<PAGE>

================================================================================


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form 10-Q

            [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934

               For the quarterly period ended December 31, 2000

                                      OR

           [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934

                      (Commission file number: 000-30931)

                           OPNET TECHNOLOGIES, INC.
            (Exact name of registrant as specified in its charter)
<TABLE>
<S>                                       <C>                              <C>
             Delaware                               7373                      52-1483235
   (State or other jurisdiction          (Primary Standard Industrial      (I.R.S. Employer
    of incorporation or organization)    Classification Code Number)       Identification No.)
</TABLE>

                        3400 International Drive, N.W.
                             Washington, DC 20008
                    (Address of principal executive office)

                                (202) 364-4700
             (Registrant's telephone number, including area code)

  Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]

  At February 9, 2001, there were outstanding 18,117,490 shares of common stock
of the registrant.

================================================================================
<PAGE>

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                                                Page
                                                                                                                ----
<S>                                                                                                             <C>
PART I.   FINANCIAL INFORMATION

Item 1.   Consolidated Financial Statements                                                                        3

          Consolidated Balance Sheets as of December 31, 2000 and March 31, 2000                                   3

          Consolidated Statements of Operations for the Three and Nine Months Ended December 31, 2000 and
          1999                                                                                                     4

          Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2000 and 1999               5

          Notes to Consolidated Financial Statements                                                               6

Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations                   10

Item 3.   Quantitative and Qualitative Disclosures About Market Risk                                              20

PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings                                                                                       21

Item 2.   Changes in Securities and Use of Proceeds                                                               21

Item 3.   Defaults Upon Senior Securities                                                                         21

Item 4.   Submission of Matters to a Vote of Security Holders                                                     21

Item 5.   Other Information                                                                                       21

Item 6.   Exhibits and Reports on Form 8-K                                                                        21

          Signatures                                                                                              22
</TABLE>

                                       2
<PAGE>

                         PART I. FINANCIAL INFORMATION

ITEM 1. Consolidated Financial Statements

                           OPNET Technologies, Inc.
                          Consolidated Balance Sheets
                     (in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                  December 31,            March 31,
                                                                                     2000                  2000
                                                                                 -------------         --------------
                                         ASSETS                                   (unaudited)             (Note 1)
<S>                                                                              <C>                   <C>
Current assets:
    Cash and cash equivalents                                                    $      67,414          $       8,765
    Accounts receivable, net of $98 and $100 in allowance for doubtful
      accounts at December 31 and March 31, 2000, respectively                           4,199                  3,119
    Refundable income taxes                                                                  -                    476
    Deferred offering costs                                                                  -                    400
    Deferred income taxes                                                                  266                    101
    Prepaid expenses and other current assets                                            1,037                    376
                                                                                 -------------         --------------
           Total current assets                                                         72,916                 13,237

Deferred income taxes                                                                       58                     99
Property and equipment, net                                                              2,754                  2,272
Construction in progress                                                                 1,671                      -
Intangible assets, net                                                                      83                    458
Other assets:
    Deposits                                                                               266                     62
    Loan to officer                                                                        231                    231
    Purchased software, net                                                                474                    354
                                                                                 -------------         --------------
           Total assets                                                          $      78,453          $      16,713
                                                                                 =============          =============
               LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Accounts payable                                                             $         557          $         170
    Accrued liabilities                                                                  3,318                  2,479
    Accrued income taxes                                                                   117                      -
    Deferred revenue                                                                     7,020                  3,476
                                                                                 -------------         --------------
           Total current liabilities                                                    11,012                  6,125
                                                                                 -------------         --------------
Non-current liabilities:
    Deferred rent                                                                           31                     30
    Deferred revenue                                                                       187                    142
                                                                                 -------------         --------------
           Total non-current liabilities                                                   218                    172
                                                                                 -------------         --------------
Commitments and contingencies
Series A redeemable convertible preferred stock, par value $0.001 - 160 shares
 authorized, 145 issued and outstanding at March 31, 2000, liquidation preference
    $48.40 per share                                                                         -                  6,948
                                                                                 -------------         --------------
Stockholders' equity:
    Preferred stock-par value $0.001; 5,000 shares authorized; 160
      designated as Series A (above), 145 issued and outstanding at March 31, 2000           -                      -
    Common stock-par value $0.001; 100,000 authorized; 24,203 and 17,079
      shares issued at December 31 and March 31, 2000, respectively; 18,069 and
      10,951 shares outstanding at December 31 and March 31, 2000, respectively             24                     17
    Additional paid-in capital                                                          62,281                    623
    Deferred compensation                                                                 (215)                  (287)
    Retained earnings                                                                    9,228                  7,125
    Accumulated other comprehensive income                                                   5                      -
    Treasury stock-6,134 and 6,128 shares at December 31 and March 31, 2000,
     respectively                                                                       (4,100)                (4,010)
                                                                                 -------------         --------------
           Total stockholders' equity                                                   67,223                  3,468
                                                                                 -------------         --------------
           Total liabilities and stockholders' equity                           $       78,453          $      16,713
                                                                                 =============          =============
</TABLE>

