##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


Form 10-Q


|   |  |                                                                                             
|-- |  | --------------------------------------------------------------------------------------------
|þ  |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934 
|   |  | For the quarterly period ended March 31, 2006                                               
|  
|OR
|  
|o  |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
|  
|   |  | For the transition period
    from           to                                             

Commission file number: 000-30027


Moldflow Corporation


(Exact name of registrant as specified in its charter)


|                                                                           |  |                                                   
|-------------------------------------------------------------------------- |  | --------------------------------------------------
|Delaware(State or other jurisdiction of
    incorporation or organization) |  | 04-3406763(I.R.S. Employer
    Identification No.)

492 OLD CONNECTICUT PATH, SUITE 401 FRAMINGHAM, MA 01701


(Address of principal executive offices) (Zip Code)


508-358-5848


(Registrants telephone number, including area code)


[None]


(Former name, former address and former fiscal year, if
changed since last report)


þ o


12b-2 o þ o


12b-2 o þ




|                                        |  |                           
|--------------------------------------- |  | --------------------------
|Class                                   |  | Outstanding at May 8, 2006
|                                        |  |                           
|Common Stock, $0.01 par value per share |  | 11,390,414 shares         









---



##### 










MOLDFLOW CORPORATION


FORM 10-Q


For the Quarter Ended March 31, 2006


TABLE OF CONTENTS


|                                         |  |                                                                                                                                 |  |        |    | 
|---------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------- |  | ------ | -- | 
|                                         |  |                                                                                                                                 |  | Page   |   
|                                         |  |                                                                                                                                 |  | Number |   
|                                         |  |                                                                                                                                 |  |        |   
|PART I. FINANCIAL
    INFORMATION       
|Item 1.                                  |  | Unaudited Financial Statements:                                                                                                 |  |        |    | 
|                                         |  | Condensed Consolidated Balance Sheet as of
    March 31, 2006 and June 30, 2005                                                 |  |        | 2  | 
|                                         |  | Condensed Consolidated Statement of Income
    for the three months and nine months ended March 31, 2006
    and March 26, 2005 |  |        | 3  | 
|                                         |  | Condensed Consolidated Statement of Cash
    Flows for the nine months ended March 31, 2006 and
    March 26, 2005              |  |        | 4  | 
|                                         |  | Notes to Unaudited Condensed Consolidated
    Financial Statements                                                              |  |        | 5  | 
|Item 2.                                  |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                                       |  |        | 19 | 
|Item 3.                                  |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                                  |  |        | 36 | 
|Item 4.                                  |  | Controls and Procedures                                                                                                         |  |        | 37 | 
|PART II. OTHER INFORMATION              
|Item 1.                                  |  | Legal Proceedings                                                                                                               |  |        | 38 | 
|Item 1A.                                 |  | Risk Factors                                                                                                                    |  |        | 38 | 
|Item 6.                                  |  | Exhibits                                                                                                                        |  |        | 44 | 
|Signatures                               |  |                                                                                                                                 |  |        | 45 | 
|EX-31.1 Section 302 Certification of CEO
|EX-31.2 Section 302 Certification of CFO
|EX-32.1 Section 906 Certification of CEO
|EX-32.2 Section 906 Certification of CFO



1



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##### Table of Contents






PART I. FINANCIAL INFORMATION







|        |                               
|------- | ------------------------------
|Item 1. | Unaudited Financial Statements




MOLDFLOW CORPORATION


CONDENSED CONSOLIDATED BALANCE SHEET


|                                     |                                        |                                            |        |        |          |  |        |        |         | 
|------------------------------------ | -------------------------------------- | ------------------------------------------ | ------ | ------ | -------- |  | ------ | ------ | ------- | 
|                                     |                                        | March 31,                                  |        |        | June 30, | 
|                                     |                                        | 2006                                       |        |        | 2005     | 
|                                     |                                        |                                            |        |        |          | 
|                                     |                                        | (In thousands)                             |       
|                                     |                                        | (Unaudited)                                |       
|ASSETS                              
|Current assets:                      |                                        |                                            |        |        |          |  |        |       
|                                     | Cash and cash equivalents              |                                            | $      | 54,577 |          |  | $      | 48,910 |        
|                                     | Marketable securities                  |                                            |        | 6,762  |          |  |        | 11,323 |        
|                                     | Accounts receivable, net               |                                            |        | 14,218 |          |  |        | 13,449 |        
|                                     | Inventories                            |                                            |        | 1,747  |          |  |        | 1,381  |        
|                                     | Prepaid expenses                       |                                            |        | 3,889  |          |  |        | 3,013  |        
|                                     | Other current assets                   |                                            |        | 2,946  |          |  |        | 2,589  |        
|                                     |                                        |                                            |        |        |          | 
|                                     |                                        | Total current assets                       |        |        | 84,139   |  |        |        | 80,665  | 
|Fixed assets, net                    |                                        |                                            | 3,217  |        |          |  | 3,336  |       
|Acquired intangible assets, net      |                                        |                                            | 1,300  |        |          |  | 1,555  |       
|Goodwill                             |                                        |                                            | 18,625 |        |          |  | 18,622 |       
|Other assets                         |                                        |                                            | 2,728  |        |          |  | 2,851  |       
|                                     |                                        |                                            |        |        |          | 
|                                     |                                        | Total assets                               |        | $      | 110,009  |  |        | $      | 107,029 | 
|                                     |                                        |                                            |        |        |          | 
|                                    
|LIABILITIES AND STOCKHOLDERS EQUITY
|Current liabilities:                 |                                        |                                            |        |        |          |  |        |       
|                                     | Accounts payable                       |                                            | $      | 1,687  |          |  | $      | 3,764  |        
|                                     | Accrued expenses                       |                                            |        | 10,039 |          |  |        | 10,165 |        
|                                     | Deferred revenue                       |                                            |        | 11,755 |          |  |        | 10,748 |        
|                                     |                                        |                                            |        |        |          | 
|                                     |                                        | Total current liabilities                  |        |        | 23,481   |  |        |        | 24,677  | 
|Deferred revenue                     |                                        |                                            | 1,350  |        |          |  | 1,124  |       
|Other long-term liabilities          |                                        |                                            | 945    |        |          |  | 1,079  |       
|                                     |                                        |                                            |        |        |          | 
|                                     |                                        | Total liabilities                          |        |        | 25,776   |  |        |        | 26,880  | 
|                                     |                                        |                                            |        |        |          | 
|Stockholders equity:                |                                        |                                            |        |        |          |  |        |       
|                                     | Common stock                           |                                            |        | 112    |          |  |        | 109    |        
|                                     | Additional paid-in capital             |                                            |        | 73,225 |          |  |        | 69,626 |        
|                                     | Retained earnings                      |                                            |        | 6,736  |          |  |        | 5,295  |        
|                                     | Accumulated other comprehensive income |                                            |        | 4,160  |          |  |        | 5,119  |        
|                                     |                                        |                                            |        |        |          | 
|                                     |                                        | Total stockholders equity                 |        |        | 84,233   |  |        |        | 80,149  | 
|                                     |                                        |                                            |        |        |          | 
|                                     |                                        | Total liabilities and stockholders equity |        | $      | 110,009  |  |        | $      | 107,029 | 
|                                     |                                        |                                            |        |        |          | 



2



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##### Table of Contents



MOLDFLOW CORPORATION





CONDENSED CONSOLIDATED STATEMENT OF INCOME


|                                                      |                                            |                                       |     |        |                   |  |       |           |        |  |           |        |        |  |       |        |        | 
|----------------------------------------------------- | ------------------------------------------ | ------------------------------------- | --- | ------ | ----------------- |  | ----- | --------- | ------ |  | --------- | ------ | ------ |  | ----- | ------ | ------ | 
|                                                      |                                            | Three Months Ended                    |     |        | Nine Months Ended | 
|                                                      |                                            |                                       |     |        |                   | 
|                                                      |                                            | March 31,                             |     |        | March 26,         |  |       | March 31, |        |  | March 26, |       
|                                                      |                                            | 2006                                  |     |        | 2005              |  |       | 2006      |        |  | 2005      |       
|                                                      |                                            |                                       |     |        |                   |  |       |           |        |  |           |       
|                                                      |                                            | (In thousands, except per share data) |    
|                                                      |                                            | (Unaudited)                           |    
|Revenue:                                              |                                            |                                       |     |        |                   |  |       |           |        |  |           |        |        |  |       |       
|                                                      | Product                                    |                                       | $   | 9,503  |                   |  | $     | 9,487     |        |  | $         | 28,319 |        |  | $     | 26,976 |       
|                                                      | Services                                   |                                       |     | 6,754  |                   |  |       | 6,410     |        |  |           | 20,112 |        |  |       | 19,160 |       
|                                                      |                                            |                                       |     |        |                   |  |       |           |        |  |           |       
|                                                      |                                            | Total revenue                         |     |        | 16,257            |  |       |           | 15,897 |  |           |        | 48,431 |  |       |        | 46,136 | 
|                                                      |                                            |                                       |     |        |                   |  |       |           |        |  |           |       
|Costs and operating expenses:                         |                                            |                                       |     |        |                   |  |       |           |        |  |           |        |        |  |       |       
|                                                      | Cost of product revenue                    |                                       |     | 2,528  |                   |  |       | 2,088     |        |  |           | 7,540  |        |  |       | 5,804  |       
|                                                      | Cost of services revenue                   |                                       |     | 1,784  |                   |  |       | 1,642     |        |  |           | 5,102  |        |  |       | 4,588  |       
|                                                      | Research and development                   |                                       |     | 2,459  |                   |  |       | 2,160     |        |  |           | 7,135  |        |  |       | 5,845  |       
|                                                      | Selling and marketing                      |                                       |     | 5,786  |                   |  |       | 5,650     |        |  |           | 17,303 |        |  |       | 15,956 |       
|                                                      | General and administrative                 |                                       |     | 2,684  |                   |  |       | 2,869     |        |  |           | 9,762  |        |  |       | 8,445  |       
|                                                      | Restructuring charges                      |                                       |     |       |                   |  |       |          |        |  |           | 1,387  |        |  |       |       |       
|                                                      | Amortization of acquired intangible assets |                                       |     | 49     |                   |  |       | 73        |        |  |           | 147    |        |  |       | 224    |       
|                                                      |                                            |                                       |     |        |                   |  |       |           |        |  |           |       
|                                                      |                                            | Total costs and operating expenses    |     |        | 15,290            |  |       |           | 14,482 |  |           |        | 48,376 |  |       |        | 40,862 | 
|                                                      |                                            |                                       |     |        |                   |  |       |           |        |  |           |       
|Income from operations                                |                                            |                                       | 967 |        |                   |  | 1,415 |           |        |  | 55        |        |        |  | 5,274 |       
|Interest income, net                                  |                                            |                                       | 663 |        |                   |  | 405   |           |        |  | 1,856     |        |        |  | 1,135 |       
|Other income, net                                     |                                            |                                       | 62  |        |                   |  | 86    |           |        |  | 96        |        |        |  | 44    |       
|                                                      |                                            |                                       |     |        |                   |  |       |           |        |  |           |       
|                                                      |                                            | Income before income taxes            |     |        | 1,692             |  |       |           | 1,906  |  |           |        | 2,007  |  |       |        | 6,453  | 
|Provision for (benefit from) income taxes             |                                            |                                       | 172 |        |                   |  | (139  | )         |        |  | 566       |        |        |  | 1,054 |       
|                                                      |                                            |                                       |     |        |                   |  |       |           |        |  |           |       
|                                                      |                                            | Net income                            |     | $      | 1,520             |  |       | $         | 2,045  |  |           | $      | 1,441  |  |       | $      | 5,399  | 
|                                                      |                                            |                                       |     |        |                   |  |       |           |        |  |           |       
|Net income per common share:                          |                                            |                                       |     |        |                   |  |       |           |        |  |           |        |        |  |       |       
|                                                      | Basic                                      |                                       | $   | 0.14   |                   |  | $     | 0.19      |        |  | $         | 0.13   |        |  | $     | 0.50   |       
|                                                      | Diluted                                    |                                       | $   | 0.13   |                   |  | $     | 0.17      |        |  | $         | 0.12   |        |  | $     | 0.47   |       
|Shares used in computing net income per common share: |                                            |                                       |     |        |                   |  |       |           |        |  |           |        |        |  |       |       
|                                                      | Basic                                      |                                       |     | 11,139 |                   |  |       | 10,837    |        |  |           | 11,076 |        |  |       | 10,713 |       
|                                                      | Diluted                                    |                                       |     | 11,817 |                   |  |       | 11,890    |        |  |           | 11,816 |        |  |       | 11,599 |       



