----

----

| R      | QUARTERLY REPORT PURSUANT TO      SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF      1934                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | FOR      THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2009                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | 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 September 30, 2009      (unaudited) and December 31, 2008                                                                                   | 3      |
|                               |          | Condensed Consolidated Statements of Operations for the three      and nine months ended September 30, 2009 and 2008      (unaudited)                                                   | 4      |
|                               |          | Condensed Consolidated Statements of Changes in      Stockholders’ Equity and Comprehensive Income (Loss) for the three months      ended September 30, 2009 and 2008 (unaudited) | 5      |
|                               |          | Condensed Consolidated Statements of Changes in      Stockholders’ Equity and Comprehensive Income (Loss) for the nine months      ended September 30, 2009 and 2008 (unaudited)  | 6      |
|                               |          | Condensed Consolidated Statements of Cash Flows for the nine      months ended September 30, 2009 and 2008 (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                                                                                                                                                                 | 28     |
|                               |          |
| Part      II. Other Information    |          |
|                               | Item      1.  | Legal Proceedings                                                                                                                                                                       | 28     |
|                               | Item      1A. | Risk Factors                                                                                                                                                                            | 28     |
|                               | Item      2.  | Unregistered Sales of Equity Securities and Use of      Proceeds                                                                                                                        | 29     |
|                               | Item      6.  | Exhibits                                                                                                                                                                                | 29     |

----

Table of Contents

DYNAMICS RESEARCH CORPORATION

|                                                                                                                                                                                        |   | September      30, |    |   | December      31, |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|---------|--------|-------------------|--------|
|                                                                                                                                                                                        |   | 2009               |    |   | 2008              |   |
| Assets                                                                                                                                                                                      |   | (unaudited)        |    |   |              |   |
| Current      assets                                                                                                                                                                         |   |               |    |   |              |   |
| Cash      and cash equivalents                                                                                                                                                              |   | $                  | 213     |   |              | $      | 7,111 |   |
| Contract      receivables, net                                                                                                                                                              |   |               | 71,925  |   |              |   | 71,438 |   |
| Prepaid      expenses and other current assets                                                                                                                                              |   |               | 4,622   |   |              |   | 2,491 |   |
| Total      current assets                                                                                                                                                                   |   |               | 76,760  |   |              |   | 81,040 |   |
| Noncurrent      assets                                                                                                                                                                      |   |               |    |   |              |   |   |   |
| Property      and equipment, net                                                                                                                                                            |   |               | 9,238   |   |              |   | 9,349 |   |
| Goodwill                                                                                                                                                                                    |   |               | 97,641  |   |              |   | 97,641 |   |
| Intangible      assets, net                                                                                                                                                                 |   |               | 4,625   |   |              |   | 7,379 |   |
| Deferred      tax asset                                                                                                                                                                     |   |               | 10,314  |   |              |   | 10,396 |   |
| Other      noncurrent assets                                                                                                                                                                |   |               | 3,146   |   |              |   | 3,125 |   |
| Total      noncurrent assets                                                                                                                                                                |   |               | 124,964 |   |              |   | 127,890 |   |
| Total      assets                                                                                                                                                                           |   | $                  | 201,724 |   |              | $      | 208,930 |   |
|                                                                                                                                                                                        |   |               |    |   |              |   |   |   |
| Liabilities      and stockholders' equity                                                                                                                                                   |   |               |    |   |              |   |   |   |
| Current      liabilities                                                                                                                                                                    |   |               |    |   |              |   |   |   |
| Current      portion of long-term debt                                                                                                                                                      |   | $                  | 8,000   |   |              | $      | 8,000 |   |
| Accounts      payable                                                                                                                                                                       |   |               | 15,659  |   |              |   | 18,095 |   |
| Accrued      compensation and employee benefits                                                                                                                                             |   |               | 17,121  |   |              |   | 13,644 |   |
| Deferred      taxes                                                                                                                                                                         |   |               | 9,670   |   |              |   | 2,670 |   |
| Other      accrued expenses                                                                                                                                                                 |   |               | 2,720   |   |              |   | 24,760 |   |
| Total      current liabilities                                                                                                                                                              |   |               | 53,170  |   |              |   | 67,169 |   |
| Long-term      liabilities                                                                                                                                                                  |   |               |    |   |              |   |   |   |
| Long-term      debt                                                                                                                                                                         |   |               | 28,298  |   |              |   | 30,000 |   |
| Other      long-term liabilities                                                                                                                                                            |   |               | 30,611  |   |              |   | 30,286 |   |
| Total      long-term liabilities                                                                                                                                                            |   |               | 58,909  |   |              |   | 60,286 |   |
| Total      liabilities                                                                                                                                                                      |   |               | 112,079 |   |              |   | 127,455 |   |
| 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; 9,837,566 and      9,674,512 shares issued and outstanding at September 30, 2009 and December      31, 2008, respectively |   |               | 984     |   |              |   | 967 |   |
| Capital      in excess of par value                                                                                                                                                         |   |               | 53,171  |   |              |   | 51,919 |   |
| Accumulated      other comprehensive loss, net of taxes                                                                                                                                     |   |               | (22,143 | )      |              |   | (22,268 | ) |
| Retained      earnings                                                                                                                                                                      |   |               | 57,633  |   |              |   | 50,857 |   |
| Total      stockholders' equity                                                                                                                                                             |   |               | 89,645  |   |              |   | 81,475 |   |
| Total      liabilities and stockholders' equity                                                                                                                                             |   | $                  | 201,724 |   |              | $      | 208,930 |   |

----

Table of Contents

DYNAMICS RESEARCH CORPORATION

|                                                 |   | Three      Months Ended |      |   | Nine      Months Ended |   |
|------------------------------------------------------|--------|-------------------------|-----------|--------|------------------------|--------|
|                                                 |   | September      30,      |      |   | September      30,     |   |
|                                                 |   | 2009                    |      |   | 2008                   |   |   | 2009 |   |   | 2008 |   |
| Contract      revenue                                |   | $                       | 67,504    |   |                   | $      | 62,300 |   |   | $ | 202,835 |   |   | $ | 170,781 |   |
| Product      sales                                   |   |                    | 1,733     |   |                   |   | 1,191 |   |   |   | 4,589 |   |   |   | 4,481 |   |
| Total      revenue                                   |   |                    | 69,237    |   |                   |   | 63,491 |   |   |   | 207,424 |   |   |   | 175,262 |   |
|                                                 |   |                    |      |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Cost      of contract revenue                        |   |                    | 56,882    |   |                   |   | 52,256 |   |   |   | 169,840 |   |   |   | 144,067 |   |
| Cost      of product sales                           |   |                    | 1,491     |   |                   |   | 1,271 |   |   |   | 4,581 |   |   |   | 4,269 |   |
| Total      cost of revenue                           |   |                    | 58,373    |   |                   |   | 53,527 |   |   |   | 174,421 |   |   |   | 148,336 |   |
|                                                 |   |                    |      |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Gross      profit on contract revenue                |   |                    | 10,622    |   |                   |   | 10,044 |   |   |   | 32,995 |   |   |   | 26,714 |   |
| Gross      profit (loss) on product sales            |   |                    | 242       |   |                   |   | (80 | ) |   |   | 8 |   |   |   | 212 |   |
| Total      gross profit                              |   |                    | 10,864    |   |                   |   | 9,964 |   |   |   | 33,003 |   |   |   | 26,926 |   |
|                                                 |   |                    |      |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Selling,      general and administrative expenses    |   |                    | 5,911     |   |                   |   | 5,529 |   |   |   | 18,756 |   |   |   | 16,077 |   |
| Provision      for litigation                        |   |                    | -         |   |                   |   | 6,000 |   |   |   | - |   |   |   | 14,819 |   |
| Amortization      of intangible assets               |   |                    | 809       |   |                   |   | 718 |   |   |   | 2,754 |   |   |   | 1,737 |   |
| Operating      income (loss)                         |   |                    | 4,144     |   |                   |   | (2,283 | ) |   |   | 11,493 |   |   |   | (5,707 | ) |
| Interest      expense, net                           |   |                    | (434      | )      |                   |   | (424 | ) |   |   | (1,530 | ) |   |   | (705 | ) |
| Other      income, net                               |   |                    | 264       |   |                   |   | 39 |   |   |   | 585 |   |   |   | 207 |   |
| Income      (loss) before provision for income taxes |   |                    | 3,974     |   |                   |   | (2,668 | ) |   |   | 10,548 |   |   |   | (6,205 | ) |
| Provision      (benefit) for income taxes            |   |                    | 1,019     |   |                   |   | (2,436 | ) |   |   | 3,772 |   |   |   | (2,346 | ) |
| Net      income (loss)                               |   | $                       | 2,955     |   |                   | $      | (232 | ) |   | $ | 6,776 |   |   | $ | (3,859 | ) |
|                                                 |   |                    |      |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings      (loss) per common share                |   |                    |      |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                |   | $                       | 0.31      |   |                   | $      | (0.02 | ) |   | $ | 0.70 |   |   | $ | (0.41 | ) |
| Diluted                                              |   | $                       | 0.30      |   |                   | $      | (0.02 | ) |   | $ | 0.69 |   |   | $ | (0.41 | ) |
|                                                 |   |                    |      |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted      average shares outstanding             |   |                    |      |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                |   |                    | 9,678,983 |   |                   |   | 9,487,155 |   |   |   | 9,631,659 |   |   |   | 9,471,420 |   |
| Diluted                                              |   |                    | 9,983,825 |   |                   |   | 9,487,155 |   |   |   | 9,840,605 |   |   |   | 9,471,420 |   |

