                                                                18,445
                                                                        ----------

                TOTAL ASSETS                                            $9,994,294
                                                                        ==========






   The accompanying notes are an integral part of these financial statements.

                                       2


<PAGE>

                                           SIMULATIONS PLUS, INC. AND SUBSIDIARY
                                                      CONSOLIDATED BALANCE SHEET
                                                            at February 29, 2008
                                                                     (Unaudited)
--------------------------------------------------------------------------------

                      LIABILITIES AND SHAREHOLDERS' EQUITY


CURRENT LIABILITIES
     Accounts payable                                                 $  133,910
     Accrued payroll and other expenses                                  427,179
     Accrued bonuses to officer                                           58,274
     Accrued warranty and service costs                                   29,270
     Accrued income tax                                                  363,041
                                                                      ----------
         Total current liabilities                                     1,011,674

Long-Term liabilities
     Deferred tax liability                                               83,000
                                                                      ----------
            Total liabilities                                          1,094,674

COMMITMENTS AND CONTINGENCIES (Note 4)                                        --

SHAREHOLDERS' EQUITY (Note 5)
     Preferred stock, $0.001 par value
         10,000,000 shares authorized
         no shares issued and outstanding                                     --
     Common stock, $0.001 par value
         50,000,000 shares authorized
         16,228,900 shares issued and outstanding                          4,700
     Additional paid-in capital                                        6,230,295
     Retained Earnings                                                 2,664,625
                                                                      ----------
            Total shareholders' equity                                 8,899,620
                                                                      ----------
                TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY            $9,994,294
                                                                      ==========





   The accompanying notes are an integral part of these financial statements.


                                       3


<PAGE>

                                                                               SIMULATIONS PLUS, INC. AND SUBSIDIARY
                                                                               CONSOLIDATED STATEMENTS OF OPERATIONS
                                                             for the three and six months ended February 29, and 28,
                                                                                                         (Unaudited)
--------------------------------------------------------------------------------------------------------------------


                                                        Three months ended                    Six months ended
                                                        ------------------                    ----------------
                                                      2008               2007              2008               2007
                                                      ----               ----              ----               ----

NET SALES                                          2,179,675          2,533,836          4,163,484          3,990,287

COST OF SALES                                        455,513            557,102            941,453            998,542
                                                ------------       ------------       ------------       ------------
GROSS PROFIT                                       1,724,162          1,976,734          3,222,031          2,991,745
                                                ------------       ------------       ------------       ------------

OPERATING EXPENSES
    Selling, general, and administrative             832,493            936,114          1,762,783          1,692,891
    Research and development                         251,894            216,432            477,845            400,059
                                                ------------       ------------       ------------       ------------
       Total operating expenses                    1,084,387          1,152,546          2,240,628          2,092,950
                                                ------------       ------------       ------------       ------------

INCOME FROM OPERATIONS                               639,775            824,188            981,403            898,795
                                                ------------       ------------       ------------       ------------

OTHER INCOME (EXPENSE)
    Interest income                                   47,076             24,881             92,223             40,809
    Miscellaneous income                                  --                 --                 25                358
    Gain on sale of assets                                --              3,102                 --              3,102
    Gain on currency exchange                         14,925              4,055             33,560              7,027
                                                ------------       ------------       ------------       ------------
       Total other income (expense)                   62,001             32,038            125,808             51,296
                                                ------------       ------------       ------------       ------------

INCOME BEFORE INCOME TAXES                           701,776            856,226          1,107,211            950,091

INCOME TAXES
    Provision for income tax                        (136,967)          (188,370)          (299,141)          (209,020)
                                                ------------       ------------       ------------       ------------
       Total income taxes                           (136,967)          (188,370)          (299,141)          (209,020)
                                                ------------       ------------       ------------       ------------

NET INCOME                                      $    564,809       $    667,856       $    808,070       $    741,071
                                                ============       ============       ============       ============

BASIC EARNINGS PER SHARE                        $       0.04       $       0.04       $       0.05       $       0.05
                                                ============       ============       ============       ============

Diluted earnings per share                      $       0.03       $       0.04       $       0.04       $       0.04
                                                ============       ============       ============       ============

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
    BASIC                                         16,130,622         15,039,924         16,020,147         14,964,096
                                                ============       ============       ============       ============

    DILUTED                                       18,279,889         18,029,650         18,369,400         17,625,312
                                                ============       ============       ============       ============

  *  The number of shares at February 28, 2007 has been retroactively restated
     to reflect a 2-for-1 stock split that occurred on October 1, 2007.


                       The accompanying notes are an integral part of these financial statements.

                                                           4


<PAGE>

                                                       SIMULATIONS PLUS, INC. AND SUBSIDIARY
                                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                               for the six months ended February 29, and 28,
                                                                                 (Unaudited)
--------------------------------------------------------------------------------------------

                                                                   2008              2007
                                                               -----------       -----------
CASH FLOWS FROM OPERATING ACTIVITIES
    Net income                                                 $   808,070       $   741,071
    Adjustments to reconcile net income to net cash
       provided by operating activities
         Depreciation and amortization of property and
           equipment                                                26,447            24,197
         Amortization of customer relationships                     13,589            16,582
         Amortization of capitalized software development
           cost                                                    236,785           222,811
         Bad debt expense                                           62,947            48,000
         Stock-based compensation                                   15,265             9,849
         Contribution of Equipment at book value                        --               774
         (Gain) on sale of assets                                       --            (3,102)

         (Increase) decrease in
           Accounts receivable                                      79,978           194,597
           Inventory                                               (50,471)          (37,335)
           Deferred tax                                            (63,900)          209,020
           Other assets                                           (141,393)           15,113
         Increase (decrease) in
           Accounts payable                                        (67,336)           95,322
           Accrued payroll and other expenses                      (64,433)           59,726
           Accrued bonuses to officers                            (143,015)            6,813
           Accrued income taxes                                    291,741            (1,600)
           Accrued warranty and service costs                       (8,898)              374
           Deferred revenue                                             --            41,109
                                                               -----------       -----------
              Net cash provided by operating activities            995,376         1,643,321
                                                               -----------       -----------

CASH FLOWS FROM INVESTING ACTIVITIES
    Purchases of property and equipment                            (61,390)          (35,143)
    Proceeds from sale of assets                                    13,152             4,475
    Capitalized computer software development costs               (389,450)         (265,616)
                                                               -----------       -----------

              Net cash used in investing activities               (437,688)         (296,284)
                                                               -----------       -----------



             The accompanying notes are an integral part of these financial statements.

                                                 5


<PAGE>

                                                    SIMULATIONS PLUS, INC. AND SUBSIDIARY
                                                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                            for the six months ended February 29, and 28,
                                                                              (Unaudited)
-----------------------------------------------------------------------------------------



CASH FLOWS FROM FINANCING ACTIVITIES
    Proceeds from the exercise of stock options                   411,677         187,043
                                                               ----------      ----------
              Net cash provided by financing activities           411,677         187,043
                                                               ----------      ----------

                Net increase in cash and cash equivalents      $  969,365      $1,534,080

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                    4,537,714       1,685,036
                                                               ----------      ----------

CASH AND CASH EQUIVALENTS, END OF QUARTER                      $5,507,079      $3,219,116
                                                               ==========      ==========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

    INTEREST PAID                                              $       --      $       --
                                                               ==========      ==========

    INCOME TAXES PAID                                          $  180,000      $    1,600
                                                               ==========      ==========





             The accompanying notes are an integral part of these financial statements.
</TABLE>

                                                 6


<PAGE>

                             SIMULATIONS PLUS, INC.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (Unaudited)


Note 1: GENERAL

As contemplated by the Securities and Exchange Commission under Item 310(b) of
Regulation S-B, the accompanying financial statements and footnotes have been
condensed and therefore do not contain all disclosures required by generally
accepted accounting principles. The interim financial data are unaudited;
however, in the opinion of Simulations Plus, Inc. ("we", "our", "us"), the
interim data includes all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the results for the interim
periods. Results for interim periods are not necessarily indicative of those to
be expected for the full year.