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MOLDFLOW CORPORATION





CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS


|                                                                                      |                                                                 |                                                         |        |         |           |   |        |        |        |  
|------------------------------------------------------------------------------------- | --------------------------------------------------------------- | ------------------------------------------------------- | ------ | ------- | --------- | - | ------ | ------ | ------ | -
|                                                                                      |                                                                 | Nine Months Ended                                       |       
|                                                                                      |                                                                 |                                                         |       
|                                                                                      |                                                                 | March 31,                                               |        |         | March 26, |  
|                                                                                      |                                                                 | 2006                                                    |        |         | 2005      |  
|                                                                                      |                                                                 |                                                         |        |         |           |  
|                                                                                      |                                                                 | (In thousands)                                          |       
|                                                                                      |                                                                 | (Unaudited)                                             |       
|Cash flows from operating activities:                                                 |                                                                 |                                                         |        |         |           |   |        |       
|Net income                                                                            |                                                                 | $                                                       | 1,441  |         |           | $ | 5,399  |       
|Adjustments to reconcile net income to net cash provided by
    operating activities: |                                                                 |                                                         |        |         |           |   |        |       
|                                                                                      | Depreciation of fixed assets                                    |                                                         |        | 982     |           |   |        | 1,043  |       
|                                                                                      | Amortization of acquired intangible assets                      |                                                         |        | 253     |           |   |        | 331    |       
|                                                                                      | Amortization of other intangible assets                         |                                                         |        | 552     |           |   |        | 548    |       
|                                                                                      | Provisions for doubtful accounts                                |                                                         |        | 36      |           |   |        | 74     |       
|                                                                                      | Share-based compensation                                        |                                                         |        | 1,703   |           |   |        |       |       
|                                                                                      | Change in deferred income taxes due to share-based compensation |                                                         |        | (96     | )         |   |        |       |       
|                                                                                      | Foreign exchange gains                                          |                                                         |        | (115    | )         |   |        | (66    | )     
|                                                                                      | Changes in operating assets and liabilities:                    |                                                         |        |         |           |   |        |        |       
|                                                                                      |                                                                 | Accounts receivable                                     |        |         | (937      | ) |        |        | (3,129 | )
|                                                                                      |                                                                 | Inventories, prepaid expenses, and other current assets |        |         | (1,665    | ) |        |        | (60    | )
|                                                                                      |                                                                 | Other assets                                            |        |         | 34        |   |        |        | (24    | )
|                                                                                      |                                                                 | Accounts payable                                        |        |         | (2,068    | ) |        |        | (552   | )
|                                                                                      |                                                                 | Accrued expenses and other liabilities                  |        |         | (142      | ) |        |        | 864    |  
|                                                                                      |                                                                 | Deferred revenue                                        |        |         | 1,480     |   |        |        | 658    |  
|                                                                                      |                                                                 |                                                         |        |         |           |  
|                                                                                      |                                                                 | Net cash provided by operating activities               |        |         | 1,458     |   |        |        | 5,086  |  
|                                                                                      |                                                                 |                                                         |        |         |           |  
|Cash flows from investing activities:                                                 |                                                                 |                                                         |        |         |           |   |        |       
|                                                                                      | Purchases of fixed assets                                       |                                                         |        | (1,015  | )         |   |        | (997   | )     
|                                                                                      | Capitalization of software development costs                    |                                                         |        | (410    | )         |   |        | (201   | )     
|                                                                                      | Purchases of marketable securities                              |                                                         |        | (11,150 | )         |   |        | (3,832 | )     
|                                                                                      | Sales and maturities of marketable securities                   |                                                         |        | 15,711  |           |   |        | 8,528  |       
|                                                                                      |                                                                 |                                                         |        |         |           |  
|                                                                                      |                                                                 | Net cash provided by investing activities               |        |         | 3,136     |   |        |        | 3,498  |  
|                                                                                      |                                                                 |                                                         |        |         |           |  
|Cash flows from financing activities:                                                 |                                                                 |                                                         |        |         |           |   |        |       
|                                                                                      | Proceeds from issuance of common stock                          |                                                         |        | 1,964   |           |   |        | 1,879  |       
|                                                                                      | Tax benefit related to exercised stock options                  |                                                         |        | 30      |           |   |        |       |       
|                                                                                      |                                                                 |                                                         |        |         |           |  
|                                                                                      |                                                                 | Net cash provided by financing activities               |        |         | 1,994     |   |        |        | 1,879  |  
|                                                                                      |                                                                 |                                                         |        |         |           |  
|Effect of exchange rate changes on cash and cash equivalents                          |                                                                 |                                                         | (921   | )       |           |   | 1,338  |       
|                                                                                      |                                                                 |                                                         |        |         |           |  
|Net increase in cash and cash equivalents                                             |                                                                 |                                                         | 5,667  |         |           |   | 11,801 |       
|Cash and cash equivalents, beginning of period                                        |                                                                 |                                                         | 48,910 |         |           |   | 35,987 |       
|                                                                                      |                                                                 |                                                         |        |         |           |  
|Cash and cash equivalents, end of period                                              |                                                                 | $                                                       | 54,577 |         |           | $ | 47,788 |       
|                                                                                      |                                                                 |                                                         |        |         |           |  



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MOLDFLOW CORPORATION


NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS







|   |                                             
|-- | --------------------------------------------
|1. | Basis of Presentation and Nature of Business



10-K.






|   |                                         
|-- | ----------------------------------------
|2. | Stock Plans and Share-Based Compensation

10-Q


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##### Table of Contents



MOLDFLOW CORPORATION


NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                           |                                             |                |      |     |                |   |      |       | 
|-------------------------- | ------------------------------------------- | -------------- | ---- | --- | -------------- | - | ---- | ----- | 
|                           |                                             | Three Months   |      |     | Nine Months    |  
|                           |                                             | Ended          |      |     | Ended          |  
|                           |                                             | March 31,      |      |     | March 31,      |  
|                           |                                             | 2006           |      |     | 2006           |  
|                           |                                             |                |      |     |                |  
|                           |                                             | (In thousands) |      |     | (In thousands) |  
|Cost of product revenue    |                                             | $              | 15   |     |                | $ | 49   |      
|Cost of services revenue   |                                             |                | 24   |     |                |   | 81   |      
|Research and development   |                                             |                | 89   |     |                |   | 261  |      
|Selling and marketing      |                                             |                | 130  |     |                |   | 405  |      
|General and administrative |                                             |                | 253  |     |                |   | 907  |      
|                           |                                             |                |      |     |                |  
|                           | Share-based compensation expense before tax |                |      | 511 |                |   |      | 1,703 | 
|Income tax benefit         |                                             |                | (156 | )   |                |   | (230 | )    
|                           |                                             |                |      |     |                |  
|                           | Net compensation expense                    |                | $    | 355 |                |   | $    | 1,473 | 
|                           |                                             |                |      |     |                |  







|                              |  |              |       |   |             |  |               | 
|----------------------------- |  | ------------ | ----- | - | ----------- |  | ------------- | 
|                              |  | Three Months |       |   | Nine Months | 
|                              |  | Ended        |       |   | Ended       | 
|                              |  | March 31,    |       |   | March 31,   | 
|                              |  | 2006         |       |   | 2006        | 
|                              |  |              |       |   |             | 
|Dividend yield                |  |              | 0     | % |             |  | 0%            | 
|Expected volatility factor(1) |  |              | 40.92 | % |             |  | 40.92%-49.16% | 
|Risk-free interest rate(2)    |  |              | 4.64  | % |             |  | 3.92%-4.64%   | 
|Expected term (in years)(3)   |  |              | 3.5   |   |             |  | 3.5-5.8       | 






|    |                                                                                                                                                                                                                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Measured using a weighted average of historical daily price
    changes of the Companys stock over the most recent period
    that matches the expected term of the option.                                                                                                                                                                     
|   
|(2) | The risk-free interest rate for periods equal to the expected
    term of the share option is based on the U.S. Treasury
    yield in effect at the time of grant.                                                                                                                                                                               
|   
|(3) | The expected term is the number of years that the Company
    estimates, based primarily on historical experience, that the
    options will be outstanding prior to exercise. The Company has
    elected to use the simplified method for estimating the expected
    term for its stock options, which qualify as
    plain-vanilla options.

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##### Table of Contents



MOLDFLOW CORPORATION


NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                       |                                                                                                                                |                |       |      |                |   |       |        |  
|---------------------- | ------------------------------------------------------------------------------------------------------------------------------ | -------------- | ----- | ---- | -------------- | - | ----- | ------ | -
|                       |                                                                                                                                | Three Months   |       |      | Nine Months    |  
|                       |                                                                                                                                | Ended          |       |      | Ended          |  
|                       |                                                                                                                                | March 26,      |       |      | March 26,      |  
|                       |                                                                                                                                | 2005           |       |      | 2005           |  
|                       |                                                                                                                                |                |       |      |                |  
|                       |                                                                                                                                | (In thousands, |       |      | (In thousands, |  
|                       |                                                                                                                                | except per     |       |      | except per     |  
|                       |                                                                                                                                | share data)    |       |      | share data)    |  
|Net income as reported |                                                                                                                                | $              | 2,045 |      |                | $ | 5,399 |       
|Less:                  |                                                                                                                                |                |       |      |                |   |       |       
|                       | Total share-based compensation expense determined under fair
    value based method for all awards, net of related tax effects |                |       | (879 | )              |   |       | (2,653 | )
|                       |                                                                                                                                |                |       |      |                |  
|Pro forma net income   |                                                                                                                                | $              | 1,166 |      |                | $ | 2,746 |       
|                       |                                                                                                                                |                |       |      |                |  
|Net income per share:  |                                                                                                                                |                |       |      |                |   |       |       
|                       | Basic  as reported                                                                                                            |                | $     | 0.19 |                |   | $     | 0.50   |  
|                       | Basic  pro forma                                                                                                              |                | $     | 0.11 |                |   | $     | 0.26   |  
|                       | Diluted  as reported                                                                                                          |                | $     | 0.17 |                |   | $     | 0.47   |  
|                       | Diluted  pro forma                                                                                                            |                | $     | 0.10 |                |   | $     | 0.23   |  



|                         |  |              |      |   |             |  |      |  
|------------------------ |  | ------------ | ---- | - | ----------- |  | ---- | -
|                         |  | Three Months |      |   | Nine Months | 
|                         |  | Ended        |      |   | Ended       | 
|                         |  | March 26,    |      |   | March 26,   | 
|                         |  | 2005         |      |   | 2005        | 
|                         |  |              |      |   |             | 
|Dividend yield           |  |              | 0    | % |             |  | 0    | %
|Volatility               |  |              | 82.0 | % |             |  | 84.0 | %
|Risk-free interest rate  |  |              | 3.6  | % |             |  | 3.5  | %
|Expected term (in years) |  |              | 4.3  |   |             |  | 4.4  |  