Note 1 - The March 31, 2000 Condensed Consolidated Balance Sheet has been
derived from the audited financial statements as of that date.

                See notes to consolidated financial statements.

                                       3
<PAGE>

                           OPNET Technologies, Inc.
                     Consolidated Statements of Operations
                                  (unaudited)

<TABLE>
<CAPTION>
                                                                  Three Months Ended               Nine Months Ended
                                                                     December 31,                     December 31,
                                                                     ------------                     ------------
                                                                2000             1999             2000            1999
                                                                ----             ----             ----            ----
                                                                         (in thousands, except per share data)
<S>                                                           <C>                <C>             <C>             <C>
Revenues:
          Software licenses                                   $    5,106        $   2,797        $  13,073       $   7,382
          Services                                                 3,629            2,308            9,866           6,069
                                                              ----------        ---------        ---------       ---------
               Total revenues                                      8,735            5,105           22,939          13,451
                                                              ----------        ---------        ---------       ---------
Cost of revenues:
          Software licenses                                           56              204              357             474
          Services                                                 1,215              762            3,329           2,049
                                                              ----------        ---------        ---------       ---------
               Total cost of revenues                              1,271              966            3,686           2,523
                                                              ----------        ---------        ---------       ---------

Gross profit                                                       7,464            4,139           19,253          10,928
                                                              ----------        ---------        ---------       ---------
Operating expenses:
          Research and development                                 2,175            1,542            5,803           4,092
          Sales and marketing                                      3,648            1,982            9,645           5,142
          General and administrative                                 883              523            2,335           1,502
                                                              ----------        ---------        ---------       ---------
               Total operating expenses                            6,706            4,047           17,783          10,736
                                                              ----------        ---------        ---------       ---------

Income from operations                                               758               92            1,470             192
Interest and other income                                          1,064              105            1,877             273
                                                              ----------        ---------        ---------       ---------
Income before provision for income taxes                           1,822              197            3,347             465
Provision for income taxes                                           678               53            1,238             128
                                                              ----------        ---------        ---------       ---------
Net income                                                         1,144              144            2,109             337
Accretion of transaction costs on redeemable convertible
  preferred stock                                                      -               (4)              (6)            (11)
                                                              ----------        ---------        ---------       ---------
Net income applicable to common shares                         $   1,144        $     140        $   2,103       $     326
                                                              ==========        =========        =========       =========
Basic net income per common share                              $    0.06        $    0.01        $    0.14       $    0.03
                                                              ==========        =========        =========       =========
Diluted net income per common share                            $    0.06        $    0.01        $    0.12       $    0.02
                                                              ==========        =========        =========       =========
Weighted average common shares outstanding (basic)                18,062           10,706           14,873          10,692
                                                              ==========        =========        =========       =========
Weighted average common shares outstanding (diluted)              19,788           14,371           17,476          14,290
                                                              ==========        =========        =========       =========
</TABLE>

                See notes to consolidated financial statements.