Note 2: SIGNIFICANT ACCOUNTING POLICIES

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

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

Revenue Recognition
-------------------
We recognize revenue related to software licenses and software maintenance in
accordance with the American Institute of Certified Public Accountants ("AICPA")
Statements of Position (SOP) No. 97-2, "Software Revenue Recognition." Product
revenue is recorded at the time of unlocking the software on the customer's
computer(s), net of estimated allowances and returns. Post-contract customer
support ("PCS") obligations are insignificant; therefore, revenue for PCS is
recognized at the same time, and the costs of providing such support services
are accrued and amortized over the obligation period.

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

                                       7


<PAGE>

We enter into one-year license agreements with most of our customers for the use
of our pharmaceutical software products. However, from time to time, we enter
into multi-year license agreements. We now unlock and invoice software one year
at a time for multi-year licenses. Therefore, revenue is now recognized one year
at a time. This eliminates the extreme variability in our reported revenues and
earnings that we experienced in the past caused by booking multi-year license
revenues up front.

Cash and Cash Equivalents
-------------------------
For purposes of the statements of cash flows, we consider all highly liquid
investments purchased with original maturities of three months or less to be
cash equivalents.

Accounts Receivable
-------------------
We maintain an allowance for doubtful accounts for estimated losses that may
arise if any of our customers are unable to make required payments. We
specifically analyze the age of customer balances, historical bad debt
experience, customer credit-worthiness, and changes in customer payment terms
when making estimates of the uncollectability of our trade accounts receivable
balances. If we determine that the financial conditions of any of our 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.

Inventory
---------
Inventory is stated at the lower of cost (first-in, first-out basis) or market
and consists primarily of computers and peripheral computer equipment.

Capitalized Computer Software Development Costs
-----------------------------------------------
Software development costs are capitalized in accordance with SFAS No. 86,
"Accounting for the Cost of Computer Software to be Sold, Leased, or otherwise
Marketed." Capitalization of software development costs begins upon the
establishment of technological feasibility and is discontinued when the product
is available for sale.

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

Amortization of capitalized software development costs is provided on a
product-by-product basis on the straight-line method over the estimated economic
life of the products (not to exceed five years). Amortization of software
development costs amounted to $236,785 and $222,811 for the six months ended
February 29, 2008 and February 28, 2007, respectively. We expect future
amortization expense to vary due to increases in capitalized computer software
development costs.

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

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:

                                       8


<PAGE>

         Equipment                                                    5 years
         Computer equipment                                      3 to 7 years
         Furniture and fixtures                                  5 to 7 years
         Leasehold improvements                                       5 years

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

Shipping and Handling
---------------------
Shipping and handling costs, recorded as cost of sales, amounted to $45,427 and
$50,243 for the six months ended February 29, 2008 and February 28, 2007,
respectively.

Research and Development Costs
------------------------------
Research and development costs are charged to expense as incurred until
technological feasibility has been established. These costs consist primarily of
salaries and direct payroll-related costs. It also includes purchased software
which was developed by other companies and incorporated into, or used in the
development of, our final products.

Income Taxes
------------
The Company utilizes SFAS No. 109, "Accounting for Income Taxes," which requires
the recognition of deferred tax assets and liabilities for 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 evaluation of the deferred tax assets is based on our history of generating
taxable profits and our projections of future profits as well as expected future
tax rates to determine if the realization of the deferred tax asset is
more-likely-than-not. Significant judgment is required in these evaluations, and
differences in future results from our estimates could result in material
differences in the realization of these assets.

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 six months ended
and accumulated amortization as of February 29, 2008 and February 28, 2007
amounted to $13,589 and $16,582, respectively, and $72,935 and $44,260,
respectively.

                                       9


<PAGE>

Earnings per Share
------------------
The Company reports earnings per share in accordance with SFAS No. 128,
"Earnings per Share." 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 similar 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 six months ended
February 29, 2008 and February 28, 2007 were as follows (the number of shares at
02/28/2007 reflects the effect of a 2-for-1 stock split on October 1, 2007 for
comparison purposes):

<TABLE>
                                                                02/29/2008           02/28/2007
                                                                ----------           ----------
<S>                                                             <C>                  <C>
Numerator
          Net income (loss) attributable to common
                    shareholders                                $ 664,327            $ 741,071

Denominator
          Weighted-average number of common shares
                    outstanding during the year                16,020,147           14,964,096
          Dilutive effect of stock options                      2,349,253            2,661,216

Common stock and common stock
          equivalents used for diluted earning per share       18,369,400           17,625,312
</TABLE>

Stock-Based Compensation
------------------------
Effective September 1, 2006, we adopted SFAS No. 123R using the modified
prospective method. Under this method, compensation cost recognized during the
six months ended February 29, 2008 includes: (1) compensation cost for all
share-based payments granted prior to, but not yet vested as of September 1,
2006, based on the grant date fair value estimated in accordance with the
original provisions of SFAS No. 123 amortized over the options' vesting period,
and (2) compensation cost for all share-based payments granted subsequent to
September 1, 2006, based on the grant-date fair value estimated in accordance
with the provisions of SFAS No. 123R amortized on a straight-line basis over the
options' vesting period. As a result of adopting SFAS No. 123R on September 1,
2006, our stock-based compensation expenses were $15,265 and $9,849 for the six
months ended February 29, 2008 and February 28, 2007, respectively, and are
included in the condensed consolidated statements of operations as Salaries and
Wages, Consulting, and Research and development expense.

Concentrations and Uncertainties
--------------------------------
International sales accounted for 43% and 36% of net sales for the six months
ended February 29, 2008 and February 28, 2007, respectively. For Simulations
Plus, Inc., two customers accounted for 20% and 10% of net sales during the six
months ended February 29, 2008, compared with two customers accounting for 22%
and 15% of net sales during the same period in FY07. For Words+, Inc., one
government agency accounted for 20%, and one customer accounted for 16% of net
sales during the six months ended February 29, 2008, compared with one
government agency accounting for 28%, and one customer accounting for 13% of net
sales during the same period in FY07.

The Company operates in the computer software industry, which is highly
competitive and changes rapidly. The Company's operating results could be
significantly affected by its ability to develop new products and find new
distribution channels for new and existing products.

                                       10


<PAGE>

For Simulations Plus, four customers comprised 21%, 18%, 14% and 10% of its
accounts receivable at February 29, 2008, and five customers comprised 25%, 20%,
13%, 12% and 10% of accounts receivable at February 28, 2007. For Words+, two
government agencies comprised 28% and 10%, and two customers comprised 14% and
10% of its accounts receivable at February 29, 2008 while one government agency
comprised 37% of its accounts receivable at February 28, 2007.

The Company's subsidiary, Words+, Inc., purchases components for its main
computer products from three manufacturers. Words+, Inc. also uses a number of
pictographic symbols that are used in its software products which are licensed
from a third party. The inability of the Company to obtain computers used in its
products or to renew its licensing agreement to use pictographic symbols could
negatively impact the Company's financial position, results of operations, and
cash flows.

Recently Issued Accounting Pronouncements
-----------------------------------------
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an
Interpretation of FASB Statement No. 109" ("FIN 48"), which clarifies the
accounting for uncertainty in income tax positions. The provisions of FIN 48
were effective for the Company on September 1, 2007. The adoption of FIN 48 did
not have a material impact on our consolidated financial statements.

