----

----

| R      | QUARTERLY REPORT PURSUANT TO      SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF      1934                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | FOR      THE QUARTERLY PERIOD ENDED JUNE 30, 2008                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | OR                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| £ | TRANSITION REPORT PURSUANT TO      SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF      1934                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | FOR      THE TRANSITION PERIOD      FROM                                                                                                TO                  |

| MASSACHUSETTS                                                       | 04-2211809                                |
|---------------------------------------------------------------------|-------------------------------------------|
| (State      or other jurisdiction of Incorporation or organization) | (I.R.S.      Employer Identification No.) |

|   | Large      accelerated filer  £                                                              | Accelerated      filer  R              |
|--------|-------------------------------------------------------------------------------------------------------------|--------------------------------------------------|
|   | Non-accelerated      filer    £ (Do not      check if a smaller reporting company) | Smaller      reporting company  £ |

----

----

----

DYNAMICS RESEARCH CORPORATION

|                               |                                         |                                                                                                                                                                               | Page |
|------------------------------------|----------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------|
| Part      I. Financial Information |                                         |
|                               | Item      1.  Financial Statements |                                                                                                                                                                               |
|                               |                                         | Condensed Consolidated Balance Sheets as of June 30, 2008 and      December 31, 2007 (unaudited)                                                                              | 3    |
|                               |                                         | Condensed Consolidated Statements of Operations for the three      and six months ended June 30, 2008 and 2007(unaudited)                                                          | 4    |
|                               |                                         | Condensed Consolidated Statements of Changes in Stockholders’      Equity and Comprehensive Income (loss) for the three months ended June 30,      2008 and 2007 (unaudited) | 5    |
|                               |                                         | Condensed Consolidated Statements of Changes in Stockholders’      Equity and Comprehensive Income (loss) for the six months ended June 30,      2008 and 2007 (unaudited)   | 6    |
|                               |                                         | Condensed Consolidated Statements of Cash Flows for the six      months ended June 30, 2008 and 2007 (unaudited)                                                                   | 7    |
|                               |                                         | Notes to Condensed Consolidated Financial Statements      (unaudited)                                                                                                              | 8    |
|                               | Item      2.                                 | Management’s Discussion and Analysis of Financial Condition      and Results of Operations                                                                                   | 19   |
|                               | Item      3.                                 | Quantitative and Qualitative Disclosures About Market      Risk                                                                                                                    | 27   |
|                               | Item      4.                                 | Controls and Procedures                                                                                                                                                            | 27   |
| Part      II. Other Information    |                                         |
|                               | Item      1.                                 | Legal Proceedings                                                                                                                                                                  | 27   |
|                               | Item      1A.                                | Risk Factors                                                                                                                                                                       | 27   |
|                               | Item      2.                                 | Unregistered Sales of Equity Securities and Use of      Proceeds                                                                                                                   | 28   |
|                               | Item      4.                                 | Submission of Matters to a Vote of Security      Holders                                                                                                                           | 28   |
|                               | Item      6.                                 | Exhibits                                                                                                                                                                           | 29   |

----

Table of Contents

DYNAMICS RESEARCH CORPORATION

|                                                                                                                                                                                   |   | June      30, |    |   | December      31, |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------|---------|--------|-------------------|--------|
|                                                                                                                                                                                   |   | 2008          |    |   | 2007              |   |
| Assets                                                                                                                                                                                 |   |          |    |   |              |   |
| Current      assets                                                                                                                                                                    |   |          |    |   |              |   |
| Cash      and cash equivalents                                                                                                                                                         |   | $             | 108     |   |              | $      | 2,006 |   |
| Contract      receivables, net                                                                                                                                                         |   |          | 64,239  |   |              |   | 63,570 |   |
| Prepaid      expenses and other current assets                                                                                                                                         |   |          | 2,723   |   |              |   | 2,508 |   |
| Total      current assets                                                                                                                                                              |   |          | 67,070  |   |              |   | 68,084 |   |
| Noncurrent      assets                                                                                                                                                                 |   |          |    |   |              |   |   |   |
| Property      and equipment, net                                                                                                                                                       |   |          | 9,576   |   |              |   | 10,182 |   |
| Goodwill                                                                                                                                                                               |   |          | 63,055  |   |              |   | 63,055 |   |
| Intangible      assets, net                                                                                                                                                            |   |          | 2,050   |   |              |   | 3,069 |   |
| Deferred      tax asset                                                                                                                                                                |   |          | 1,484   |   |              |   | 1,484 |   |
| Other      noncurrent assets                                                                                                                                                           |   |          | 4,303   |   |              |   | 4,079 |   |
| Total      noncurrent assets                                                                                                                                                           |   |          | 80,468  |   |              |   | 81,869 |   |
| Total      assets                                                                                                                                                                      |   | $             | 147,538 |   |              | $      | 149,953 |   |
| Liabilities      and stockholders' equity                                                                                                                                              |   |          |    |   |              |   |   |   |
| Current      liabilities                                                                                                                                                               |   |          |    |   |              |   |   |   |
| Accounts      payable                                                                                                                                                                  |   | $             | 13,626  |   |              | $      | 12,163 |   |
| Accrued      compensation and employee benefits                                                                                                                                        |   |          | 13,433  |   |              |   | 13,409 |   |
| Deferred      taxes                                                                                                                                                                    |   |          | 5,696   |   |              |   | 8,486 |   |
| Other      accrued expenses                                                                                                                                                            |   |          | 12,727  |   |              |   | 3,078 |   |
| Total      current liabilities                                                                                                                                                         |   |          | 45,482  |   |              |   | 37,136 |   |
| Long-term      liabilities                                                                                                                                                             |   |          |    |   |              |   |   |   |
| Long-term      debt                                                                                                                                                                    |   |          | 607     |   |              |   | 7,737 |   |
| Other      long-term liabilities                                                                                                                                                       |   |          | 7,931   |   |              |   | 8,576 |   |
| Total      long-term liabilities                                                                                                                                                       |   |          | 8,538   |   |              |   | 16,313 |   |
| Total      liabilities                                                                                                                                                                 |   |          | 54,020  |   |              |   | 53,449 |   |
| Commitments      and contingencies                                                                                                                                                     |   |          |    |   |              |   |   |   |
| Stockholders'      equity                                                                                                                                                              |   |          |    |   |              |   |   |   |
| Preferred      stock, $0.10 par value; 5,000,000 shares authorized; no shares issued and      outstanding                                                                              |   |          | -       |   |              |   | - |   |
| Common      stock, $0.10 par value; 30,000,000 shares authorized; 9,562,309 and      9,509,849 shares issued and outstanding at June 30, 2008 and December 31,      2007, respectively |   |          | 956     |   |              |   | 951 |   |
| Capital      in excess of par value                                                                                                                                                    |   |          | 50,995  |   |              |   | 50,251 |   |
| Accumulated      other comprehensive loss                                                                                                                                              |   |          | (6,853  | )      |              |   | (6,745 | ) |
| Retained      earnings                                                                                                                                                                 |   |          | 48,420  |   |              |   | 52,047 |   |
| Total      stockholders' equity                                                                                                                                                        |   |          | 93,518  |   |              |   | 96,504 |   |
| Total      liabilities and stockholders' equity                                                                                                                                        |   | $             | 147,538 |   |              | $      | 149,953 |   |