Stock Plans






7



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##### Table of Contents



MOLDFLOW CORPORATION


NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                                                             |  |                   |           |                  |                |   |       |        |                  |  |                |   |  |   |       | 
|------------------------------------------------------------ |  | ----------------- | --------- | ---------------- | -------------- | - | ----- | ------ | ---------------- |  | -------------- | - |  | - | ----- | 
|                                                             |  | Nine Months Ended |          
|                                                             |  |                   |          
|                                                             |  | March 31, 2006    |           |                  | March 26, 2005 |  
|                                                             |  |                   |           |                  |                |  
|                                                             |  |                   |           | Weighted Average |                |   |       |        | Weighted Average | 
|                                                             |  | Shares            |           |                  | Exercise Price |   |       | Shares |                  |  | Exercise Price |  
|                                                             |  |                   |           |                  |                |   |       |        |                  |  |                |  
|Outstanding at beginning of period                           |  |                   | 2,487,267 |                  |                | $ | 10.22 |        |                  |  | 2,634,157      |   |  | $ | 9.77  | 
|Granted                                                      |  |                   | 183,029   |                  |                |   | 15.07 |        |                  |  | 337,800        |   |  |   | 12.20 | 
|Exercised                                                    |  |                   | (318,026  | )                |                |   | 6.92  |        |                  |  | (282,205       | ) |  |   | 7.39  | 
|Canceled                                                     |  |                   | (77,630   | )                |                |   | 14.84 |        |                  |  | (88,406        | ) |  |   | 12.08 | 
|                                                             |  |                   |           |                  |                |   |       |        |                  |  |                |  
|Outstanding at end of period                                 |  |                   | 2,274,640 |                  |                | $ | 10.92 |        |                  |  | 2,601,346      |   |  | $ | 10.26 | 
|                                                             |  |                   |           |                  |                |   |       |        |                  |  |                |  
|Options exercisable at end of period                         |  |                   | 1,778,980 |                  |                |   |       |        |                  |  | 1,754,262      |   |  |   |       | 
|Weighted average fair value of options granted in the period |  |                   |           |                  |                | $ | 6.00  |        |                  |  |                |   |  | $ | 7.87  | 



|                         |  |                     |           |             |                     |  |           |       |  |   |        |          |  |                |           |  |  |   |       | 
|------------------------ |  | ------------------- | --------- | ----------- | ------------------- |  | --------- | ----- |  | - | ------ | -------- |  | -------------- | --------- |  |  | - | ----- | 
|                         |  | Options Outstanding |           |             | Options Exercisable | 
|                         |  |                     |           |             |                     | 
|                         |  |                     |           | Weighted    |                     |  |           |       | 
|                         |  |                     |           | Average     |                     |  | Weighted  |       |  |  
|                         |  |                     |           | Remaining   |                     |  | Average   |       |  |   |        | Weighted | 
|                         |  |                     |           | Contractual |                     |  | Exercise  |       |  |   |        | Average  | 
|Range of Exercise Prices |  | Shares              |           |             | Life                |  |           | Price |  |   | Shares |          |  | Exercise Price |          
|                         |  |                     |           |             |                     |  |           |       |  |   |        |          |  |                |          
|$0.36-$5.00              |  |                     | 604,749   |             |                     |  | 1.4 years |       |  | $ | 4.61   |          |  |                | 604,749   |  |  | $ | 4.61  | 
|$5.01-$10.00             |  |                     | 378,244   |             |                     |  | 2.7 years |       |  |   | 9.13   |          |  |                | 285,804   |  |  |   | 8.94  | 
|$10.01-$15.00            |  |                     | 775,418   |             |                     |  | 2.7 years |       |  |   | 12.24  |          |  |                | 544,726   |  |  |   | 12.32 | 
|$15.01-$20.00            |  |                     | 434,679   |             |                     |  | 3.2 years |       |  |   | 16.67  |          |  |                | 262,151   |  |  |   | 17.45 | 
|$20.01-$25.00            |  |                     | 65,450    |             |                     |  | 2.7 years |       |  |   | 21.75  |          |  |                | 65,450    |  |  |   | 21.75 | 
|$25.01-$30.00            |  |                     | 16,100    |             |                     |  | 2.8 years |       |  |   | 26.24  |          |  |                | 16,100    |  |  |   | 26.24 | 
|                         |  |                     |           |             |                     |  |           |       |  |   |        |          |  |                |          
|                         |  |                     | 2,274,640 |             |                     |  | 2.5 years |       |  | $ | 10.92  |          |  |                | 1,778,980 |  |  | $ | 10.39 | 
|                         |  |                     |           |             |                     |  |           |       |  |   |        |          |  |                |          





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MOLDFLOW CORPORATION


NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                            |  |           |        |          |            |   |       | 
|--------------------------- |  | --------- | ------ | -------- | ---------- | - | ----- | 
|                            |  |           |        | Weighted |           
|                            |  |           |        | Average  |           
|                            |  | Number    |        |          | Grant Date |  
|                            |  | of Shares |        |          | Fair Value |  
|                            |  |           |        |          |            |  
|Nonvested at June 30, 2005  |  |           |       |          |            |   |      | 
|Granted                     |  |           | 94,733 |          |            | $ | 15.39 | 
|Vested                      |  |           |       |          |            |   |      | 
|Forfeited                   |  |           |       |          |            |   |      | 
|                            |  |           |        |          |            |  
|Nonvested at March 31, 2006 |  |           | 94,733 |          |            | $ | 15.39 | 
|                            |  |           |        |          |            |  





|   |                            
|-- | ---------------------------
|3. | Net Income Per Common Share



|                                                                                    |                                             |                                       |        |     |                   |   |        |           |  |   |           |     |  |   |        |     | 
|----------------------------------------------------------------------------------- | ------------------------------------------- | ------------------------------------- | ------ | --- | ----------------- | - | ------ | --------- |  | - | --------- | --- |  | - | ------ | --- | 
|                                                                                    |                                             | Three Months Ended                    |        |     | Nine Months Ended |  
|                                                                                    |                                             |                                       |        |     |                   |  
|                                                                                    |                                             | March 31,                             |        |     | March 26,         |   |        | March 31, |  |   | March 26, |    
|                                                                                    |                                             | 2006                                  |        |     | 2005              |   |        | 2006      |  |   | 2005      |    
|                                                                                    |                                             |                                       |        |     |                   |   |        |           |  |   |           |    
|                                                                                    |                                             | (In thousands, except per share data) |       
|Net income                                                                          |                                             | $                                     | 1,520  |     |                   | $ | 2,045  |           |  | $ | 1,441     |     |  | $ | 5,399  |    
|                                                                                    |                                             |                                       |        |     |                   |   |        |           |  |   |           |    
|Weighted average shares used in computing net income per common
    share  basic   |                                             |                                       | 11,139 |     |                   |   | 10,837 |           |  |   | 11,076    |     |  |   | 10,713 |    
|Effect of dilutive securities:                                                      |                                             |                                       |        |     |                   |   |        |           |  |   |           |     |  |   |        |    
|                                                                                    | Stock options and unvested restricted stock |                                       |        | 678 |                   |   |        | 1,053     |  |   |           | 740 |  |   |        | 886 | 
|                                                                                    |                                             |                                       |        |     |                   |   |        |           |  |   |           |    
|Weighted average shares used in computing net income per common
    share  diluted |                                             |                                       | 11,817 |     |                   |   | 11,890 |           |  |   | 11,816    |     |  |   | 11,599 |    
|                                                                                    |                                             |                                       |        |     |                   |   |        |           |  |   |           |    
|Net income per common share  basic                                                 |                                             | $                                     | 0.14   |     |                   | $ | 0.19   |           |  | $ | 0.13      |     |  | $ | 0.50   |    
|Net income per common share  diluted                                               |                                             | $                                     | 0.13   |     |                   | $ | 0.17   |           |  | $ | 0.12      |     |  | $ | 0.47   |    





|   |                                                        
|-- | -------------------------------------------------------
|4. | Derivative Financial Instruments and Hedging Activities



9



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##### Table of Contents



MOLDFLOW CORPORATION


NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|   |                           
|-- | --------------------------
|5. | Acquired Intangible Assets





|                            |                        |                |       |       |               |   |        |          |   |       |          |     |  |              |       |       |          |   |        |        |   |   |       |     | 
|--------------------------- | ---------------------- | -------------- | ----- | ----- | ------------- | - | ------ | -------- | - | ----- | -------- | --- |  | ------------ | ----- | ----- | -------- | - | ------ | ------ | - | - | ----- | --- | 
|                            |                        | March 31, 2006 |       |       | June 30, 2005 |  
|                            |                        |                |       |       |               |  
|                            |                        | Gross          |       |       |               |   | Net    |          |   | Gross |          |     |  |              | Net   |      
|                            |                        | Carrying       |       |       | Accumulated   |   |        | Carrying |   |       | Carrying |     |  | Accumulated  |       |       | Carrying |  
|                            |                        | Amount         |       |       | Amortization  |   |        | Amount   |   |       | Amount   |     |  | Amortization |       |       | Amount   |  
|                            |                        |                |       |       |               |   |        |          |   |       |          |     |  |              |       |       |          |  
|                            |                        | (In thousands) |      
|Acquired intangible assets: |                        |                |       |       |               |   |        |          |   |       |          |     |  |              |       |       |          |   |        |        |   |   |       |    
|                            | Customer base          |                | $     | 986   |               |   | $      | (496     | ) |       | $        | 490 |  |              | $     | 987   |          |   | $      | (380   | ) |   | $     | 607 | 
|                            | Developed technology   |                |       | 1,675 |               |   |        | (978     | ) |       |          | 697 |  |              |       | 1,675 |          |   |        | (870   | ) |   |       | 805 | 
|                            | Customer order backlog |                |       | 40    |               |   |        | (40      | ) |       |          |    |  |              |       | 40    |          |   |        | (40    | ) |   |       |    | 
|                            | Non-compete agreements |                |       | 1,410 |               |   |        | (1,297   | ) |       |          | 113 |  |              |       | 1,411 |          |   |        | (1,268 | ) |   |       | 143 | 
|                            |                        |                |       |       |               |   |        |          |   |       |          |     |  |              |       |       |          |  
|Total                       |                        | $              | 4,111 |       |               | $ | (2,811 | )        |   | $     | 1,300    |     |  | $            | 4,113 |       |          | $ | (2,558 | )      |   | $ | 1,555 |    
|                            |                        |                |       |       |               |   |        |          |   |       |          |     |  |              |       |       |          |  



10



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##### Table of Contents



MOLDFLOW CORPORATION


NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                  |  |                |       | 
|--------------------------------- |  | -------------- | ----- | 
|                                  |  | Amortization   |      
|Fiscal Year                       |  | Expense        |      
|                                  |  |                |      
|                                  |  | (In thousands) |      
|2006 (remainder)                  |  | $              | 84    | 
|2007                              |  |                | 314   | 
|2008                              |  |                | 298   | 
|2009                              |  |                | 246   | 
|2010                              |  |                | 228   | 
|Thereafter                        |  |                | 130   | 
|                                  |  |                |      
|Total future amortization expense |  | $              | 1,300 | 
|                                  |  |                |      





|   |            
|-- | -----------
|6. | Inventories



|               |  |                |       |  |          |   |       | 
|-------------- |  | -------------- | ----- |  | -------- | - | ----- | 
|               |  | March 31,      |       |  | June 30, |  
|               |  | 2006           |       |  | 2005     |  
|               |  |                |       |  |          |  
|               |  | (In thousands) |      
|Raw materials  |  | $              | 1,692 |  |          | $ | 991   | 
|Finished goods |  |                | 55    |  |          |   | 390   | 
|               |  |                |       |  |          |  
|               |  | $              | 1,747 |  |          | $ | 1,381 | 
|               |  |                |       |  |          |  



|   |                           
|-- | --------------------------
|7. | Software Development Costs





|                                |  |                |        |   |          |   |        |  
|------------------------------- |  | -------------- | ------ | - | -------- | - | ------ | -
|                                |  | March 31,      |        |   | June 30, |  
|                                |  | 2006           |        |   | 2005     |  
|                                |  |                |        |   |          |  
|                                |  | (In thousands) |       
|Gross carrying amount           |  | $              | 2,738  |   |          | $ | 2,328  |  
|Less  accumulated amortization |  |                | (1,548 | ) |          |   | (1,077 | )
|                                |  |                |        |   |          |  
|Net carrying amount             |  | $              | 1,190  |   |          | $ | 1,251  |  
|                                |  |                |        |   |          |  