Note 3:  PROPERTY AND EQUIPMENT

Furniture and equipment as of February 29, 2008 consisted of the following:


         Equipment                                                   $ 173,245
         Computer equipment                                            334,605
         Furniture and fixtures                                         61,498
         Automobile                                                     21,769
         Leasehold improvements                                         53,898
                                                                     ----------
              Sub total                                                645,015
         Less: Accumulated depreciation and amortization              (533,320)
                                                                     ----------
              Net Book Value                                           111,695
                                                                     ==========

Note 4:  COMMITMENTS AND CONTINGENCIES

Employee Agreement
------------------
On August 9, 2007, the Company entered into an employment agreement with its
President/Chief Executive Officer that expires in August 2009. The employment
agreement provides for an annual salary of $250,000. At the CEO's request, this
new agreement does not include an annual bonus, which has ranged up to $150,000
in all previous agreements. Thus, a savings to the Company of up to $75,000 per
year may be realized as a result of this new agreement. The agreement also
provides that 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.

Litigation
----------
On April 6, 2006 we received notice from a liquidator for the former French
subsidiary of Bioreason (Bioreason SARL), saying that the liquidator had
initiated legal action against Simulations Plus in the French courts with
respect to ClassPharmer distribution rights to European customers, and is
claiming commissions and legal fees with respect to European customers. We have


                                       11


<PAGE>

been working through our U.S. attorneys and a law firm in Paris. We filed a
counterclaim for our rights and lost sales against Bioreason SARL's assets by
sending a debt recovery declaration to the liquidator on June 15, 2006.

On April 9, 2008, we have received the approval of the settlement agreement from
the commercial division of French Ordinary Court. This means that the settlement
agreement is now enforceable, and this case is finally closed.

Note 5: STOCKHOLDERS' EQUITY

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 250,000
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 500,000. In February 2000, the shareholders approved an
increase in the number of shares that may be granted under the Option Plan to
1,000,000. In December 2000, the shareholders approved an increase in the number
of shares that may be granted under the Option Plan to 1,250,000. Furthermore,
in February 2005, the shareholders approved an additional 250,000 shares,
resulting to the total number of shares that may be granted under the Option
Plan to 1,500,000. All of the preceding numbers of options are based on numbers
of options prior to the two-for-one stock split on August 14, 2006. The 1996
Stock Option Plan terminated in September 2006 at the end of its term.

On February 23, 2007, the Board of Directors adopted and the shareholders
approved the 2007 Stock Options Plan under which a total of 500,000 shares of
common stock had been reserved for issuance.

The following table summarizes the stock option transactions. All of the numbers
of options reflect a 2-for-1 stock split on August 14, 2006 and another 2-for-1
stock split on October 1, 2007.

<TABLE>
<S>     <C>
                                                                                Weighted-Average
                                                                                 Exercise Price
                                                      Number of Options            Per Share
                                                    ---------------------     ---------------------

          Outstanding, August 31, 2007                         3,209,736                $     0.68
                             Granted                             287,000                $     3.03
                             Exercised                          (467,500)               $     0.88
                             Expired/Cancelled                  (202,000)               $     0.59

          Outstanding, February 29, 2008                       2,827,236                $     0.90
                                                    ---------------------     ---------------------

          Exercisable, February 29, 2008                       2,412,236                $     0.65
                                                    =====================     =====================

                                       12


<PAGE>

                                                    Weighted Average
                                                    Number Outstanding                  Market Price*

     Non Vested before 9/1/2007                                 170,000                          $  0.86
          Granted                                               287,000                          $  3.03
          Vested                                                (42,000)                         $  0.86
          Cancelled                                                   -                          $     -
                                            ----------------------------      ---------------------------
     Non Vested at 02/29/2008                                   415,000                          $  2.36
                                            ----------------------------      ---------------------------


*Weighted Average Fair Market Price was calculated by using the Black-Scholes
option valuation model, which was developed for use in estimating the fair value
of traded options and 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
the Company's 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 4.28 years at February 29, 2008. The exercise prices for the
options outstanding at February 29, 2008 ranged from $0.26 to $3.03, and the
information relating to these options is as follows:

                                                                Weighted-Average      Weighted-Average    Weighted-Average
                                                                    Remaining             Exercise            Exercise
                                                                Contractual Life          Price of            Price of
                       Stock Options        Stock Options          of Options             Options             Options
  Exercise Price        Outstanding          Exercisable           Outstanding          Outstanding         Exercisable
------------------    ----------------    ----------------    --------------------    ---------------     ---------------
$0.26 - 0.50                1,003,936           1,003,936         2.53 years                 $  0.37             $  0.37
$0.51 - 0.75                  841,200             841,200         1.95 years                 $  0.66             $  0.66
$0.76 - 1.25                  695,100             567,100         7.31 years                 $  1.09             $  1.14
$1.26 - 3.03                  287,000                   0         9.97 years                 $  3.03                 n/a
                      ----------------    ----------------
                            2,827,236           2,412,236
                      ================    ================
</TABLE>

Other Stock Options
-------------------
As of February 29, 2008, the independent members of the Board of Directors hold
options to purchase 52,824 shares of common stock at exercise prices ranging
from $0.30 to $6.68, which options were granted on or before February 29, 2008.

                       Number of Options        Weighted average exercise price
                       -----------------        -------------------------------

Options Outstanding               52,824                  $ 1.55
Options exercisable               40,024                  $ 0.58

                                       13


<PAGE>

Note 6:  SEGMENT AND GEOGRAPHIC REPORTING

We account for segments and geographic revenues in accordance with SFAS No. 131,
"Disclosure about Segments of an Enterprise and Related Information." Our
reportable segments are strategic business units that offer different products
and services. Results for each segment and consolidated results are as follows
for the six months ended February 29, 2008 and February 28, 2007:

<TABLE>
<S>     <C>
                                              February 29, 2008
--------------------------------------------- ---------------- -------------- ---------------- ---------------
                                                Simulations
                                                 Plus, Inc     Words +, Inc.   Eliminations        Total
--------------------------------------------- ---------------- -------------- ---------------- ---------------
Net Sales                                           2,987,934      1,175,550                        4,163,484
--------------------------------------------- ---------------- -------------- ---------------- ---------------
Income (loss) from operations                       1,053,464       (72,061)                          981,403
--------------------------------------------- ---------------- -------------- ---------------- ---------------
Identifiable assets                                 9,860,669      2,009,867      (1,795,942)      10,074,594
--------------------------------------------- ---------------- -------------- ---------------- ---------------
Capital expenditures                                        0         61,390                           61,390
--------------------------------------------- ---------------- -------------- ---------------- ---------------
Depreciation and Amortization                           9,210         17,237                           26,447
--------------------------------------------- ---------------- -------------- ---------------- ---------------

                                              February 28, 2007
--------------------------------------------------------------------------------------------------------------
                                                Simulations
                                                 Plus, Inc     Words +, Inc.    Eliminations        Total
--------------------------------------------- ---------------- -------------- ---------------- ---------------
Net Sales                                           2,632,197      1,358,090                        3,990,287
--------------------------------------------- ---------------- -------------- ---------------- ---------------
Income (loss) from operations                         923,517       (24,722)                          898,795
--------------------------------------------- ---------------- -------------- ---------------- ---------------
Identifiable assets                                 7,471,982      1,891,003      (1,709,816)       7,653,169
--------------------------------------------- ---------------- -------------- ---------------- ---------------
Capital expenditures                                   15,709         19,434                           35,143
--------------------------------------------- ---------------- -------------- ---------------- ---------------
Depreciation and Amortization                           9,613         14,584                           24,197
--------------------------------------------- ---------------- -------------- ---------------- ---------------

In addition, the Company allocates revenues to geographic areas based on the
locations of its customers. Geographical revenues for the six months ended
February 29, 2008 and February 28, 2007 were as follows (in thousands):