----

Table of Contents

DYNAMICS RESEARCH CORPORATION

|                                                 |   | Three      Months Ended |      |   | Six      Months Ended |   |      |
|------------------------------------------------------|--------|-------------------------|-----------|--------|-----------------------|--------|-----------|
|                                                 |   | June      30,           |      |   | June      30,         |   |      |
|                                                 |   | 2008                    |      |   | 2007                  |   |      | 2008 |   |   | 2007 |
| Contract      revenue                                |   | $                       | 53,708    |   |                  | $      | 57,030    |   |   | $ | 108,481 |   |   | $ | 112,942 |   |
| Product      sales                                   |   |                    | 1,585     |   |                  |   | 980       |   |   |   | 3,290 |   |   |   | 1,848 |   |
| Total      revenue                                   |   |                    | 55,293    |   |                  |   | 58,010    |   |   |   | 111,771 |   |   |   | 114,790 |   |
|                                                 |   |                    |      |   |                  |   |      |   |   |   |   |   |   |   |   |   |   |
| Cost      of contract revenue                        |   |                    | 45,599    |   |                  |   | 47,460    |   |   |   | 91,811 |   |   |   | 94,393 |   |
| Cost      of product sales                           |   |                    | 1,393     |   |                  |   | 1,200     |   |   |   | 2,998 |   |   |   | 2,348 |   |
| Total      cost of  revenue                |   |                    | 46,992    |   |                  |   | 48,660    |   |   |   | 94,809 |   |   |   | 96,741 |   |
|                                                 |   |                    |      |   |                  |   |      |   |   |   |   |   |   |   |   |   |   |
| Gross      profit on contract revenue                |   |                    | 8,109     |   |                  |   | 9,570     |   |   |   | 16,670 |   |   |   | 18,549 |   |
| Gross      profit (loss) on product sales            |   |                    | 192       |   |                  |   | (220      | ) |   |   | 292 |   |   |   | (500 | ) |
| Total      gross profit                              |   |                    | 8,301     |   |                  |   | 9,350     |   |   |   | 16,962 |   |   |   | 18,049 |   |
|                                                 |   |                    |      |   |                  |   |      |   |   |   |   |   |   |   |   |   |   |
| Selling,      general and administrative expenses    |   |                    | 5,147     |   |                  |   | 5,763     |   |   |   | 10,548 |   |   |   | 11,361 |   |
| Provision      for litigation                        |   |                    | -         |   |                  |   | -         |   |   |   | 8,819 |   |   |   | 181 |   |
| Amortization      of intangible assets               |   |                    | 510       |   |                  |   | 651       |   |   |   | 1,019 |   |   |   | 1,301 |   |
| Operating      income (loss)                         |   |                    | 2,644     |   |                  |   | 2,936     |   |   |   | (3,424 | ) |   |   | 5,206 |   |
| Interest      expense, net                           |   |                    | (142      | )      |                  |   | (473      | ) |   |   | (281 | ) |   |   | (929 | ) |
| Other      income, net                               |   |                    | 239       |   |                  |   | 122       |   |   |   | 168 |   |   |   | 255 |   |
| Income      (loss) before provision for income taxes |   |                    | 2,741     |   |                  |   | 2,585     |   |   |   | (3,537 | ) |   |   | 4,532 |   |
| Provision      for income taxes                      |   |                    | 1,112     |   |                  |   | 1,071     |   |   |   | 90 |   |   |   | 1,895 |   |
| Net      income (loss)                               |   | $                       | 1,629     |   |                  | $      | 1,514     |   |   | $ | (3,627 | ) |   | $ | 2,637 |   |
|                                                 |   |                    |      |   |                  |   |      |   |   |   |   |   |   |   |   |   |   |
| Earnings      (loss) per common share                |   |                    |      |   |                  |   |      |   |   |   |   |   |   |   |   |   |   |
| Basic                                                |   | $                       | 0.17      |   |                  | $      | 0.16      |   |   | $ | (0.38 | ) |   | $ | 0.28 |   |
| Diluted                                              |   | $                       | 0.17      |   |                  | $      | 0.16      |   |   | $ | (0.38 | ) |   | $ | 0.27 |   |
|                                                 |   |                    |      |   |                  |   |      |   |   |   |   |   |   |   |   |   |   |
| Weighted      average shares outstanding             |   |                    |      |   |                  |   |      |   |   |   |   |   |   |   |   |   |   |
| Basic                                                |   |                    | 9,443,347 |   |                  |   | 9,317,297 |   |   |   | 9,430,607 |   |   |   | 9,308,558 |   |
| Diluted                                              |   |                    | 9,724,839 |   |                  |   | 9,650,919 |   |   |   | 9,430,607 |   |   |   | 9,609,575 |   |

----

Table of Contents

DYNAMICS RESEARCH CORPORATION

|                                                                                                            |   |              |   |   |           |   |   | Capital        |   |           | Accumulated |   |        |     |   |   |   |   |
|-----------------------------------------------------------------------------------------------------------------|--------|-------------------|--------|--------|----------------|--------|--------|----------------|--------|----------------|-------------|--------|-------------|----------|--------|--------|--------|--------|
|                                                                                                            |   |              |   |   |           |   |   | in      Excess |   |           | Other       |   |        |     |   |   |   |   |
|                                                                                                            |   | Common      Stock |   |   | of      Par    |   |   | Comprehensive  |   |           | Retained    |   |        |     |   |
|                                                                                                            |   | Shares            |   |   | Par      value |   |   | Value          |   |           | Loss        |   |        | Earnings |   |   | Total  |   |
| Balance      at March 31, 2008                                                                                  |   |              | 9,558  |   |           | $      | 956    |           |   | $              | 50,775      |   |        | $        | (6,853 | )      |   | $      | 46,791 |   |   | $ | 91,669 |   |
| Comprehensive      income:                                                                                      |   |              |   |   |           |   |   |           |   |           |        |   |        |     |   |   |   |   |   |   |   |   |   |   |
| Net      income                                                                                                 |   |              | -      |   |           |   | -      |           |   |           | -           |   |        |     | -      |   |   |   | 1,629 |   |   |   | 1,629 |   |
| Comprehensive      income                                                                                       |   |              | -      |   |           |   | -      |           |   |           | -           |   |        |     | -      |   |   |   | - |   |   |   | 1,629 |   |
| Issuance      of common stock through stock option exercises and employee stock purchase      plan transactions |   |              | 22     |   |           |   | 2      |           |   |           | 178         |   |        |     | -      |   |   |   | - |   |   |   | 180 |   |
| Issuance      of restricted stock                                                                               |   |              | 14     |   |           |   | 2      |           |   |           | (2          | )      |        |     | -      |   |   |   | - |   |   |   | - |   |
| Forfeiture      of restricted stock                                                                             |   |              | (3     | )      |           |   | (1     | )              |   |           | 1           |   |        |     | -      |   |   |   | - |   |   |   | - |   |
| Release      of restricted stock                                                                                |   |              | (29    | )      |           |   | (3     | )              |   |           | (292        | )      |        |     | -      |   |   |   | - |   |   |   | (295 | ) |
| Share-based      compensation                                                                                   |   |              | -      |   |           |   | -      |           |   |           | 322         |   |        |     | -      |   |   |   | - |   |   |   | 322 |   |
| Tax      benefit from stock options exercised and employee stock purchase plan      transactions                |   |              | -      |   |           |   | -      |           |   |           | 13          |   |        |     | -      |   |   |   | - |   |   |   | 13 |   |
| Balance      at June 30, 2008                                                                                   |   |              | 9,562  |   |           | $      | 956    |           |   | $              | 50,995      |   |        | $        | (6,853 | )      |   | $      | 48,420 |   |   | $ | 93,518 |   |
|                                                                                                            |   |              |   |   |           |   |   |           |   |           |        |   |        |     |   |   |   |   |   |   |   |   |   |   |
|                                                                                                            |   |              |   |   |           |   |   |           |   | Capital        |        |   | Accumulated |     |   |   |   |   |   |   |   |   |
|                                                                                                            |   |              |   |   |           |   |   |           |   | in      Excess |        |   | Other       |     |   |   |   |   |   |   |   |   |
|                                                                                                            |   | Common      Stock |   |   | of      Par    |   |   | Comprehensive  |   |           | Retained    |   |        |     |   |   |
|                                                                                                            |   | Shares            |   |   | Par      value |   |   | Value          |   |           | Loss        |   |        | Earnings |   |   | Total  |   |
| Balance      at March 31, 2007                                                                                  |   |              | 9,378  |   |           | $      | 938    |           |   | $              | 48,310      |   |        | $        | (9,206 | )      |   | $      | 46,068 |   |   | $ | 86,110 |   |
| Comprehensive      income:                                                                                      |   |              |   |   |           |   |   |           |   |           |        |   |        |     |   |   |   |   |   |   |   |   |   |   |
| Net      income                                                                                                 |   |              | -      |   |           |   | -      |           |   |           | -           |   |        |     | -      |   |   |   | 1,514 |   |   |   | 1,514 |   |
| Comprehensive      income                                                                                       |   |              | -      |   |           |   | -      |           |   |           | -           |   |        |     | -      |   |   |   | - |   |   |   | 1,514 |   |
| Issuance      of common stock through stock option exercises and employee stock purchase      plan transactions |   |              | 42     |   |           |   | 4      |           |   |           | 337         |   |        |     | -      |   |   |   | - |   |   |   | 341 |   |
| Issuance      of restricted stock                                                                               |   |              | 52     |   |           |   | 5      |           |   |           | (5          | )      |        |     | -      |   |   |   | - |   |   |   | - |   |
| Forfeiture      of restricted stock                                                                             |   |              | (6     | )      |           |   | (1     | )              |   |           | 1           |   |        |     | -      |   |   |   | - |   |   |   | - |   |
| Release      of restricted stock                                                                                |   |              | (2     | )      |           |   | -      |           |   |           | (18         | )      |        |     | -      |   |   |   | - |   |   |   | (18 | ) |
| Share-based      compensation                                                                                   |   |              | -      |   |           |   | -      |           |   |           | 407         |   |        |     | -      |   |   |   | - |   |   |   | 407 |   |
| Tax      benefit from stock options exercised and employee stock purchase plan      transactions                |   |              | -      |   |           |   | -      |           |   |           | 34          |   |        |     | -      |   |   |   | - |   |   |   | 34 |   |
| Balance      at June 30, 2007                                                                                   |   |              | 9,464  |   |           | $      | 946    |           |   | $              | 49,066      |   |        | $        | (9,206 | )      |   | $      | 47,582 |   |   | $ | 88,388 |   |

