<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 November 30, 2007 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 January 11, 2008, was 16,161,400.


<PAGE>

                             SIMULATIONS PLUS, INC.
                                   FORM 10-QSB
                FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 2007

                                Table of Contents

                          PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements (Unaudited)                                   Page
                                                                            ----
         Consolidated Balance Sheet at November 30, 2007 (unaudited)          2

         Consolidated Statements of Operations for the three months
            and three months ended November 30, 2007 and 2006 (unaudited)     4

         Consolidated Statements of Cash Flows for the three months
            ended November 30, 2007 and 2006 (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                                     23

Item 3.  Quantitative and Qualitative Disclosures about Market Risk          23

Item 4.  Controls and Procedures                                             23

                           PART II. OTHER INFORMATION

Item 1.  Legal Proceedings                                                   24

Item 2.  Changes in Securities                                               24

Item 3.  Defaults upon Senior Securities                                     24

Item 4.  Submission of Matters to a Vote of Security Holders                 24

Item 5.  Other Information                                                   24

Item 6.  Exhibits and Reports on Form 8-K                                    24

Signature                                                                    25
Exhibit - Certifications


<PAGE>

                                           SIMULATIONS PLUS, INC. AND SUBSIDIARY
                                                      CONSOLIDATED BALANCE SHEET
                                                                     (Unaudited)
                                                               November 30, 2006
--------------------------------------------------------------------------------


                                     ASSETS

CURRENT ASSETS
     Cash and cash equivalents                                       $4,584,313
     Accounts receivable, net of allowance for doubtful accounts
         and estimated contractual discounts of $117,050              2,379,574
     Inventory                                                          237,167
     Prepaid expenses and other current assets                           69,079
     Deferred tax asset                                                 200,954
                                                                     ----------
            Total current assets                                      7,471,087

CAPITALIZED COMPUTER SOFTWARE DEVELOPMENT COSTS,
     net of accumulated amortization of $2,973,764                    1,585,610

PROPERTY AND EQUIPMENT, net (note 4)                                     77,003
CUSTOMER RELATIONSHIPS, net of accumulated amortization of $66,328       61,714
OTHER ASSETS                                                             18,445
                                                                     ----------
                TOTAL ASSETS                                         $9,213,859
                                                                     ==========








   The accompanying notes are an integral part of these financial statements.
                                       2

<PAGE>

                                           SIMULATIONS PLUS, INC. AND SUBSIDIARY
                                                      CONSOLIDATED BALANCE SHEET
                                                                     (Unaudited)
                                                               November 30, 2006
--------------------------------------------------------------------------------



                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
     Accounts payable                                                $  225,150
     Accrued payroll and other expenses                                 507,845
     Accrued bonuses to officer                                          21,339
     Accrued warranty and service costs                                  35,004
     Accrued income tax                                                  36,513
                                                                     ----------

         Total current liabilities                                      825,851

Long-Term liabilities
     Deferred tax liability                                             313,215
                                                                     ----------

            Total liabilities                                         1,139,066

COMMITMENTS AND CONTINGENCIES (note 5)

SHAREHOLDERS' EQUITY (note 6)
     Preferred stock, $0.001 par value
         10,000,000 shares authorized
         no shares issued and outstanding                                    --
     Common stock, $0.001 par value
         20,000,000 shares authorized
         15,981,400 shares issued and outstanding                         4,453
     Additional paid-in capital                                       5,970,525
     Retained Earnings                                                2,099,815
                                                                     ----------

            Total shareholders' equity                                8,074,793
                                                                     ----------

                TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY           $9,213,859
                                                                     ==========


   The accompanying notes are an integral part of these financial statements.
                                       3

<PAGE>
<TABLE>

                                                       SIMULATIONS PLUS, INC. AND SUBSIDIARY
                                                       CONSOLIDATED STATEMENTS OF OPERATIONS
                                                     For the Three Months Ended November 30,
                                                                                 (Unaudited)

--------------------------------------------------------------------------------------------