                                          February 29, 2008
------------------------------ --------------- ------------ ------------ ------------ ------------ ----------
                                                                                          South
                                North America     Europe        Asia        Oceania      America      Total
------------------------------ --------------- ------------ ------------ ------------ ------------ ----------
Simulations Plus, Inc.                  1,441        1,212          334          -0-          -0-      2,987
------------------------------ --------------- ------------ ------------ ------------ ------------ ----------
Words+, Inc.                              949          192           15           20          -0-      1,176
------------------------------ --------------- ------------ ------------ ------------ ------------ ----------
Total                                   2,390        1,404          349           20          -0-      4,163
------------------------------ =============== ============ ============ ============ ============ ==========


                                          February 28, 2007
------------------------------ --------------- ------------ ------------ ------------ ------------ ----------
                                                                                          South
                                North America     Europe        Asia        Oceania      America      Total
------------------------------ --------------- ------------ ------------ ------------ ------------ ----------
Simulations Plus, Inc.                  1,414          908          310          -0-          -0-      2,632
------------------------------ --------------- ------------ ------------ ------------ ------------ ----------
Words+, Inc.                            1,129          191           25           11            2      1,358
------------------------------ --------------- ------------ ------------ ------------ ------------ ----------
Total                                   2,543        1,099          335           11            2      3,990
------------------------------ =============== ============ ============ ============ ============ ==========
</TABLE>


Note 7:  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 total employee compensation. We can also elect to make a profit-sharing
contribution. Contributions by the Company to this Plan amounted to $36,168 and
$30,518 for the six months ended February 29, 2008 and February 28, 2007,
respectively.

                                       14


<PAGE>

Note 9:  SUBSEQUENT EVENT

On April 9, 2008, we have received the approval of the settlement agreement from
the commercial division of French Ordinary Court. This means that the settlement
agreement is now enforceable, and this case is finally closed.













                                       15


<PAGE>

Item 2. Management's Discussion and Analysis or Plan of Operations
        ----------------------------------------------------------

FORWARD-LOOKING STATEMENTS
--------------------------

CERTAIN STATEMENTS IN THIS QUARTERLY REPORT ON FORM 10-QSB, OR THE "REPORT," ARE
"FORWARD-LOOKING STATEMENTS." THESE FORWARD-LOOKING STATEMENTS INCLUDE, BUT ARE
NOT LIMITED TO, STATEMENTS ABOUT THE PLANS, OBJECTIVES, EXPECTATIONS AND
INTENTIONS OF SIMULATIONS PLUS, INC., A CALIFORNIA CORPORATION (REFERRED TO IN
THIS REPORT AS THE "COMPANY") AND OTHER STATEMENTS CONTAINED IN THIS REPORT THAT
ARE NOT HISTORICAL FACTS. FORWARD-LOOKING STATEMENTS IN THIS REPORT OR HEREAFTER
INCLUDED IN OTHER PUBLICLY AVAILABLE DOCUMENTS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION, OR THE "COMMISSION," REPORTS TO OUR STOCKHOLDERS AND OTHER
PUBLICLY AVAILABLE STATEMENTS ISSUED OR RELEASED BY US INVOLVE KNOWN AND UNKNOWN
RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH COULD CAUSE OUR ACTUAL RESULTS,
PERFORMANCE (FINANCIAL OR OPERATING) OR ACHIEVEMENTS TO DIFFER FROM THE FUTURE
RESULTS, PERFORMANCE (FINANCIAL OR OPERATING) OR ACHIEVEMENTS EXPRESSED OR
IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH FUTURE RESULTS ARE BASED UPON
MANAGEMENT'S BEST ESTIMATES BASED UPON CURRENT CONDITIONS AND THE MOST RECENT
RESULTS OF OPERATIONS. WHEN USED IN THIS REPORT, THE WORDS "EXPECT,"
"ANTICIPATE," "INTEND," "PLAN," "BELIEVE," "SEEK," "ESTIMATE" AND SIMILAR
EXPRESSIONS ARE GENERALLY INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS,
BECAUSE THESE FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES. THERE
ARE IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THOSE EXPRESSED OR IMPLIED BY THESE FORWARD-LOOKING STATEMENTS, INCLUDING OUR
PLANS, OBJECTIVES, EXPECTATIONS AND INTENTIONS AND OTHER FACTORS.


GENERAL

BUSINESS
--------

Simulations Plus, Inc. (the "Company" or "Simulations Plus", or "we" or "our")
and its wholly owned subsidiary, Words+, Inc. ("Words+") produce different types
of products: (1) Simulations Plus, incorporated in 1996, develops and produces
software for use in pharmaceutical research and for education, and also provides
contract research services to the pharmaceutical industry, and (2) Words+,
founded in 1981, produces computer software and specialized hardware for use by
persons with disabilities, as well as a personal productivity software program
called Abbreviate! for the retail market. For the purposes of this document, we
sometimes refer to the two businesses as "Simulations Plus" when referring to
the business that is primarily pharmaceutical software and services, and
"Words+" when referring to the business that is primarily assistive technologies
for persons with disabilities.

SIMULATIONS PLUS
----------------

PRODUCTS
--------
We currently offer four software products for pharmaceutical research: ADMET
Predictor(TM), ClassPharmer(TM), DDDPlus(TM), and GastroPlus(TM).

ADMET PREDICTOR
---------------
ADMET (Absorption, Distribution, Metabolism, Excretion and Toxicity)
Predictor consists of a library of statistically significant numerical models
that predict various properties of chemical compounds from just their molecular
structures. This capability means a chemist can merely draw a molecule diagram
and get estimates of these properties, even though the molecule has never


                                       16


<PAGE>

existed. Drug companies search through millions of such "virtual" molecular
structures as they attempt to find new drugs. The vast majority of these
molecules are not suitable as medicines for various reasons. Some have such low
solubility that they will not dissolve well, some have such low permeability
through the intestinal wall that they will not be absorbed well, some degrade so
quickly that they are not stable enough to have a useful shelf life, some bind
to proteins (like albumin) in blood to such a high extent that little unbound
drug is available to reach the target, and some will be toxic in various ways.
Identification of such properties as early as possible enables researchers to
eliminate poor compounds without spending time and money to make them and then
run experiments to identify these weaknesses. Today, many molecules can be
eliminated on the basis of computer predictions, such as those provided by ADMET
Predictor.

Several studies have now been published that compare the predictive accuracy of
software programs like ADMET Predictor. In each case, out of more than a dozen
programs, ADMET Predictor has been ranked first in accuracy over all other
programs (it was ranked second in one study, but that study was later redone
with a more difficult set of test compounds and a newer version of ADMET
Predictor, and it was then ranked first). No other software product was
consistently in the top 4 in these studies. This is a remarkable accomplishment,
considering the greater size and resources of many of our competitors.

ADMET Predictor includes ADMET Modeler. ADMET Modeler was first released in July
of 2003 as a separate product, and was integrated into ADMET Predictor in 2006.
This powerful program automates the generation of predictive models used in
ADMET Predictor in a small fraction of the time once required to build these
models. For example, new toxicity models were developed in a matter of a few
hours once we completed the tedious effort of "cleaning up" the databases (which
often contain a significant number of errors). Prior to the
availability of ADMET Modeler, we would have needed as much as three months
after cleaning the databases for each new model to obtain similar results.

Pharmaceutical companies spend enormous amounts of money conducting a wide
variety of experiments on new molecules each year. Using such data to build
predictive models provides a second return on this investment; however, in the
past, model-building has traditionally been a tedious activity that required a
specialist. With ADMET Modeler, scientists without model-building experience can
now use their own experimental data to quickly create high quality predictive
models.