11



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##### Table of Contents



MOLDFLOW CORPORATION


NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                     
|-- | --------------------
|8. | Comprehensive Income





|                                   |                                                                                                            |                    |       |      |                   |   |       |           |   |   |           |        |   |   |       |       | 
|---------------------------------- | ---------------------------------------------------------------------------------------------------------- | ------------------ | ----- | ---- | ----------------- | - | ----- | --------- | - | - | --------- | ------ | - | - | ----- | ----- | 
|                                   |                                                                                                            | Three Months Ended |       |      | Nine Months Ended |  
|                                   |                                                                                                            |                    |       |      |                   |  
|                                   |                                                                                                            | March 31,          |       |      | March 26,         |   |       | March 31, |   |   | March 26, |       
|                                   |                                                                                                            | 2006               |       |      | 2005              |   |       | 2006      |   |   | 2005      |       
|                                   |                                                                                                            |                    |       |      |                   |   |       |           |   |   |           |       
|                                   |                                                                                                            | (In thousands)     |      
|Net income                         |                                                                                                            | $                  | 1,520 |      |                   | $ | 2,045 |           |   | $ | 1,441     |        |   | $ | 5,399 |      
|Other comprehensive income (loss): |                                                                                                            |                    |       |      |                   |   |       |           |   |   |           |        |   |   |       |      
|                                   | Increase (decrease) in fair value of marketable securities, net
    of related tax effects                 |                    |       | 7    |                   |   |       | (4        | ) |   |           | 27     |   |   |       | 1     | 
|                                   | Increase (decrease) in value of financial instruments designated
    as hedges, net of related tax effects |                    |       | (10  | )                 |   |       | (45       | ) |   |           | 58     |   |   |       | 29    | 
|                                   | Foreign currency translation adjustment                                                                    |                    |       | (506 | )                 |   |       | (219      | ) |   |           | (1,043 | ) |   |       | 1,652 | 
|                                   |                                                                                                            |                    |       |      |                   |   |       |           |   |   |           |       
|Other comprehensive income (loss)  |                                                                                                            |                    | (509  | )    |                   |   | (268  | )         |   |   | (958      | )      |   |   | 1,682 |      
|                                   |                                                                                                            |                    |       |      |                   |   |       |           |   |   |           |       
|Comprehensive income               |                                                                                                            | $                  | 1,011 |      |                   | $ | 1,777 |           |   | $ | 483       |        |   | $ | 7,081 |      
|                                   |                                                                                                            |                    |       |      |                   |   |       |           |   |   |           |       



|   |                    
|-- | -------------------
|9. | Restructuring Plans

2005 Plan




|                             |  |                |        |   |             |   |     |       |  |   |       |   |  |   |        |  
|---------------------------- |  | -------------- | ------ | - | ----------- | - | --- | ----- |  | - | ----- | - |  | - | ------ | -
|                             |  | Employee       |        |   | Lease       |   |     |       |  |  
|                             |  | Severance      |        |   | Termination |   |     | Other |  |   |      
|                             |  | Costs          |        |   | Costs       |   |     | Costs |  |   | Total |  
|                             |  |                |        |   |             |   |     |       |  |   |       |  
|                             |  | (In thousands) |       
|Restructuring charge         |  | $              | 1,313  |   |             | $ | 14  |       |  | $ | 60    |   |  | $ | 1,387  |  
|Cash payments                |  |                | (272   | ) |             |   | (14 | )     |  |   | (26   | ) |  |   | (312   | )
|Foreign exchange impact      |  |                | 3      |   |             |   |    |       |  |   |      |   |  |   | 3      |  
|                             |  |                |        |   |             |   |     |       |  |   |       |  
|Balance at December 31, 2005 |  |                | 1,044  |   |             |   |    |       |  |   | 34    |   |  |   | 1,078  |  
|Cash payments                |  |                | (1,048 | ) |             |   |    |       |  |   | (35   | ) |  |   | (1,083 | )
|Foreign exchange impact      |  |                | 4      |   |             |   |    |       |  |   | 1     |   |  |   | 5      |  
|                             |  |                |        |   |             |   |     |       |  |   |       |  
|Balance at March 31, 2006    |  | $              |       |   |             | $ |    |       |  | $ |      |   |  | $ |       |  
|                             |  |                |        |   |             |   |     |       |  |   |       |  

12



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##### Table of Contents



MOLDFLOW CORPORATION


NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


April 2002 Plan




|                          |  |             |     |  
|------------------------- |  | ----------- | --- | -
|                          |  | Lease       |    
|                          |  | Termination |    
|                          |  | Costs       |    
|                          |  |             |    
|                          |  | (In         |    
|                          |  | thousands)  |    
|Balance at June 30, 2005  |  | $           | 447 |  
|Cash payments             |  |             | (76 | )
|Foreign exchange impact   |  |             | (23 | )
|                          |  |             |    
|Balance at March 31, 2006 |  | $           | 348 |  
|                          |  |             |    



|    |                                   
|--- | ----------------------------------
|10. | Segment and Geographic Information

Segment Information




13



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##### Table of Contents



MOLDFLOW CORPORATION


NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                       |                                    |                    |   |        |                   |  |   |           |   |  |           |         |   |  |   |         |  
|-------------------------------------- | ---------------------------------- | ------------------ | - | ------ | ----------------- |  | - | --------- | - |  | --------- | ------- | - |  | - | ------- | -
|                                       |                                    | Three Months Ended |   |        | Nine Months Ended | 
|                                       |                                    |                    |   |        |                   | 
|                                       |                                    | March 31,          |   |        | March 26,         |  |   | March 31, |   |  | March 26, |        
|                                       |                                    | 2006               |   |        | 2005              |  |   | 2006      |   |  | 2005      |        
|                                       |                                    |                    |   |        |                   |  |   |           |   |  |           |        
|Revenue:                               |                                    |                    |   |        |                   |  |   |           |   |  |           |         |   |  |   |        
|Product revenue:                       |                                    |                    |   |        |                   |  |   |           |   |  |           |         |   |  |   |        
|                                       | Design Analysis Solutions          |                    | $ | 5,649  |                   |  | $ | 5,913     |   |  | $         | 17,733  |   |  | $ | 17,290  |  
|                                       | Manufacturing Solutions            |                    |   | 3,854  |                   |  |   | 3,574     |   |  |           | 10,586  |   |  |   | 9,686   |  
|                                       |                                    |                    |   |        |                   |  |   |           |   |  |           |        
|                                       | Total product revenue              |                    |   | 9,503  |                   |  |   | 9,487     |   |  |           | 28,319  |   |  |   | 26,976  |  
|                                       |                                    |                    |   |        |                   |  |   |           |   |  |           |        
|Services revenue:                      |                                    |                    |   |        |                   |  |   |           |   |  |           |         |   |  |   |        
|                                       | Design Analysis Solutions          |                    |   | 5,993  |                   |  |   | 5,750     |   |  |           | 17,937  |   |  |   | 17,182  |  
|                                       | Manufacturing Solutions            |                    |   | 761    |                   |  |   | 660       |   |  |           | 2,175   |   |  |   | 1,978   |  
|                                       |                                    |                    |   |        |                   |  |   |           |   |  |           |        
|                                       | Total services revenue             |                    |   | 6,754  |                   |  |   | 6,410     |   |  |           | 20,112  |   |  |   | 19,160  |  
|                                       |                                    |                    |   |        |                   |  |   |           |   |  |           |        
|Total revenue:                         |                                    |                    |   |        |                   |  |   |           |   |  |           |         |   |  |   |        
|                                       | Design Analysis Solutions          |                    |   | 11,642 |                   |  |   | 11,663    |   |  |           | 35,670  |   |  |   | 34,472  |  
|                                       | Manufacturing Solutions            |                    |   | 4,615  |                   |  |   | 4,234     |   |  |           | 12,761  |   |  |   | 11,664  |  
|                                       |                                    |                    |   |        |                   |  |   |           |   |  |           |        
|                                       | Total revenue                      |                    | $ | 16,257 |                   |  | $ | 15,897    |   |  | $         | 48,431  |   |  | $ | 46,136  |  
|                                       |                                    |                    |   |        |                   |  |   |           |   |  |           |        
|Costs and operating expenses:          |                                    |                    |   |        |                   |  |   |           |   |  |           |         |   |  |   |        
|                                       | Design Analysis Solutions          |                    | $ | 5,909  |                   |  | $ | 5,589     |   |  | $         | 16,851  |   |  | $ | 15,064  |  
|                                       | Manufacturing Solutions            |                    |   | 4,938  |                   |  |   | 4,547     |   |  |           | 14,709  |   |  |   | 12,462  |  
|                                       | Unallocated                        |                    |   | 4,443  |                   |  |   | 4,346     |   |  |           | 16,816  |   |  |   | 13,336  |  
|                                       |                                    |                    |   |        |                   |  |   |           |   |  |           |        
|                                       | Total costs and operating expenses |                    | $ | 15,290 |                   |  | $ | 14,482    |   |  | $         | 48,376  |   |  | $ | 40,862  |  
|                                       |                                    |                    |   |        |                   |  |   |           |   |  |           |        
|Segment income (loss) from operations: |                                    |                    |   |        |                   |  |   |           |   |  |           |         |   |  |   |        
|                                       | Design Analysis Solutions          |                    | $ | 5,733  |                   |  | $ | 6,074     |   |  | $         | 18,819  |   |  | $ | 19,408  |  
|                                       | Manufacturing Solutions            |                    |   | (323   | )                 |  |   | (313      | ) |  |           | (1,948  | ) |  |   | (798    | )
|                                       | Unallocated                        |                    |   | (4,443 | )                 |  |   | (4,346    | ) |  |           | (16,816 | ) |  |   | (13,336 | )
|                                       |                                    |                    |   |        |                   |  |   |           |   |  |           |        
|                                       | Total income from operations       |                    | $ | 967    |                   |  | $ | 1,415     |   |  | $         | 55      |   |  | $ | 5,274   |  
|                                       |                                    |                    |   |        |                   |  |   |           |   |  |           |        

14



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##### Table of Contents



MOLDFLOW CORPORATION


NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Geographic Information




|                 |                                    |                       |   |       |                   |  |   |           |        |  |           |        |        |  |   |        |        | 
|---------------- | ---------------------------------- | --------------------- | - | ----- | ----------------- |  | - | --------- | ------ |  | --------- | ------ | ------ |  | - | ------ | ------ | 
|                 |                                    | Three Months Ended    |   |       | Nine Months Ended | 
|                 |                                    |                       |   |       |                   | 
|                 |                                    | March 31,             |   |       | March 26,         |  |   | March 31, |        |  | March 26, |       
|                 |                                    | 2006                  |   |       | 2005              |  |   | 2006      |        |  | 2005      |       
|                 |                                    |                       |   |       |                   |  |   |           |        |  |           |       
|                 |                                    | (In thousands)        |  
|Revenue:         |                                    |                       |   |       |                   |  |   |           |        |  |           |        |        |  |   |       
|Asia/ Australia: |                                    |                       |   |       |                   |  |   |           |        |  |           |        |        |  |   |       
|                 | Design Analysis Solutions products |                       | $ | 3,218 |                   |  | $ | 3,119     |        |  | $         | 9,256  |        |  | $ | 8,610  |       
|                 | Manufacturing Solutions products   |                       |   | 173   |                   |  |   | 4         |        |  |           | 329    |        |  |   | 43     |       
|                 | Design Analysis Solutions services |                       |   | 2,130 |                   |  |   | 1,962     |        |  |           | 6,455  |        |  |   | 5,900  |       
|                 | Manufacturing Solutions services   |                       |   | 5     |                   |  |   | 4         |        |  |           | 20     |        |  |   | 9      |       
|                 |                                    |                       |   |       |                   |  |   |           |        |  |           |       
|                 |                                    | Total Asia/ Australia |   |       | 5,526             |  |   |           | 5,089  |  |           |        | 16,060 |  |   |        | 14,562 | 
|                 |                                    |                       |   |       |                   |  |   |           |        |  |           |       
|Americas:        |                                    |                       |   |       |                   |  |   |           |        |  |           |        |        |  |   |       
|                 | Design Analysis Solutions products |                       |   | 784   |                   |  |   | 963       |        |  |           | 2,272  |        |  |   | 2,640  |       
|                 | Manufacturing Solutions products   |                       |   | 3,118 |                   |  |   | 3,082     |        |  |           | 8,407  |        |  |   | 8,121  |       
|                 | Design Analysis Solutions services |                       |   | 1,497 |                   |  |   | 1,371     |        |  |           | 4,343  |        |  |   | 4,089  |       
|                 | Manufacturing Solutions services   |                       |   | 549   |                   |  |   | 433       |        |  |           | 1,560  |        |  |   | 1,235  |       
|                 |                                    |                       |   |       |                   |  |   |           |        |  |           |       
|                 |                                    | Total Americas        |   |       | 5,948             |  |   |           | 5,849  |  |           |        | 16,582 |  |   |        | 16,085 | 
|                 |                                    |                       |   |       |                   |  |   |           |        |  |           |       
|Europe:          |                                    |                       |   |       |                   |  |   |           |        |  |           |        |        |  |   |       
|                 | Design Analysis Solutions products |                       |   | 1,647 |                   |  |   | 1,831     |        |  |           | 6,205  |        |  |   | 6,040  |       
|                 | Manufacturing Solutions products   |                       |   | 563   |                   |  |   | 488       |        |  |           | 1,850  |        |  |   | 1,522  |       
|                 | Design Analysis Solutions services |                       |   | 2,366 |                   |  |   | 2,417     |        |  |           | 7,139  |        |  |   | 7,193  |       
|                 | Manufacturing Solutions services   |                       |   | 207   |                   |  |   | 223       |        |  |           | 595    |        |  |   | 734    |       
|                 |                                    |                       |   |       |                   |  |   |           |        |  |           |       
|                 |                                    | Total Europe          |   |       | 4,783             |  |   |           | 4,959  |  |           |        | 15,789 |  |   |        | 15,489 | 
|                 |                                    |                       |   |       |                   |  |   |           |        |  |           |       
|Consolidated:    |                                    |                       |   |       |                   |  |   |           |        |  |           |        |        |  |   |       
|                 | Design Analysis Solutions products |                       |   | 5,649 |                   |  |   | 5,913     |        |  |           | 17,733 |        |  |   | 17,290 |       
|                 | Manufacturing Solutions products   |                       |   | 3,854 |                   |  |   | 3,574     |        |  |           | 10,586 |        |  |   | 9,686  |       
|                 | Design Analysis Solutions services |                       |   | 5,993 |                   |  |   | 5,750     |        |  |           | 17,937 |        |  |   | 17,182 |       
|                 | Manufacturing Solutions services   |                       |   | 761   |                   |  |   | 660       |        |  |           | 2,175  |        |  |   | 1,978  |       
|                 |                                    |                       |   |       |                   |  |   |           |        |  |           |       
|                 |                                    | Total consolidated    |   | $     | 16,257            |  |   | $         | 15,897 |  |           | $      | 48,431 |  |   | $      | 46,136 | 
|                 |                                    |                       |   |       |                   |  |   |           |        |  |           |       