                                                                  2007               2006
                                                                  ----               ----

<S>                                                          <C>                <C>
NET SALES                                                    $  1,983,809       $  1,456,451

COST OF SALES                                                     485,940            441,440
                                                             ------------       ------------
GROSS PROFIT                                                    1,497,869          1,015,011
                                                             ------------       ------------

OPERATING EXPENSES
     Selling, general, and administrative                         930,291            756,777
     Research and development                                     225,951            183,627
                                                             ------------       ------------

        Total operating expenses                                1,156,242            940,404
                                                             ------------       ------------

INCOME (LOSS) FROM OPERATIONS                                     341,627             74,607
                                                             ------------       ------------

OTHER INCOME (EXPENSE)
     Interest income                                               45,147             15,928
     Miscellaneous income                                              25                358
     Gain (Loss) on currency exchange                              18,635              2,972
                                                             ------------       ------------

        Total other income (expense)                               63,807             19,258
                                                             ------------       ------------

INCOME (LOSS) BEFORE INCOME TAXES                                 405,434             93,865

BENEFIT FROM (PROVISION FOR) INCOME TAXES
     Benefit from (provision for) income tax                     (162,174)           (20,650)
                                                             ------------       ------------

        Total benefit from (provision for) income taxes          (162,174)           (20,650)
                                                             ------------       ------------

NET INCOME (LOSS)                                            $    243,260       $     73,215
                                                             ============       ============

BASIC EARNINGS (LOSS) PER SHARE                              $       0.02       $       0.00
                                                             ============       ============

DILUTED EARNINGS (LOSS) PER SHARE                            $       0.01       $       0.00
                                                             ============       ============
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING*
     BASIC                                                     15,911,312         14,889,102
                                                             ============       ============

     DILUTED                                                   18,429,743         17,097,120
                                                             ============       ============

*       The numbers of shares at November 30, 2007 and 2006 reflect the 2-for-1
        stock splits which occurred on both October 1, 2007 and August 14, 2006.



             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 Three Months Ended November 30,
                                                                                 (Unaudited)
--------------------------------------------------------------------------------------------


                                                                   2007              2006
                                                                   ----              ----

CASH FLOWS FROM OPERATING ACTIVITIES
    Net income                                                 $   243,260       $    73,215
    Adjustments to reconcile net income to net cash
      provided by operating activities
         Depreciation and amortization of property and
           equipment                                                12,900            11,604
         Amortization of customer relationships                      6,982             8,478
         Amortization of capitalized software development
           costs                                                   116,171           107,178
         Bad Debts                                                  62,947                --
         Deferred tax                                              125,661            20,650
         Stock-based compensation                                    5,185             6,451
         Contribution of Equipment at book value                        --               774

         (Increase) decrease in
           Accounts receivable                                    (334,849)          372,475
           Inventory                                                (6,253)            3,142
           Other assets                                              4,590            24,399
         Increase (decrease) in
           Accounts payable                                         23,904           (74,870)
           Accrued payroll and other expenses                       16,233             8,649
           Accrued bonuses to officers                            (179,950)          (88,323)
           Accrued income taxes                                    (34,787)           (1,600)
           Accrued warranty and service costs                       (3,164)              100
           Deferred revenue                                             --            90,213
                                                               -----------       -----------
             Net cash provided by operating activities              58,830           562,535
                                                               -----------       -----------

CASH FLOWS FROM INVESTING ACTIVITIES
    Purchases of property and equipment                                 --           (18,272)
    Capitalized computer software development costs               (173,971)         (132,967)
                                                               -----------       -----------

             Net cash used in investing activities                (173,971)         (151,239)
                                                               -----------       -----------

CASH FLOWS FROM FINANCING ACTIVITIES
    Proceeds from the exercise of stock options                    161,740             6,450
                                                               -----------       -----------

             Net cash provided by financing activities             161,740             6,450
                                                               -----------       -----------

                Net increase (decrease) in cash and cash
                  equivalents                                  $    46,599       $   417,746


