NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
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TO BE HELD FEBRUARY 24, 2006
The Annual Meeting (the "Meeting") of Shareholders of Simulations Plus, Inc.
(the "Company"), will be held on February 24, 2006, at 2:00 p.m., Pacific Time,
at 42505 10th Street West, Lancaster, California, for the following purposes:
1. To elect to the Board of Directors four (4) directors, to serve until the
next Annual Meeting of Shareholders of the Company or until their successors are
elected and qualified, subject to prior death, resignation or removal.
2. To ratify the appointment of Rose, Snyder and Jacobs as independent public
accountants for the Company for the fiscal year ending August 31, 2006.
3. To transact such other business as may properly come before the Meeting or
any adjournments or postponements thereof.
All shareholders are cordially invited to attend the Meeting, although only
shareholders of record at the close of business on December 20, 2005, will be
entitled to notice of and to vote at the Meeting. A list of shareholders
entitled to vote at the Annual Meeting will be open to inspection by the
shareholders at the Company's principal office, 42505 10th Street West,
Lancaster, California, for a period of 10 days prior to the Annual Meeting and
at the Annual Meeting itself.
Shares can be voted at the Meeting only if the holder is present in person or
represented by proxy. We urge you to date and sign the enclosed proxy and return
it in the accompanying envelope promptly so that your shares may be voted in
accordance with your wishes and the presence of a quorum may be assured. We
encourage you to do so even if you plan to attend the Meeting in person. The
prompt return of your signed proxy, regardless of the number of shares you hold,
will aid the Company in reducing the expense of additional proxy solicitation.
The giving of such proxy does not affect your right to vote in person in the
event you attend the Meeting.
By Order of the Board of Directors
Virginia Woltosz
Secretary
Lancaster, California
January 24, 2006
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YOUR PROXY
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PLEASE SIGN AND RETURN YOUR PROXY PROMPTLY IN THE ENCLOSED POSTPAID ENVELOPE.
SHOULD YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON EVEN THOUGH YOU HAVE GIVEN
A PROXY. THE PROMPT RETURN OF YOUR PROXY WILL BE OF GREAT HELP IN PREPARATION
FOR THE MEETING.
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SIMULATIONS PLUS, INC.
42505 10th Street West, Lancaster, California 93534-7059 (661) 723-7723
SIMULATIONS PLUS INC. - NOTICE OF ANNUAL MEETING OF SHAREHOLDERS PG. 1
PROXY STATEMENT
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TO BE HELD FEBRUARY 24, 2006
This proxy statement is furnished to the shareholders of Simulations Plus, Inc.,
a California corporation (the "Company"), in connection with the Annual Meeting
of Shareholders (the "Meeting") to be held at the Company's Offices located at
42505 10th Street West, Lancaster, California 93534-7059, on February 24, 2006,
at 2:00 p.m. local time. The Meeting will be held to consider and vote on the
following proposals:
PURPOSE OF MEETING
1. To elect to the Board of Directors four (4) directors, to serve until the
next Annual Meeting of Shareholders of the Company or until their successors are
elected and qualified, subject to their prior death, resignation or removal.
2. To ratify the appointment of Rose, Snyder and Jacobs as the independent
registered public accounting firm for the Company for the year ending August 31,
2006.
3. To transact such other business as may properly come before the Meeting and
any adjournments thereof.
A list of shareholders entitled to vote at the Annual Meeting will be open to
inspection by the shareholders at the Company's principal office, 42505 10th
Street West, Lancaster, California, for a period of 10 days prior to the Annual
Meeting and at the Annual Meeting itself.
Requests should be addressed to the Company, Simulations Plus, Inc., to the
attention of Walt Woltosz, Chief Executive Officer, 42505 10th Street West,
Lancaster, California 93534, (661) 723-7723.
INCORPORATION BY REFERENCE
Simulations Plus, Inc., a California corporation (the "Company") is currently
subject to the reporting requirements of the Securities Exchange Act of (1)934,
as amended (the "Exchange Act") and, in accordance therewith, files reports,
proxy and Proxy Statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy and Proxy Statements
and other information may be inspected and copied at the Public Reference
Facilities of the Commission at 100 F Street, N.E., Room 1580, Washington D.C.
20549, and copies of such materials can be obtained from the Public Reference
Section of the Commission, 100 F Street, N.E., Room 1580, Washington D.C. 20549
at prescribed rates. In addition, such materials may be accessed electronically
at the Commission's site on the World Wide Web, located at http://www.sec.gov.
The Company intends to furnish its shareholders with annual reports containing
audited financial statements and such other periodic reports as the Company may
determine to be appropriate or as may be required by law.
A copy of the Company's 2005 Annual Report on Form 10-KSB including financial
statements for the years ended August 31, 2005 and 2004, is being mailed to all
shareholders herewith. Except for any portion of the Form 10-KSB which is
specifically incorporated by reference into this Proxy Statement, the Form
10-KSB is not to be regarded as proxy solicitation material or as a
communication by means of which any solicitation is being made. THE COMPANY WILL
PROVIDE ANY SHAREHOLDER WITH A COPY OF ANY EXHIBIT TO THE FORM 10-KSB/A PURSUANT
TO THE REQUEST PROCEDURE DESCRIBED IN THE FORM 10 KSB.