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MOLDFLOW CORPORATION


NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |             
|--- | ------------
|11. | Income Taxes













|    |                                                      
|--- | -----------------------------------------------------
|12. | Contingencies, Commitments and Guarantor Arrangements



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MOLDFLOW CORPORATION


NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                   |  |                    |     |   |                   |   |      |           |  |   |           |   |  |   |      |  
|---------------------------------- |  | ------------------ | --- | - | ----------------- | - | ---- | --------- |  | - | --------- | - |  | - | ---- | -
|                                   |  | Three Months Ended |     |   | Nine Months Ended |  
|                                   |  |                    |     |   |                   |  
|                                   |  | March 31,          |     |   | March 26,         |   |      | March 31, |  |   | March 26, |  
|                                   |  | 2006               |     |   | 2005              |   |      | 2006      |  |   | 2005      |  
|                                   |  |                    |     |   |                   |   |      |           |  |   |           |  
|                                   |  | (In thousands)     |     |   |                   |   |     
|                                   |  |                    |     |   |                   | ? |     
|Balance at beginning of period     |  | $                  | 157 |   |                   | $ | 280  |           |  | $ | 120       |   |  | $ | 254  |  
|Additions                          |  |                    | 18  |   |                   |   |     |           |  |   | 64        |   |  |   | 55   |  
|Revisions to estimated liabilities |  |                    |    |   |                   |   | (100 | )         |  |   |          |   |  |   | (100 | )
|Settlements                        |  |                    | (16 | ) |                   |   | (25  | )         |  |   | (25       | ) |  |   | (54  | )
|                                   |  |                    |     |   |                   |   |      |           |  |   |           |  
|Balance at end of period           |  | $                  | 159 |   |                   | $ | 155  |           |  | $ | 159       |   |  | $ | 155  |  
|                                   |  |                    |     |   |                   |   |      |           |  |   |           |  



|    |                                 
|--- | --------------------------------
|13. | Recent Accounting Pronouncements







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MOLDFLOW CORPORATION


NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










|    |                 
|--- | ----------------
|14. | Subsequent Event



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|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 2. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations



Forward-Looking Statements


10-Q




Business Overview




easy-to


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20



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Design Analysis Solutions






Manufacturing Solutions


set-up




Critical Accounting Policies and Significant Judgments and
Estimates








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share-based


10-K


Overview of Results of Operations for the Three Months and
Nine Months Ended March 31, 2006


Financial highlights
included:




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Revenue of $16.3 million in the third quarter of fiscal
    2006 compared to $15.9 million in the third quarter of
    fiscal 2005,                                                                                                                                                                                                                                                                                                            
|
| |  | Revenue of $48.4 million in the first nine months of fiscal
    2006 compared to $46.1 million in the first nine months of
    fiscal 2005,                                                                                                                                                                                                                                                                                                    
|
| |  | DAS revenue of $11.7 million and $35.7 million in the
    three and nine months ended March 31, 2006, respectively,
    compared to $11.7 million and $34.5 million,
    respectively, in the same periods of the previous fiscal year,                                                                                                                                                                                                        
|
| |  | MS revenue of $4.6 million and $12.8 million in the
    three and nine months ended March 31, 2006, respectively,
    increased from $4.2 million and $11.7 million,
    respectively, in the same periods of the previous fiscal year,
    and                                                                                                                                                                                                
|
| |  | Income from operations of $967,000 and $55,000 for the three and
    nine months ended March 31, 2006, respectively, which
    included the effect of $355,000 and $1.5 million of costs,
    net of tax, respectively, related to share-based compensation
    expense. In addition, the nine months ended March 31, 2006,
    also included a charge of $1.2 million, net of related tax
    effects, related to our 2005 restructuring plan.

Summary of Operating
Performance:


|                       |  |                                            |        |  |         |  |              |           |  |   |         |  |  |  |     |  
|---------------------- |  | ------------------------------------------ | ------ |  | ------- |  | ------------ | --------- |  | - | ------- |  |  |  | --- | -
|                       |  | Three Months                               |        |  |         |  | Three Months |           |  |  
|                       |  | Ended                                      |        |  | As a %  |  |              | Ended     |  |   | As a %  | 
|                       |  | March 31,                                  |        |  | of      |  |              | March 26, |  |   | of      | 
|                       |  | 2006                                       |        |  | Revenue |  |              | 2005      |  |   | Revenue | 
|                       |  |                                            |        |  |         |  |              |           |  |   |         | 
|                       |  | (In thousands, except for percentage data) |       
|Revenue                |  | $                                          | 16,257 |  |         |  | 100          | %         |  | $ | 15,897  |  |  |  | 100 | %
|Cost of revenue        |  |                                            | 4,312  |  |         |  | 26           |           |  |   | 3,730   |  |  |  | 23  |  
|Operating expenses     |  |                                            | 10,978 |  |         |  | 68           |           |  |   | 10,752  |  |  |  | 68  |  
|                       |  |                                            |        |  |         |  |              |           |  |   |         | 
|Income from operations |  | $                                          | 967    |  |         |  | 6            | %         |  | $ | 1,415   |  |  |  | 9   | %
|                       |  |                                            |        |  |         |  |              |           |  |   |         | 

|                       |  |                                            |        |  |         |  |             |           |  |   |         |  |  |  |     |  
|---------------------- |  | ------------------------------------------ | ------ |  | ------- |  | ----------- | --------- |  | - | ------- |  |  |  | --- | -
|                       |  | Nine Months                                |        |  |         |  | Nine Months |           |  |  
|                       |  | Ended                                      |        |  | As a %  |  |             | Ended     |  |   | As a %  | 
|                       |  | March 31,                                  |        |  | of      |  |             | March 26, |  |   | of      | 
|                       |  | 2006                                       |        |  | Revenue |  |             | 2005      |  |   | Revenue | 
|                       |  |                                            |        |  |         |  |             |           |  |   |         | 
|                       |  | (In thousands, except for percentage data) |       
|Revenue                |  | $                                          | 48,431 |  |         |  | 100         | %         |  | $ | 46,136  |  |  |  | 100 | %
|Cost of revenue        |  |                                            | 12,642 |  |         |  | 26          |           |  |   | 10,392  |  |  |  | 23  |  
|Operating expenses     |  |                                            | 35,734 |  |         |  | 74          |           |  |   | 30,470  |  |  |  | 66  |  
|                       |  |                                            |        |  |         |  |             |           |  |   |         | 
|Income from operations |  | $                                          | 55     |  |         |  |            | %         |  | $ | 5,274   |  |  |  | 11  | %
|                       |  |                                            |        |  |         |  |             |           |  |   |         | 



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Results of Operations




|                              |                                            |                                    |  |    |                   |   |  |           |     |   |           |    |     |   |  |    |     |  
|----------------------------- | ------------------------------------------ | ---------------------------------- |  | -- | ----------------- | - |  | --------- | --- | - | --------- | -- | --- | - |  | -- | --- | -
|                              |                                            | Three Months Ended                 |  |    | Nine Months Ended |  
|                              |                                            |                                    |  |    |                   |  
|                              |                                            | March 31,                          |  |    | March 26,         |   |  | March 31, |     |   | March 26, |   
|                              |                                            | 2006                               |  |    | 2005              |   |  | 2006      |     |   | 2005      |   
|                              |                                            |                                    |  |    |                   |   |  |           |     |   |           |   
|Revenue:                      |                                            |                                    |  |    |                   |   |  |           |     |   |           |    |     |   |  |   
|                              | Product                                    |                                    |  | 58 | %                 |   |  | 60        | %   |   |           | 58 | %   |   |  | 58 | %  
|                              | Services                                   |                                    |  | 42 |                   |   |  | 40        |     |   |           | 42 |     |   |  | 42 |    
|                              |                                            |                                    |  |    |                   |   |  |           |     |   |           |   
|                              |                                            | Total revenue                      |  |    | 100               | % |  |           | 100 | % |           |    | 100 | % |  |    | 100 | %
|                              |                                            |                                    |  |    |                   |   |  |           |     |   |           |   
|Costs and operating expenses: |                                            |                                    |  |    |                   |   |  |           |     |   |           |    |     |   |  |   
|                              | Cost of product revenue                    |                                    |  | 16 | %                 |   |  | 13        | %   |   |           | 15 |     |   |  | 13 | %  
|                              | Cost of services revenue                   |                                    |  | 11 |                   |   |  | 10        |     |   |           | 11 |     |   |  | 10 |    
|                              | Research and development                   |                                    |  | 15 |                   |   |  | 14        |     |   |           | 15 |     |   |  | 13 |    
|                              | Selling and marketing                      |                                    |  | 35 |                   |   |  | 36        |     |   |           | 36 |     |   |  | 35 |    
|                              | General and administrative                 |                                    |  | 17 |                   |   |  | 18        |     |   |           | 20 |     |   |  | 18 |    
|                              | Restructuring charges                      |                                    |  |   |                   |   |  |          |     |   |           | 3  |     |   |  |   |    
|                              | Amortization of acquired intangible assets |                                    |  |   |                   |   |  |          |     |   |           |   |     |   |  |   |    
|                              |                                            |                                    |  |    |                   |   |  |           |     |   |           |   
|                              |                                            | Total costs and operating expenses |  |    | 94                |   |  |           | 91  |   |           |    | 100 |   |  |    | 89  |  
|                              |                                            |                                    |  |    |                   |   |  |           |     |   |           |   
|                              | Income from operations                     |                                    |  | 6  |                   |   |  | 9         |     |   |           |   |     |   |  | 11 |    
|                              | Interest income, net                       |                                    |  | 4  |                   |   |  | 3         |     |   |           | 4  |     |   |  | 3  |    
|                              | Other income, net                          |                                    |  |   |                   |   |  | 1         |     |   |           |   |     |   |  |   |    
|                              |                                            |                                    |  |    |                   |   |  |           |     |   |           |   
|                              |                                            | Income before income taxes         |  |    | 10                |   |  |           | 13  |   |           |    | 4   |   |  |    | 14  |  
|                              | Provision for (benefit from) income taxes  |                                    |  |   |                   |   |  |          |     |   |           | 1  |     |   |  | 2  |    
|                              |                                            |                                    |  |    |                   |   |  |           |     |   |           |   
|                              |                                            | Net income                         |  |    | 10                | % |  |           | 13  | % |           |    | 3   | % |  |    | 12  | %
|                              |                                            |                                    |  |    |                   |   |  |           |     |   |           |   