             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 Three Months Ended November 30,
                                                                                 (Unaudited)
--------------------------------------------------------------------------------------------


                                                                   2007              2006
                                                                   ----              ----

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

CASH AND CASH EQUIVALENTS, END OF PERIODS                      $ 4,584,313       $ 2,102,782
                                                               ===========       ===========


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

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

    INCOME TAXES PAID                                          $    80,000       $     1,600
                                                               ===========       ===========


















             The accompanying notes are an integral part of these financial statements.
                                                 6
</TABLE>

<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 $116,171 and $107,178 for the three months ended
November 30, 2007 and 2006, 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 $22,507 and
$22,679 for the three months ended November 30, 2007 and 2006, 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 three months ended
and accumulated amortization as of November 30, 2007 and 2006 amounted to
$66,328 and $36,156, 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 three months
ended November 30, 2007 and 2006 were as follows (the number of shares at
11/30/2006 reflects the effect of 2-for-1 stock splits on October 1, 2007 and
August 14, 2006 for comparison purposes):

<TABLE>
                                                               11/30/2007       11/30/2006
                                                               ----------       ----------
<S>                                                           <C>              <C>
Numerator
          Net income attributable to common
                    shareholders                              $   243,260      $    73,215

Denominator
          Weighted-average number of common shares
                    outstanding during the year                15,911,312       14,889,102
          Dilutive effect of stock options                      2,518,431        2,208,018

Common stock and common stock
          equivalents used for diluted earning per share       18,429,743       17,097,120
</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
three months ended November 30, 2007 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 were $5,185 and $6,451 for the three months
ended November 30, 2007 and 2006, respectively, and included in the condensed
consolidated statements of operations as Consulting, and Research and
development expense.

Concentrations and Uncertainties
--------------------------------
International sales accounted for 30% and 29% of net sales for the three months
ended November 30, 2007 and 2006, respectively. For Simulations Plus, Inc.,
three customers accounted for 41%, 8%, and 7% of net sales during the three
months ended November 30, 2007, compared with one customer accounting for 22% of
net sales during the same period in FY06. For Words+, Inc., two government
agencies accounted for 22% and 7% of net sales during the three months ended
November 30, 2007, compared with one government agency accounting for 27.9% of
net sales during the same period in FY06.

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, three customers comprised 50%, 7%, and 6% of its accounts
receivable at November 30, 2007, and four customers comprised 41%, 13%, 11% and
10% of accounts receivable at November 30, 2006. The accounts receivable balance
of Simulations Plus increased $802,000, or 198.5%, to $1,207,000 at November 30,
2007 from $404,000 at November 30, 2006. This is due primarily a large order
that came in mid November. For Words+, two government agencies comprised 35% and
10%, and one insurance agency comprised 9% of its accounts receivable at
November 30, 2007, and one government agency comprised 30% of its accounts
receivable at November 30, 2006.

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 November 30, 2007 consisted of the following:

         Equipment                                                  $  163,121
         Computer equipment                                            334,605
         Furniture and fixtures                                         61,498
         Automobile                                                     21,769
         Leasehold improvements                                         53,898
                                                                    -----------
              Sub total                                                634,891
         Less: Accumulated depreciation and amortization              (557,888)
                                                                    -----------
              Net Book Value                                            77,003
                                                                    ===========


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.

                                       11

<PAGE>

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
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 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
now we have signed the agreement which has been submitted to 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, 2007, our French lawyer informed us that the hearing was again
postponed until November 2007.

As of today, we are still waiting for the approval of the settlement agreement
from the commercial division of French Ordinary Court.


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 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 by 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.