INFORMATION CONCERNING SOLICITATION AND VOTING
The following information is provided to shareholders to explain the use of this
Proxy Statement for this Meeting:
RECORD DATE
Only shareholders of record at the close of business on December 20, 2005 are
entitled to vote at the Meeting. The Company's Common Stock is its only class of
voting securities. As of December 20, 2005, the Company had issued and
outstanding 3,653,448 shares of Common Stock of record.
SIMULATIONS PLUS INC. - NOTICE OF ANNUAL MEETING OF SHAREHOLDERS PG. 2
REVOCABILITY OF PROXIES
A PROXY FOR USE AT THE MEETING IS ENCLOSED. ANY STOCKHOLDER WHO EXECUTES AND
DELIVERS A PROXY HAS THE RIGHT TO REVOKE IT AT ANY TIME BEFORE ITS EXERCISE BY
FILING WITH THE SECRETARY OF THE COMPANY AN INSTRUMENT REVOKING IT OR A DULY
EXECUTED PROXY BEARING A LATER DATE. IN ADDITION, A STOCKHOLDER MAY REVOKE A
PROXY PREVIOUSLY EXECUTED BY ATTENDING THE MEETING AND ELECTING TO VOTE IN
PERSON.
VOTING AND SOLICITATION
Proxies are being solicited by the Board of Directors of the Company. The cost
of this solicitation will be borne by the Company. Solicitation will be
primarily by mail, but may also be made by telephone, fax transmission or
personal contact by certain officers and directors of the Company, who will not
receive any compensation therefore. Shares of Common Stock represented by
properly executed proxies will, unless such proxies have been previously
revoked, be voted in accordance with the instructions indicated thereon. IN THE
ABSENCE OF SPECIFIC INSTRUCTIONS TO THE CONTRARY, PROPERLY EXECUTED PROXIES WILL
BE VOTED FOR EACH OF THE PROPOSALS DESCRIBED ABOVE. No business other than that
set forth in the accompanying Notice of Annual Meeting of Shareholders is
expected to come before the Meeting. Should any other matter requiring a vote of
shareholders properly arise, the persons named in the enclosed form of proxy
will vote such proxy in accordance with the recommendation of the Board of
Directors.
Each share of Common Stock is entitled to one vote for each share held as of
record, and there are no preemptive rights. The law of the state of California
and the Company's current Certificate of Incorporation (the "Certificate of
Incorporation") and Bylaws do provide for cumulative voting for the election of
directors or any other purpose.
The effect of cumulative voting is that the holders of a majority of the
outstanding shares of Common Stock may not be able to elect all of the
Company's directors. No shareholder will be entitled to cumulate votes for a
candidate, however, unless that candidate's name has been placed in nomination
prior to the voting and the shareholder, or any other shareholder, has given
notice at the meeting, prior to the voting, of an intention to cumulate votes. A
favorable vote consists of a simple majority of the shares entitled to vote at
the meeting. The Company believes that as of December 20, 2005, the approximate
number of shareholders of record of its common stock was 68 and that there were
approximately 454 beneficial owners. This includes shares held in nominee or
"street" accounts.
Only shareholders of record at the close of business on December 20, 2005, will
be entitled to vote at the meeting. On December 20, 2005, there were
3,653,448 shares of the Common Stock issued and outstanding. Shareholders
are entitled to one vote per share on all matters being submitted to
shareholders at the meeting, other than with respect to the election of
directors, for which cumulative voting is currently required under certain
circumstances by applicable pro-visions of California Law. Under cumulative
voting, each shareholder may give any one candidate whose name is placed in
nomination prior to the commencement of voting a number of votes equal to the
number of directors to be elected, multiplied by the number of votes to which
the shareholder's shares are normally entitled, or distribute such number of
votes among as many candidates as the shareholder sees fit.
The Board of Directors knows of only two shareholders who owned more than five
percent of the outstanding voting securities of the Company as of the record
date: Walter S. Woltosz and Virginia E. Woltosz. See "Beneficial Ownership of
Common Stock."
QUORUM; ABSTENTIONS; BROKER NON-VOTES
Shares representing 50% of the voting power of the 3,653,448 shares of Common
Stock outstanding on the Record Date, which have voting rights, must be
represented at the Meeting to constitute a quorum for conducting business. In
the absence of a quorum, the shareholders present in person or by proxy, by
majority vote and without further notice, may adjourn the meeting from time to
time until a quorum is attained. At any reconvened meeting following such
adjournment at which a quorum shall be present, any business may be transacted
which might have been transacted at the Meeting as originally notified.
SIMULATIONS PLUS INC. - NOTICE OF ANNUAL MEETING OF SHAREHOLDERS PG. 3
The required quorum for the transaction of business at the Meeting is a majority
of the votes eligible to be cast by holders of shares of Common Stock issued and
outstanding on the Record Date. Shares that are voted "FOR" or "AGAINST" a
matter are treated as being present at the Meeting for purposes of establishing
a quorum and are also treated as shares entitled to vote at the Meeting (the
"Votes Cast") with respect to such matter.