----

Table of Contents

DYNAMICS RESEARCH CORPORATION

|                                                          |   |              |   |   |           |   |   | Capital       |   |    | Accumulated |   |        |     |    |   |   |   |
|---------------------------------------------------------------|--------|-------------------|--------|--------|----------------|--------|--------|---------------|--------|---------|-------------|--------|-------------|----------|---------|--------|--------|--------|
|                                                          |   | Common      Stock |   |   | in      Excess |   |   | Other         |   |    |        |   |        |     |    |
|                                                          |   | Issued            |   |   | of      Par    |   |   | Comprehensive |   |    | Retained    |   |        |     |    |
|                                                          |   | Shares            |   |   | Par      value |   |   | Value         |   |    | Loss        |   |        | Earnings |    |   | Total  |   |
| Balance      at June 30, 2009                                 |   |              | 9,762  |   |           | $      | 976    |          |   | $       | 52,433      |   |        | $        | (22,118 | )      |   | $      | 54,678 |   |   | $ | 85,969 |   |
| Comprehensive      income:                                    |   |              |   |   |           |   |   |          |   |    |        |   |        |     |    |   |   |   |   |   |   |   |   |   |
| Net      income                                               |   |              | -      |   |           |   | -      |          |   |    | -           |   |        |     | -       |   |   |   | 2,955 |   |   |   | 2,955 |   |
| Other      comprehensive income, net of tax:                  |   |              |   |   |           |   |   |          |   |    |        |   |        |     |    |   |   |   |   |   |   |   |   |   |
| Changes      in unrealized loss on derivative instruments     |   |              | -      |   |           |   | -      |          |   |    | -           |   |        |     | (25     | )      |   |   | - |   |   |   | (25 | ) |
| Comprehensive      income                                     |   |              | -      |   |           |   | -      |          |   |    | -           |   |        |     | -       |   |   |   | - |   |   |   | 2,930 |   |
| Issuance      of common stock through stock plan transactions |   |              | 60     |   |           |   | 7      |          |   |    | 549         |   |        |     | -       |   |   |   | - |   |   |   | 556 |   |
| Issuance      of restricted stock                             |   |              | 23     |   |           |   | 2      |          |   |    | (2          | )      |        |     | -       |   |   |   | - |   |   |   | - |   |
| Forfeiture      of restricted stock                           |   |              | (3     | )      |           |   | -      |          |   |    | -           |   |        |     | -       |   |   |   | - |   |   |   | - |   |
| Release      of restricted stock                              |   |              | (4     | )      |           |   | (1     | )             |   |    | (48         | )      |        |     | -       |   |   |   | - |   |   |   | (49 | ) |
| Share-based      compensation                                 |   |              | -      |   |           |   | -      |          |   |    | 193         |   |        |     | -       |   |   |   | - |   |   |   | 193 |   |
| Tax      benefit from stock plan transactions                 |   |              | -      |   |           |   | -      |          |   |    | 46          |   |        |     | -       |   |   |   | - |   |   |   | 46 |   |
| Balance      at September 30, 2009                            |   |              | 9,838  |   |           | $      | 984    |          |   | $       | 53,171      |   |        | $        | (22,143 | )      |   | $      | 57,633 |   |   | $ | 89,645 |   |
|                                                          |   |              |   |   |           |   |   |          |   |    |        |   |        |     |    |   |   |   |   |   |   |   |   |   |
|                                                          |   |              |   |   |           |   |   |          |   | Capital |        |   | Accumulated |     |    |   |   |   |   |   |   |   |
|                                                          |   | Common      Stock |   |   | in      Excess |   |   | Other         |   |    |        |   |        |     |    |   |   |
|                                                          |   | Issued            |   |   | of      Par    |   |   | Comprehensive |   |    | Retained    |   |        |     |    |   |
|                                                          |   | Shares            |   |   | Par      value |   |   | Value         |   |    | Loss        |   |        | Earnings |    |   | Total  |   |
| Balance      at June 30, 2008                                 |   |              | 9,562  |   |           | $      | 956    |          |   | $       | 50,995      |   |        | $        | (6,853  | )      |   | $      | 48,420 |   |   | $ | 93,518 |   |
| Comprehensive      loss:                                      |   |              |   |   |           |   |   |          |   |    |        |   |        |     |    |   |   |   |   |   |   |   |   |   |
| Net      loss                                                 |   |              | -      |   |           |   | -      |          |   |    | -           |   |        |     | -       |   |   |   | (232 | ) |   |   | (232 | ) |
| Other      comprehensive income, net of tax:                  |   |              |   |   |           |   |   |          |   |    |        |   |        |     |    |   |   |   |   |   |   |   |   |   |
| Changes      in unrealized loss on derivative instruments     |   |              | -      |   |           |   | -      |          |   |    | -           |   |        |     | (54     | )      |   |   | - |   |   |   | (54 | ) |
| Comprehensive      loss                                       |   |              | -      |   |           |   | -      |          |   |    | -           |   |        |     | -       |   |   |   | - |   |   |   | (286 | ) |
| Issuance      of common stock through stock plan transactions |   |              | 41     |   |           |   | 4      |          |   |    | 243         |   |        |     | -       |   |   |   | - |   |   |   | 247 |   |
| Issuance      of restricted stock                             |   |              | 38     |   |           |   | 4      |          |   |    | (4          | )      |        |     | -       |   |   |   | - |   |   |   | - |   |
| Forfeiture      of restricted stock                           |   |              | (5     | )      |           |   | -      |          |   |    | -           |   |        |     | -       |   |   |   | - |   |   |   | - |   |
| Release      of restricted stock                              |   |              | -      |   |           |   | -      |          |   |    | (2          | )      |        |     | -       |   |   |   | - |   |   |   | (2 | ) |
| Share-based      compensation                                 |   |              | -      |   |           |   | -      |          |   |    | 219         |   |        |     | -       |   |   |   | - |   |   |   | 219 |   |
| Tax      benefit from stock plan transactions                 |   |              | -      |   |           |   | -      |          |   |    | 44          |   |        |     | -       |   |   |   | - |   |   |   | 44 |   |
| Balance      at September 30, 2008                            |   |              | 9,636  |   |           | $      | 964    |          |   | $       | 51,495      |   |        | $        | (6,907  | )      |   | $      | 48,188 |   |   | $ | 93,740 |   |