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Revenue






|         |          |                    |   |                |                   |  |   |           |  |  |           |        |  |  |   |        | 
|-------- | -------- | ------------------ | - | -------------- | ----------------- |  | - | --------- |  |  | --------- | ------ |  |  | - | ------ | 
|         |          | Three Months Ended |   |                | Nine Months Ended | 
|         |          |                    |   |                |                   | 
|         |          | March 31,          |   |                | March 26,         |  |   | March 31, |  |  | March 26, |       
|         |          | 2006               |   |                | 2005              |  |   | 2006      |  |  | 2005      |       
|         |          |                    |   |                |                   |  |   |           |  |  |           |       
|         |          |                    |   | (In thousands) |                   |  |  
|Revenue: |          |                    |   |                |                   |  |   |           |  |  |           |        |  |  |   |       
|         | Product  |                    | $ | 9,503          |                   |  | $ | 9,487     |  |  | $         | 28,319 |  |  | $ | 26,976 | 
|         | Services |                    |   | 6,754          |                   |  |   | 6,410     |  |  |           | 20,112 |  |  |   | 19,160 | 
|         |          |                    |   |                |                   |  |   |           |  |  |           |       
|         | Total    |                    | $ | 16,257         |                   |  | $ | 15,897    |  |  | $         | 48,431 |  |  | $ | 46,136 | 
|         |          |                    |   |                |                   |  |   |           |  |  |           |       



|                             |                 |                                            |   |        |                   |  |   |           |   |  |           |        |   |  |   |        |  
|---------------------------- | --------------- | ------------------------------------------ | - | ------ | ----------------- |  | - | --------- | - |  | --------- | ------ | - |  | - | ------ | -
|                             |                 | Three Months Ended                         |   |        | Nine Months Ended | 
|                             |                 |                                            |   |        |                   | 
|                             |                 | March 31,                                  |   |        | March 26,         |  |   | March 31, |   |  | March 26, |       
|                             |                 | 2006                                       |   |        | 2005              |  |   | 2006      |   |  | 2005      |       
|                             |                 |                                            |   |        |                   |  |   |           |   |  |           |       
|                             |                 | (In thousands, except for percentage data) |  
|Revenue:                     |                 |                                            |   |        |                   |  |   |           |   |  |           |        |   |  |   |       
|                             | Asia/ Australia |                                            | $ | 5,526  |                   |  | $ | 5,089     |   |  | $         | 16,060 |   |  | $ | 14,562 |  
|                             | Americas        |                                            |   | 5,948  |                   |  |   | 5,849     |   |  |           | 16,582 |   |  |   | 16,085 |  
|                             | Europe          |                                            |   | 4,783  |                   |  |   | 4,959     |   |  |           | 15,789 |   |  |   | 15,489 |  
|                             |                 |                                            |   |        |                   |  |   |           |   |  |           |       
|                             | Total           |                                            | $ | 16,257 |                   |  | $ | 15,897    |   |  | $         | 48,431 |   |  | $ | 46,136 |  
|                             |                 |                                            |   |        |                   |  |   |           |   |  |           |       
|Percentage of total revenue: |                 |                                            |   |        |                   |  |   |           |   |  |           |        |   |  |   |       
|                             | Asia/ Australia |                                            |   | 34     | %                 |  |   | 32        | % |  |           | 33     | % |  |   | 31     | %
|                             | Americas        |                                            |   | 37     |                   |  |   | 37        |   |  |           | 34     |   |  |   | 35     |  
|                             | Europe          |                                            |   | 29     |                   |  |   | 31        |   |  |           | 33     |   |  |   | 34     |  
|                             |                 |                                            |   |        |                   |  |   |           |   |  |           |       
|                             | Total           |                                            |   | 100    | %                 |  |   | 100       | % |  |           | 100    | % |  |   | 100    | %
|                             |                 |                                            |   |        |                   |  |   |           |   |  |           |       

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Product Revenue




|                                     |                           |                                            |   |            |             |  |   |              |   |  |      |      |   |  |   |       |  
|------------------------------------ | ------------------------- | ------------------------------------------ | - | ---------- | ----------- |  | - | ------------ | - |  | ---- | ---- | - |  | - | ----- | -
|                                     |                           |                                            |   | Increase   |             |  |  
|                                     |                           |                                            |   | (Decrease) |             |  |  
|                                     |                           | Three Months                               |   |            | Compared to |  |   | Three Months |  
|                                     |                           | Ended                                      |   |            | Prior Year  |  |   | Ended        |  
|                                     |                           | March 31,                                  |   |            |             |  |   | March 26,    |  
|                                     |                           | 2006                                       |   |            | $           |  |   | %            |   |  | 2005 |     
|                                     |                           |                                            |   |            |             |  |   |              |   |  |      |     
|                                     |                           | (In thousands, except for percentage data) |  
|Asia/ Australia product revenue:     |                           |                                            |   |            |             |  |   |              |   |  |      |      |   |  |   |      
|                                     | Design Analysis Solutions |                                            | $ | 3,218      |             |  | $ | 99           |   |  |      | 3    | % |  | $ | 3,119 |  
|                                     | Manufacturing Solutions   |                                            |   | 173        |             |  |   | 169          |   |  |      | 4225 |   |  |   | 4     |  
|                                     |                           |                                            |   |            |             |  |   |              |   |  |      |     
|                                     | Total                     |                                            |   | 3,391      |             |  |   | 268          |   |  |      | 9    |   |  |   | 3,123 |  
|                                     |                           |                                            |   |            |             |  |   |              |   |  |      |     
|Americas product revenue:            |                           |                                            |   |            |             |  |   |              |   |  |      |      |   |  |   |      
|                                     | Design Analysis Solutions |                                            |   | 784        |             |  |   | (179         | ) |  |      | (19  | ) |  |   | 963   |  
|                                     | Manufacturing Solutions   |                                            |   | 3,118      |             |  |   | 36           |   |  |      | 1    |   |  |   | 3,082 |  
|                                     |                           |                                            |   |            |             |  |   |              |   |  |      |     
|                                     | Total                     |                                            |   | 3,902      |             |  |   | (143         | ) |  |      | 4    |   |  |   | 4,045 |  
|                                     |                           |                                            |   |            |             |  |   |              |   |  |      |     
|Europe product revenue:              |                           |                                            |   |            |             |  |   |              |   |  |      |      |   |  |   |      
|                                     | Design Analysis Solutions |                                            |   | 1,647      |             |  |   | (184         | ) |  |      | (10  | ) |  |   | 1,831 |  
|                                     | Manufacturing Solutions   |                                            |   | 563        |             |  |   | 75           |   |  |      | 15   |   |  |   | 488   |  
|                                     |                           |                                            |   |            |             |  |   |              |   |  |      |     
|                                     | Total                     |                                            |   | 2,210      |             |  |   | (109         | ) |  |      | (5   | ) |  |   | 2,319 |  
|                                     |                           |                                            |   |            |             |  |   |              |   |  |      |     
|Total product revenue:               |                           |                                            |   |            |             |  |   |              |   |  |      |      |   |  |   |      
|                                     | Design Analysis Solutions |                                            |   | 5,649      |             |  |   | (264         | ) |  |      | (4   | ) |  |   | 5,913 |  
|                                     | Manufacturing Solutions   |                                            |   | 3,854      |             |  |   | 280          |   |  |      | 8    |   |  |   | 3,574 |  
|                                     |                           |                                            |   |            |             |  |   |              |   |  |      |     
|                                     | Total                     |                                            | $ | 9,503      |             |  | $ | 16           |   |  |      |     | % |  | $ | 9,487 |  
|                                     |                           |                                            |   |            |             |  |   |              |   |  |      |     
|Percentage of total product revenue: |                           |                                            |   |            |             |  |   |              |   |  |      |      |   |  |   |      
|                                     | Design Analysis Solutions |                                            |   | 59         | %           |  |   |              |   |  |      |      |   |  |   | 62    | %
|                                     | Manufacturing Solutions   |                                            |   | 41         |             |  |   |              |   |  |      |      |   |  |   | 38    |  
|                                     |                           |                                            |   |            |             |  |   |              |   |  |      |     
|                                     | Total                     |                                            |   | 100        | %           |  |   |              |   |  |      |      |   |  |   | 100   | %
|                                     |                           |                                            |   |            |             |  |   |              |   |  |      |     

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##### Table of Contents



|                                     |                           |                                            |   |            |             |  |   |             |   |  |      |     |   |  |   |        |  
|------------------------------------ | ------------------------- | ------------------------------------------ | - | ---------- | ----------- |  | - | ----------- | - |  | ---- | --- | - |  | - | ------ | -
|                                     |                           |                                            |   | Increase   |             |  |  
|                                     |                           |                                            |   | (Decrease) |             |  |  
|                                     |                           | Nine Months                                |   |            | Compared to |  |   | Nine Months |  
|                                     |                           | Ended                                      |   |            | Prior Year  |  |   | Ended       |  
|                                     |                           | March 31,                                  |   |            |             |  |   | March 31,   |  
|                                     |                           | 2006                                       |   |            | $           |  |   | %           |   |  | 2005 |    
|                                     |                           |                                            |   |            |             |  |   |             |   |  |      |    
|                                     |                           | (In thousands, except for percentage data) |  
|Asia/ Australia product revenue:     |                           |                                            |   |            |             |  |   |             |   |  |      |     |   |  |   |       
|                                     | Design Analysis Solutions |                                            | $ | 9,256      |             |  | $ | 646         |   |  |      | 8   | % |  | $ | 8,610  |  
|                                     | Manufacturing Solutions   |                                            |   | 329        |             |  |   | 286         |   |  |      | 665 |   |  |   | 43     |  
|                                     |                           |                                            |   |            |             |  |   |             |   |  |      |    
|                                     | Total                     |                                            |   | 9,585      |             |  |   | 932         |   |  |      | 11  |   |  |   | 8,653  |  
|                                     |                           |                                            |   |            |             |  |   |             |   |  |      |    
|Americas product revenue:            |                           |                                            |   |            |             |  |   |             |   |  |      |     |   |  |   |       
|                                     | Design Analysis Solutions |                                            |   | 2,272      |             |  |   | (368        | ) |  |      | (14 | ) |  |   | 2,640  |  
|                                     | Manufacturing Solutions   |                                            |   | 8,407      |             |  |   | 286         |   |  |      | 4   |   |  |   | 8,121  |  
|                                     |                           |                                            |   |            |             |  |   |             |   |  |      |    
|                                     | Total                     |                                            |   | 10,679     |             |  |   | (82         | ) |  |      | (1  | ) |  |   | 10,761 |  
|                                     |                           |                                            |   |            |             |  |   |             |   |  |      |    
|Europe product revenue:              |                           |                                            |   |            |             |  |   |             |   |  |      |     |   |  |   |       
|                                     | Design Analysis Solutions |                                            |   | 6,205      |             |  |   | 165         |   |  |      | 3   |   |  |   | 6,040  |  
|                                     | Manufacturing Solutions   |                                            |   | 1,850      |             |  |   | 328         |   |  |      | 22  |   |  |   | 1,522  |  
|                                     |                           |                                            |   |            |             |  |   |             |   |  |      |    
|                                     | Total                     |                                            |   | 8,055      |             |  |   | 493         |   |  |      | 7   |   |  |   | 7,562  |  
|                                     |                           |                                            |   |            |             |  |   |             |   |  |      |    
|Total product revenue:               |                           |                                            |   |            |             |  |   |             |   |  |      |     |   |  |   |       
|                                     | Design Analysis Solutions |                                            |   | 17,733     |             |  |   | 443         |   |  |      | 3   |   |  |   | 17,290 |  
|                                     | Manufacturing Solutions   |                                            |   | 10,586     |             |  |   | 900         |   |  |      | 9   |   |  |   | 9,686  |  
|                                     |                           |                                            |   |            |             |  |   |             |   |  |      |    
|                                     | Total                     |                                            | $ | 28,319     |             |  | $ | 1,343       |   |  |      | 5   | % |  | $ | 26,976 |  
|                                     |                           |                                            |   |            |             |  |   |             |   |  |      |    
|Percentage of total product revenue: |                           |                                            |   |            |             |  |   |             |   |  |      |     |   |  |   |       
|                                     | Design Analysis Solutions |                                            |   | 63         | %           |  |   |             |   |  |      |     |   |  |   | 64     | %
|                                     | Manufacturing Solutions   |                                            |   | 37         | %           |  |   |             |   |  |      |     |   |  |   | 36     | %
|                                     |                           |                                            |   |            |             |  |   |             |   |  |      |    
|                                     | Total                     |                                            |   | 100        | %           |  |   |             |   |  |      |     |   |  |   | 100    | %
|                                     |                           |                                            |   |            |             |  |   |             |   |  |      |    