----

Table of Contents

DYNAMICS RESEARCH CORPORATION

|                                                                                                            |   |              |   |   |           |   |   | Capital        |   |           | Accumulated |   |        |     |   |   |   |   |
|-----------------------------------------------------------------------------------------------------------------|--------|-------------------|--------|--------|----------------|--------|--------|----------------|--------|----------------|-------------|--------|-------------|----------|--------|--------|--------|--------|
|                                                                                                            |   |              |   |   |           |   |   | in      Excess |   |           | Other       |   |        |     |   |   |   |   |
|                                                                                                            |   | Common      Stock |   |   | of      Par    |   |   | Comprehensive  |   |           | Retained    |   |        |     |   |
|                                                                                                            |   | Shares            |   |   | Par      value |   |   | Value          |   |           | Loss        |   |        | Earnings |   |   | Total  |   |
| Balance      at December 31, 2007                                                                               |   |              | 9,510  |   |           | $      | 951    |           |   | $              | 50,251      |   |        | $        | (6,745 | )      |   | $      | 52,047 |   |   | $ | 96,504 |   |
| Comprehensive      loss:                                                                                        |   |              |   |   |           |   |   |           |   |           |        |   |        |     |   |   |   |   |   |   |   |   |   |   |
| Net      loss                                                                                                   |   |              | -      |   |           |   | -      |           |   |           | -           |   |        |     | -      |   |   |   | (3,627 | ) |   |   | (3,627 | ) |
| Other      comprehensive loss, net of tax:                                                                      |   |              |   |   |           |   |   |           |   |           |        |   |        |     |   |   |   |   |   |   |   |   |   |   |
| Reclassification      adjustment for gain on sale of investment included in net loss, net of      taxes         |   |              | -      |   |           |   | -      |           |   |           | -           |   |        |     | (108   | )      |   |   | - |   |   |   | (108 | ) |
| Comprehensive      loss                                                                                         |   |              | -      |   |           |   | -      |           |   |           | -           |   |        |     | -      |   |   |   | - |   |   |   | (3,735 | ) |
| Issuance      of common stock through stock option exercises and employee stock purchase      plan transactions |   |              | 50     |   |           |   | 5      |           |   |           | 409         |   |        |     | -      |   |   |   | - |   |   |   | 414 |   |
| Issuance      of restricted stock                                                                               |   |              | 48     |   |           |   | 5      |           |   |           | (5          | )      |        |     | -      |   |   |   | - |   |   |   | - |   |
| Forfeiture      of restricted stock                                                                             |   |              | (5     | )      |           |   | (1     | )              |   |           | 1           |   |        |     | -      |   |   |   | - |   |   |   | - |   |
| Release      of restricted stock                                                                                |   |              | (41    | )      |           |   | (4     | )              |   |           | (410        | )      |        |     | -      |   |   |   | - |   |   |   | (414 | ) |
| Share-based      compensation                                                                                   |   |              | -      |   |           |   | -      |           |   |           | 724         |   |        |     | -      |   |   |   | - |   |   |   | 724 |   |
| Tax      benefit from stock options exercised and employee stock purchase plan      transactions                |   |              | -      |   |           |   | -      |           |   |           | 25          |   |        |     | -      |   |   |   | - |   |   |   | 25 |   |
| Balance      at June 30, 2008                                                                                   |   |              | 9,562  |   |           | $      | 956    |           |   | $              | 50,995      |   |        | $        | (6,853 | )      |   | $      | 48,420 |   |   | $ | 93,518 |   |
|                                                                                                            |   |              |   |   |           |   |   |           |   |           |        |   |        |     |   |   |   |   |   |   |   |   |   |   |
|                                                                                                            |   |              |   |   |           |   |   |           |   | Capital        |        |   | Accumulated |     |   |   |   |   |   |   |   |   |
|                                                                                                            |   |              |   |   |           |   |   |           |   | in      Excess |        |   | Other       |     |   |   |   |   |   |   |   |   |
|                                                                                                            |   | Common      Stock |   |   | of      Par    |   |   | Comprehensive  |   |           | Retained    |   |        |     |   |   |
|                                                                                                            |   | Shares            |   |   | Par      value |   |   | Value          |   |           | Loss        |   |        | Earnings |   |   | Total  |   |
| Balance      at December 31, 2006                                                                               |   |              | 9,315  |   |           | $      | 931    |           |   | $              | 47,644      |   |        | $        | (9,206 | )      |   | $      | 44,945 |   |   | $ | 84,314 |   |
| Comprehensive      income:                                                                                      |   |              |   |   |           |   |   |           |   |           |        |   |        |     |   |   |   |   |   |   |   |   |   |   |
| Net      income                                                                                                 |   |              | -      |   |           |   | -      |           |   |           | -           |   |        |     | -      |   |   |   | 2,637 |   |   |   | 2,637 |   |
| Comprehensive      income                                                                                       |   |              | -      |   |           |   | -      |           |   |           | -           |   |        |     | -      |   |   |   | - |   |   |   | 2,637 |   |
| Issuance      of common stock through stock option exercises and employee stock purchase      plan transactions |   |              | 94     |   |           |   | 10     |           |   |           | 754         |   |        |     | -      |   |   |   | - |   |   |   | 764 |   |
| Issuance      of restricted stock                                                                               |   |              | 84     |   |           |   | 8      |           |   |           | (8          | )      |        |     | -      |   |   |   | - |   |   |   | - |   |
| Forfeiture      of restricted stock                                                                             |   |              | (10    | )      |           |   | (1     | )              |   |           | 1           |   |        |     | -      |   |   |   | - |   |   |   | - |   |
| Release      of restricted stock                                                                                |   |              | (19    | )      |           |   | (2     | )              |   |           | (191        | )      |        |     | -      |   |   |   | - |   |   |   | (193 | ) |
| Share-based      compensation                                                                                   |   |              | -      |   |           |   | -      |           |   |           | 803         |   |        |     | -      |   |   |   | - |   |   |   | 803 |   |
| Tax      benefit from stock options exercised and employee stock purchase plan      transactions                |   |              | -      |   |           |   | -      |           |   |           | 63          |   |        |     | -      |   |   |   | - |   |   |   | 63 |   |
| Balance      at June 30, 2007                                                                                   |   |              | 9,464  |   |           | $      | 946    |           |   | $              | 49,066      |   |        | $        | (9,206 | )      |   | $      | 47,582 |   |   | $ | 88,388 |   |