                                       4
<PAGE>

                            OPNET Technologies, Inc.
                      Consolidated Statements of Cash Flows
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                    Nine Months Ended
                                                                                        December 31,
                                                                            ------------------------------------
                                                                                2000                    1999
                                                                            -------------           ------------
                                                                                      (in thousands)
<S>                                                                         <C>                    <C>
Cash flows from operating activities:
    Net income                                                              $       2,109           $        337
    Adjustments to reconcile net income to net cash provided by
     operating activities:
        Expense related to employee stock options                                     166                     15
        Depreciation and amortization                                               1,064                    910
        Deferred income taxes                                                        (124)                  (183)
        Tax benefit from exercise of nonqualified stock options                       220                      -
        Changes in assets and liabilities:
           Accounts receivable                                                     (1,080)                  (331)
           Prepaid expenses and other current assets                                 (661)                  (251)
           Refundable income taxes                                                    476                    (92)
           Deposits                                                                  (204)                   (14)
           Accounts payable                                                           387                    (35)
           Accrued liabilities                                                      1,133                  1,516
           Accrued income taxes                                                       117                      -
           Deferred revenue                                                         3,589                  1,966
           Deferred rent                                                                1                    (12)
                                                                            -------------          -------------
             Net cash provided by operating activities                              7,193                  3,826
                                                                            -------------          -------------

Cash flows from investing activities:
    Purchase of securities available for sale                                           -                 (4,013)
    Purchase of intangibles                                                             -                   (500)
    Purchase of software                                                             (120)                  (181)
    Purchase of property and equipment                                             (2,842)                  (877)
                                                                            -------------          -------------
             Net cash used in investing activities                                 (2,962)                (5,571)
                                                                            -------------          -------------
Cash flows from financing activities:
    Proceeds from sale of common stock                                             59,800                      -
    Costs incurred for initial public offering                                     (5,673)                     -
    Proceeds from exercise of common stock options                                    219                      3
    Proceeds from issuance of common stock under employee stock
     purchase plans                                                                    67                      -
                                                                            -------------          -------------
             Net cash provided by financing activities                             54,413                      3
                                                                            -------------          -------------
Effect of exchange rate changes on cash and cash equivalents                            5                      -

Net increase (decrease) in cash and cash equivalents                               58,649                 (1,742)

Cash and cash equivalents, beginning of period                                      8,765                  6,414
                                                                            -------------          -------------
Cash and cash equivalents, end of period                                    $      67,414          $       4,672
                                                                            =============          =============
</TABLE>

                See notes to consolidated financial statements.

                                       5
<PAGE>

                           OPNET Technologies, Inc.
                  Notes to Consolidated Financial Statements
                                  (unaudited)

  1. Basis of Presentation and Nature of Operations

  OPNET Technologies, Inc. ("OPNET", the "Company", "we" or "us") provides
network management software solutions that enable organizations to optimize the
performance and maximize the availability of communications networks and
networked applications. Our suite of products advances network and application
management beyond reactive problem identification and reporting to proactive
problem resolution and avoidance. The OPNET product suite combines predictive
simulation and a comprehensive understanding of network technologies to enable
network professionals to more effectively design and deploy networks, diagnose
network and application performance problems, and predict the impact of proposed
network modifications. OPNET is headquartered in Washington, D.C. and has sales
offices worldwide.

  The accompanying consolidated financial statements include the results of
OPNET Technologies, Inc. and its wholly owned subsidiaries, OPNET Technologies
Societe Par Actions Simplifiee ("OPNET Technologies SAS") and MIL 3
International Limited. All significant intercompany accounts and transactions
have been eliminated in consolidation. The interim financial statements included
herein are unaudited and have been prepared in accordance with generally
accepted accounting principles ("GAAP") and applicable rules and regulations of
the Securities and Exchange Commission (the "SEC") regarding interim financial
reporting. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with GAAP have been condensed or
omitted pursuant to such rules and regulations. Accordingly, these interim
financial statements should be read in conjunction with the audited consolidated
financial statements and accompanying notes thereto contained in the Company's
Registration Statement on Form S-1, as amended, filed with the SEC on August 1,
2000 (SEC File No. 333-32588). In the opinion of management, these interim
financial statements reflect all adjustments of a normal and recurring nature
necessary to present fairly the Company's results for the interim periods. The
preparation of financial statements in conformity with GAAP requires management
to make certain estimates and assumptions. These estimates and assumptions
affect the reported amounts of assets and liabilities as of the date of the
financial statements, as well as the reported amount of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
In addition, the Company's operating results for the three and nine months ended
December 31, 2000 may not be indicative of the operating results for the full
fiscal year or any other future period.