26



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##### Table of Contents







Services Revenue








Cost of Revenue


|                                 |          |                                            |       |             |             |   |     |              |  |  |      |    |   |   |       |       | 
|-------------------------------- | -------- | ------------------------------------------ | ----- | ----------- | ----------- | - | --- | ------------ |  |  | ---- | -- | - | - | ----- | ----- | 
|                                 |          |                                            |       | Increase    |             |   |    
|                                 |          |                                            |       | Compared to |             |   |    
|                                 |          | Three Months                               |       |             | Prior       |   |     | Three Months | 
|                                 |          | Ended                                      |       |             | Fiscal Year |   |     | Ended        | 
|                                 |          | March 31,                                  |       |             |             |   |     | March 26,    | 
|                                 |          | 2006                                       |       |             | $           |   |     | %            |  |  | 2005 |   
|                                 |          |                                            |       |             |             |   |     |              |  |  |      |   
|                                 |          | (In thousands, except for percentage data) |      
|Cost of revenue:                 |          |                                            |       |             |             |   |     |              |  |  |      |    |   |   |       |      
|                                 | Product  |                                            | $     | 2,528       |             |   | $   | 440          |  |  |      | 21 | % |   | $     | 2,088 | 
|                                 | Services |                                            |       | 1,784       |             |   |     | 142          |  |  |      | 9  |   |   |       | 1,642 | 
|                                 |          |                                            |       |             |             |   |     |              |  |  |      |   
|                                 |          | $                                          | 4,312 |             |             | $ | 582 |              |  |  | 16   | %  |   | $ | 3,730 |      
|                                 |          |                                            |       |             |             |   |     |              |  |  |      |   
|As a percentage of total revenue |          |                                            | 27    | %           |             |   |     |              |  |  |      |    |   |   | 23    | %    

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|                                 |          |                                            |        |             |             |   |       |             |  |  |      |    |   |   |        |       | 
|-------------------------------- | -------- | ------------------------------------------ | ------ | ----------- | ----------- | - | ----- | ----------- |  |  | ---- | -- | - | - | ------ | ----- | 
|                                 |          |                                            |        | Increase    |             |   |      
|                                 |          |                                            |        | Compared to |             |   |      
|                                 |          | Nine Months                                |        |             | Prior       |   |       | Nine Months | 
|                                 |          | Ended                                      |        |             | Fiscal Year |   |       | Ended       | 
|                                 |          | March 31,                                  |        |             |             |   |       | March 26,   | 
|                                 |          | 2006                                       |        |             | $           |   |       | %           |  |  | 2005 |   
|                                 |          |                                            |        |             |             |   |       |             |  |  |      |   
|                                 |          | (In thousands, except for percentage data) |       
|Cost of revenue:                 |          |                                            |        |             |             |   |       |             |  |  |      |    |   |   |        |      
|                                 | Product  |                                            | $      | 7,540       |             |   | $     | 1,736       |  |  |      | 30 | % |   | $      | 5,804 | 
|                                 | Services |                                            |        | 5,102       |             |   |       | 514         |  |  |      | 11 |   |   |        | 4,588 | 
|                                 |          |                                            |        |             |             |   |       |             |  |  |      |   
|                                 |          | $                                          | 12,642 |             |             | $ | 2,250 |             |  |  | 22   | %  |   | $ | 10,392 |      
|                                 |          |                                            |        |             |             |   |       |             |  |  |      |   
|As a percentage of total revenue |          |                                            | 26     | %           |             |   |       |             |  |  |      |    |   |   | 23     | %    

Cost of Product
Revenue








Cost of Services
Revenue








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Research and
Development


|                                 |  |                                            |       |             |             |   |     |              |  |  |      |   |  |   |       |  
|-------------------------------- |  | ------------------------------------------ | ----- | ----------- | ----------- | - | --- | ------------ |  |  | ---- | - |  | - | ----- | -
|                                 |  |                                            |       | Increase    |             |   |    
|                                 |  |                                            |       | Compared to |             |   |    
|                                 |  | Three Months                               |       |             | Prior       |   |     | Three Months | 
|                                 |  | Ended                                      |       |             | Fiscal Year |   |     | Ended        | 
|                                 |  | March 31,                                  |       |             |             |   |     | March 26,    | 
|                                 |  | 2006                                       |       |             | $           |   |     | %            |  |  | 2005 |  
|                                 |  |                                            |       |             |             |   |     |              |  |  |      |  
|                                 |  | (In thousands, except for percentage data) |      
|Research and development         |  | $                                          | 2,459 |             |             | $ | 299 |              |  |  | 14   | % |  | $ | 2,160 |  
|As a percentage of total revenue |  |                                            | 15    | %           |             |   |     |              |  |  |      |   |  |   | 14    | %

|                                 |  |                                            |       |             |             |   |       |             |  |  |      |   |  |   |       |  
|-------------------------------- |  | ------------------------------------------ | ----- | ----------- | ----------- | - | ----- | ----------- |  |  | ---- | - |  | - | ----- | -
|                                 |  |                                            |       | Increase    |             |   |      
|                                 |  |                                            |       | Compared to |             |   |      
|                                 |  | Nine Months                                |       |             | Prior       |   |       | Nine Months | 
|                                 |  | Ended                                      |       |             | Fiscal Year |   |       | Ended       | 
|                                 |  | March 31,                                  |       |             |             |   |       | March 26,   | 
|                                 |  | 2006                                       |       |             | $           |   |       | %           |  |  | 2005 |  
|                                 |  |                                            |       |             |             |   |       |             |  |  |      |  
|                                 |  | (In thousands, except for percentage data) |      
|Research and development         |  | $                                          | 7,135 |             |             | $ | 1,290 |             |  |  | 22   | % |  | $ | 5,845 |  
|As a percentage of total revenue |  |                                            | 15    | %           |             |   |       |             |  |  |      |   |  |   | 13    | %



share-based


share-based


Selling and Marketing


|                                 |  |                                            |       |             |             |   |     |              |  |  |      |   |  |   |       |  
|-------------------------------- |  | ------------------------------------------ | ----- | ----------- | ----------- | - | --- | ------------ |  |  | ---- | - |  | - | ----- | -
|                                 |  |                                            |       | Increase    |             |   |    
|                                 |  |                                            |       | Compared to |             |   |    
|                                 |  | Three Months                               |       |             | Prior       |   |     | Three Months | 
|                                 |  | Ended                                      |       |             | Fiscal Year |   |     | Ended        | 
|                                 |  | March 31,                                  |       |             |             |   |     | March 26,    | 
|                                 |  | 2006                                       |       |             | $           |   |     | %            |  |  | 2005 |  
|                                 |  |                                            |       |             |             |   |     |              |  |  |      |  
|                                 |  | (In thousands, except for percentage data) |      
|Selling and marketing            |  | $                                          | 5,786 |             |             | $ | 136 |              |  |  | 2    | % |  | $ | 5,650 |  
|As a percentage of total revenue |  |                                            | 36    | %           |             |   |     |              |  |  |      |   |  |   | 36    | %

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|                                 |  |                                            |        |             |             |   |       |             |  |  |      |   |  |   |        |  
|-------------------------------- |  | ------------------------------------------ | ------ | ----------- | ----------- | - | ----- | ----------- |  |  | ---- | - |  | - | ------ | -
|                                 |  |                                            |        | Increase    |             |   |      
|                                 |  |                                            |        | Compared to |             |   |      
|                                 |  | Nine Months                                |        |             | Prior       |   |       | Nine Months | 
|                                 |  | Ended                                      |        |             | Fiscal Year |   |       | Ended       | 
|                                 |  | March 31,                                  |        |             |             |   |       | March 26,   | 
|                                 |  | 2006                                       |        |             | $           |   |       | %           |  |  | 2005 |  
|                                 |  |                                            |        |             |             |   |       |             |  |  |      |  
|                                 |  | (In thousands, except for percentage data) |       
|Selling and marketing            |  | $                                          | 17,303 |             |             | $ | 1,347 |             |  |  | 8    | % |  | $ | 15,956 |  
|As a percentage of total revenue |  |                                            | 36     | %           |             |   |       |             |  |  |      |   |  |   | 35     | %







General and
Administrative


|                                 |  |                                            |       |             |             |   |      |              |  |  |      |    |  |   |       |  
|-------------------------------- |  | ------------------------------------------ | ----- | ----------- | ----------- | - | ---- | ------------ |  |  | ---- | -- |  | - | ----- | -
|                                 |  |                                            |       | (Decrease)  |             |   |     
|                                 |  |                                            |       | Compared to |             |   |     
|                                 |  | Three Months                               |       |             | Prior       |   |      | Three Months | 
|                                 |  | Ended                                      |       |             | Fiscal Year |   |      | Ended        | 
|                                 |  | March 31,                                  |       |             |             |   |      | March 26,    | 
|                                 |  | 2006                                       |       |             | $           |   |      | %            |  |  | 2005 |   
|                                 |  |                                            |       |             |             |   |      |              |  |  |      |   
|                                 |  | (In thousands, except for percentage data) |      
|General and administrative       |  | $                                          | 2,684 |             |             | $ | (185 | )            |  |  | (6   | )% |  | $ | 2,869 |  
|As a percentage of total revenue |  |                                            | 17    | %           |             |   |      |              |  |  |      |    |  |   | 18    | %

|                                 |  |                                            |       |             |             |   |       |             |  |  |      |   |  |   |       |  
|-------------------------------- |  | ------------------------------------------ | ----- | ----------- | ----------- | - | ----- | ----------- |  |  | ---- | - |  | - | ----- | -
|                                 |  |                                            |       | Increase    |             |   |      
|                                 |  |                                            |       | Compared to |             |   |      
|                                 |  | Nine Months                                |       |             | Prior       |   |       | Nine Months | 
|                                 |  | Ended                                      |       |             | Fiscal Year |   |       | Ended       | 
|                                 |  | March 31,                                  |       |             |             |   |       | March 26,   | 
|                                 |  | 2006                                       |       |             | $           |   |       | %           |  |  | 2005 |  
|                                 |  |                                            |       |             |             |   |       |             |  |  |      |  
|                                 |  | (In thousands, except for percentage data) |      
|General and administrative       |  | $                                          | 9,762 |             |             | $ | 1,317 |             |  |  | 16   | % |  | $ | 8,445 |  
|As a percentage of total revenue |  |                                            | 20    | %           |             |   |       |             |  |  |      |   |  |   | 18    | %





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Restructuring Charges






Amortization of Acquired
Intangible Assets


|                                           |  |                                            |    |             |             |   |     |              |  |  |      |    |  |   |    |  
|------------------------------------------ |  | ------------------------------------------ | -- | ----------- | ----------- | - | --- | ------------ |  |  | ---- | -- |  | - | -- | -
|                                           |  |                                            |    | Decrease    |             |   |    
|                                           |  |                                            |    | Compared to |             |   |    
|                                           |  | Three Months                               |    |             | Prior       |   |     | Three Months | 
|                                           |  | Ended                                      |    |             | Fiscal Year |   |     | Ended        | 
|                                           |  | March 31,                                  |    |             |             |   |     | March 26,    | 
|                                           |  | 2006                                       |    |             | $           |   |     | %            |  |  | 2005 |   
|                                           |  |                                            |    |             |             |   |     |              |  |  |      |   
|                                           |  | (In thousands, except for percentage data) |   
|Amortization of acquired intangible assets |  | $                                          | 49 |             |             | $ | (24 | )            |  |  | (33  | )% |  | $ | 73 |  
|As a percentage of total revenue           |  |                                            | 1  | %           |             |   |     |              |  |  |      |    |  |   | 1  | %

|                                           |  |                                            |     |             |             |   |     |             |  |  |      |    |  |   |     |  
|------------------------------------------ |  | ------------------------------------------ | --- | ----------- | ----------- | - | --- | ----------- |  |  | ---- | -- |  | - | --- | -
|                                           |  |                                            |     | Decrease    |             |   |    
|                                           |  |                                            |     | Compared to |             |   |    
|                                           |  | Nine Months                                |     |             | Prior       |   |     | Nine Months | 
|                                           |  | Ended                                      |     |             | Fiscal Year |   |     | Ended       | 
|                                           |  | March 31,                                  |     |             |             |   |     | March 26,   | 
|                                           |  | 2006                                       |     |             | $           |   |     | %           |  |  | 2005 |   
|                                           |  |                                            |     |             |             |   |     |             |  |  |      |   
|                                           |  | (In thousands, except for percentage data) |    
|Amortization of acquired intangible assets |  | $                                          | 147 |             |             | $ | (77 | )           |  |  | (34  | )% |  | $ | 224 |  
|As a percentage of total revenue           |  |                                            | 1%  |             |             |   |     |             |  |  |      |    |  |   | 1   | %