The Company will count abstentions for purposes of determining both: (i) the
presence or absence of a quorum for the transaction of business, and (ii) the
total number of Votes Cast with respect to a proposal (other than the election
of directors). Accordingly, abstentions will have the same effect as a vote
against the proposal.
Further, the Company intends to count broker non-votes for the purpose of
determining the presence or absence of a quorum for the transaction of business,
although broker non-votes will not be counted for purposes of determining the
number of Votes Cast with respect to the particular proposal on which the broker
has expressly not voted. Thus, a broker non-vote will not affect the outcome of
the voting on a proposal.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company that are intended to be presented by
such shareholders at the Company's next Annual Meeting of Shareholders for the
fiscal year ending August 31, 2006, must be received by the Company no
later than August 20, 2006, in order to be considered for inclusion in the proxy
statement and form of proxy relating to that meeting.
COMPANY STOCK PRICE PERFORMANCE
The stock price performance graph below is required by the SEC and shall not be
deemed to be incorporated by reference by any general statement incorporating by
reference this Proxy Statement into any filing under the Securities Act of
(1)933, as amended, or under the Securities Exchange Act of 1934, as amended,
except to the extent that the Company specifically incorporates this information
by reference, and shall not otherwise be deemed soliciting material or filed
under such Acts.
The graph below compares the cumulative total shareholder return on the Common
Stock of the Company from August 31, 2000 to August 31, 2005 with the cumulative
total return on the Russell 2000 Index, and the S&P 600 Small Cap Index
(assuming the investment of $100 in the Company's Common Stock and in each of
the indices on August 31, 2000, and reinvestment of all dividends).
[STOCK PRICE PERFORMANCE GRAPH APPEARS HERE]
The graph above was plotted using the following data:
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STOCK PERFORMANCE: 8/31/05 SIMULATIONS PLUS,
DATE RUSSELL 2000 S&P 600 INC.
================================================================================
8/31/00 537.89 135.704 223.49 138.341 2.500 50.000
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8/31/01 468.56 118.213 223.04 138.063 1.200 24.000
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8/31/02 391.57 98.789 200.255 123.959 1.520 30.400
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8/31/03 508.87 128.383 243.425 150.681 2.550 51.000
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8/31/04 547.93 138.237 277.222 171.601 3.30 66.000
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8/31/05 661.51 166.892 347.42 215.054 3.40 68.000
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SIMULATIONS PLUS INC. - NOTICE OF ANNUAL MEETING OF SHAREHOLDERS PG. 4
INFORMATION RELATING TO VARIOUS PROPOSALS
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PROPOSALS FOR VOTING
PROPOSAL 1: ELECTION OF DIRECTORS
The Board of Directors acts as a whole in determining the persons to be
nominated as members of the Board of Directors. The Board of Directors
identifies, screens and reviews potential directors for nominees for election to
the Board at the Annual Meeting and candidates to fill any vacancies on the
Board. When considering a potential candidate for membership on the Company's
Board, the Board of Directors considers relevant business and industry
experience and demonstrated character and judgment. The Board of Directors has
not received any recommended nominations from any of the Company's shareholders
in connection with this Annual Meeting.
The Board of Directors has nominated the persons named below for election as
directors of the Company to serve until the next Annual Meeting of Shareholders
and until their successors are duly elected and qualified.
VOTE REQUIRED
In order to be elected as a director, a nominee will have to receive a majority
of the votes cast for that nominee, assuming a quorum (which consists of a
majority of the shares entitled to vote at the meeting) is present at the
meeting. See "Voting," above.
At the time of the Annual Meeting, the Board of Directors will consist of four
incumbent members who are seeking to be elected at the meeting to hold office
until the next meeting of shareholders and until their successors are elected
and qualified. The Company's Bylaws presently provide for a Board of no less
than three and no more than five directors, with the number of directors
currently fixed at four.
Walter S. Woltosz, Virginia E. Woltosz, Dr. David Z. D'Argenio, and Dr. Richard
R. Weiss, all of whom are incumbent directors, have been nominated by the Board
of Directors for election as directors of the Company. All of the nominees have
informed the Company that they are willing to serve, if elected, and management
has no reason to believe that any of the nominees will be unavailable. In the
event a nominee for director should become unavailable for election, the persons
named in the proxy will vote for the election of any other person who may be
recommended and nominated by the Board for the office of director. Information
regarding director nominees and directors is set forth below:
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NAME AGE POSITION WITH THE COMPANY
DIRECTOR SINCE
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DIRECTORS AND DIRECTOR NOMINEES:
Walter S. Woltosz 60 Chairman of the Board, Chief Executive Officer
1996 and President of the Company
Virginia E. Woltosz 54 Secretary and Director of the Company
1996
Dr. David Z. D'Argenio 56 Director
1997
Dr. Richard R. Weiss 72 Director
1997
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WALTER S. WOLTOSZ is a co-founder of the Company and has served as its Chief
Executive Officer and President and as Chairman of the Board of Directors since
its incorporation in July 1996. Mr. Woltosz is also a co-founder of Words+ and
served as its Chief Executive Officer and President from its incorporation in
1981 until the appointment of Jeffrey Dahlen as President of Words+ in 2004.