----

Table of Contents

DYNAMICS RESEARCH CORPORATION

|                                                                      |   |              |   |   |           |   |   | Capital       |   |    | Accumulated |   |        |     |    |   |   |   |
|---------------------------------------------------------------------------|--------|-------------------|--------|--------|----------------|--------|--------|---------------|--------|---------|-------------|--------|-------------|----------|---------|--------|--------|--------|
|                                                                      |   | Common      Stock |   |   | in      Excess |   |   | Other         |   |    |        |   |        |     |    |
|                                                                      |   | Issued            |   |   | of      Par    |   |   | Comprehensive |   |    | Retained    |   |        |     |    |
|                                                                      |   | Shares            |   |   | Par      value |   |   | Value         |   |    | Loss        |   |        | Earnings |    |   | Total  |   |
| Balance      at December 31, 2008                                         |   |              | 9,675  |   |           | $      | 967    |          |   | $       | 51,919      |   |        | $        | (22,268 | )      |   | $      | 50,857 |   |   | $ | 81,475 |   |
| Comprehensive      income:                                                |   |              |   |   |           |   |   |          |   |    |        |   |        |     |    |   |   |   |   |   |   |   |   |   |
| Net      income                                                           |   |              | -      |   |           |   | -      |          |   |    | -           |   |        |     | -       |   |   |   | 6,776 |   |   |   | 6,776 |   |
| Other      comprehensive income, net of tax:                              |   |              |   |   |           |   |   |          |   |    |        |   |        |     |    |   |   |   |   |   |   |   |   |   |
| Changes      in unrealized loss on derivative instruments                 |   |              | -      |   |           |   | -      |          |   |    | -           |   |        |     | 125     |   |   |   | - |   |   |   | 125 |   |
| Comprehensive      income                                                 |   |              | -      |   |           |   | -      |          |   |    | -           |   |        |     | -       |   |   |   | - |   |   |   | 6,901 |   |
| Issuance      of common stock through stock plan transactions             |   |              | 96     |   |           |   | 10     |          |   |    | 811         |   |        |     | -       |   |   |   | - |   |   |   | 821 |   |
| Issuance      of restricted stock                                         |   |              | 100    |   |           |   | 10     |          |   |    | (10         | )      |        |     | -       |   |   |   | - |   |   |   | - |   |
| Forfeiture      of restricted stock                                       |   |              | (15    | )      |           |   | (1     | )             |   |    | 1           |   |        |     | -       |   |   |   | - |   |   |   | - |   |
| Release      of restricted stock                                          |   |              | (18    | )      |           |   | (2     | )             |   |    | (152        | )      |        |     | -       |   |   |   | - |   |   |   | (154 | ) |
| Share-based      compensation                                             |   |              | -      |   |           |   | -      |          |   |    | 547         |   |        |     | -       |   |   |   | - |   |   |   | 547 |   |
| Tax      benefit from stock plan transactions                             |   |              | -      |   |           |   | -      |          |   |    | 55          |   |        |     | -       |   |   |   | - |   |   |   | 55 |   |
| Balance      at September 30, 2009                                        |   |              | 9,838  |   |           | $      | 984    |          |   | $       | 53,171      |   |        | $        | (22,143 | )      |   | $      | 57,633 |   |   | $ | 89,645 |   |
|                                                                      |   |              |   |   |           |   |   |          |   |    |        |   |        |     |    |   |   |   |   |   |   |   |   |   |
|                                                                      |   |              |   |   |           |   |   |          |   | Capital |        |   | Accumulated |     |    |   |   |   |   |   |   |   |
|                                                                      |   | Common      Stock |   |   | in      Excess |   |   | Other         |   |    |        |   |        |     |    |   |   |
|                                                                      |   | Issued            |   |   | 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                                                             |   |              | -      |   |           |   | -      |          |   |    | -           |   |        |     | -       |   |   |   | (3,859 | ) |   |   | (3,859 | ) |
| Other      comprehensive loss, net of tax:                                |   |              |   |   |           |   |   |          |   |    |        |   |        |     |    |   |   |   |   |   |   |   |   |   |
| Reclassification      adjustment for realized gain on sale of investments |   |              | -      |   |           |   | -      |          |   |    | -           |   |        |     | (108    | )      |   |   | - |   |   |   | (108 | ) |
| Changes      in unrealized loss on derivative instruments                 |   |              | -      |   |           |   | -      |          |   |    | -           |   |        |     | (54     | )      |   |   | - |   |   |   | (54 | ) |
| Comprehensive      loss                                                   |   |              | -      |   |           |   | -      |          |   |    | -           |   |        |     | -       |   |   |   | - |   |   |   | (4,021 | ) |
| Issuance      of common stock through stock plan transactions             |   |              | 91     |   |           |   | 9      |          |   |    | 652         |   |        |     | -       |   |   |   | - |   |   |   | 661 |   |
| Issuance      of restricted stock                                         |   |              | 86     |   |           |   | 9      |          |   |    | (9          | )      |        |     | -       |   |   |   | - |   |   |   | - |   |
| Forfeiture      of restricted stock                                       |   |              | (10    | )      |           |   | (1     | )             |   |    | 1           |   |        |     | -       |   |   |   | - |   |   |   | - |   |
| Release      of restricted stock                                          |   |              | (41    | )      |           |   | (4     | )             |   |    | (412        | )      |        |     | -       |   |   |   | - |   |   |   | (416 | ) |
| Share-based      compensation                                             |   |              | -      |   |           |   | -      |          |   |    | 943         |   |        |     | -       |   |   |   | - |   |   |   | 943 |   |
| Tax      benefit from stock plan transactions                             |   |              | -      |   |           |   | -      |          |   |    | 69          |   |        |     | -       |   |   |   | - |   |   |   | 69 |   |
| Balance      at September 30, 2008                                        |   |              | 9,636  |   |           | $      | 964    |          |   | $       | 51,495      |   |        | $        | (6,907  | )      |   | $      | 48,188 |   |   | $ | 93,740 |   |