During this reporting period, improvement of ADMET Predictor/Modeler has
continued. We completed Phase I of our NIH SBIR (Small Business Innovation
Research) grant and we finalized our Phase II proposal, which was submitted on
December 5, 2007. Our Phase I study clearly demonstrated that we are able to
generate partial atomic charges within molecules with excellent accuracy at a
rate of millions of molecules per day, compared with traditional methods that
require about one day per molecule. Because of this success, we are optimistic
about our Phase II proposal for an additional $750,000 over two years. However,
there can be no assurances that we will receive a Phase II award, nor that if we
do receive one, that it will be in the amount of $750,000 for the two-year
period of performance. In early April, we received notice that our proposal was
returned unscored, with one reviewer providing a favorable review and another
providing an unfavorable review. The unfavorable review included several
statements that were incorrect, including that the accuracy of the partial
charges produced by this new method and the speed with which they are generated
are not innovative. This is easily disproved, and we will resubmit this proposal
at the next submittal date in August.

We released ADMET Predictor version 2.4 during March 2008, which incorporates
the new Enslein Metabolism Module for the prediction of kinetic rate constants
for metabolism via hydroxylation (the most common form of metabolism) by the


                                       17


<PAGE>

five most common enzymes, which are known as CYP 450-1A2, -2C9, -2C19, and
-3A4. To our knowledge, this is the first such capability available in a
commercial software product, and the predictions are based on a proprietary
database developed by Enslein Research of Rochester, NY. This additional cost
module was evaluated by industry scientists prior to release and received high
praise for its utility and potential cost savings.

Version 2.4 also allows smaller companies to license separate modules when all
the capabilities of the program are not required. The total price with all
modules remains the same; however, we have received a number of requests to
provide only limited capabilities at a lower price for some companies, and this
new licensing approach is expected to increase sales by enabling smaller
companies to license only the parts of the program that they need.

ADMET Predictor is compatible with the popular Pipeline Pilot(TM) software
offered by SciTegic, a subsidiary of Accelrys. This software serves as a tool to
allow chemists to run several different software programs in series to
accomplish a set workflow for large numbers of molecules. In early discovery,
chemists often work with hundreds of thousands or millions of "virtual"
molecules - molecules that exist only in a computer. The chemist tries to decide
which few molecules from these large "libraries" should be made and tested.
Using Pipeline Pilot with ADMET Predictor (and ClassPharmer - see below),
perhaps in conjunction with other software products, the chemist can create and
screen very large libraries faster and more efficiently than running each
program by itself.

Modifications that provide enhanced user convenience and data analysis
capabilities continue to be added to both ADMET Predictor and ADMET Modeler. A
powerful new graphics capability is in development that will allow users to
visualize results in multiple dimensions. We continue to improve methods for
automatically selecting the best molecular descriptors for modeling a particular
molecular property. We are updating all of our models using the new partial
charge descriptors developed under our SBIR grant. We are obtaining additional
toxicity databases to extend the number of toxicity predictions. Tight
integration with both GastroPlus and ClassPharmer has been achieved. Licenses of
ADMET Predictor have already been purchased by users who want the combined
capabilities of GastroPlus or ClassPharmer with ADMET Predictor, but who do not
need the full capabilities of ADMET Predictor/ADMET Modeler.

CLASSPHARMER
------------
ClassPharmer continues to evolve into a more and more powerful tool for
medicinal and computational chemists. Coupled with ADMET Predictor, the two
provide an unmatched capability for chemists to search through huge libraries of
compounds to find the most interesting classes and molecules that are active
against a particular target. In addition, ClassPharmer with ADMET Predictor can
take an interesting molecule and generate high quality analogs (similar
molecules) using different algorithms to ensure that the new molecules are both
active and that they are also acceptable in a variety of ADMET (Absorption,
Distribution, Metabolism, Excretion and Toxicity) properties.

Improvements during the second quarter were focused on incorporating more new
features requested by our users around the world, as well as adding other new
capabilities identified in-house. As of this writing, ClassPharmer 4.5 is in
final beta testing and documentation. This new version will add the detection of
Activity Cliffs, i.e., small changes in molecular structure that produce large
changes in activity or some other property.

                                       18


<PAGE>

In October 2007, we announced the release of ClassPharmer 4.4 that further
enhanced the ability of the program to design new molecules. Version 4.5 will
add again to this capability through tighter integration with ADMET Predictor,
detection of Activity/Property Cliffs, more powerful options for chemical
reactions, and a number of new user convenience features.

ClassPharmer's molecule design capabilities provide ways for chemists to rapidly
generate large numbers of novel chemical structures based on intelligence from
compounds that have already been synthesized and tested, or from basic chemical
reactions selected by the user. Export of results is available in Microsoft
Excel(TM) format as well as other convenient file formats requested by users.

DDDPLUS
-------
DDDPlus sales have continued to grow as formulation scientists recognize the
value of this one-of-a-kind simulation software in their work. Improvements have
been added to further enhance the value of this product to our customers.
Numerous user convenience features have been added, as well as more
sophisticated handling of dosage forms that incorporate multiple polymers for
controlled release. Work on DDDPlus was limited during this quarter in favor of
other projects.

GASTROPLUS
----------
GastroPlus continues to enjoy its "gold standard" status in the industry for its
class of simulation software. It is used from early drug discovery through
preclinical development and into early clinical trials. The information provided
through GastroPlus simulations guides project decisions in various ways. Among
the kinds of knowledge gained through such simulations are: (1) the best "first
dose in human" for a new drug prior to Phase I trials, (2) whether a potential
new drug compound is likely to be absorbed at high enough levels to achieve the
desired blood concentrations needed for effective therapy, (3) whether the
absorption process is affected by certain enzymes and transporter proteins in
the intestinal tract that may cause the amount of drug reaching the blood to be
very different from one region of the intestine to another, (4) when certain
properties of a new compound are probably adequately estimated through computer
("IN SILICO") predictions or simple experiments rather than through more
expensive and time-consuming IN VITRO or animal experiments, (5) what the likely
variations in blood and tissue concentration levels of a new drug would be in a
large population, in different age groups or in different ethnic groups, and (6)
whether a new formulation for an existing approved drug is likely to demonstrate
"bioequivalence" (equivalent blood concentration versus time) to the currently
marketed dosage form in a human trial.

In this reporting period we improved the PKPlus(TM) Module to enable it to fit
pharmacokinetic models to multiple data sets, including both intravenous and
oral dosage forms. We made further improvements to the new sophisticated kidney
model to simulate how drugs are cleared in urine. And we continue to add
convenience features requested by our users. We also added the ability of the
program to track metabolites of a parent drug, including metabolites of
metabolites, to as many levels as desired. This is a significant new capability
because it allows the user to predict how much of each metabolite will be
generated, and into which tissues the metabolite is likely to partition. Some
metabolites can be toxic, so knowing how much is produced and where it goes is
valuable information to assess the likelihood of adverse effects.

Our marketing intelligence and reorder history indicate that GastroPlus
continues to enjoy a dominant position in the number of users worldwide. In
addition to virtually every major pharmaceutical company, licenses include a
growing number of smaller pharmaceutical and biotech companies, generic drug
companies, and drug delivery companies (companies that design the tablet or
capsule for a drug compound that was developed by another company). Although


                                       19


<PAGE>

these companies are smaller than the pharmaceutical giants, they can also save
considerable time and money through simulation. We believe this part of the
industry, which includes many hundreds of companies, represents major growth
potential for GastroPlus. Our experience has been that the number of new
companies adopting GastroPlus has been growing steadily, adding to the base of
annual licenses each year.