----

Table of Contents

DYNAMICS RESEARCH CORPORATION

|                                                                                                |   | Six      Months Ended |    |
|-----------------------------------------------------------------------------------------------------|--------|-----------------------|---------|
|                                                                                                |   | June      30,         |    |
|                                                                                                |   | 2008                  |    |   | 2007 |   |
| Cash      flows from operating activities:                                                          |   |                  |    |   |   |   |
| Net      income (loss)                                                                              |   | $                     | (3,627  | ) |   | $ | 2,637 |   |
| Adjustments      to reconcile net cash provided by (used in) operating      activities:             |   |                  |    |   |   |   |   |   |
| Depreciation                                                                                        |   |                  | 1,419   |   |   |   | 1,576 |   |
| Amortization      of intangible assets                                                              |   |                  | 1,019   |   |   |   | 1,301 |   |
| Share-based      compensation                                                                       |   |                  | 724     |   |   |   | 803 |   |
| Investment      income from equity interest                                                         |   |                  | (171    | ) |   |   | (99 | ) |
| Tax      benefit from stock options exercised and employee stock purchase plan      transactions    |   |                  | (25     | ) |   |   | (63 | ) |
| Provision      for litigation                                                                       |   |                  | 8,819   |   |   |   | 181 |   |
| Deferred      income taxes                                                                          |   |                  | (2,719  | ) |   |   | (1,825 | ) |
| Other                                                                                               |   |                  | (380    | ) |   |   | (265 | ) |
| Change      in operating assets and liabilities:                                                    |   |                  |    |   |   |   |   |   |
| Contract      receivables, net                                                                      |   |                  | (669    | ) |   |   | (3,277 | ) |
| Prepaid      expenses and other current assets                                                      |   |                  | (549    | ) |   |   | (753 | ) |
| Accounts      payable                                                                               |   |                  | 1,463   |   |   |   | (4,144 | ) |
| Accrued      compensation and employee benefits                                                     |   |                  | 24      |   |   |   | (888 | ) |
| Other      accrued expenses                                                                         |   |                  | 476     |   |   |   | (1,143 | ) |
| Other      long-term liabilities                                                                    |   |                  | (307    | ) |   |   | 206 |   |
| Net      cash provided by (used in) operating activities                                            |   |                  | 5,497   |   |   |   | (5,753 | ) |
| Cash      flows from investing activities:                                                          |   |                  |    |   |   |   |   |   |
| Additions      to property and equipment                                                            |   |                  | (813    | ) |   |   | (740 | ) |
| Proceeds      from sale of investments and long-lived assets                                        |   |                  | 275     |   |   |   | - |   |
| Dividends      from equity investment                                                               |   |                  | 311     |   |   |   | 171 |   |
| Payments      related to the sale of building                                                       |   |                  | (35     | ) |   |   | - |   |
| Increase      in other assets                                                                       |   |                  | (427    | ) |   |   | (133 | ) |
| Net      cash used in investing activities                                                          |   |                  | (689    | ) |   |   | (702 | ) |
| Cash      flow from financing activities:                                                           |   |                  |    |   |   |   |   |   |
| Borrowings      under revolving credit agreement                                                    |   |                  | 55,037  |   |   |   | 110,685 |   |
| Repayments      under revolving credit agreement                                                    |   |                  | (62,167 | ) |   |   | (112,658 | ) |
| Proceeds      from the exercise of stock options and employee stock purchase plan      transactions |   |                  | 414     |   |   |   | 764 |   |
| Tax      benefit from stock options exercised and employee stock purchase plan      transactions    |   |                  | 25      |   |   |   | 63 |   |
| Payments      of deferred financing costs                                                           |   |                  | (15     | ) |   |   | - |   |
| Net      cash used in financing activities                                                          |   |                  | (6,706  | ) |   |   | (1,146 | ) |
| Net      decrease in cash and cash equivalents                                                      |   |                  | (1,898  | ) |   |   | (7,601 | ) |
| Cash      and cash equivalents, beginning of period                                                 |   |                  | 2,006   |   |   |   | 7,887 |   |
| Cash      and cash equivalents, end of period                                                       |   | $                     | 108     |   |   | $ | 286 |   |