----

Table of Contents

DYNAMICS RESEARCH CORPORATION

|                                                                                    |   | Nine      Months Ended |    |
|-----------------------------------------------------------------------------------------|--------|------------------------|---------|
|                                                                                    |   | September      30,     |    |
|                                                                                    |   | 2009                   |    |   | 2008 |   |
| Cash      flows from operating activities:                                              |   |                   |    |   |   |   |
| Net      income (loss)                                                                  |   | $                      | 6,776   |   |   | $ | (3,859 | ) |
| Adjustments      to reconcile net cash provided by (used in) operating      activities: |   |                   |    |   |   |   |   |   |
| Depreciation                                                                            |   |                   | 2,326   |   |   |   | 2,187 |   |
| Amortization      of intangible assets                                                  |   |                   | 2,754   |   |   |   | 1,737 |   |
| Share-based      compensation                                                           |   |                   | 547     |   |   |   | 943 |   |
| Investment      income from equity interest                                             |   |                   | (316    | ) |   |   | (411 | ) |
| Tax      benefit from stock plan transactions                                           |   |                   | (55     | ) |   |   | (69 | ) |
| Provision      (payment) for litigation                                                 |   |                   | (15,000 | ) |   |   | 14,819 |   |
| Deferred      income taxes                                                              |   |                   | 7,000   |   |   |   | (473 | ) |
| Other                                                                                   |   |                   | (512    | ) |   |   | (516 | ) |
| Change      in operating assets and liabilities:                                        |   |                   |    |   |   |   | - |   |
| Contract      receivables, net                                                          |   |                   | (487    | ) |   |   | 4,950 |   |
| Prepaid      expenses and other current assets                                          |   |                   | (2,131  | ) |   |   | (3,867 | ) |
| Accounts      payable                                                                   |   |                   | (2,436  | ) |   |   | 4,189 |   |
| Accrued      compensation and employee benefits                                         |   |                   | 3,477   |   |   |   | 783 |   |
| Other      accrued expenses                                                             |   |                   | (2,889  | ) |   |   | 192 |   |
| Other      long-term liabilities                                                        |   |                   | 835     |   |   |   | (544 | ) |
| Net      cash provided by (used in) operating activities                                |   |                   | (111    | ) |   |   | 20,061 |   |
| Cash      flows from investing activities:                                              |   |                   |    |   |   |   |   |   |
| Purchase      of business                                                               |   |                   | (4,250  | ) |   |   | (42,436 | ) |
| Additions      to property and equipment                                                |   |                   | (2,283  | ) |   |   | (1,509 | ) |
| Proceeds      from sale of investments and long-lived assets                            |   |                   | 230     |   |   |   | 280 |   |
| Dividends      from equity investment                                                   |   |                   | 456     |   |   |   | 411 |   |
| Payments      related to the sale of building                                           |   |                   | -       |   |   |   | (35 | ) |
| Increase      in other assets                                                           |   |                   | (114    | ) |   |   | (489 | ) |
| Net      cash used in investing activities                                              |   |                   | (5,961  | ) |   |   | (43,778 | ) |
| Cash      flow from financing activities:                                               |   |                   |    |   |   |   |   |   |
| Borrowings      under term loan                                                         |   |                   | -       |   |   |   | 40,000 |   |
| Repayments      under term loan                                                         |   |                   | (6,000  | ) |   |   | - |   |
| Borrowings      under revolving credit agreement                                        |   |                   | 50,121  |   |   |   | 69,225 |   |
| Repayments      under revolving credit agreement                                        |   |                   | (45,823 | ) |   |   | (76,962 | ) |
| Proceeds      from the exercise of stock plan transactions                              |   |                   | 821     |   |   |   | 661 |   |
| Tax      benefit from stock plan transactions                                           |   |                   | 55      |   |   |   | 69 |   |
| Payments      of deferred financing costs                                               |   |                   | -       |   |   |   | (464 | ) |
| Net      cash provided by (used in) financing activities                                |   |                   | (826    | ) |   |   | 32,529 |   |
| Net      increase (decrease) in cash and cash equivalents                               |   |                   | (6,898  | ) |   |   | 8,812 |   |
| Cash      and cash equivalents, beginning of period                                     |   |                   | 7,111   |   |   |   | 2,006 |   |
| Cash      and cash equivalents, end of period                                           |   | $                      | 213     |   |   | $ | 10,818 |   |

----

Table of Contents

NOTE 1. BASIS OF PRESENTATION

----

Table of Contents

----

Table of Contents

|                        |   | Three                   |   |   | Nine                    |   |
|-----------------------------|--------|-------------------------|--------|--------|-------------------------|--------|
|                        |   | Months                  |   |   | Months                  |   |
|                        |   | Ended                   |   |   | Ended                   |   |
|                        |   | September      30, 2008 |   |   | September      30, 2008 |   |
| Revenue                     |   | $                       | 67,626 |   |                    | $      | 200,006 |   |
| Gross      profit           |   | $                       | 11,377 |   |                    | $      | 36,050 |   |
| Operating      loss         |   | $                       | (1,761 | )      |                    | $      | (1,329 | ) |
| Net      loss               |   | $                       | (117   | )      |                    | $      | (2,800 | ) |
|                        |   |                    |   |   |                    |   |   |   |
| Loss      per common share: |   |                    |   |   |                    |   |   |   |
| Basic                       |   | $                       | (0.01  | )      |                    | $      | (0.30 | ) |
| Diluted                     |   | $                       | (0.01  | )      |                    | $      | (0.30 | ) |

|                                                                                                                       |   | September      30, |    |   | December 31, |   |
|----------------------------------------------------------------------------------------------------------------------------|--------|--------------------|---------|--------|-------------------|--------|
|                                                                                                                       |   | 2009               |    |   | 2008              |   |
| Contract      receivables, net                                                                                             |   |               |    |   |              |   |
| Billed      receivables                                                                                                    |   | $                  | 28,214  |   |              | $      | 35,423 |   |
| Unbilled      receivables(1):                                                                                              |   |               |    |   |              |   |   |   |
| Revenues      recorded in excess of milestone billings on fixed price contracts with the      States of Ohio and Tennessee |   |               | 17,611  |   |              |   | 8,907 |   |
| Retainages      and fee withholdings                                                                                       |   |               | 829     |   |              |   | 1,179 |   |
| Other      unbilled receivables                                                                                            |   |               | 25,924  |   |              |   | 26,858 |   |
| Total      unbilled receivables                                                                                            |   |               | 44,364  |   |              |   | 36,944 |   |
| Allowance      for doubtful accounts                                                                                       |   |               | (653    | )      |              |   | (929 | ) |
| Contract      receivables, net                                                                                             |   | $                  | 71,925  |   |              | $      | 71,438 |   |
|                                                                                                                       |   |               |    |   |              |   |   |   |
| Prepaid      expenses and other current assets:                                                                            |   |               |    |   |              |   |   |   |
| Refundable      income taxes                                                                                               |   | $                  | 1,484   |   |              | $      | - |   |
| Inventory                                                                                                                  |   |               | 1,131   |   |              |   | 766 |   |
| Restricted      cash                                                                                                       |   |               | 70      |   |              |   | 150 |   |
| Other                                                                                                                      |   |               | 1,937   |   |              |   | 1,575 |   |
| Prepaid      expenses and other current assets                                                                             |   | $                  | 4,622   |   |              | $      | 2,491 |   |
|                                                                                                                       |   |               |    |   |              |   |   |   |
| Property      and equipment, net:                                                                                          |   |               |    |   |              |   |   |   |
| Production      equipment                                                                                                  |   | $                  | 11,596  |   |              | $      | 11,530 |   |
| Software                                                                                                                   |   |               | 12,107  |   |              |   | 11,602 |   |
| Furniture      and other equipment                                                                                         |   |               | 8,697   |   |              |   | 7,644 |   |
| Leasehold      improvements                                                                                                |   |               | 3,412   |   |              |   | 2,949 |   |
| Property      and equipment                                                                                                |   |               | 35,812  |   |              |   | 33,725 |   |
| Less      accumulated depreciation                                                                                         |   |               | (26,574 | )      |              |   | (24,376 | ) |
| Property      and equipment, net                                                                                           |   | $                  | 9,238   |   |              | $      | 9,349 |   |
|                                                                                                                       |   |               |    |   |              |   |   |   |