VIRGINIA E. WOLTOSZ is a co-founder of the Company and served as its Senior Vice
President and Secretary since its incorporation in July 1996 until January 31,
2003. Mrs. Woltosz is also a co-founder of Words+ and served as its Vice
President, Secretary and Treasurer from its incorporation in 1981 until January
31, 2003. Mrs. Woltosz retired from the position of Senior Vice President as of
January 31, 2003, but remains as Secretary and Treasurer of Simulations Plus.
Virginia E. Woltosz is the wife of Walter S. Woltosz.
DR. DAVID Z. D'ARGENIO started to serve as a Director of the Company in June
1997. He is currently Professor of Biomedical Engineering at the University of
Southern California ("USC"), and has been on the faculty at USC since 1979. He
also serves as the Co-Director of the Biomedical Simulations Resource Project at
USC, a project funded by the National Institutes of Health since 1985.
SIMULATIONS PLUS INC. - NOTICE OF ANNUAL MEETING OF SHAREHOLDERS PG. 5
DR. RICHARD R. WEISS started to serve as a Director of the Company in June 1997.
>From October 1994 to the present, Dr. Weiss has acted as a consultant to a
number of aerospace companies through his own consulting entity, Richard R.
Weiss Consulting Services. From June 1993 through July 1994, Dr. Weiss was
employed by the U.S. Department of Defense as its Deputy Director, Space Launch
& Technology.
BUSINESS EXPERIENCE OF EXECUTIVE OFFICERS WHO ARE NOT ALSO DIRECTORS:
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NAME AGE POSITION WITH THE COMPANY
OFFICER SINCE
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Ronald F. Creeley 54 Vice President, Marketing and
1997 Sales of the Company and Words+, Inc.
Momoko A. Beran 53 Chief Financial Officer of the
1996 Company and Words+, Inc.
Jeffrey A. Dahlen 44 President of Words+, Inc.
2003
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RONALD F. CREELEY joined the Company in February 1997 as its Vice President,
Marketing and Sales. Prior to joining the Company, Mr. Creeley had been
Marketing Director at Union Pen Company, Time Resources, and New England
Business Services, Inc., with experience in marketing and research.
MOMOKO A. BERAN joined Words+ in June 1993 as Director of Accounting and was
named the Company's Chief Financial Officer in July 1996. Prior to joining
Words+, Ms. Beran had been Financial Controller for AB Component Systems Inc.,
which had its headquarters in the U.K. Since February 1, 2003, Ms. Beran has
also been the Company's Director of Human Resources.
JEFFREY A. DAHLEN rejoined the Company in April 2003 as Vice President of
Research and Development for Words+ after five years with iAT, a software
consulting firm he founded based in Pasadena, California. Mr. Dahlen was
promoted to President of Words+, Inc. in April 2004. He is a graduate of
Stanford University in Electrical Engineering and has 20 years' experience in
both software and hardware design, which includes development of extremely high
speed processing hardware with the Jet Propulsion Laboratory at the California
Institute of Technology, and over 10 years of software and hardware design and
development at Words+.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation paid
or accrued for the fiscal years ended August 2005, 2004, and 2003 by the Company
to or for the benefit of the Company's CEO, President, Chief Financial Officer,
and Vice President, Sales and Marketing (the "named executive officers"). No
other executive officers of the Company received total annual compensation for
the fiscal year ended August 31, 2005, 2004, or 2003 that exceeded $100,000.
Summary Compensation Table
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NAME AND FISCAL ACCRUED LONG-TERM
PRINCIPAL POSITION YEAR SALARY BONUS (2) SALARY (1) OTHER (3) COMPENSATION
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Securities (#shares)
Underlying Options
Granted during FY
Walter S. Woltosz 2005 $165,000 $19,340 - - -
President and Chief 2004 $165,000 $38,813 - - -
Executive Officer 2003 $165,000 $ 7,538 $190,583 - -
Ronald F. Creeley 2005 $100,000 $ 4,951 - $4,000 5,000
Vice President, Sales 2004 $100,000 $ 6,596 - $3,679 -
and Marketing 2003 $100,000 $ 4,700 $ 35,519 $2,944 -
Momoko A. Beran 2005 $100,000 $ 6,010 $4,000 5,000
Chief Financial Officer 2004 $100,000 $10,010 - $3,667 -
2003 $ 87,500 $ 3,130 $ 47,413 $3,208 -
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(1) Amount represents deferred salary from previous years paid during the year.
(2) Amount represents bonus earned during the applicable year.
(3) Amount represents Company matching for 401(k) Plan.