                                       12

<PAGE>


                                                                Weighted-Average
                                                    Number of    Exercise Price
                                                     Options       Per Share
                                                   ----------      ---------
         Outstanding, August 31, 2007               3,209,736      $   0.68
                            Granted                        --      $  --
                            Exercised                (220,000)     $   0.74
                            Expired/Cancelled        (202,000)     $   0.59

         Outstanding, November 30, 2007             2,787,736      $   0.69
                                                   ----------      --------

         Exercisable, November 30, 2007             2,687,736      $   0.69
                                                   ==========      ========

<TABLE>
<S>     <C>

                         Options Outstanding & Unvested at November 30, 2007
                         ---------------------------------------------------

                                                            Remaining             *Weighted
                                           Number        Contractual Life           Average
                                        Outstanding         (in years)        Fair Market Price
                                        -----------         ----------        -----------------
     Non Vested before 9/1/2007           170,000                                    $  0.86
          Granted                               -                                    $     -
          Vested                          (42,000)                                   $  0.32
          Cancelled                             -                                    $     -

     Non Vested at 11/30/2007             128,000             7.87                   $  0.32

*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 4.2 years at November 30, 2007. The exercise prices for the
options outstanding at November 30, 2007 ranged from $0.27 to $1.24, 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
------------------    ----------------    ----------------    --------------------    ---------------     ---------------
$0.27 - 0.50                1,033,936           1,033,936          2.7 years                 $  0.37             $  0.37
$0.50 - 0.75                  861,200             861,200          2.2 years                 $  0.67             $  0.67
$0.75 - 1.24                  892,600             764,600          7.8 years                 $  1.10             $  1.14
                      ----------------    ----------------
                            2,787,736           2,659,736
                      ================    ================


                                       13

<PAGE>

Other Stock Options
-------------------
As of November 30, 2007, 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 November 30, 2007.

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

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

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 three months ended November 30, 2007 and 2006:

                                   November 30, 2007
-------------------------------------------------------------------------------------------
                                    Simulations
                                     Plus, Inc    Words +, Inc.  Eliminations     Total
-------------------------------------------------------------------------------------------
Net Sales                             1,438,426        545,383                   1,983,809
-------------------------------------------------------------------------------------------
Income (loss) from operations           489,505       (147,878)                    341,627
-------------------------------------------------------------------------------------------
Identifiable assets                   8,964,153      2,108,881    (1,859,175)    9,213,859
-------------------------------------------------------------------------------------------
Capital expenditures                          -              -                           -
-------------------------------------------------------------------------------------------
Depreciation and Amortization           118,165         17,888                     136,053
-------------------------------------------------------------------------------------------


                                    November 30, 2006
---------------------------------------------------------------------------------------------
                                     Simulations
                                       Plus, Inc    Words +, Inc.  Eliminations     Total
---------------------------------------------------------------------------------------------
Net Sales                                824,303         632,148                   1,456,451
---------------------------------------------------------------------------------------------
Income (loss) from operations            109,089        (34,482)                      74,607
---------------------------------------------------------------------------------------------
Identifiable assets                    6,515,286       1,793,374    (1,774,914)    6,533,746
---------------------------------------------------------------------------------------------
Capital expenditures                       5,874          12,398                      18,272
---------------------------------------------------------------------------------------------
Depreciation and Amortization             93,153          34,107                     127,260
---------------------------------------------------------------------------------------------


In addition, the Company allocates revenues to geographic areas based on the
locations of its customers. Geographical revenues for the three months ended
November 30, 2007 and 2006 were as follows (in thousands):

                            November 30, 2007
-----------------------------------------------------------------------------------------------
                               North                                          South
                              America       Europe      Asia       Oceania    America    Total
-----------------------------------------------------------------------------------------------
Simulations Plus, Inc.           859         417         162         -0-         -0-     1,439
-----------------------------------------------------------------------------------------------
Words+, Inc.                     519          14          11           1         -0-       545
-----------------------------------------------------------------------------------------------
Total                          1,379         430         173           1         -0-     1,984
--------------------------=====================================================================

                                       14

<PAGE>

                               November 30, 2006
---------------------------------------------------------------------------------------------
                             North                                            South
                            America      Europe       Asia       Oceania     America   Total
---------------------------------------------------------------------------------------------
Simulations Plus, Inc.         471         173         180         -0-         -0-       824
---------------------------------------------------------------------------------------------
Words+, Inc.                   563          49          18         -0-           2       632
---------------------------------------------------------------------------------------------
Total                        1,034         222         198         -0-           2     1,456
-------------------------====================================================================
</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 $18,037 and
$14,703 for the three months ended November 30, 2007 and 2006, respectively.