We are aware that other companies have developed competitive software; however,
based on customer feedback, we believe that the competitive threat to GastroPlus
is very limited. We also continue to improve GastroPlus under the two-year (one
full-time equivalent) contract we announced on August 31, 2006, as well as
through our own internal product improvement efforts.

CONTRACT RESEARCH AND CONSULTING SERVICES
-----------------------------------------
Our recognized expertise in oral absorption and pharmacokinetics is evidenced by
the fact that our staff members have been speakers or presenters at over 40
prestigious scientific meetings worldwide in the past three years. We frequently
conduct contracted studies for customers who prefer to have studies run by our
scientists rather than to license our software and train someone to use it. The
demand for our consulting services has been increasing steadily, and we expect
this trend to continue. Consulting contracts serve both to showcase our
technologies and as a way to build relationships with new customers, as well as
strengthening relationships with our existing customers.

For example, during this reporting period we further improved our ability to
simulate absorption through the eye. This new route of administration required a
significant amount of scientific investigation, programming changes, and actual
data to validate the model equations. Scientists who work in ocular delivery at
several customer sites have told us that they had not seen such a sophisticated
capability before.

GOVERNMENT-FUNDED RESEARCH
--------------------------
We completed our Phase I SBIR effort and our proposal for a Phase II follow-on
grant on the order of $750,000. SBIR grant funds provide the ability to expand
staff and grow the product line without adversely affecting earnings, because
the expenses associated with the efforts in the studies are funded largely, if
not completely, through the grants. As noted above, our Phase II proposal was
returned unscored, and we are preparing to resubmit with information that proves
that the one unfavorable reviewer based their opinion on incorrect assumptions.

WORDS+ SUBSIDIARY
-----------------

PRODUCTS
--------
Our wholly owned subsidiary, Words+, Inc. has been an industry pioneer and
technology leader for over 25 years in introducing and improving augmentative
and alternative communication and computer access software and devices for
disabled persons. We intend to continue to be at the forefront of the
development of new products. We will continue to enhance our major software
products, E Z Keys(TM) and Say-it! SAM(TM), as well as our growing line of
hardware products. We are also considering acquisitions of other products,
businesses and companies that are complementary to our existing augmentative and
alternative communication and computer access business lines. We purchased the
Say-it! SAM technologies from SAM Communications, LLC of San Diego in December
2003. This acquisition gave us our smallest, lightest augmentative communication
system, which is based on a Hewlett-Packard iPAQ personal digital assistant
(PDA). PDA-based communication devices have been very successful in the
augmentative communication market, and this technology purchase has enabled us
to move into this market segment faster and at lower cost than developing the
product ourselves. SAM-based products now account for a significant share of our
growing Words+ revenues. Since the acquisition of the Say-it! SAM technologies,
we have continued to add new functionality to the SAM software and to offer it
on additional hardware platforms.

                                       20


<PAGE>

During this reporting period, sales of our new PDA-based (personal digital
assistant based) Say-it! SAM augmentative communication device continued to be
strong.




RESULTS OF OPERATIONS

COMPARISON OF THREE MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007.

The following table sets forth our consolidated statements of operations (in
thousands) and the percentages that such items bear to net sales:

<TABLE>
<S>     <C>
                                      ------------------------------------------------------------
                                                          Three Months Ended
                                      ------------------------------------------------------------
                                                02/29/08                       02/28/07
                                      ------------------------------ -----------------------------
Net sales                                   $   2,180          100%       $  2,534           100%
Cost of sales                                     456          20.9            557           22.0
                                      ---------------- ------------- -------------- --------------
Gross profit                                    1,724          79.1          1,977           78.0
                                      ---------------- ------------- -------------- --------------
Selling, general and administrative               832          38.2            936           36.9
Research and development                          252          11.6            217            8.6
                                      ---------------- ------------- -------------- --------------
Total operating expenses                        1,084          49.7          1,153           45.5
                                      ---------------- ------------- -------------- --------------
Income from operations                            640          29.4            824           32.5
                                      ---------------- ------------- -------------- --------------
Other income                                       62           2.8             32            1.3
                                      ---------------- ------------- -------------- --------------
Net income before taxes                           702          32.2            856           33.8
                                      ---------------- ------------- -------------- --------------
Provision for income taxes                       (137)        (6.3)%          (188)         (7.4)%
                                      ---------------- ------------- -------------- --------------
Net income (loss)                              $  565         25.9%         $  668          26.4%
                                      ================ ============= ============== ==============
</TABLE>

NET SALES

Consolidated net sales decreased $354,000, or 14.0%, to $2,180,000 in the second
fiscal quarter of 2008 (2QFY08) from $2,534,000 in the second fiscal quarter of
2007 (2QFY07). Our sales from pharmaceutical and educational software decreased
approximately $258,000, or 14.3%; and our Words+, Inc. subsidiary's sales
decreased approximately $96,000, or 13.2%, for the quarter. We attribute the
decrease in pharmaceutical software sales primarily to a large order in 2QFY07
last year that came in during the first quarter this year, and thus was reported
in 1QFY08. If this large order had been received in the same fiscal quarter,
then revenues in 2QFY08 would have been increased from the same period last
year. In spite of the movement of this large pharmaceutical software order into
the first quarter, new pharmaceutical software sales in the second quarter made
up for a major portion of the difference.

We attribute the decrease in Words+ sales primarily to a decrease in
"TuffTalker" and "Freedom" products with EZKeys software, which is based on
Windows XP systems. Just recently, two major AAC manufacturers introduced
XP-based software in the market, resulting in stiff competition for our
products. Although revenues from our "Say-it! SAM" speech output device
increased significantly, the increase could not offset the decrease in revenue
from other products.

                                       21


<PAGE>

COST OF SALES

Consolidated cost of sales decreased $101,000, or 18.2%, to $456,000 in 2QFY08
from $557,000 in 2QFY07. The percentage of cost of sales in 2QFY08 decreased
1.1% to 20.9% from 22.0% in 2QFY07. For Simulations Plus, cost of sales
decreased $2,000, or 1.1%. However, as a percentage of revenue, cost of sales
increased to 14.1% in 2QFY08 from 12.2% in 2QFY07. A significant portion of cost
of sales for pharmaceutical software products is the systematic amortization of
capitalized software development costs, which is an independent fixed cost
rather than a variable cost related to sales. This amortization cost increased
approximately $18,000, or 20.1%, in 2QFY08 compared with 2QFY07. However,
royalty expense decreased approximately $51,000, or 31.8%, in 2QFY08 compared
with 2QFY07.

For Words+, cost of sales decreased $99,000, or 29.4%. As a percentage, cost of
sales also decreased by 8.7% between the second fiscal quarters of FY08 and
FY07. We attribute the percentage decrease in cost of sales for Words+ primarily
to the sales generated from products with higher margins as well as less revenue
from products with high computer costs.

GROSS PROFIT

Consolidated gross profit decreased $253,000, or 12.8%, to $1,724,000 in 2QFY08
from $1,977,000 in 2QFY07. We attribute this decrease to the decrease in sales
of pharmaceutical software and services due to the shift in the large order from
2QFY08 to 1QFY08, and decreases in sales of Words+ products which outweighed
decreases in cost of goods sold.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Consolidated selling, general and administrative (SG&A) expenses decreased
$104,000, or 11.1%, to $832,000 in 2QFY08 from $936,000 in 2QFY07. For
Simulations Plus, SG&A decreased $44,000, or 7.5%. As a percentage of sales,
SG&A increased to approximately 34.9% in 2QFY08 from approximately 32.3% in
2QFY07. The major decreases in SG&A expenses were travel expenses, accrued bonus
to the Company's CEO, bad debts, and professional fees, which outweighed
increases in commissions, investor relations, hiring expense, salaries, and
payroll-related expenses such as health insurance, 401K and payroll taxes.