----

Table of Contents

|                                                   |   | September      30, |   |   | December 31, |   |
|--------------------------------------------------------|--------|--------------------|--------|--------|-------------------|--------|
|                                                   |   | 2009               |   |   | 2008              |   |
| Other      noncurrent assets:                          |   |               |   |   |              |   |
| Deferred      compensation plan investments            |   | $                  | 1,311  |   |              | $      | 1,107 |   |
| Equity      investments                                |   |               | 1,039  |   |              |   | 1,180 |   |
| Other                                                  |   |               | 796    |   |              |   | 838 |   |
| Other      noncurrent assets                           |   | $                  | 3,146  |   |              | $      | 3,125 |   |
|                                                   |   |               |   |   |              |   |   |   |
| Accrued      compensation and employee benefits:       |   |               |   |   |              |   |   |   |
| Accrued      compensation and related  taxes |   | $                  | 8,060  |   |              | $      | 7,504 |   |
| Accrued      vacation                                  |   |               | 5,313  |   |              |   | 4,391 |   |
| Accrued      pension liability                         |   |               | 500    |   |              |   | - |   |
| Other                                                  |   |               | 3,248  |   |              |   | 1,749 |   |
| Accrued      compensation and employee benefits        |   | $                  | 17,121 |   |              | $      | 13,644 |   |
|                                                   |   |               |   |   |              |   |   |   |
| Other      accrued expenses:                           |   |               |   |   |              |   |   |   |
| Accrued      litigation reserve                        |   | $                  | -      |   |              | $      | 15,000 |   |
| Accrued      acquisition costs                         |   |               | -      |   |              |   | 4,265 |   |
| Accrued      income taxes                              |   |               | -      |   |              |   | 2,042 |   |
| Deferred      gain on sale of building                 |   |               | 676    |   |              |   | 676 |   |
| Other                                                  |   |               | 2,044  |   |              |   | 2,777 |   |
| Other      accrued expenses                            |   | $                  | 2,720  |   |              | $      | 24,760 |   |
|                                                   |   |               |   |   |              |   |   |   |
| Other      long-term liabilities:                      |   |               |   |   |              |   |   |   |
| Accrued      pension liability                         |   | $                  | 23,232 |   |              | $      | 22,570 |   |
| Deferred      gain on sale of building                 |   |               | 3,550  |   |              |   | 4,057 |   |
| Deferred      compensation plan liability              |   |               | 1,311  |   |              |   | 1,107 |   |
| Other                                                  |   |               | 2,518  |   |              |   | 2,552 |   |
| Other      long-term liabilities                       |   | $                  | 30,611 |   |              | $      | 30,286 |   |

| (1) | At      September 30, 2009 and December 31, 2008, $487 and $495, respectively, of      unbilled retainages and fee withholdings are not anticipated to be billed      within one year.  Additionally, at December 31, 2008, $4,557 of      the unbilled balance under the Company’s contract with the State of      Tennessee is not scheduled to be invoiced within one  year. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                            |   | September      30, 2009 |   |   | December      31, 2008 |   |
|---------------------------------|--------|-------------------------|--------|--------|------------------------|--------|
|                            |   |                    |   |   | Accumulated            |   |   |   |   |   |   |   |   | Accumulated |   |   |   |   |
|                            |   | Cost                    |   |   | Amortization           |   |   | Net |   |   | Cost |   |   | Amortization |   |   | Net |   |
| Customer      relationships     |   | $                       | 13,400 |   |                   | $      | (11,608 | ) |   | $ | 1,792 |   |   | $ | 14,700 |   |   | $ | (11,769 | ) |   | $ | 2,931 |   |
| Customer      contracts         |   |                    | 3,500  |   |                   |   | (1,806 | ) |   |   | 1,694 |   |   |   | 3,500 |   |   |   | (522 | ) |   |   | 2,978 |   |
| Non-competition      agreements |   |                    | 1,400  |   |                   |   | (261 | ) |   |   | 1,139 |   |   |   | 1,400 |   |   |   | - |   |   |   | 1,400 |   |
| 8(a)      contract transition   |   |                    | 130    |   |                   |   | (130 | ) |   |   | - |   |   |   | 130 |   |   |   | (60 | ) |   |   | 70 |   |
| Total                           |   | $                       | 18,430 |   |                   | $      | (13,805 | ) |   | $ | 4,625 |   |   | $ | 19,730 |   |   | $ | (12,351 | ) |   | $ | 7,379 |   |

----

Table of Contents

| Remainder      of 2009   |   | $ | 551   |   |
|--------------------------|--------|---|-------|--------|
| 2010                     |   | $ | 1,542 |   |
| 2011                     |   | $ | 1,188 |   |
| 2012                     |   | $ | 492   |   |
| 2013                     |   | $ | 349   |   |
| 2014      and thereafter |   | $ | 503   |   |

----

Table of Contents

|                                  |                             |   | Fair      Value Measurements     |   |   |         |   |
|---------------------------------------|----------------------------------|--------|----------------------------------|--------|--------|--------------|--------|
|                                  |                             |   | At      September 30, 2009 Using |   |   |         |   |
|                                  | Balance      Sheet Location      |   | Level      1                     |   |   | Level      2 |   |   | Level      3 |   |   | Total |   |
| Assets:                               |                             |   |                             |   |   |         |   |   |   |   |   |   |   |
| Investments      held in Rabbi Trusts | Other      noncurrent assets     |   | $                                | 1,311  |   |         | $      | - |   |   | $ | - |   |   | $ | 1,311 |   |
|                                  |                             |   |                             |   |   |         |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities:                          |                             |   |                             |   |   |         |   |   |   |   |   |   |   |   |   |   |   |
| Interest      rate swap               | Other      long-term liabilities |   | $                                | -      |   |         | $      | 653 |   |   | $ | - |   |   | $ | 653 |   |
|                                  |                             |   |                             |   |   |         |   |   |   |   |   |   |   |   |   |   |   |
|                                  |                             |   |                             |   |   |         |   |   |   |   |   |   |   |   |   |   |   |
|                                  |                             |   | Fair      Value Measurements     |   |   |         |   |   |
|                                  |                             |   | At      December 31, 2008 Using  |   |   |         |   |   |
|                                  | Balance      Sheet Location      |   | Level      1                     |   |   | Level      2 |   |   | Level      3 |   |   | Total |   |
| Assets:                               |                             |   |                             |   |   |         |   |   |   |   |   |   |   |   |   |   |   |
| Investments      held in Rabbi Trusts | Other      noncurrent assets     |   | $                                | 1,107  |   |         | $      | - |   |   | $ | - |   |   | $ | 1,107 |   |
|                                  |                             |   |                             |   |   |         |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities:                          |                             |   |                             |   |   |         |   |   |   |   |   |   |   |   |   |   |   |
| Interest      rate swap               | Other      long-term liabilities |   | $                                | -      |   |         | $      | 860 |   |   | $ | - |   |   | $ | 860 |   |

----

Table of Contents

|                                                                 |   | September      30, 2009 |   |   | December      31, 2008 |   |   | Three      Months Ended September 30, 2009 |   |   | Nine Months      Ended September 30, 2009 |   |
|----------------------------------------------------------------------|--------|-------------------------|--------|--------|------------------------|--------|--------|--------------------------------------------|--------|--------|------------------------------------------------|--------|
| Other      long-term liabilities                                     |   | $                       | 653    |   |                   | $      | 860    |                                       |   |   |                                           |   |   |   |
| Gain      (loss) recognized in other comprehensive income, net oftax |   |                    |   |   |                   |   |   |                                       |   | $      | (25                                            | )      |   | $ | 125 |   |

|                                               |   | Three      Months Ended |   |   | Nine      Months Ended |   |
|----------------------------------------------------|--------|-------------------------|--------|--------|------------------------|--------|
|                                               |   | September      30,      |   |   | September      30,     |   |
|                                               |   | 2009                    |   |   | 2008                   |   |   | 2009 |   |   | 2008 |   |
| Interest      cost on projected benefit obligation |   | $                       | 1,067  |   |                   | $      | 959 |   |   | $ | 3,200 |   |   | $ | 2,877 |   |
| Expected      return on plan assets                |   |                    | (964   | )      |                   |   | (1,396 | ) |   |   | (2,892 | ) |   |   | (4,188 | ) |
| Recognized      actuarial loss                     |   |                    | 303    |   |                   |   | 137 |   |   |   | 909 |   |   |   | 411 |   |
| Net      periodic pension expense (income)         |   | $                       | 406    |   |                   | $      | (300 | ) |   | $ | 1,217 |   |   | $ | (900 | ) |