----

Table of Contents

NOTE 1. BASIS OF PRESENTATION

----

Table of Contents

|                                                                                                                               |   | June      30, |    |   | December 31, |   |
|------------------------------------------------------------------------------------------------------------------------------------|--------|---------------|---------|--------|-------------------|--------|
|                                                                                                                               |   | 2008          |    |   | 2007              |   |
| Contract      receivables, net                                                                                                     |   |          |    |   |              |   |
| Billed      receivables                                                                                                            |   | $             | 38,827  |   |              | $      | 31,884 |   |
| Unbilled      receivables(1):                                                                                                      |   |          |    |   |              |   |   |   |
| Revenues      recorded in excess of milestone billings on fixed price contracts with the      State of Ohio and State of Tennessee |   |          | 7,316   |   |              |   | 7,572 |   |
| Retainages      and fee withholdings                                                                                               |   |          | 901     |   |              |   | 1,529 |   |
| Other      unbilled receivables                                                                                                    |   |          | 18,165  |   |              |   | 23,488 |   |
| Total      unbilled receivables                                                                                                    |   |          | 26,382  |   |              |   | 32,589 |   |
| Allowance      for doubtful accounts                                                                                               |   |          | (970    | )      |              |   | (903 | ) |
| Contract      receivables, net                                                                                                     |   | $             | 64,239  |   |              | $      | 63,570 |   |
|                                                                                                                               |   |          |    |   |              |   |   |   |
| Property      and equipment, net:                                                                                                  |   |          |    |   |              |   |   |   |
| Production      equipment                                                                                                          |   | $             | 11,930  |   |              | $      | 11,917 |   |
| Software                                                                                                                           |   |          | 11,231  |   |              |   | 11,052 |   |
| Furniture      and other equipment                                                                                                 |   |          | 7,286   |   |              |   | 6,862 |   |
| Leasehold      improvements                                                                                                        |   |          | 2,572   |   |              |   | 2,375 |   |
| Property      and equipment                                                                                                        |   |          | 33,019  |   |              |   | 32,206 |   |
| Less      accumulated depreciation                                                                                                 |   |          | (23,443 | )      |              |   | (22,024 | ) |
| Property      and equipment, net                                                                                                   |   | $             | 9,576   |   |              | $      | 10,182 |   |
|                                                                                                                               |   |          |    |   |              |   |   |   |
| Other      noncurrent assets:                                                                                                      |   |          |    |   |              |   |   |   |
| Deferred      compensation plan investments                                                                                        |   | $             | 1,595   |   |              | $      | 1,747 |   |
| Prepaid      pension asset                                                                                                         |   |          | 1,318   |   |              |   | 718 |   |
| Equity      investments                                                                                                            |   |          | 979     |   |              |   | 1,119 |   |
| Other                                                                                                                              |   |          | 411     |   |              |   | 495 |   |
| Other      noncurrent assets                                                                                                       |   | $             | 4,303   |   |              | $      | 4,079 |   |
|                                                                                                                               |   |          |    |   |              |   |   |   |
| Accrued      compensation and employee benefits:                                                                                   |   |          |    |   |              |   |   |   |
| Accrued      payroll and payroll  taxes                                                                                  |   | $             | 5,379   |   |              | $      | 6,967 |   |
| Accrued      vacation                                                                                                              |   |          | 4,772   |   |              |   | 4,273 |   |
| Accrued      employee exit costs(2)                                                                                                |   |          | 736     |   |              |   | - |   |
| Other                                                                                                                              |   |          | 2,546   |   |              |   | 2,169 |   |
| Accrued      compensation and employee benefits                                                                                    |   | $             | 13,433  |   |              | $      | 13,409 |   |
|                                                                                                                               |   |          |    |   |              |   |   |   |
| Other      accrued expenses:                                                                                                       |   |          |    |   |              |   |   |   |
| Accrued      litigation liability                                                                                                  |   | $             | 9,000   |   |              | $      | 181 |   |
| Accrued      income taxes                                                                                                          |   |          | 1,009   |   |              |   | 585 |   |
| Deferred      gain on sale of building                                                                                             |   |          | 676     |   |              |   | 676 |   |
| Other                                                                                                                              |   |          | 2,042   |   |              |   | 1,636 |   |
| Other      accrued expenses                                                                                                        |   | $             | 12,727  |   |              | $      | 3,078 |   |
|                                                                                                                               |   |          |    |   |              |   |   |   |
| Other      long-term liabilities:                                                                                                  |   |          |    |   |              |   |   |   |
| Deferred      gain on sale of building, net                                                                                        |   | $             | 4,395   |   |              | $      | 4,733 |   |
| Deferred      compensation plan liability                                                                                          |   |          | 1,595   |   |              |   | 1,747 |   |
| Other                                                                                                                              |   |          | 1,941   |   |              |   | 2,096 |   |
|    Other      long-term liabilities                                                                                 |   | $             | 7,931   |   |              | $      | 8,576 |   |

----

Table of Contents

| (1)    | Contract      receivables are classified as current assets in accordance with industry      practice.  At June 30, 2008 and December 31, 2007, $522 and      $553, respectively, of unbilled retainages and fee withholdings are not      anticipated to be billed within twelve months.  Additionally, at      June 30, 2008, $926 of the unbilled balance under the Company’s contract      with the State of Tennessee is not scheduled to be invoiced within one      year.                          |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| (2)    | During      the first half of 2008, the Company learned that its work on the Navy’s      Trident Missile program will be curtailed significantly in the second half      of 2008.  The Company estimates that the total cost associated      with the work force reduction caused by this curtailment will be $950 of      which $736 has been recorded in accrued compensation and employee benefits      at June 30, 2008 and included in cost of contract revenue for the three      and six months then ended. |

| Remainder      of 2008 |   | $ | 1,019 |   |
|------------------------|--------|---|-------|--------|
| 2009                   |   | $ | 1,031 |   |

----

Table of Contents

|                                               |   | Three      Months Ended |   |   | Six      Months Ended |   |
|----------------------------------------------------|--------|-------------------------|--------|--------|-----------------------|--------|
|                                               |   | June      30,           |   |   | June      30,         |   |
|                                               |   | 2008                    |   |   | 2007                  |   |   | 2008 |   |   | 2007 |   |
| Interest      cost on projected benefit obligation |   | $                       | 959    |   |                  | $      | 1,006 |   |   | $ | 1,918 |   |   | $ | 2,012 |   |
| Expected      return on plan assets                |   |                    | (1,396 | )      |                  |   | (1,464 | ) |   |   | (2,792 | ) |   |   | (2,927 | ) |
| Recognized      actuarial loss                     |   |                    | 137    |   |                  |   | 270 |   |   |   | 274 |   |   |   | 540 |   |
| Net      periodic pension income                   |   | $                       | (300   | )      |                  | $      | (188 | ) |   | $ | (600 | ) |   | $ | (375 | ) |

|                                        |   | Three      Months Ended |   |   | Six      Months Ended |   |
|---------------------------------------------|--------|-------------------------|--------|--------|-----------------------|--------|
|                                        |   | June      30,           |   |   | June      30,         |   |
|                                        |   | 2008                    |   |   | 2007                  |   |   | 2008 |   |   | 2007 |   |
| Cost      of products and services          |   | $                       | 133    |   |                  | $      | 154 |   |   | $ | 296 |   |   | $ | 280 |   |
| Selling,      general and administrative    |   |                    | 189    |   |                  |   | 253 |   |   |   | 428 |   |   |   | 523 |   |
| Total      share-based compensation expense |   | $                       | 322    |   |                  | $      | 407 |   |   | $ | 724 |   |   | $ | 803 |   |

----

Table of Contents

|                                              |   |           |      |   |     |   |   | Weighted        |   |   |      |   |
|---------------------------------------------------|--------|----------------|-----------|--------|----------|--------|--------|-----------------|--------|--------|-----------|--------|
|                                              |   |           |      |   |     |   |   | Average         |   |   |      |   |
|                                              |   |           |      |   | Weighted |   |   | Remaining       |   |   |      |   |
|                                              |   |           |      |   | Average  |   |   | Contractual     |   |   | Aggregate |   |
|                                              |   | Number      of |      |   | Exercise |   |   | Term            |   |   | Intrinsic |   |
|                                              |   | Shares         |      |   | Price    |   |   | (in      years) |   |   | Value     |   |
| Outstanding      at December 31, 2007             |   |           | 1,012,078 |   |     | $      | 8.34   |            |   |   | 3.0       |   |   | $ | 3,030 |   |
| Granted                                           |   |           | -         |   |     | $      | -      |            |   |   |      |   |   |   |   |   |
| Exercised                                         |   |           | (25,617   | )      |     | $      | 7.25   |            |   |   |      |   |   |   |   |   |
| Cancelled                                         |   |           | (12,000   | )      |     | $      | 13.60  |            |   |   |      |   |   |   |   |   |
| Outstanding      and exercisable at June 30, 2008 |   |           | 974,461   |   |     | $      | 8.30   |            |   |   | 2.5       |   |   | $ | 2,638 |   |