For Words+, SG&A expenses decreased $60,000, or 16.9%, due primarily to
decreases in commissions, ads, catalogs, telephone and supply. These decreases
outweighed increases in travel expenses, bad debts, marketing consulting,
salaries, and 401K.

RESEARCH AND DEVELOPMENT

We incurred approximately $467,000 of research and development costs for both
companies during 2QFY08. Of this amount, $215,000 was capitalized and $252,000
was expensed. In 2QFY07, we incurred $349,000 of research and development costs,
of which $132,000 was capitalized and $217,000 was expensed. The increase of
$118,000, or 33.8%, in total research and development expenditures from 2QFY07
to 2QFY08 was due primarily to salaries of new hires and salary increases to
existing staff.

                                       22


<PAGE>

OTHER INCOME (EXPENSE)

Net other income (expense) in 2QFY08 increased by $30,000, or 93.5%, to $62,000
in 2QFY08 from $32,000 in 2QFY07. This is due primarily to increased interest
revenue from Money Market accounts and gains on currency exchange.

PROVISION FOR INCOME TAXES

The provision for income taxes decreased by $51,000, or 27.1%, to $137,000 in
2QFY08 from $188,000 in 2QFY07 due primarily to a change in our estimated
provision for income tax. We have recently hired a new firm to review and
prepare our income tax provision as well as a tax credit specialist to
investigate the Company's eligibility for various tax credits. Although the
research is not yet finalized, we believe that we will be eligible for various
tax credits and have reflected this eligibility in our estimated provision for
income taxes.

NET INCOME

Consolidated net income decreased by $103,000, or 15.4%, to $565,000 in 2QFY08
from $668,000 in 2QFY07. We attribute this decrease in profit primarily to the
decreases in revenue from both pharmaceutical software caused by the shift in
revenue from 2QFY08 to 1QFY08, and lower sales of Words+ products which
outweighed decreases in cost of sales, operating expenses, tax provision, and an
increase in other income.



COMPARISON OF SIX MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007.

The following table sets forth our consolidated statements of operations (in
thousands) and the percentages that such items bear to net sales:

<TABLE>
<S>     <C>
                                                    ------------------------------------------------------------
                                                                         Six Months Ended
                                                    ------------------------------------------------------------
                                                               02/29/08                      02/28/07
                                                    ------------------------------- ----------------------------
Net sales                                                 $   4,163           100%      $  3,990           100%
Cost of sales                                                   941           22.6           998           25.1
                                                    ---------------- -------------- ------------- --------------
Gross profit                                                  3,222           77.4         2,992           75.0
                                                    ---------------- -------------- ------------- --------------
Selling, general and administrative                           1,763           42.4         1,693           42.4
Research and development                                        478           11.5           400           10.0
                                                    ---------------- -------------- ------------- --------------
Total operating expenses                                      2,241           53.8         2,093           52.5
                                                    ---------------- -------------- ------------- --------------
Income from operations                                          981           23.6           899           22.5
                                                    ---------------- -------------- ------------- --------------
Other income                                                    126            3.0            51            1.3
                                                    ---------------- -------------- ------------- --------------
Net income before taxes                                       1,107           26.6           950           23.8
                                                    ---------------- -------------- ------------- --------------
Provision for income taxes                                     (299)          (7.2)         (209)          (5.2)
                                                    ---------------- -------------- ------------- --------------
Net income                                                 $    808          19.4%      $    741          18.6%
                                                    ================ ============== ============= ==============
</TABLE>

NET SALES

Consolidated net sales increased $173,000, or 4.3%, to $4,163,000 in the first
six months of fiscal year 2008 (FY08) from $3,990,000 in the first six months of
fiscal year 2007 (FY07). Our sales from pharmaceutical software and services


                                       23


<PAGE>

increased approximately $356,000, or 13.5%; however, our Words+, Inc.
subsidiary's sales decreased approximately $183,000, or 13.4%, for the first six
months of fiscal year 2008.

We attribute the increase in pharmaceutical software sales primarily to
increased licenses, both to new customers and for new modules, additional
licenses to renewal customers, and contract studies. We attribute the decrease
in Words+ sales primarily to a decrease in "TuffTalker" and "Freedom" products
with EZKeys software which is based on Windows XP systems. Just recently, two
major AAC manufacturers introduced XP-based software to the market, resulting in
stiff competition for our products. In spite of a delay in new "Say-it! SAM" PDA
production through most of the first fiscal quarter of this year, the revenue
from "Say-it! SAM" products increased overall during the first six months of
FY08 compared with FY07; however, those increases were offset by the decline in
Windows XP-based system revenues.

COST OF SALES

Consolidated cost of sales decreased $57,000, or 5.7%, to $941,000 in the first
six months of FY08 from $998,000 in the first six months of FY07; however, as a
percentage of revenues, cost of sales increased 1.4%. For Simulations Plus, cost
of sales increased $68,000, or 20.3%, and as a percentage of revenue, cost of
sales increased to 13.6% in the first six months of FY08 from 12.8% in the first
six month of FY07. A significant portion of cost of sales for pharmaceutical
software products is the systematic amortization of capitalized software
development costs, which is an independent fixed cost rather than a variable
cost related to sales. This amortization cost increased approximately $45,000,
or 26.2%, in the first six months of FY08 compared with the same period in FY07.
Royalty expense increased approximately $23,000, or 14.2%, in the first six
months of FY08 compared with the same period in FY07.

For Words+, cost of sales decreased $125,000, or 19.0%. As a percentage of
revenue, cost of sales decreased 3.1% between the first six months of FY08 and
FY07. We attribute the percentage decrease in cost of sales for Words+ primarily
to sales from products with higher margins and less revenue from products with
high cost computers for Windows XP-based systems.

GROSS PROFIT

Consolidated gross profit increased $230,000, or 7.7%, to $3,222,000 in the
first six months of FY08 from $2,992,000 in the first six months of FY07. We
attribute this increase to increased sales of pharmaceutical software and
services and decreased cost of goods sold for Words+ products.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Consolidated selling, general and administrative (SG&A) expenses increased
$70,000, or 4.1%, to $1,763,000 in the first six months of FY08 from $1,693,000
in the first six months of FY07. For Simulations Plus, SG&A increased $70,000,
or 6.8%; however, as a percentage of sales, SG&A decreased from approximately
38.9% in the first six months of FY07 to approximately 36.6% in the first six
months of FY08. The major increases in SG&A expenses were consultant fees,
investor relations, professional fees, salaries, bonuses and payroll-related
expenses such as health insurance, 401K, and payroll taxes which outweighed a
decrease in bad debts from one receivable from the purchased assets of
Bioreason, and lower trade show expenses.

For Words+, SG&A expenses were the same in the first six months of FY08 and
FY07. Increased expenses for bad debts and salaries were offset by decreases in
commissions, telephones, and supplies.

                                       24


<PAGE>

RESEARCH AND DEVELOPMENT

We incurred approximately $867,000 of research and development costs for both
companies during the first six months of FY08. Of this amount, $389,000 was
capitalized and $478,000 was expensed. In the first six months of FY07, we
incurred $666,000 of research and development costs, of which $266,000 was
capitalized and $400,000 was expensed. The increase of $201,000, or 30.2%, in
total research and development expenditures from the first six months of FY07 to
the first six months of FY08 was due primarily to salaries for new hires and
salary increases and bonuses to existing staff.

OTHER INCOME

Net other income in the first six months of FY08 increased by $75,000, or
145.3%, from $51,000 to $126,000. This is due primarily to increased interest
revenue from Money Market accounts and a gain on currency exchange from the
billing in foreign currencies by the request from our customers.