----

Table of Contents

|                                        |   | Three      Months Ended |   |   | Nine      Months Ended |   |
|---------------------------------------------|--------|-------------------------|--------|--------|------------------------|--------|
|                                        |   | September      30,      |   |   | September      30,     |   |
|                                        |   | 2009                    |   |   | 2008                   |   |   | 2009 |   |   | 2008 |   |
| Cost      of products and services          |   | $                       | 87     |   |                   | $      | 102 |   |   | $ | 234 |   |   | $ | 398 |   |
| Selling,      general and administrative    |   |                    | 106    |   |                   |   | 117 |   |   |   | 313 |   |   |   | 545 |   |
| Total      share-based compensation expense |   | $                       | 193    |   |                   | $      | 219 |   |   | $ | 547 |   |   | $ | 943 |   |

|                                                   |   |           |    |   |     |   |   | Weighted        |   |   |      |   |
|--------------------------------------------------------|--------|----------------|---------|--------|----------|--------|--------|-----------------|--------|--------|-----------|--------|
|                                                   |   |           |    |   |     |   |   | Average         |   |   |      |   |
|                                                   |   |           |    |   | Weighted |   |   | Remaining       |   |   |      |   |
|                                                   |   |           |    |   | Average  |   |   | Contractual     |   |   | Aggregate |   |
|                                                   |   | Number      of |    |   | Exercise |   |   | Term            |   |   | Intrinsic |   |
|                                                   |   | Shares         |    |   | Price    |   |   | (in      years) |   |   | Value     |   |
| Outstanding      and exercisable at December 31, 2008  |   |           | 889,108 |   |     | $      | 8.42   |            |   |   | 2.1       |   |   | $ | 729 |   |
| Granted                                                |   |           | -       |   |     | $      | -      |            |   |   |      |   |   |   |   |   |
| Exercised                                              |   |           | (65,381 | )      |     | $      | 8.62   |            |   |   |      |   |   |   |   |   |
| Cancelled                                              |   |           | (6,784  | )      |     | $      | 13.21  |            |   |   |      |   |   |   |   |   |
| Outstanding      and exercisable at September 30, 2009 |   |           | 816,943 |   |     | $      | 8.36   |            |   |   | 1.4       |   |   | $ | 4,056 |   |

|                                                           |   | Three      Months Ended |   |   | Nine      Months Ended |   |
|----------------------------------------------------------------|--------|-------------------------|--------|--------|------------------------|--------|
|                                                           |   | September      30,      |   |   | September      30,     |   |
|                                                           |   | 2009                    |   |   | 2008                   |   |   | 2009 |   |   | 2008 |   |
| Amounts      realized or received from stock option exercises: |   |                    |   |   |                   |   |   |   |   |   |   |   |
| Cash      proceeds received                                    |   | $                       | 465    |   |                   | $      | 152 |   |   | $ | 564 |   |   | $ | 338 |   |
| Intrinsic      value realized                                  |   | $                       | 114    |   |                   | $      | 112 |   |   | $ | 137 |   |   | $ | 182 |   |
| Income      tax benefit realized                               |   | $                       | 45     |   |                   | $      | 44 |   |   | $ | 53 |   |   | $ | 68 |   |

|                                 |   |           |    |   | Weighted        |   |
|--------------------------------------|--------|----------------|---------|--------|-----------------|--------|
|                                 |   |           |    |   | Average         |   |
|                                 |   | Number      of |    |   | Grant-Date      |   |
|                                 |   | Shares         |    |   | Fair      Value |   |
| Nonvested      at December 31, 2008  |   |           | 158,476 |   |            | $      | 10.61 |   |
| Granted                              |   |           | 99,548  |   |            | $      | 8.92 |   |
| Vested                               |   |           | (65,068 | )      |            | $      | 11.53 |   |
| Cancelled                            |   |           | (14,700 | )      |            | $      | 9.59 |   |
| Nonvested      at September 30, 2009 |   |           | 178,256 |   |            | $      | 9.41 |   |

----

Table of Contents

|                                                                    |   | Three      Months Ended |      |   | Nine      Months Ended |   |
|-------------------------------------------------------------------------|--------|-------------------------|-----------|--------|------------------------|--------|
|                                                                    |   | September      30,      |      |   | September      30,     |   |
|                                                                    |   | 2009                    |      |   | 2008                   |   |   | 2009 |   |   | 2008 |   |
|  Weighted      average shares outstanding - Basic                  |   |                    | 9,678,983 |   |                   |   | 9,487,155 |   |   |   | 9,631,659 |   |   |   | 9,471,420 |   |
|  Dilutive      effect of stock options and restricted stock grants |   |                    | 304,842   |   |                   |   | - |   |   |   | 208,946 |   |   |   | - |   |
|  Weighted      average shares outstanding - Diluted                |   |                    | 9,983,825 |   |                   |   | 9,487,155 |   |   |   | 9,840,605 |   |   |   | 9,471,420 |   |

|                                  |   | Three      Months Ended |   |   | Nine      Months Ended |   |
|---------------------------------------|--------|-------------------------|--------|--------|------------------------|--------|
|                                  |   | September      30,      |   |   | September      30,     |   |
|                                  |   | 2009                    |   |   | 2008                   |   |   | 2009 |   |   | 2008 |   |
| Revenues      from external customers |   |                    |   |   |                   |   |   |   |   |   |   |   |
| Systems      and Services             |   | $                       | 67,504 |   |                   | $      | 62,300 |   |   | $ | 202,835 |   |   | $ | 170,781 |   |
| Metrigraphics                         |   |                    | 1,733  |   |                   |   | 1,191 |   |   |   | 4,589 |   |   |   | 4,481 |   |
|                                  |   | $                       | 69,237 |   |                   | $      | 63,491 |   |   | $ | 207,424 |   |   | $ | 175,262 |   |
| Gross      profit (loss)              |   |                    |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Systems      and Services             |   | $                       | 10,622 |   |                   | $      | 10,044 |   |   | $ | 32,995 |   |   | $ | 26,714 |   |
| Metrigraphics                         |   |                    | 242    |   |                   |   | (80 | ) |   |   | 8 |   |   |   | 212 |   |
|                                  |   | $                       | 10,864 |   |                   | $      | 9,964 |   |   | $ | 33,003 |   |   | $ | 26,926 |   |
| Operating      income (loss)          |   |                    |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Systems      and Services             |   | $                       | 4,185  |   |                   | $      | (1,963 | ) |   | $ | 12,375 |   |   | $ | (5,049 | ) |
| Metrigraphics                         |   |                    | (41    | )      |                   |   | (320 | ) |   |   | (882 | ) |   |   | (658 | ) |
|                                  |   | $                       | 4,144  |   |                   | $      | (2,283 | ) |   | $ | 11,493 |   |   | $ | (5,707 | ) |

