An Extrinsic Fabry-Perot interferometric (EFPI) sensor attached to a vibrating structure will see a sinusoidal strain. Harmonic analysis on this strain yields well defined harmonics. Strain level measurement, on a periodically-actuated-instrumented structure, can provide information about the heath of that structure. This approach can form a smart health monitoring system for composite structures. A simple demodulation system employing artificial neural networks (ANN) was used to extract harmonics and predict the maximum strain level on a smart composite beam. This paper deals with the computer simulation of the sinusoidal strain and implementation of the demodulation system. The system employs two back-propagation neural networks. The first network extracts the harmonics from the strain profile and the second predicts the strain levels through harmonic analysis extracted.