  2. Initial Public Offering

  On August 1, 2000, the Company's registration statement for its initial public
offering of 4,000,000 shares of Common Stock became effective. The offering
closed on August 7, 2000, yielding proceeds of approximately $46,766,000 after
deducting underwriting discounts and commissions and estimated offering expenses
payable by the Company. The underwriters of the offering also exercised their
over-allotment option to purchase an additional 600,000 shares, which closed on
August 9, 2000, raising an additional $7,254,000 in net proceeds to the Company.
Upon the closing of the offering, the Series A Redeemable Convertible Preferred
Stock was converted into 2,171,769 shares of Common Stock as discussed in Note
5.

  3. Facilities Lease

  On June 2, 2000, the Company executed a new office lease agreement and plans
to relocate its corporate and principal operational offices to Bethesda,
Maryland. The Company is scheduled to take possession of the premises,
consisting of approximately 60,000 square feet of office space, in February
2001. The lease is for ten years with two five-year renewal options. The first
year's rent will be approximately $2,267,000 and is subject to escalation based
upon a consumer price index adjustment of up to 3% each year. The lease also
requires the Company to maintain a security deposit of approximately $3,400,000
(in the form of a bank letter of credit, as discussed below in Note 4), which is
subject to annual reductions based upon meeting certain minimum financial
requirements.

  4. Credit Agreements

  On June 10, 2000, the Company entered into a $5,000,000 line of credit
facility with a commercial bank which expires on June 10, 2001. The line of
credit allows the Company to use the funds for corporate borrowings and issuance
of letters of credit up to a maximum of $5,000,000. The Company used the
facility to issue a letter of credit for approximately $3,400,000 to satisfy the
security deposit requirements for its new corporate office facilities lease, as
discussed above in Note 3.

                                       6
<PAGE>

  The outstanding principal balance on the credit facility is payable on June
10, 2001 with interest payable monthly, based on LIBOR plus the applicable
margin ranging from 2% to 2.5% as stated in the agreement. The credit facility
also has a renewal option for one additional year provided the Company meets
certain conditions by the original maturity date.

  The credit facility is collateralized by certain assets of the Company. There
are also certain financial ratios and conditions that the Company must maintain
under the terms of the loan agreement, as well as certain covenants with which
the Company must comply.

  5. Stockholders' Equity

     Common Stock

  On June 27, 2000, in connection with the Company's initial public offering
of Common Stock, the Board of directors approved a three-for-two split of Common
Stock. All references to the number of common shares and per share amounts have
been restated as appropriate to reflect the effect of the split for all periods
presented.

  On July 25, 2000, the Company filed its Second Amended and Restated
Certificate of Incorporation with the Secretary of State of the State of
Delaware to increase the authorized capital stock of the Company to 105,160,000
shares, consisting of 100,000,000 shares of Common Stock, par value $0.001 per
share, 5,000,000 shares of undesignated preferred stock, par value of $0.001 per
share and 160,000 shares of Series A redeemable convertible preferred stock, par
value of $0.001.

  On August 7, 2000, the Company filed its Third Amended and Restated
Certificate of Incorporation with the Secretary of State of the State of
Delaware to adjust the authorized capital stock of the Company to 105,000,000
shares, consisting of 100,000,000 shares of Common Stock, par value $0.001 per
share and 5,000,000 shares of undesignated preferred stock, par value of $0.001
per share.