SIMULATIONS PLUS INC. - NOTICE OF ANNUAL MEETING OF SHAREHOLDERS PG. 6
EMPLOYMENT AND OTHER COMPENSATION AGREEMENTS
The Board of Directors renewed its employment agreement with Walter Woltosz
commencing September 1, 2005 for two years. The agreement provided for an annual
salary of $172,000. Pursuant to such agreement, Mr. Woltosz was entitled to such
health insurance and other benefits that are not inconsistent with that which we
customarily provide to our other management employees and to reimbursement of
customary, ordinary and necessary business expenses incurred in connection with
the rendering of services to the Company. The agreement also provides that we
may terminate the agreement without cause upon 30 days' written notice, and that
our only obligation to Mr. Woltosz would be for a payment equal to the greater
of (i) 12 months of salary or (ii) the remainder of the term of the employment
agreement from the date of notice of termination. Further, the agreement
provides that we may terminate the agreement for cause (as defined) and that our
only obligation to Mr. Woltosz would be limited to the payment of Mr. Woltosz'
salary and benefits through and until the effective date of any such
termination.
As part of the agreement with the original underwriter and as partial
compensation for the sale of Words+ to Simulations Plus in 1996, commencing with
our fiscal year ending 1997 and for each fiscal year thereafter, Walter and
Virginia Woltosz are entitled to receive bonuses not to exceed $150,000 and
$60,000, respectively, equal to 5% of our net annual income before taxes. The
net income before tax for FY05 was $386,798, thus we accrued bonuses in the
total amount of $38,680: $19,340 for Walter Woltosz and $19,340 for Virginia
Woltosz. These bonuses are due and payable within 10 days after the filing of
the annual report.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of our Common Stock as of August 31, 2005 by (i) each person who is
known to own beneficially more than 5% of the outstanding shares of our Common
Stock, (ii) each of our directors and executive officers, and (iii) all
directors and executive officers of the Company as a group:
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AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER (1)(2) BENEFICIAL OWNERSHIP OF CLASS
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Walter S. and Virginia E. Woltosz (3) 2,057,000 50.45%
Momoko Beran (4) 190,500 4.67%
Ronald F. Creeley (5) 183,000 4.49%
Dr. David Z. D'Argenio (6) 4,653 *
Dr. Richard R. Weiss (7) 4,653 *
Jeffrey A. Dahlen (8) 10,000 *
All directors and officers as a group 2,449,806 60.08%
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* Less than 1%
(1) Such persons have sole voting and investment power with respect to all
Shares of Common Stock shown as being beneficially owned by them, subject to
community property laws, where applicable, and the information contained in the
footnotes to this table.
(2) The address of each director and executive officer named is c/o the Company,
42505 10th Street West, Lancaster, California 93534.
(3) Own an aggregate of 2,017,000 plus 40,000 shares of common stock underlying
an option exercisable within the next 60 days of the date of the Annual Report.
Does not include additional stock options for 10,000 shares, which are not
exercisable within the next 60 days of the date of the Annual Report.
(4) Owns 1,300 shares of common stock acquired from the exercise of options
granted under the 1996 Stock Option plan, plus 189,200 shares of common stock
underlying an option exercisable within the next 60 days of the date of the
Annual Report. Does not include stock options for 15,000 shares, which are not
exercisable within the next 60 days of the date of the Annual Report.
(5) Owns 1,000 shares of common stock, plus 182,000 shares of common stock
underlying an option exercisable within the next 60 days of the date of the
Annual Report. Does not include stock options for 15,000 shares, which are not
exercisable within the next 60 days of the date of the Annual Report.
SIMULATIONS PLUS INC. - NOTICE OF ANNUAL MEETING OF SHAREHOLDERS PG. 7
(6) Owns 1,000 shares of common stock, plus 3,653 shares of common stock
underlying an option exercisable within the next 60 days of the date of the
Annual Report. Does not include stock options for 950 shares, which are not
exercisable within the next 60 days of the date of the Annual Report.
(7) Owns 1,000 shares of common stock, plus 3,653 shares of common stock
underlying an option exercisable within the next 60 days of the date of the
Annual Report. Does not include stock options for 950 shares, which are not
exercisable within the next 60 days of the date of the Annual Report.
(8) 55,000 shares of common stock options were granted, of which 10,000 shares
are exercisable within the next 60 days of the date of the Annual Report. Does
not include stock options for 45,000 shares, which are not exercisable within
the next 60 days of the date of the Annual Report.
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OPTION GRANTS IN FY05
The following table discloses information about option grants to the Named
Executive Officers during the year ended August 31, 2005, including hypothetical
gains or "option spreads" for the options at the end of their respective
ten-year terms, as calculated in accordance with the rules of the SEC. Each gain
is based on an arbitrarily assumed annualized rate of compound appreciation of
the market price at the date of the grant of 1% and 4% from the date the option
was granted to the end of the option term. Actual gains, if any, on option
exercises are dependent on the future performance of our common stock, overall
market conditions and continued employment.