Note 8:  SUBSEQUENT EVENT

Since December 1, 2007, an additional 180,000 stock options to purchase shares
have been exercised by employees that generated $172,425 in proceeds.




                                       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 and 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
existed. Drug companies search through millions of such "virtual" molecular


                                       16

<PAGE>

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
seem to always 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.

Another improvement to ADMET Predictor has been the development of predictive
models for metabolism of new compounds by a certain class of enzymes known as
Cytochrome P450 enzymes. This work, which began in 2006, has been done in
collaboration with Enslein Research, Inc. ("Enslein") of Rochester, New York. We
announced in a press release on September 20, 2007 that we had signed an
agreement with Enslein that gives Simulations Plus exclusive access to Enslein's
database of metabolism measurements that had been developed under a National
Institutes of Health Small Business Innovation Research grant. We are currently
awaiting final results from our beta testers in the pharmaceutical industry to
release this product.

                                       17

<PAGE>

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. We
are developing improved methods for selecting the best molecular descriptors for
modeling a particular molecular property. We have updated our HIV-1 Integrase
prediction models. We are investigating additional toxicity databases to extend
the number of toxicity predictions provided in ADMET Predictor. A dynamic linked
library (dll) module that provides a limited version of ADMET Predictor allows
both GastroPlus and ClassPharmer to call ADMET Predictor directly for further
convenience. We expect that this new capability will increase sales of ADMET
Predictor to 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. These new capabilities were demonstrated in
Sendai, Japan at the International Society for the Study of Xenobiotics meeting
in October 2007.

ClassPharmer
------------
ClassPharmer improvements during the first quarter were focused on incorporating
new features requested by users around the world, as well as adding other new
capabilities identified in-house. In October 2007, we announced the release of a
new version of ClassPharmer (4.4) that further enhances the ability of the
program to design new molecules. This new capability provides a way for chemists
to automatically generate large numbers of novel chemical structures based on
the known chemistry from compounds that have already been synthesized and
tested. We have also begun a tight integration with our ADMET Predictor software
that will enable rapid and convenient generation and evaluation of new chemical
structures to dramatically accelerate the drug discovery process for medicinal
chemists. We added export of results in Microsoft Excel(TM) format as well as
other convenient file formats requested by users. We further enhanced the new
molecule design capabilities of ClassPharmer to make this expanded capability
more flexible and powerful.

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; however, the list of built-in excipients was expanded and a few
features were improved.

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


                                       18

<PAGE>

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 PDPlus(TM) Module to enhance the
programs' capabilities in this area in order to attempt to capture a greater
audience working in clinical trial data analysis. We added a new sophisticated
kidney model to simulate how drugs are cleared in urine. And we added a number
of convenience features requested by our users. We are also enhancing the
graphics capabilities in GastroPlus to provide users with greater insight into
the results they obtain with the program.

Our marketing intelligence indicates that GastroPlus enjoys 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 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 shows steady
growth, 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 limited. We continue working on improving 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 oral cavity (lingual, sublingual, and buccal
delivery) as part of a funded study contract begun in the previous fiscal
quarter. This new route of administration required a significant amount of
scientific investigation, programming changes, and actual data to validate the
model equations. The customer provided the data and the program modifications


                                       19

<PAGE>

provided valuable insight to the customer about how an oral spray for a
particular drug was being absorbed and metabolized in human. The customer now
licenses GastroPlus.

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.

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.