|                                                           |   | Three      Months Ended |   |   | Six      Months Ended |   |
|----------------------------------------------------------------|--------|-------------------------|--------|--------|-----------------------|--------|
|                                                           |   | June      30,           |   |   | June      30,         |   |
|                                                           |   | 2008                    |   |   | 2007                  |   |   | 2008 |   |   | 2007 |   |
| Amounts      realized or received from stock option exercises: |   |                    |   |   |                  |   |   |   |   |   |   |   |
| Cash      proceeds received                                    |   | $                       | 73     |   |                  | $      | 160 |   |   | $ | 186 |   |   | $ | 421 |   |
| Intrinsic      value realized                                  |   | $                       | 36     |   |                  | $      | 148 |   |   | $ | 70 |   |   | $ | 219 |   |
| Income      tax benefit realized                               |   | $                       | 13     |   |                  | $      | 31 |   |   | $ | 24 |   |   | $ | 58 |   |

|                                |   |           |     |   | Weighted        |   |
|-------------------------------------|--------|----------------|----------|--------|-----------------|--------|
|                                |   |           |     |   | Average         |   |
|                                |   | Number      of |     |   | Grant-Date      |   |
|                                |   | Shares         |     |   | Fair      Value |   |
| Nonvested      at December 31, 2007 |   |           | 223,330  |   |            | $      | 11.43 |   |
| Granted                             |   |           | 48,000   |   |            | $      | 10.10 |   |
| Vested                              |   |           | (136,004 | )      |            | $      | 10.92 |   |
| Cancelled                           |   |           | (5,450   | )      |            | $      | 12.53 |   |
| Nonvested      at June 30, 2008     |   |           | 129,876  |   |            | $      | 11.44 |   |

----

Table of Contents

|                                                                    |   | Three      Months Ended |      |   | Six      Months Ended |   |
|-------------------------------------------------------------------------|--------|-------------------------|-----------|--------|-----------------------|--------|
|                                                                    |   | June      30,           |      |   | June      30,         |   |
|                                                                    |   | 2008                    |      |   | 2007                  |   |   | 2008 |   |   | 2007 |   |
|  Weighted      average shares outstanding - Basic                  |   |                    | 9,443,347 |   |                  |   | 9,317,297 |   |   |   | 9,430,607 |   |   |   | 9,308,558 |   |
|  Dilutive      effect of stock options and restricted stock grants |   |                    | 281,492   |   |                  |   | 333,622 |   |   |   | - |   |   |   | 301,017 |   |
|  Weighted      average shares outstanding - Diluted                |   |                    | 9,724,839 |   |                  |   | 9,650,919 |   |   |   | 9,430,607 |   |   |   | 9,609,575 |   |

|                                  |   | Three      Months Ended |   |   | Six      Months Ended |   |
|---------------------------------------|--------|-------------------------|--------|--------|-----------------------|--------|
|                                  |   | June      30,           |   |   | June      30,         |   |
|                                  |   | 2008                    |   |   | 2007                  |   |   | 2008 |   |   | 2007 |   |
| Revenues      from external customers |   |                    |   |   |                  |   |   |   |   |   |   |   |
| Systems      and Services             |   | $                       | 53,708 |   |                  | $      | 57,030 |   |   | $ | 108,481 |   |   | $ | 112,942 |   |
| Metrigraphics                         |   |                    | 1,585  |   |                  |   | 980 |   |   |   | 3,290 |   |   |   | 1,848 |   |
|                                  |   | $                       | 55,293 |   |                  | $      | 58,010 |   |   | $ | 111,771 |   |   | $ | 114,790 |   |
| Gross      margin (loss)              |   |                    |   |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Systems      and Services             |   | $                       | 8,109  |   |                  | $      | 9,570 |   |   | $ | 16,670 |   |   | $ | 18,549 |   |
| Metrigraphics                         |   |                    | 192    |   |                  |   | (220 | ) |   |   | 292 |   |   |   | (500 | ) |
|                                  |   | $                       | 8,301  |   |                  | $      | 9,350 |   |   | $ | 16,962 |   |   | $ | 18,049 |   |
| Operating      income (loss)          |   |                    |   |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Systems      and Services             |   | $                       | 2,755  |   |                  | $      | 3,394 |   |   | $ | (3,086 | ) |   | $ | 6,157 |   |
| Metrigraphics                         |   |                    | (111   | )      |                  |   | (458 | ) |   |   | (338 | ) |   |   | (951 | ) |
|                                  |   | $                       | 2,644  |   |                  | $      | 2,936 |   |   | $ | (3,424 | ) |   | $ | 5,206 |   |

----

Table of Contents

|                           |   | June      30, |   |   | December 31, |   |
|--------------------------------|--------|---------------|--------|--------|-------------------|--------|
|                           |   | 2008          |   |   | 2007              |   |
| Contract      receivables, net |   | $             | 1,482  |   |              | $      | 4,486 |   |
| Other      receivables, net    |   | $             | -      |   |              | $      | 314 |   |

----

Table of Contents

----

Table of Contents

----

Table of Contents

|   | • |   | Any      failure by the Company and its subsidiaries to make any payment of      principal, interest and other sums due under the facility within three      calendar days of the date when such payment is due;                 |   |
|--------|---------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|   |
|   | • |   | Any      breach by the Company or any of its subsidiaries of certain covenants,      representations and warranties;                                                                                                             |   |
|   |
|   | • |   | Any      default and acceleration of any indebtedness owed by the Company or any of      its subsidiaries to any person (other than the bank group) which is in      excess of $1,000,000;                                       |   |
|   |
|   | • |   | Any      final judgment against the Company or any of its subsidiaries in excess of      $1,000,000 which has not been insured to the reasonable satisfaction of      Brown Brothers Harriman & Co. as Administrative Agent; |   |
|   |
|   | • |   | Any      bankruptcy (voluntary or involuntary) of the Company or any of its      subsidiaries; and                                                                                                                               |   |
|   |
|   | • |   | Any      material adverse change in the business or financial condition of the      Company and its subsidiaries; or                                                                                                             |   |
|   |
|   | • |   | Any      change in control of the Company.                                                                                                                                                                                       |   |

----

Table of Contents

----

Table of Contents

Item 2.

|   | • |   | the      ability to make more meaningful period-to-period comparisons of our      ongoing operating results;                      |
|--------|---------|--------|-----------------------------------------------------------------------------------------------------------------------------------|
|   |    |   |                                                                                                                              |
|   | • |   | the      ability to better identify trends in our underlying business and perform      related trend analysis;                    |
|   |    |   |                                                                                                                              |
|   | • |   | a      higher degree of transparency for certain expenses (particularly when a      specific charge impacts multiple line items); |
|   |    |   |                                                                                                                              |
|   | • |   | a      better understanding of how management plans and measures our underlying      business; and                                |
|   |    |   |                                                                                                                              |
|   | • |   | an      easier way to compare our most recent results of operations against      investor and analyst financialmodels.            |