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NO. OF PERCENT OF POTENTIAL REALIZABLE VALUE AT
SECURITIES TOTAL OPTIONS ASSUMED ANNUAL RATED OF STOCK
UNDERLYING GRANTED TO EXERCISE PRICE APPRECIATION FOR OPTION TERM (4)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ---------- ----------
NAME GRANTED FY05 SHARE (3) DATE 1% 4%
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Walter S. Woltosz - 0% n/a n/a n/a n/a
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Virginia E. Woltosz - 0% n/a n/a n/a n/a
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Momoko A. Beran 5,000 7% $4.42 6/22/2015 $24,412 $32,713
------------------------------------------------------------------------------------------------------------------------------------
Ronald Creeley 5,000 7% $4.42 6/22/2015 $24,412 $32,713
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Jeffrey Dahlen 5,000 7% $4.42 6/22/2015 $24,412 $32,713
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AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
The following table discloses certain information regarding the options held at
August 31, 2005 by the Chief Executive Officer and each other named executive
officer.
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SHARES VALUE NUMBER VALUE OF
ACQUIRED ON REALIZED OF OPTIONS OPTIONS
EXERCISE (2) AT AUG. 31, 2005 AT AUG. 31, 2005 (1)
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Exercisable Unexercisable Exercisable Unexercisable
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Walter S. Woltosz - - 20,000 5,000 $ 37,200* $ 9,300*
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Virginia E. Woltosz - - 20,000 5,000 $ 37,200* $ 9,300*
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Momoko A. Beran - - 189,000 15,000 $270,123 $19,310
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Ronald F. Creeley 8,000 $28,880 182,000 15,000 $259,570 $19,310
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Dr. David Z. D'Argenio - - 3,653 950 $ 4,696 $ 152
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Dr. Richard R. Weiss - - 3,653 950 $ 4,696 $ 152
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Jeffrey Dahlen - - 10,000 45,000 - -
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SIMULATIONS PLUS INC. - NOTICE OF ANNUAL MEETING OF SHAREHOLDERS PG. 8
(1) Based on a per share price of $3.40 at August 31, 2005 less applicable
option exercise prices.
(2) The value realized represents the difference between the aggregate closing
price of the shares on the date of exercise less the aggregate exercise price
paid.
* Granted at $1.54, 110% of market price of the issue date
OPTION PLANS
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 (1)999, 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 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,
increasing the total number of shares that may be granted under the Option Plan
to 1,500,000. The Option Plan terminates in 2006, subject to earlier termination
by the Board of Directors.
COMPANY CODE OF ETHICS
1. PURPOSE
Simulations Plus and Words+ are involved in businesses that are intended to help
people, through our products and services that serve pharmaceutical science,
education, and the disabled community. Serving these customers while providing a
fair return on investment for our stockholders and a suitable working
environment for our employees requires that we conduct every aspect of our
business with honesty and integrity. This Code of Ethics sets out the basic
standards to be followed by employees to ensure that their daily actions on
behalf of the Company are honest and ethical.
2. SCOPE
This Code of Ethics applies to all Simulations Plus and Words+ employees in all
departments and functions.
3. POLICY
Each Simulations Plus and Words+ employee must:
3.1 Conduct the Company's business with honesty and integrity and in a
professional manner that protects the Company's good public image and
reputation.
3.2 Build relationships with customers, vendors, and fellow employees based on
trust, and treat every individual with respect and dignity in the conduct of
Company business.
3.3 Become familiar with and comply with all legal requirements and Company
policies and procedures that relate to their activities.
3.4 Avoid all activities that could involve or lead to involvement in any
unlawful practice or any harm to the Company's reputation or image.
3.5 Avoid actual or potential conflicts of interest with the Company, or the
appearance thereof, in all transactions.
3.6 Provide accurate and reliable information in all records kept or submitted.
3.7 Safeguard and respect the confidential information of the Company and its
vendors and customers.
3.8 Promptly report to the Company any violation of law or ethical principles or
Company policies that come to the employee s attention, and cooperate fully in
any audit, enquiry, review, or investigation by or on behalf of the Company.
SIMULATIONS PLUS INC. - NOTICE OF ANNUAL MEETING OF SHAREHOLDERS PG. 9
4. RESPONSIBILITY
4.1 All employees must uphold these standards in the conduct of Company
business, and the Company must handle all actual and apparent conflicts of
interest between personal and professional relationships and all other matters
governed by this Code and related policies.
4.2 Senior management should be a role model for these standards by visibly
demonstrating support and regularly encouraging adherence by managers. Managers
should ensure their employees receive guidance, training and communication on
ethical behavior and legal compliance relative to their duties for the Company.
4.3 Failure by any employee to comply with this or any Simulations Plus or
Words+ policy will subject employees, including supervisors who ignore
prohibited conduct, or have knowledge of the conduct and fail to correct it, to
disciplinary action up to and including dismissal from employment with the
Company.
4.4 When in doubt about what the correct action to take in any situation, ask
the following question: Would I feel comfortable in explaining this action to my
family or close friends or seeing my action reported on the front page of the
local newspaper? The Company is best served when each employee's answer to this
question is an unqualified Yes .
5. DEFINITIONS
None
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended August 31, 2005, the Board of Directors held four
meetings. The Board has an Audit Committee and a Compensation Committee.
The Audit Committee consists of Dr. D'Argenio, Dr. Weiss and Mr. Woltosz. The
Audit Committee, which meets periodically with management and the Company's
independent auditors, reviews the internal accounting procedures of the Company
and reviews the services provided by the Company's independent auditors. The
Audit Committee met four times during fiscal 2005.