During this reporting period, we completed the final design for our new
PDA-based (personal digital assistant based) Say-it! SAM augmentative
communication device, including a completely new PDA and a custom
injection-molded case available in multiple colors. This new device includes a
new audio amplifier and speaker system as well. It was demonstrated at the
Closing the Gap conference in Minneapolis in October 2007 and received strong
interest from those in attendance. We have now begun shipping these units after
a lull of about three months in which the supply of the previous PDA was
depleted, resulting in lower sales for Words+ during this reporting period.

                                       20

<PAGE>

RESULTS OF OPERATIONS

COMPARISON OF THREE MONTHS ENDED NOVEMBER 30, 2007 AND 2006.

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

<TABLE>
                                         ----------------------------------------------------
                                                          Three Months Ended
                                         ----------------------------------------------------
                                                 11/30/07                   11/30/06
                                         ------------------------- --------------------------
<S>                                      <C>             <C>        <C>              <C>
Net sales                                $ 1,984         100%       $ 1,456          100%
Cost of sales                                486          24.5          441          30.3
                                         ------------------------------------------------
Gross profit                               1,498          75.5        1,015          69.7
                                         ------------------------------------------------
Selling, general and administrative          930          46.9          757          52.0
Research and development                     226          11.4          183          12.6
                                         ------------------------------------------------
Total operating expenses                   1,156          58.3          940          64.6
                                         ------------------------------------------------
Income from operations                       342          17.2           75           5.1
                                         ------------------------------------------------
Other income                                  63           3.2           19           1.3
                                         ------------------------------------------------
Net income before taxes                      405          20.4           94           6.4
                                         ------------------------------------------------
(Provision for) income taxes                (162)         (8.2)         (21)         (1.4)
                                         ------------------------------------------------
Net income                               $   243          12.3%     $    73           5.0%
                                         =================================================
</TABLE>

NET SALES
---------
Our consolidated net sales increased $527,000, or 36.2%, to $1,984,000 in the
first fiscal quarter of 2008 (1QFY08) from $1,456,000 in the first fiscal
quarter of 2007 (1QFY07). Sales from pharmaceutical software and services
increased approximately $614,000, or 74.5%; and our Words+, Inc. subsidiary's
sales decreased approximately $87,000, or 13.8%, for the quarter. We attribute
the increase in pharmaceutical software sales primarily to a large order that
came in during the first quarter this year that had been received in the second
fiscal quarter of last fiscal year, as well as new customers and for new modules
and additional licenses to renewal customers. Revenues from contract services
also increased in 1QFY08 compared with 1QFY07. Because of this large order in
November, the accounts receivable balance at November 30, 2007 increased
significantly.

We attribute the decrease in Words+ sales primarily to a decrease in sales of
the PDA version of our "Say-it! SAM" speech output device. Our inventory of the
discontinued previous PDA was depleted during the previous quarter, resulting in
an inability to accept orders for these units until the new device was close to
production. These units have now started to ship in quantity as of December 2007
and the product is receiving excellent feedback from those who have received
them. Although revenues from our "Freedom" products increased, some declines in
sales of other products outweighed this increase.

COST OF SALES
-------------
Consolidated cost of sales increased $45,000, or 10.1%, to $486,000 in 1QFY08
from $441,000 in 1QFY07; however, the percentage of cost of sales in 1QFY08
decreased 5.8% to 24.5% from 30.3% in 1QFY07. For Simulations Plus, cost of
sales increased $71,000, or 60.7%; however, as a percentage of revenue, cost of
sales decreased to 13.1% in 1QFY08 from 14.2% in 1QFY07. 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 as more new products became available for sale, by approximately


                                       21

<PAGE>

$26,000, or 33.0%, in 1QFY08 compared with 1QFY07. Another significant portion
of cost of sales is Royalty expense, which is determined by the revenues
generated from GastroPlus basic program without modules. Royalty expense
increased approximately $44,000, or 120.7%, in 1QFY08 compared with 1QFY07 due
to growth in GastroPlus license sales.