----

Table of Contents

----

Table of Contents

----

Table of Contents

Item 2. Management’sDiscussion and Analysis of Financial Condition and Resultsof Operations

|   | • |   | 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

|                                                   |   | Three      Months Ended |   |   |   | Nine      Months Ended  |   |   |
|--------------------------------------------------------|--------|-------------------------|--------|--------|--------|-------------------------|--------|--------|
|                                                   |   | September,      30 2008 |   |   |   | September,      30 2008 |   |   |
| (in      millions)                                     |   | $ (1)                   |   |   | % (2)  |                    |   |   | $ (1) |   |   | % (2) |   |   |
| GAAP      operating loss                               |   | $                       | (2.3   | )      |   |                    | (3.6   | )%     |   |   | $ | (5.7 | ) |   |   | (3.3 | )% |   |
| Provision      for litigation                          |   |                    | 6.0    |   |   |                    | 9.5    | %      |   |   |   | 14.8 |   |   |   | 8.5 | % |   |
| Non-GAAP      operating income                         |   | $                       | 3.7    |   |   |                    | 5.9    | %      |   |   | $ | 9.1 |   |   |   | 5.2 | % |   |
|                                                   |   |                    |   |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |
| GAAP      loss before provision for income taxes       |   | $                       | (2.7   | )      |   |                    | (4.2   | )%     |   |   | $ | (6.2 | ) |   |   | (3.5 | )% |   |
| Provision      for litigation                          |   |                    | 6.0    |   |   |                    | 9.5    | %      |   |   |   | 14.8 |   |   |   | 8.5 | % |   |
| Non-GAAP      income before provision for income taxes |   | $                       | 3.3    |   |   |                    | 5.2    | %      |   |   | $ | 8.6 |   |   |   | 4.9 | % |   |
|                                                   |   |                    |   |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |
| GAAP      benefit for income taxes                     |   | $                       | (2.4   | )      |   |                    | 91.3   | %      | (3) |   | $ | (2.3 | ) |   |   | 37.8 | % | (3) |
| Tax      provision for litigation                      |   |                    | 3.6    |   |   |                    | 60.6   | %      | (3) |   |   | 5.8 |   |   |   | 38.8 | % | (3) |
| Non-GAAP      provision for income taxes               |   | $                       | 1.2    |   |   |                    | 35.9   | %      | (3) |   | $ | 3.4 |   |   |   | 39.6 | % | (3) |
|                                                   |   |                    |   |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |
| GAAP      net loss                                     |   | $                       | (0.2   | )      |   |                    | (0.4   | )%     |   |   | $ | (3.9 | ) |   |   | (2.2 | )% |   |
| Provision      for litigation, net of tax benefit      |   |                    | 2.4    |   |   |                    | 3.7    | %      |   |   |   | 9.1 |   |   |   | 5.2 | % |   |
| Non-GAAP      net income                               |   | $                       | 2.1    |   |   |                    | 3.4    | %      |   |   | $ | 5.2 |   |   |   | 3.0 | % |   |

| (1) | Totals      may not add due to rounding.                                                                                                                                                                                                                                                    |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Represents      a percentage of total revenue of $63.5 million and $175.3 million for the      three and nine months ended September 30, 2008, respectively, excluding      the percentages for provision (benefit) 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

----

Table of Contents

|                                                    |   | Three      Months Ended September 30, |   |   |
|---------------------------------------------------------|--------|---------------------------------------|--------|--------|
|                                                    |   | 2009                                  |   |   |   | 2008 |   |   |
| (in      millions)                                      |   | $      (1)                            |   |   | % |   |   |   | $      (1) |   |   | % |   |   |
|  Contract      revenue                             |   | $                                     | 67.5   |   |   |   | 97.5 | % |   |   | $ | 62.3 |   |   |   | 98.1 | % |   |
|  Product      sales                                |   |                                  | 1.7    |   |   |   | 2.5 |   |   |   |   | 1.2 |   |   |   | 1.9 |   |   |
|  Total      revenue                                |   | $                                     | 69.2   |   |   |   | 100.0 | % |   |   | $ | 63.5 |   |   |   | 100.0 | % |   |
|                                                    |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Gross      profit on contract revenue (3)         |   | $                                     | 10.6   |   |   |   | 15.7 | % |   |   | $ | 10.0 |   |   |   | 16.1 | % |   |
|  Gross      profit (loss) on product sales (3)     |   |                                  | 0.2    |   |   |   | 14.0 | % |   |   |   | (0.1 | ) |   |   | (6.7 | )% |   |
|  Total      gross profit (3)                       |   |                                  | 10.9   |   |   |   | 15.7 | % |   |   |   | 10.0 |   |   |   | 15.7 | % |   |
|                                                    |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Selling,      general and administrative expenses |   |                                  | 5.9    |   |   |   | 8.5 | % |   |   |   | 5.5 |   |   |   | 8.7 | % |   |
|  Provision      for litigation                     |   |                                  | -      |   |   |   | 0.0 | % |   |   |   | 6.0 |   |   |   | 9.5 | % |   |
|  Amortization      of intangible assets            |   |                                  | 0.8    |   |   |   | 1.2 | % |   |   |   | 0.7 |   |   |   | 1.1 | % |   |
|  Operating      income (loss)                      |   |                                  | 4.1    |   |   |   | 6.0 | % |   |   |   | (2.3 | ) |   |   | (3.6 | )% |   |
|  Interest      expense, net                        |   |                                  | (0.4   | )      |   |   | (0.6 | )% |   |   |   | (0.4 | ) |   |   | (0.7 | )% |   |
|  Other      income, net                            |   |                                  | 0.3    |   |   |   | 0.4 | % |   |   |   | 0.0 |   |   |   | 0.1 | % |   |
|  Provision      (benefit) for income taxes         |   |                                  | 1.0    |   |   |   | 25.6 | % | (2) |   |   | (2.4 | ) |   |   | 91.3 | % | (2) |
|  Net      income (loss)                            |   | $                                     | 3.0    |   |   |   | 4.3 | % |   |   | $ | (0.2 | ) |   |   | (0.4 | )% |   |

|                                                    |   | Nine      months Ended September 30, |   |   |
|---------------------------------------------------------|--------|--------------------------------------|--------|--------|
|                                                    |   | 2009                                 |   |   |   | 2008 |   |   |
| (in      millions)                                      |   | $      (1)                           |   |   | % |   |   |   | $      (1) |   |   | % |   |   |
|  Contract      revenue                             |   | $                                    | 202.8  |   |   |   | 97.8 | % |   |   |   | 170.8 |   |   |   | 97.4 | % |   |
|  Product      sales                                |   |                                 | 4.6    |   |   |   | 2.2 |   |   |   |   | 4.5 |   |   |   | 2.6 |   |   |
|  Total      revenue                                |   | $                                    | 207.4  |   |   |   | 100.0 | % |   |   | $ | 175.3 |   |   |   | 100.0 | % |   |
|                                                    |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Gross      profit on contract revenue (3)         |   | $                                    | 33.0   |   |   |   | 16.3 | % |   |   | $ | 26.7 |   |   |   | 15.6 | % |   |
|  Gross      profit on product sales (3)            |   |                                 | 0.0    |   |   |   | 0.2 | % |   |   |   | 0.2 |   |   |   | 4.7 | % |   |
|  Total      gross profit (3)                       |   |                                 | 33.0   |   |   |   | 15.9 | % |   |   |   | 26.9 |   |   |   | 15.4 | % |   |
|                                                    |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Selling,      general and administrative expenses |   |                                 | 18.8   |   |   |   | 9.0 | % |   |   |   | 16.1 |   |   |   | 9.2 | % |   |
|  Provision      for litigation                     |   |                                 | -      |   |   |   | 0.0 | % |   |   |   | 14.8 |   |   |   | 8.5 | % |   |
|  Amortization      of intangible assets            |   |                                 | 2.8    |   |   |   | 1.3 | % |   |   |   | 1.7 |   |   |   | 1.0 | % |   |
|  Operating      income (loss)                      |   |                                 | 11.5   |   |   |   | 5.5 | % |   |   |   | (5.7 | ) |   |   | (3.3 | )% |   |
|  Interest      expense, net                        |   |                                 | (1.5   | )      |   |   | (0.7 | )% |   |   |   | (0.7 | ) |   |   | (0.4 | )% |   |
|  Other      income, net                            |   |                                 | 0.6    |   |   |   | 0.3 | % |   |   |   | 0.2 |   |   |   | 0.1 | % |   |
|  Provision      (benefit) for income taxes         |   |                                 | 3.8    |   |   |   | 35.8 | % | (2) |   |   | (2.3 | ) |   |   | 37.8 | % | (2) |
|  Net      income (loss)                            |   | $                                    | 6.8    |   |   |   | 3.3 | % |   |   | $ | (3.9 | ) |   |   | (2.2 | )% |   |