Interest Income, Net






31



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Other Income, Net






Provision for Income
Taxes
















32



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Liquidity and Capital Resources


|                                                                |  |                |        |   |             |   |        | 
|--------------------------------------------------------------- |  | -------------- | ------ | - | ----------- | - | ------ | 
|                                                                |  | Nine Months    |        |   | Nine Months |  
|                                                                |  | Ended          |        |   | Ended       |  
|                                                                |  | March 31,      |        |   | March 26,   |  
|                                                                |  | 2006           |        |   | 2005        |  
|                                                                |  |                |        |   |             |  
|                                                                |  | (In thousands) |       
|Cash provided by operating activities                           |  | $              | 1,458  |   |             | $ | 5,086  | 
|Cash provided by investing activities                           |  |                | 3,136  |   |             |   | 3,498  | 
|Cash provided by financing activities                           |  |                | 1,994  |   |             |   | 1,879  | 
|Effect of exchange rate changes on cash and cash equivalents    |  |                | (921   | ) |             |   | 1,338  | 
|                                                                |  |                |        |   |             |  
|Net increase in cash and cash equivalents                       |  |                | 5,667  |   |             |   | 11,801 | 
|Cash and cash equivalents, beginning of period                  |  |                | 48,910 |   |             |   | 35,987 | 
|                                                                |  |                |        |   |             |  
|Cash and cash equivalents, end of period                        |  | $              | 54,577 |   |             | $ | 47,788 | 
|                                                                |  |                |        |   |             |  
|Marketable securities, end of period                            |  | $              | 6,762  |   |             | $ | 10,970 | 
|                                                                |  |                |        |   |             |  
|Cash, cash equivalents and marketable securities, end of period |  | $              | 61,339 |   |             | $ | 58,758 | 
|                                                                |  |                |        |   |             |  



33



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34



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Off-Balance Sheet Financing Arrangements




Recent Accounting Pronouncements












35



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Impact of Inflation









|        |                                                               
|------- | --------------------------------------------------------------
|Item 3. | Quantitative and Qualitative Disclosures about Market
    Risk







36



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##### Table of Contents










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

Evaluation of Disclosure Controls and Procedures


13a-15 15d-15


Changes in Internal Control Over Financial Reporting




37



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PART II. OTHER INFORMATION







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








|         |             
|-------- | ------------
|Item 1A. | Risk Factors

Risk Factors and Important Factors That May Affect Future
Results






| |                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our business may be disrupted by the execution of our
    current restructuring plans and we may not achieve the
    anticipated savings associated with the plans.





| |                                                                                      
| | -------------------------------------------------------------------------------------
| | Our business model is changing as we further develop and
    exploit our MS products.





| |                                                                         
| | ------------------------------------------------------------------------
| | We make estimates in determining our worldwide income tax
    provision.







38



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| |                                                                                                    
| | ---------------------------------------------------------------------------------------------------
| | A general economic slowdown, particularly in our end
    markets, may adversely impact our results.





| |                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------
| | We are dependent on third parties such as resellers and
    distributors to distribute a substantial portion of our MS
    products.



39



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| |                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our quarterly operating results are subject to significant
    fluctuations and, as a result,
    period-to-period
    comparisons of our results of operations are not necessarily
    meaningful and should not be relied upon as indicators of future
    performance.





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | seasonal slowdowns, in particular, in our first and, to a lesser
    extent, our third fiscal quarter, in many of the markets in
    which we sell our products,                                                                                                                                                                                                                                                                               
|
| |  | because the gross margins of our MS business are lower than the
    gross margins of our Design Analysis Solutions (DAS)
    business, our gross margin and operating income may decline as
    the MS business grows as a percentage of total revenue,                                                                                                                                                                                      
|
| |  | the timing and magnitude of capital expenditures, including
    costs relating to the expansion of our operations and
    infrastructure, and planned program spending, required for major
    marketing initiatives or tradeshows,                                                                                                                                                                                                            
|
| |  | introductions of new services or enhancements by us and our
    competitors and corresponding changes in pricing policies,                                                                                                                                                                                                                                                                                                                     
|
| |  | our increased use of third parties such as distributors, OEM
    partners and resellers which may lessen the control we have over
    revenue and earnings during any particular period,                                                                                                                                                                                                                                                       
|
| |  | the timing and magnitude of our tax expense, resulting from the
    globally distributed nature of our selling and research and
    development operations, and certain on-going tax audits or
    investigations by various local tax authorities that may lead to
    the loss of certain planned-for tax benefits, or increased
    taxable income in certain jurisdictions that may not be offset
    by losses in other tax jurisdictions,
|
| |  | fluctuations in our tax rate from quarter to quarter due to the
    impact of discrete events, including the settlement of claims,
    the management of audits and other inquiries, the acquisition of
    other companies or other events,                                                                                                                                                                                                   
|
| |  | the impact of expensing stock-based compensation,                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | currency and exchange rate fluctuations,                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | timing and integration of acquisitions,                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | costs of compliance with the Sarbanes-Oxley Act of 2002, and                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | restructuring charges taken during any fiscal year, including
    the restructuring charges taken in the second and fourth
    quarters of fiscal 2006.                                                                                                                                                                                                                                                                                        





| |                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------
| | If we experience delays in introducing new products or if
    our existing or new products do not achieve market acceptance,
    we may lose revenue.





| |   |                                  
| | - | ---------------------------------
| |  | rapid technological advances,    
|
| |  | evolving industry standards,     
|
| |  | changes in end-user requirements,

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| |   |                                             
| | - | --------------------------------------------
| |  | intense competition,                        
|
| |  | technically complex products,               
|
| |  | frequent new product introductions, and     
|
| |  | evolving offerings by product manufacturers.







| |                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Any future mergers, acquisitions and strategic
    relationships may result in lost revenue caused by business
    disruptions and missed opportunities caused by the distraction
    of our management.





| |                                                                                                                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we determine that any of our goodwill or intangible
    assets, including technology purchased in acquisitions, are
    impaired, we would be required to take a charge to earnings,
    which could have a material adverse effect on our results of
    operations.





| |                                                                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we become subject to intellectual property infringement
    claims, we could incur significant expenses and we could be
    prevented from offering specific products or services.



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| |                                                                                   
| | ----------------------------------------------------------------------------------
| | We may lose sales if we are unable to protect important
    intellectual property.







| |   |                                                                                                                                                                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we cannot be certain that our pending United States and foreign
    patent applications will result in issued patents or that the
    claims allowed are or will be sufficiently broad to protect our
    technology,                                                                                                  
|
| |  | third parties may design around our patented technologies or
    seek to challenge or invalidate our patented technologies,                                                                                                                                                                                            
|
| |  | patents of others may have an adverse effect on our ability to
    do business,                                                                                                                                                                                                                                        
|
| |  | the contractual provisions that we rely on, in part, to protect
    our trade secrets and proprietary knowledge may be breached, and
    we may not have adequate remedies for any breach and our trade
    secrets and proprietary information may be disclosed to the
    public,                                    
|
| |  | our trade secrets may become known without breach of such
    agreements or may be independently developed by competitors,                                                                                                                                                                                             
|
| |  | foreign countries, including some of those in which we do
    business, may reduce or limit the protection of our intellectual
    property rights and software piracy, particularly in certain
    countries in Asia, may result in lost revenue in those countries
    or to customers with worldwide operations, and
|
| |  | the cost of enforcing our intellectual property rights,
    including actions currently on going, may reduce our future
    profitability.                                                                                                                                                                             



| |                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------
| | Our financial condition or results of operations may be
    adversely affected by international business risks.







| |   |                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------
| |  | decreased liquidity resulting from longer accounts receivable
    collection cycles typical of certain foreign countries,                         
|
| |  | decreased revenue on foreign sales resulting from possible
    foreign currency exchange and conversion issues,                                   
|
| |  | lower productivity resulting from difficulties managing our
    sales, support, and research and development operations across
    many countries,

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| |   |                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | decreased earnings based on changes in tax regulations in
    foreign jurisdictions or the timing of required tax payments in
    foreign jurisdictions that may not yet be offset by tax benefits
    arising from losses in other jurisdictions,
|
| |  | lost revenue resulting from difficulties associated with
    enforcing agreements and collecting receivables through foreign
    legal systems,                                                                                                   
|
| |  | interruptions of our operations due to political and social
    conditions of the countries in which we do business,                                                                                                                              
|
| |  | lost revenue resulting from the imposition by foreign
    governments of trade protection measures, and                                                                                                                                           
|
| |  | higher cost of sales resulting from import or export licensing
    requirements.                                                                                                                                                                  



| |                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We have more limited financial and other resources than
    many of our competitors and potential competitors and may be
    unable to compete successfully against them.





| |                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------
| | Disruption of operations at our development or
    manufacturing facilities could interfere with our product
    development and production cycles.





| |                                                                     
| | --------------------------------------------------------------------
| | Our MS products may lead to product liability claims
    against us.





| |                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our net income and earnings per share have been and will
    continue to be significantly reduced as a result of the
    requirement that we record compensation expense for shares
    issued under our stock plans.



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| |                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our stock price is highly volatile and our stock price
    could experience substantial declines and our managements
    attention may be diverted from more productive tasks.





| |   |                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------
| |  | revenues and operating results failing to meet the expectations
    of securities analysts or investors in any quarter,
|
| |  | downward revisions in securities analysts estimates or
    changes in general market conditions,                      
|
| |  | changes in our senior management personnel,                                                                            
|
| |  | sale of shares of our common stock by insiders or affiliated
    persons,                                              
|
| |  | technological innovations by competitors or in competing
    technologies,                                             
|
| |  | a decrease in the demand for our common stock,                                                                         
|
| |  | investor perception of our industry or our prospects, and                                                              
|
| |  | general technology or economic trends.                                                                                 








|        |         
|------- | --------
|Item 6. | Exhibits

Exhibits:


|        |    |    |  |                                                                                         
|------- | -- | -- |  | ----------------------------------------------------------------------------------------
|Exhibit |    |   
|No.     |    |   
|        |    |   
|        | 31 | .1 |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive
    Officer. (Filed herewith.)
|        | 31 | .2 |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial
    Officer. (Filed herewith.)
|        | 32 | .1 |  | Section 1350 Certification of Chief Executive Officer.(1)
    (Filed herewith.)         
|        | 32 | .2 |  | Section 1350 Certification of Chief Financial Officer.(1)
    (Filed herewith.)         






|    |                                                                                                                                                                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | This certification shall not be deemed filed for
    purposes of Section 18 of the Securities Exchange Act of
    1934, or otherwise subject to the liability of that section, nor
    shall it be deemed incorporated by reference into any filing
    under the Securities Act of 1933 or the Securities Exchange Act
    of 1934.

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SIGNATURES






| |                     
| | --------------------
| | Moldflow Corporation



| |     |                     
| | --- | --------------------
| | By: | /s/ A. ROLAND THOMAS

| |                                      
| | -------------------------------------
| |                                      
| | A. Roland Thomas                     
| | President and Chief Executive Officer
|
| | Moldflow Corporation                 



| |     |                           
| | --- | --------------------------
| | By: | /s/ CHRISTOPHER L. GORGONE

| |                                    
| | -----------------------------------
| |                                    
| | Christopher L. Gorgone             
| | Executive Vice President of Finance
| | and Chief Financial Officer        
| | (Principal Financial Officer)      



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