For Words+, cost of sales decreased $26,000, or 8.1%; however, as a percentage,
cost of sales increased 3.4% between the first fiscal quarter of FY08 and FY07.
We attribute the percentage increase in cost of sales for Words+ primarily to
the special discount provided for the dealer demo units on new "Say-it! SAM"
units, lower total revenues for the quarter, and shipping material cost
increases.

GROSS PROFIT
------------
Consolidated gross profit increased $483,000, or 47.6%, to $1,498,000 in 1QFY08
from $1,015,000 in 1QFY07. We attribute this increase to the increase in sales
of pharmaceutical software, contract studies, which outweighed decrease in Word+
gross profit.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
--------------------------------------------
Consolidated selling, general and administrative (SG&A) expenses increased
$173,000, or 22.9%, to $930,000 in 1QFY08 from $757,000 in 1QFY07. For
Simulations Plus, SG&A increased $114,000, or 25.8%. As a percentage of sales,
SG&A decreased to approximately 38.5% in 1QFY08 from approximately 53.3% in
1QFY07. The major increases in SG&A expenses were travel, trade shows, investor
relations, accrued bonus to a Secretary, professional fees, salaries and
payroll-related expenses such as health insurance, 401K and payroll taxes, which
outweighed decreases in commission expense and equipment rentals.

For Words+, SG&A expenses increased $60,000, or 18.9%, due primarily to
increases in travel, trade shows, bad debts, marketing consultant fees and
salaries. These increases outweighed decreases in commissions, telephone and
supplies.

RESEARCH AND DEVELOPMENT
------------------------
We incurred approximately $400,000 of research and development costs for both
companies during the 1QFY08. Of this amount, $174,000 was capitalized and
$226,000 was expensed. In 1QFY07, we incurred $317,000 of research and
development costs, of which $134,000 was capitalized and $183,000 was expensed.
The increase of $83,000, or 26.2%, in total research and development
expenditures from the 1QFY07 to the 1QFY08 was due primarily to increases in
salaries because of new hires and salary increases to existing staff.

OTHER INCOME (EXPENSE)
----------------------
Net other income (expense) in 1QFY08 increased by $44, 000, or 231.3%, to $63,
000 in 1QFY08 from $19,000 in 1QFY07. This is due primarily to increased
interest revenue from Money Market accounts.

PROVISION FOR INCOME TAXES
--------------------------
The provision for income taxes increased by $141,000, or 685.3%, to $162,000 in
1QFY08 from $21,000 in 1QFY07 due to higher income. The expiration of the
Extraterritorial Income Exclusion resulted in an increase of our overall
combined tax rate. In addition, Congress did not extend the Research and
Development Tax Credit, which expired on December 31, 2007. As a result, we are
projecting a tax rate of 40% going forward. However, there is a bill, H.R. 2138,
currently under consideration by the House of Representatives, which would
extend the Research and Development Tax Credit permanently. If this bill passes,
we will re-evaluate our enacted tax rates at that time to determine if a change
in our estimated tax rate is necessary.

                                       22

<PAGE>

NET INCOME
----------
Consolidated net income increased by $170,000, or 234.4%, to $243,000 in 1QFY08
from $73,000 in 1QFY07. We attribute this increase in profit primarily to the
increases in revenue from pharmaceutical software and services and other income,
which outweighed increases in cost of sales, selling, and general and
administrative expenses, research and development expenses, provision for income
taxes and the net loss from Words+ operations.

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.

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 and one European
customer. As a result, we experienced a small gain from currency exchange in the
first three 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.

                                       23

<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.

                  As of today, we are still waiting for the approval of the
                  settlement agreement from the commercial division of French
                  Ordinary Court.

Item 2.           Changes in Securities
                  ---------------------
                  None.

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

Item 4.           Submission of Matters to a Vote of Security Holders
                  ---------------------------------------------------
                  None.

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


                                       24

<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
January 11, 2008.

                                                        Simulations Plus, Inc.

Date:  January 11, 2008                          By:    /s/ MOMOKO BERAN
                                                        ------------------------
                                                        Momoko Beran
                                                        Chief Financial Officer













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