| (1) | Totals      may not add due to rounding.                                                                                       |
|-----|--------------------------------------------------------------------------------------------------------------------------------|
| (2) | The      percentage of provision (benefit) 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 September 30, |   |
|-------------------------------------------------|--------|---------------------------------------|--------|
|                                            |   | 2009                                  |   |   | 2008 |   |
| (in      millions)                              |   | $      (1)                            |   |   | %      (1) |   |   | $      (1) |   |   | %      (1) |   |
| National      defense and intelligence agencies |   | $                                     | 36.9   |   |   |   | 54.6 | % |   | $ | 39.9 |   |   |   | 64.0 | % |
| Federal      civilian agencies                  |   |                                  | 10.7   |   |   |   | 15.9 |   |   |   | 9.6 |   |   |   | 15.4 |   |
| Homeland      Security                          |   |                                  | 13.5   |   |   |   | 20.1 |   |   |   | 6.1 |   |   |   | 9.8 |   |
| State      and local government agencies        |   |                                  | 5.9    |   |   |   | 8.8 |   |   |   | 6.2 |   |   |   | 10.0 |   |
| Other                                           |   |                                  | 0.4    |   |   |   | 0.6 |   |   |   | 0.5 |   |   |   | 0.8 |   |
| Total      contract revenue                     |   | $                                     | 67.5   |   |   |   | 100.0 | % |   | $ | 62.3 |   |   |   | 100.0 | % |

|                                            |   | Nine      Months Ended September 30, |   |
|-------------------------------------------------|--------|--------------------------------------|--------|
|                                            |   | 2009                                 |   |   | 2008 |   |
| (in      millions)                              |   | $      (1)                           |   |   | %      (1) |   |   | $      (1) |   |   | %      (1) |   |
| National      defense and intelligence agencies |   | $                                    | 110.6  |   |   |   | 54.5 | % |   | $ | 118.0 |   |   |   | 69.1 | % |
| Federal      civilian agencies                  |   |                                 | 32.6   |   |   |   | 16.1 |   |   |   | 23.0 |   |   |   | 13.5 |   |
| Homeland      Security                          |   |                                 | 40.3   |   |   |   | 19.9 |   |   |   | 9.1 |   |   |   | 5.3 |   |
| State      and local government agencies        |   |                                 | 18.3   |   |   |   | 9.0 |   |   |   | 18.8 |   |   |   | 11.0 |   |
| Other                                           |   |                                 | 1.1    |   |   |   | 0.5 |   |   |   | 1.9 |   |   |   | 1.1 |   |
| Total      contract revenue                     |   | $                                    | 202.8  |   |   |   | 100.0 | % |   | $ | 170.8 |   |   |   | 100.0 | % |

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

----

Table of Contents

|                                                     |   | Three      Months Ended |   |   | Nine      Months Ended |   |
|----------------------------------------------------------|--------|-------------------------|--------|--------|------------------------|--------|
|                                                     |   | September      30,      |   |   | September      30,     |   |
|                                                     |   | 2009                    |   |   | 2008                   |   |   | 2009 |   |   | 2008 |   |
|  Time      and materials                            |   |                    | 41     | %      |                   |   | 49 | % |   |   | 43 | % |   |   | 50 | % |
|  Fixed      price, including service type contracts |   |                    | 40     |   |                   |   | 33 |   |   |   | 38 |   |   |   | 31 |   |
|  Cost      reimbursable                             |   |                    | 19     |   |                   |   | 18 |   |   |   | 19 |   |   |   | 19 |   |
|                                                     |   |                    | 100    | %      |                   |   | 100 | % |   |   | 100 | % |   |   | 100 | % |
|                                                     |   |                    |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
|  Prime      contract                                |   |                    | 70     | %      |                   |   | 68 | % |   |   | 71 | % |   |   | 61 | % |
|  Sub-contract                                       |   |                    | 30     |   |                   |   | 32 |   |   |   | 29 |   |   |   | 39 |   |
|                                                     |   |                    | 100    | %      |                   |   | 100 | % |   |   | 100 | % |   |   | 100 | % |

----

Table of Contents

----

Table of Contents

----

Table of Contents

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKETRISK

----

Table of Contents

Item 4. CONTROLS AND PROCEDURES

Item 1. LEGAL PROCEEDINGS

Item 1A. RISK FACTORS

----

Table of Contents

Item 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USEOF PROCEEDS

by any "affiliated purchaser," as defined in Rule 10b-18(a)(3) underthe Exchange Act, of shares of our common stock during each month in the thirdquarter of 2009.  All shares repurchased were not part of a publiclyannounced share purchase program and represent shares repurchased to coverpayroll withholding taxes in connection with the vesting of restricted stockawards.

|                                         |   |              |   |   |          |   |   | Total Number |   |   | Approximate              |   |
|----------------------------------------------|--------|-------------------|--------|--------|---------------|--------|--------|-------------------|--------|--------|--------------------------|--------|
|                                         |   |              |   |   |          |   |   | of      Shares    |   |   | Dollar      Value        |   |
|                                         |   |              |   |   |          |   |   | Purchased      as |   |   | of Shares that |   |
|                                         |   |              |   |   |  Average |   |   | Part      of      |   |   | May      Yet Be          |   |
|                                         |   | Total Number |   |   |  Price   |   |   | Publicly          |   |   | Purchased                |   |
|                                         |   | of      Shares    |   |   | Paid      Per |   |   | Announced         |   |   | Under      the           |   |
| Period                                       |   | Purchased         |   |   | Share         |   |   | Programs          |   |   | Programs                 |   |
| July      1, 2009 to July 31, 2009           |   |              | 193    |   |          | $      | 11.60  |              |   |   | -                        |   |   | $ | - |   |
| August      1, 2009 to August 31, 2009       |   |              | 2,523  |   |          | $      | 12.68  |              |   |   | -                        |   |   |   | - |   |
| September      1, 2009 to September 30, 2009 |   |              | 1,017  |   |          | $      | 13.55  |              |   |   | -                        |   |   |   | - |   |
| Total                                        |   |              | 3,733  |   |          | $      | 12.86  |              |   |   | -                        |   |   | $ | - |   |

Item 6. EXHIBITS

| 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:  November      9, 2009 | /s/      David Keleher                                                    |
|                                   | Senior      Vice President, Chief Financial Officer and Treasurer         |
|                                   | (Principal      Financial Officer)                                        |
|                                   |                                                                      |
| Date:  November      9, 2009 | /s/      Shaun N. McCarthy                                                |
|                                   | Vice      President, Corporate Controller and Chief Accounting    Officer |
|                                   | (Principal      Accounting Officer)                                       |
|                                   |                                                                      |
|                                   |                                                                      |

----