----

Table of Contents

|                                                      |   | Six      Months Ended |   |
|-----------------------------------------------------------|--------|-----------------------|--------|
|                                                      |   | June      30,         |   |
|                                                      |   | 2008                  |   |   | 2007 |   |
| (in      millions)                                        |   | $ (1)                 |   |   | % (2) |   |   | $ (1) |   |   | % (2) |   |
| GAAP      operating income (loss)                         |   | $                     | (3.4   | ) |   |   | (3.1 | )% |   | $ | 5.2 |   |   |   | 4.5 | % |
| Provision      for litigation                             |   |                  | 8.8    |   |   |   | 7.9 | % |   |   | 0.2 |   |   |   | 0.2 | % |
| Non-GAAP      operating income                            |   | $                     | 5.4    |   |   |   | 4.8 | % |   | $ | 5.4 |   |   |   | 4.7 | % |
|                                                      |   |                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| GAAP      income (loss) before provision for income taxes |   | $                     | (3.5   | ) |   |   | (3.2 | )% |   | $ | 4.5 |   |   |   | 3.9 | % |
| Provision      for litigation                             |   |                  | 8.8    |   |   |   | 7.9 | % |   |   | 0.2 |   |   |   | 0.2 | % |
| Non-GAAP      income before provision for income taxes    |   | $                     | 5.3    |   |   |   | 4.7 | % |   | $ | 4.7 |   |   |   | 4.1 | % |
|                                                      |   |                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| GAAP      provision for income taxes (3)                  |   | $                     | 0.1    |   |   |   | (2.5 | )% |   | $ | 1.9 |   |   |   | 41.8 | % |
| Tax      benefit for provision for litigation (3)         |   |                  | 2.1    |   |   |   | 24.1 | % |   |   | 0.1 |   |   |   | 39.8 | % |
| Non-GAAP      provision for income taxes (3)              |   | $                     | 2.2    |   |   |   | 41.9 | % |   | $ | 2.0 |   |   |   | 41.7 | % |
|                                                      |   |                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| GAAP      net income (loss)                               |   | $                     | (3.6   | ) |   |   | (3.2 | )% |   | $ | 2.6 |   |   |   | 2.3 | % |
| Provision      for litigation, net of tax benefit         |   |                  | 6.7    |   |   |   | 6.0 | % |   |   | 0.1 |   |   |   | 0.1 | % |
| Non-GAAP      net income                                  |   | $                     | 3.1    |   |   |   | 2.7 | % |   | $ | 2.7 |   |   |   | 2.4 | % |

| (1)    | Totals      may not add due to rounding.                                                                                                                                                                                                                     |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                         |
| (2)    | Represents      a percentage of total revenue of $111.8 million and $114.8 million in the      six months ended June 30, 2008 and 2007, excluding the percentages for      provision for income taxes and the tax benefit for provision for      litigation. |
|   |                                                                                                                                                                                                                                                         |
| (3)    | These      amounts represent a percentage of GAAP income (loss) before provision for      income taxes, provision for litigation and non-GAAP income before      provision for income taxes,respectively.                                                    |

----

Table of Contents

|                                                |   | Three      Months Ended June 30, |   |
|-----------------------------------------------------|--------|----------------------------------|--------|
|                                                |   | 2008                             |   |   | 2007 |   |
| (in      millions)                                  |   | $ (1)                            |   |   | % |   |   | $ (1) |   |   | % |   |
|  Contract      revenue                         |   | $                                | 53.7   |   |   |   | 97.1 | % |   | $ | 57.0 |   |   |   | 98.3 | % |
|  Product      sales                            |   |                             | 1.6    |   |   |   | 2.9 |   |   |   | 1.0 |   |   |   | 1.7 |   |
|  Total      revenue                            |   | $                                | 55.3   |   |   |   | 100.0 | % |   | $ | 58.0 |   |   |   | 100.0 | % |
|                                                |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Gross      profit on contract revenue (3)     |   | $                                | 8.1    |   |   |   | 15.1 | % |   | $ | 9.6 |   |   |   | 16.8 | % |
|  Gross      profit (loss) on product sales (3) |   |                             | 0.2    |   |   |   | 12.1 | % |   |   | (0.2 | ) |   |   | (22.4 | )% |
|  Total      gross profit (3)                   |   |                             | 8.3    |   |   |   | 15.0 | % |   |   | 9.4 |   |   |   | 16.1 | % |
|                                                |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Selling,      general and administrative      |   |                             | 5.1    |   |   |   | 9.3 | % |   |   | 5.8 |   |   |   | 9.9 | % |
|  Amortization      of intangible assets        |   |                             | 0.5    |   |   |   | 0.9 | % |   |   | 0.7 |   |   |   | 1.1 | % |
|  Operating      income                         |   |                             | 2.6    |   |   |   | 4.8 | % |   |   | 2.9 |   |   |   | 5.1 | % |
|  Interest      expense, net                    |   |                             | (0.1   | ) |   |   | (0.3 | )% |   |   | (0.5 | ) |   |   | (0.8 | )% |
|  Other      income, net                        |   |                             | 0.2    |   |   |   | 0.4 | % |   |   | 0.1 |   |   |   | 0.2 | % |
|  Provision      for income taxes (2)           |   |                             | 1.1    |   |   |   | 40.6 | % |   |   | 1.1 |   |   |   | 41.4 | % |
|  Net      income                               |   | $                                | 1.6    |   |   |   | 2.9 | % |   | $ | 1.5 |   |   |   | 2.6 | % |

|                                                |   | Six      Months Ended June 30, |   |
|-----------------------------------------------------|--------|--------------------------------|--------|
|                                                |   | 2008                           |   |   | 2007 |   |
| (in      millions)                                  |   | $ (1)                          |   |   | % |   |   | $ (1) |   |   | % |   |
|  Contract      revenue                         |   | $                              | 108.5  |   |   |   | 97.1 | % |   | $ | 112.9 |   |   |   | 98.4 | % |
|  Product      sales                            |   |                           | 3.3    |   |   |   | 2.9 |   |   |   | 1.8 |   |   |   | 1.6 |   |
|  Total      revenue                            |   | $                              | 111.8  |   |   |   | 100.0 | % |   | $ | 114.8 |   |   |   | 100.0 | % |
|                                                |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Gross      profit on contract revenue (3)     |   | $                              | 16.7   |   |   |   | 15.4 | % |   | $ | 18.5 |   |   |   | 16.4 | % |
|  Gross      profit (loss) on product sales (3) |   |                           | 0.3    |   |   |   | 8.9 | % |   |   | (0.5 | ) |   |   | (27.1 | )% |
|  Total      gross profit (3)                   |   |                           | 17.0   |   |   |   | 15.2 | % |   |   | 18.0 |   |   |   | 15.7 | % |
|                                                |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Selling,      general and administrative      |   |                           | 10.5   |   |   |   | 9.4 | % |   |   | 11.4 |   |   |   | 9.9 | % |
|  Provision      for litigation                 |   |                           | 8.8    |   |   |   | 7.9 | % |   |   | 0.2 |   |   |   | 0.2 | % |
|  Amortization      of intangible assets        |   |                           | 1.0    |   |   |   | 0.9 | % |   |   | 1.3 |   |   |   | 1.1 | % |
|  Operating      income (loss)                  |   |                           | (3.4   | ) |   |   | (3.1 | )% |   |   | 5.2 |   |   |   | 4.5 | % |
|  Interest      expense, net                    |   |                           | (0.3   | ) |   |   | (0.3 | )% |   |   | (0.9 | ) |   |   | (0.8 | )% |
|  Other      income, net                        |   |                           | 0.2    |   |   |   | 0.2 | % |   |   | 0.3 |   |   |   | 0.2 | % |
|  Provision      for income taxes (2)           |   |                           | 0.1    |   |   |   | 2.5 | % |   |   | 1.9 |   |   |   | 41.8 | % |
|  Net      income (loss)                        |   | $                              | (3.6   | ) |   |   | (3.2 | )% |   | $ | 2.6 |   |   |   | 2.3 | % |

| (1)    | Totals      may not add due to rounding.                                                                             |
|--------|----------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                 |
| (2)    | The      percentage of provision for income taxes relates to a percentage of income      (loss) before income taxes. |
|   |                                                                                                                 |
| (3)    | These      amounts represent a percentage of contract revenues, product sales and      total revenues, respectively. |