The Compensation Committee consists of Dr. D'Argenio and Dr. Weiss. The
Compensation Committee met one time during fiscal 2005.
During fiscal 2005, each Board member attended 50% or more of the aggregate of
the meetings of the Board and of the committees on which he served, held during
the period for which he was a director or committee member, respectively.
DIRECTOR COMPENSATION
In accordance with the Company's bylaws, outside directors receive compensation
of $2500.00 per year plus $500 per meeting. In addition, each outside director
receives options for 500 shares per year at the fair value of the shares on the
date of grant.
SIMULATIONS PLUS INC. - NOTICE OF ANNUAL MEETING OF SHAREHOLDERS PG. 10
PROPOSAL 2: TO RATIFY THE SELECTION OF ROSE, SNYDER AND JACOBS CPA's AS THE
COMPANY'S INDEPENDENT ACCOUNTANTS
The Board has selected Rose, Snyder and Jacobs CPA's as its independent
registered accounting firm for the Company for 2005. A resolution is being
submitted to shareholders at the meeting for ratification of such selection and
the accompanying proxy will be voted for such ratification, unless instructions
to the contrary are indicated therein. Although ratification by shareholders is
not a legal prerequisite to the Board's selection of Rose, Snyder and Jacobs as
the Company's independent registered accounting firm, the Company believes such
ratification to be appropriate. If the shareholders do not ratify the selection
of Rose, Snyder and Jacobs, the selection of our independent registered
accounting firm will be reconsidered by the Board; however, the Board may select
Rose, Snyder and Jacobs, notwithstanding the failure of the shareholders to
ratify its selection.
The Board expects that a representative of Rose, Snyder and Jacobs will be
present at the meeting, will have an opportunity to make a statement if he or
she so desires, and will be available to respond to appropriate questions.
Singer Lewak Greenbaum & Goldstein LLP has been the Company's independent
registered accounting firm since 1996. For the fiscal year ended August 31,
2005, Singer Lewak Greenbaum & Goldstein LLP performed audit and other services
for the Company including consultations during the year on matters related to
accounting, financial reporting and the review of financial and related
information that was included in filings with the Securities and Exchange
Commission.
The Company incurred the following fees to Rose, Snyder & Jacobs, CPAs for
services rendered during the fiscal year ended August 31, 2005:
--------------------------------------------------------------------------------
FEE CATEGORY FY05 FEES
--------------------------------------------------------------------------------
Audit fees $55,803
Audit-related fees -
Tax fees 13,467
All other fees
Total fees $69,270
The Company incurred the following fees to Singer Lewak Greenbaum & Goldstein,
LLP for services rendered during the fiscal year ended August 31, 2004:
--------------------------------------------------------------------------------
FEE CATEGORY FY04 FEES (1)
--------------------------------------------------------------------------------
Audit fees $62,514
Audit-related fees -
Tax fees 9,474
All other fees
Total fees $71,988
(1) Includes fees billed and estimated adjustments by Singer Lewak Greenbaum &
Goldstein, LLP in 2004 for the 2004 audit and tax returns.
AUDIT FEES - Consists of fees incurred for professional services rendered for
the audit of Simulations Plus, Inc.'s consolidated financial statements and for
reviews of the interim consolidated financial statements included in our
quarterly reports on Form 10-QSB and consents for filings with the SEC.
AUDIT-RELATED FEES - Consists of fees billed for professional services that are
reasonably related to the performance of the audit or review of Simulations
Plus, Inc.'s consolidated financial statements, but are not reported under
"Audit fees." No such fees were incurred during the past two years.
TAX FEES - Consists of fees billed for professional services relating to tax
compliance, tax reporting, and tax advice.
ALL OTHER FEES - Consists of fees billed for all other services.
The appointment of auditors is approved annually by the Board. VOTE REQUIRED.
Approval of Proposal 2 requires the affirmative vote of a majority of the shares
of Common Stock present and voting at a meeting if a quorum is present.
Recommendation of the Board of Directors
The Board of Directors recommends a vote FOR approval of Proposal 2.
SIMULATIONS PLUS INC. - NOTICE OF ANNUAL MEETING OF SHAREHOLDERS PG. 11
OTHER MATTERS
The Board of Directors of the Company knows of no other matters to be presented
at the Annual Meeting other than those described above. However, if any other
matters properly come before the meeting, it is intended that any shares voted
by proxy will be voted in the discretion of the Board of Directors.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 as amended (the "Exchange
Act") requires the Company's officers and directors, and persons who own more
than ten percent of its Common Stock to file reports of ownership and changes
of ownership with the Securities and Exchange Commission and NASDAQ. Such
persons are also required to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on the Company's review of the copies of those forms received by
the Company, or written representations from such persons, the Company believes
that all Section 16(a) filing requirements for the fiscal year ended August 31,
2005 were met with the exception of two Form 4's by the directors.