PROVISION FOR INCOME TAXES

The provision for income taxes increased by $90,000, or 43.1%, to $299,000 in
the first six months of FY08 from $209,000 in the first six months of FY07. This
increase is due primarily to a change in estimated tax rate as discussed in the
result of 3 months operation as well as increase in net income before tax.

NET INCOME (LOSS)

Consolidated net income decreased by $77,000, or 10.4%, to $664,000 in the first
six months of FY08 from $741,000 in the first six months of FY07. We attribute
this decrease in profit primarily to increases in operating expenses and the
increased provision for income taxes, which outweighed increases in revenue and
other income.


LIQUIDITY AND CAPITAL RESOURCES

Our principal sources of capital have been cash flows from our operations. We
have achieved continuous positive operating cash flow in the last six fiscal
years. We believe that our existing capital and anticipated funds from
operations will be sufficient to meet our anticipated cash needs for working
capital and capital expenditures for the foreseeable future. Thereafter, if cash
generated from operations is insufficient to satisfy our capital requirements,
we may open a revolving line of credit with a bank, or we may have to sell
additional equity or debt securities or obtain expanded credit facilities. In
the event such financing is needed in the future, there can be no assurance that
such financing will be available to us, or, if available, that it will be in
amounts and on terms acceptable to us. If cash flows from operations became
insufficient to continue operations at the current level, and if no additional
financing was obtained, then management would restructure the Company in a way
to preserve its pharmaceutical and disability businesses while maintaining
expenses within operating cash flows.

                                       25


<PAGE>

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Our risk from exposure to financial markets is limited to foreign exchange
variances and fluctuations in interest rates. We may be subject to some foreign
exchange risks. Most of our business transactions are in U.S. dollars, although
we generate significant revenues from customers overseas. The exception is that
we were compensated in Japanese yen by some Japanese customers. As a result, we
experienced a small gain from currency exchange in the first six months of FY08.
In the future, if foreign currency transactions increase significantly, then we
may mitigate this effect through foreign currency forward contracts whose
market-to-market gains or losses are recorded in "Other Income or expense" at
the time of the transaction. To date, exchange rate exposure has not resulted in
a material impact.

Item 4. Controls and Procedures
        -----------------------

     (a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES.
         As of the end of the period covered by this report, the Company carried
         out an evaluation, under the supervision and with the participation of
         the Company's management, including the Company's Chief Executive
         Officer and Chief Financial Officer, of the effectiveness of the design
         and operation of the Company's disclosure controls and procedures
         pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the
         Chief Executive Officer and Chief Financial Officer concluded that the
         Company's disclosure controls and procedures are effective in timely
         alerting them to material information relating to the Company required
         to be included in the Company's periodic SEC filings.

     (b) CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING.
         There were no changes in the Company's internal controls over financial
         reporting during the Company's most recent fiscal quarter that have
         materially affected, or are reasonably likely to materially affect, the
         Company's internal controls over financial reporting.


                                       26


<PAGE>

                           PART II. OTHER INFORMATION

Item 1.           Legal Proceedings
                  -----------------

                  On April 6, 2006, we received notice from a liquidator for the
                  former French subsidiary of Bioreason (Bioreason SARL), saying
                  that the liquidator had initiated legal action against
                  Simulations Plus in the French courts with respect to
                  ClassPharmer distribution rights to European customers, and is
                  claiming commissions and legal fees with respect to European
                  customers. We have been working through our U.S. attorneys and
                  a law firm in Paris. We have filed a counterclaim for our
                  rights and lost sales against Bioreason SARL's assets by
                  sending a debt recovery declaration to the liquidator on June
                  15, 2006.

                  On May 23, 2007, we received an e-mail from our French Lawyer
                  that we had received a proposal for an amicable settlement, in
                  which we would give up our claims if Bioreason SARL would
                  agree to waive any claims against Simulations Plus. This
                  proposal was accepted by phone by the lawyer of Bioreason
                  SARL, and we signed the agreement which was submitted to the
                  French court.

                  On July 13, 2007, we received another e-mail from our French
                  Lawyer that the agent in charge of the liquidation of
                  Bioreason SARL requested the hearing to be postponed until
                  October 11, 2007, and her request was accepted by the French
                  supervisory judge.

                  On October 31, our French Lawyer informed us that the hearing
                  was again postponed until November 2007.

                  On April 9, 2008, we received the approval of the settlement
                  agreement from the commercial division of French Ordinary
                  Court. This means that the settlement agreement is now in
                  force, and this case is finally closed.

Item 2.           Changes in Securities
                  ---------------------
                  On February 29, 2008, the Registrant held its annual meeting
                  of shareholders. One of the proposals was to increase the
                  number of authorized shares of common stock from 20,000,000
                  shares to 50,000,000 shares, and this proposal was approved.

Item 3.           Defaults Upon Senior Securities
                  -------------------------------
                  None.

Item 4.           Submission of Matters to a Vote of Security Holders
                  ---------------------------------------------------
                  On February 29, 2008, the Registrant held its annual meeting
                  of shareholders. The following proposals were submitted to a
                  vote of security holders at the meeting.

         1.  To elect to the Board of Director five (5) directors
                  Walter Woltosz
                  Virginia Woltosz
                  Dr. David Z. D'Argenio
                  Dr. Richard Weiss H.
                  Wayne Rosenberger

                                       27


<PAGE>

         2.   To ratify the appointment of Rose, Snyder, and Jacobs as the
              Company's independent public accountants for the fiscal year
              ending August 31, 2008.

         3.   To amend and restate the Company's certificate of incorporation to
              increase the number of authorized shares of common stock from
              20,000,000 shares to 50,000,000 shares.

         The above proposals were approved and the results of the balloting at
         the meeting are summarized in the following table.

<TABLE>
<S>     <C>
------------------------------------- ------------------ ----------- ----------- -------------- ----------------

              Proposal                       Yes             No       Abstain      Withheld          Total
------------------------------------- ------------------ ----------- ----------- -------------- ----------------
(1) Walter Woltosz                           13,018,648          --          --      1,571,676       14,590,324
------------------------------------- ------------------ ----------- ----------- -------------- ----------------
(1) Virginia Woltosz                         13,178,611          --          --      1,410,713       14,589,324
------------------------------------- ------------------ ----------- ----------- -------------- ----------------
(1) Dr. David Z. D'Argenio                   13,419,439          --          --        100,577       13,520,016
------------------------------------- ------------------ ----------- ----------- -------------- ----------------
(1) Dr. Richard Weiss                        13,412,743          --          --        107,273       13,520,016
------------------------------------- ------------------ ----------- ----------- -------------- ----------------
(1) H. Wayne Rosenberger                     13,450,562          --          --         69,454       13,520,016
------------------------------------- ------------------ ----------- ----------- -------------- ----------------
                (2)                          13,422,342      91,905       5,769             --       13,520,016
------------------------------------- ------------------ ----------- ----------- -------------- ----------------
                (3)                          13,168,499     343,420       8,097             --       13,520,016
------------------------------------- ------------------ ----------- ----------- -------------- ----------------
</TABLE>

Item 5.           Other Information
                  -----------------
                  None.

Item 6.           Exhibits and Reports on form 8-K
                  --------------------------------
                  (a)     Exhibits:

                  31.1-2 Certification of Chief Executive Officer and Chief
                         Financial Officer
                  32     Certification pursuant to Sec. 906 of the
                         Sarbanes-Oxley Act of 2002


                                       28


<PAGE>

                                    SIGNATURE

In accordance with Section 13 or 15 (d) of the Securities Exchange Act of 1934,
the Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Lancaster, State of California, on
April 14, 2008.

                                                 Simulations Plus, Inc.

Date:  April 14, 2008                       By:  /s/ MOMOKO BERAN
                                                 ------------------------------
                                                 Momoko Beran
                                                 Chief Financial Officer







                                       29