----

Table of Contents

|                                            |   | Three      Months Ended June 30, |   |
|-------------------------------------------------|--------|----------------------------------|--------|
|                                            |   | 2008                             |   |   | 2007 |   |
| (in      millions)                              |   | $ (1)                            |   |   | % (1) |   |   | $ (1) |   |   | % (1) |   |
| National      defense and intelligence agencies |   | $                                | 37.2   |   |   |   | 69.3 | % |   | $ | 45.2 |   |   |   | 79.3 | % |
| Federal      civilian agencies                  |   |                             | 8.4    |   |   |   | 15.6 |   |   |   | 7.9 |   |   |   | 13.9 |   |
| State      and local government agencies        |   |                             | 7.4    |   |   |   | 13.7 |   |   |   | 3.8 |   |   |   | 6.6 |   |
| Other                                           |   |                             | 0.8    |   |   |   | 1.4 |   |   |   | 0.1 |   |   |   | 0.2 |   |
| Total      contract revenue                     |   | $                                | 53.7   |   |   |   | 100.0 | % |   | $ | 57.0 |   |   |   | 100.0 | % |

|                                            |   | Six      Months Ended June 30, |   |
|-------------------------------------------------|--------|--------------------------------|--------|
|                                            |   | 2008                           |   |   | 2007 |   |
| (in      millions)                              |   | $ (1)                          |   |   | % (1) |   |   | $ (1) |   |   | % (1) |   |
| National      defense and intelligence agencies |   | $                              | 78.2   |   |   |   | 72.1 | % |   | $ | 89.9 |   |   |   | 79.6 | % |
| Federal      civilian agencies                  |   |                           | 16.2   |   |   |   | 15.0 |   |   |   | 15.5 |   |   |   | 13.7 |   |
| State      and local government agencies        |   |                           | 12.6   |   |   |   | 11.6 |   |   |   | 7.3 |   |   |   | 6.5 |   |
| Other                                           |   |                           | 1.4    |   |   |   | 1.3 |   |   |   | 0.3 |   |   |   | 0.3 |   |
| Total      contract revenue                     |   | $                              | 108.5  |   |   |   | 100.0 | % |   | $ | 112.9 |   |   |   | 100.0 | % |

| (1) | Totals      may not add due to rounding. |
|-----|------------------------------------------|

----

Table of Contents

|                                                     |   | Three      Months Ended |   |   | Six      Months Ended |   |
|----------------------------------------------------------|--------|-------------------------|--------|--------|-----------------------|--------|
|                                                     |   | June      30,           |   |   | June      30,         |   |
|                                                     |   | 2008                    |   |   | 2007                  |   |   | 2008 |   |   | 2007 |   |
|  Time      and materials                            |   |                    | 46     | %      |                  |   | 56 | % |   |   | 50 | % |   |   | 56 | % |
|  Cost      reimbursable                             |   |                    | 21     |   |                  |   | 22 |   |   |   | 20 |   |   |   | 22 |   |
|  Fixed      price, including service type contracts |   |                    | 33     |   |                  |   | 22 |   |   |   | 30 |   |   |   | 22 |   |
|                                                     |   |                    | 100    | %      |                  |   | 100 | % |   |   | 100 | % |   |   | 100 | % |
|                                                     |   |                    |   |   |                  |   |   |   |   |   |   |   |   |   |   |   |
|  Prime      contract                                |   |                    | 64     | %      |                  |   | 57 | % |   |   | 62 | % |   |   | 56 | % |
|  Sub-contract                                       |   |                    | 36     |   |                  |   | 43 |   |   |   | 38 |   |   |   | 44 |   |
|                                                     |   |                    | 100    | %      |                  |   | 100 | % |   |   | 100 | % |   |   | 100 | % |

----

Table of Contents

----

Table of Contents

----

Table of Contents

----

Table of Contents

Item 3. 

Item 4. 

Item 1. 

Item 1A

----

Table of Contents

Item 2

|                                 |   |              |   |   |               |   |   | Total Number |   |   | Approximate              |   |
|--------------------------------------|--------|-------------------|--------|--------|--------------------|--------|--------|-------------------|--------|--------|--------------------------|--------|
|                                 |   |              |   |   |               |   |   | of      Shares    |   |   | Dollar      Value        |   |
|                                 |   |              |   |   |               |   |   | Purchased      as |   |   | of Shares that |   |
|                                 |   |              |   |   |               |   |   | Part      of      |   |   | May      Yet Be          |   |
|                                 |   | Total Number |   |   | Average      Price |   |   | Publicly          |   |   | Purchased                |   |
|                                 |   | of      Shares    |   |   | Paid      Per      |   |   | Announced         |   |   | Under      the           |   |
| Period                               |   | Purchased         |   |   | Share              |   |   | Programs          |   |   | Programs                 |   |
| April      1, 2008 to April 30, 2008 |   |              | 3,967  |   |               | $      | 10.18  |              |   |   | -                        |   |   | $ | - |   |
| May      1, 2008 to May 31, 2008     |   |              | 130    |   |               | $      | 10.67  |              |   |   | -                        |   |   |   | - |   |
| June      1, 2008 to June 30, 2008   |   |              | 24,439 |   |               | $      | 10.39  |              |   |   | -                        |   |   |   | - |   |
| Total                                |   |              | 28,536 |   |               | $      | 10.36  |              |   |   | -                        |   |   | $ | - |   |

Item 4.

|                      |   | Number of Shares Voted For |      |   | Number      ofShares      Withheld |   |
|---------------------------|--------|---------------------------------|-----------|--------|------------------------------------|--------|
| Class      III Directors: |   |                            |      |   |                               |   |
| Mr.      Kenneth F. Kames |   |                            | 5,805,754 |   |                               |   | 1,558,523 |   |
| Mr.      James P. Regan   |   |                            | 5,843,501 |   |                               |   | 1,520,776 |   |

| Class      I Directors:                                           |
|-------------------------------------------------------------------|
| Lieutenant      General Charles P. McCausland (U.S.A.F., retired) |
| General      George T. Babbitt, Jr. (U.S.A.F., retired)           |
| Class      II Directors:                                          |
| Dr.      Francis J. Aguilar                                       |
| Mr.      John S. Anderegg, Jr.                                    |
| Mr.      Nickolas Stavropoulos                                    |

----

Table of Contents

Item 6

| 31.1   | Certification      of the Chief Executive Officer pursuant to Rule 13a-14(a) under the      Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the      Sarbanes-Oxley Act of 2002. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                    |
| 31.2   | Certification      of the Chief Financial Officer pursuant to Rule 13a-14(a) under the      Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the      Sarbanes-Oxley Act of 2002. |
|   |                                                                                                                                                                                                    |
| 32.1   | Certification      of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of      2002.                                   |
|   |                                                                                                                                                                                                    |
| 32.2   | Certification      of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of      2002.                                   |

----

Table of Contents

|                                  | DYNAMICS      RESEARCH CORPORATION                                   |
|---------------------------------------|----------------------------------------------------------------------|
|                                  | (Registrant)                                                         |
|                                  |                                                                 |
|                                  |                                                                 |
| Date:  August      11, 2008 | /s/      David Keleher                                               |
|                                  | Senior      Vice President, Chief Financial Officer and Treasurer    |
|                                  | (Principal      Financial Officer and Principal Accounting  Officer) |

----