By Order of the Board of Directors
/s/ Virginia E. Woltosz
--------------------------------------------------------------------------------
Virginia E. Woltosz
Secretary
Dated: December 20, 2005
SIMULATIONS PLUS INC. - NOTICE OF ANNUAL MEETING OF SHAREHOLDERS PG. 12
APPENDIX 1: AUDIT COMMITTEE CHARTER
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ORGANIZATION:
The audit committee shall be composed of directors, the majority of whom are
independent of the management of the corporation and are free of any
relationship that, in the opinion of the Board of Directors, would interfere
with their exercise of independent judgment as a committee member.
STATEMENT OF POLICY:
The audit committee shall provide assistance to the corporate management in
fulfilling their responsibility to the shareholders, potential shareholders, and
investment community on matters relating to corporate finances. In so doing, it
is the responsibility of the audit committee to maintain free and open means of
communication between the directors, the independent registered accounting firm
("independent auditors"), and the financial management of the corporation.
RESPONSIBILITIES:
In carrying out its responsibilities, the audit committee believes its policies
and procedures should remain flexible, in order to best react to changing
conditions and to ensure to the directors and shareholders that the corporate
accounting and reporting practices of the corporation are in accordance with all
requirements and are of high quality. In carrying out these responsibilities,
the audit committee will:
o Review and recommend to the management the independent auditors to be selected
to audit the financial statements of the corporation and its subsidiaries.
o Review with the independent auditors, the company's management, and financial
and accounting personnel, the adequacy and effectiveness of the accounting and
financial controls of the corporation, and elicit any recommendations for the
improvement of such internal control procedures or particular areas where new or
more detailed controls or procedures are desirable. Particular emphasis should
be given to the adequacy of such internal controls to expose any payments,
transactions, or procedures that might be deemed illegal or otherwise improper.
Further, the committee periodically should review company policy.
o Review the financial statements contained in the annual report to shareholders
with management and the independent auditors to determine that the independent
auditors are satisfied with the disclosure and content of the financial
statements to be presented to the shareholders. Any changes in accounting
principles should be reviewed.
o Provide sufficient opportunity for independent auditors to meet with the
members of the audit committee without members of management present. Among the
items to be discussed in these meetings are the independent auditors' evaluation
of the corporation's financial, accounting, auditing personnel, and the
cooperation that the independent auditors received during the course of the
audit.
o Investigate any matter brought to its attention within the scope of its
duties, with the power to retain outside counsel for this purpose if, in its
judgment, that is appropriate.
SIMULATIONS PLUS INC. - NOTICE OF ANNUAL MEETING OF SHAREHOLDERS PG. 13
APPENDIX 2: FORM OF PROXY CARD
--------------------------------------------------------------------------------
APPENDIX 2: FORM OF PROXY CARD
Exhibit to Proxy Statement for the 2006 Annual Meeting of Shareholders
Simulations Plus, Inc.
SIMULATIONS PLUS INC. - NOTICE OF ANNUAL MEETING OF SHAREHOLDERS PG. 14
PROXY
--------------------------------------------------------------------------------
SOLICITED BY THE BOARD OF DIRECTORS OF SIMULATIONS PLUS, INC.
-- ANNUAL MEETING OF SHAREHOLDERS -- FEBRUARY 24, 2006
The undersigned hereby appoints Walter S. Woltosz and Momoko A. Beran, or either
of them, attorneys and proxies for the undersigned, with full power of
substitution, for and in the name, place and stead of the undersigned, to
represent and vote, as designated below, all shares of stock of Simulations
Plus, Inc., a California Corporation, held of record by the undersigned on
December 20, 2005, at the Annual Meeting of the Shareholders to be held at 42505
10th Street West, Lancaster, California at 2:00 p.m. Pacific Standard Time on
February 24, or at any adjournment or postponement of such meeting, in
accordance with and as described in the Notice of Annual Meeting of Shareholders
and Proxy Statement. If no direction is given, this proxy will be voted FOR
Proposals 1 and 2, and in the discretion of the proxy as to such other matters
as may properly come before the meeting.
[X] Please mark the votes as in this example.
The Board of Directors recommends a vote for Proposals 1, and 2.
1. Election of Directors
Nominees: Walter S. Woltosz, Virginia E. Woltosz, Dr. David Z. D'Argenio
and Dr. Richard R. Weiss
FOR [ ] WITHHELD [ ]
--------------------------------------------------------------------------------
FOR all nominees except as stated on line above
2. Ratification of Selection of Rose, Snyder and Jacobs CPA's as Auditors
FOR [ ] AGAINST [ ] ABSTAIN [ ]
The undersigned hereby revokes any proxy or proxies heretofore given to vote
upon or act with respect to such stock and hereby ratifies all that the proxies,
their substitutes, or any of them, may lawfully do by virtue hereof.
Please sign exactly as your name appears on the address label affixed hereto. If
acting as attorney, executor, trustee or in other representative capacity, sign
name and title.
Date:
--------------------------------------------------------------------------------
Signature:
--------------------------------------------------------------------------------
Signature if held jointly:
--------------------------------------------------------------------------------
SIMULATIONS PLUS INC. - NOTICE OF ANNUAL MEETING OF SHAREHOLDERS PG. 15