  During the three and nine months ended December 31, 2000, employee exercises
of stock options resulted in proceeds to the Company of approximately $13,000
and $219,000 and the issuance of 49,900 and 340,527 shares of Common Stock,
respectively. Employee purchases of Common Stock under the 2000 Employee Stock
Purchase Plan resulted in proceeds to the Company of approximately $67,000 and
the issuance of 5,226 shares of Common Stock for the three and nine months ended
December 31, 2000.

     Preferred Stock

  On September 30, 1997, the Company entered into a Series A Redeemable
Convertible Preferred Stock Purchase Agreement (the "Agreement") with two
investors, pursuant to which the Company authorized 160,000 shares of the Series
A Redeemable Convertible Preferred Stock (the "Series A Preferred Stock") and
issued and sold 144,640 of those shares for approximately $7,001,000. The
difference between the carrying amount of the Series A Preferred Stock of
$6,948,000 at March 31, 2000, and the redemption amount of $7,001,000 based upon
the liquidation amount, represents the cost of issuance, which was accreted pro
rata over the period beginning on the September 1997 issuance date, and ending
upon the automatic conversion of all such shares of Series A Preferred Stock
upon the closing of the Company's initial public offering as discussed in Note
2.

                                       7
<PAGE>

  6. Net Income Per Common Share

  In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 128, Earnings Per Share.
This statement requires dual presentation of basic and diluted earnings per
share on the face of the income statement. Basic earnings per share is to be
computed by dividing net income available to common shareholders by the weighted
average number of common shares outstanding for the period. Diluted earnings per
share is to reflect the potential dilution that could occur if securities or
other contracts to issue common shares were exercised or converted into common
shares for all periods presented.

<TABLE>
<CAPTION>
                                                                      Three Months Ended              Nine Months Ended
                                                                         December 31,                  December 31,
                                                                     -----------------------     -------------------------
                                                                        2000           1999           2000          1999
                                                                        ----           ----           ----          ----
Income (Numerator):                                                            (in thousands, except per share data)
<S>                                                                  <C>            <C>          <C>             <C>
    Basic net income applicable to common shares                     $  1,144        $   140     $   2,103        $    326
    Plus:
    Accretion of transaction costs on redeemable convertible
    preferred stock                                                         -              4             6              11
                                                                     --------        -------     ---------        --------
    Net income                                                       $  1,144        $   144     $   2,109        $    337
                                                                     ========        =======     =========        ========
Shares (Denominator):
      Weighted average common shares outstanding (basic)               18,062         10,706        14,873          10,692
      Effect of other dilutive securities:
            Options                                                     1,726          1,493         1,584           1,426
            Redeemable convertible preferred stock                          -          2,172         1,019           2,172
                                                                     --------        -------     ---------        --------
      Weighted average common shares outstanding (diluted)             19,788         14,371        17,476          14,290
                                                                     ========        =======     =========        ========
Net income per common share:
      Basic net income per common share                              $   0.06        $  0.01     $    0.14        $   0.03
      Diluted net income per common share                                0.06           0.01          0.12            0.02
</TABLE>

  7. Business Segment and Geographic Area Information

  The Company operates in one industry segment, the development and sale of
computer software programs and related services. There were no sales to any
customers within a single country except for the United States where such sales
accounted for 10% or more of total revenues. Substantially all assets are held
in the United States for the quarter ended December 31, 2000 and fiscal year
ended March 31, 2000.

  8. Supplemental Cash Flow Information

                                                            Nine Months Ended
                                                               December 31,
                                                          --------------------
                                                          2000           1999
                                                          ----           ----
       Supplemental disclosure of cash flow information:
         Cash paid during the year for income taxes       $     551      $   561

       Supplemental disclosure of non cash activities:
         Accrued offering costs                           $      60      $     -
         Accretion on preferred stock                     $       6      $    11
         Purchase of treasury stock                       $      78      $     -
         Conversion of preferred stock                    $   6,954      $     -

                                       8
<PAGE>

  9.  Comprehensive Income

  In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income.
This statement requires the Company to report and display certain information
related to comprehensive income and its components. Comprehensive income
includes net income and other comprehensive income. For the three and nine
months ended December 31, 2000, comprehensive income for the Company was $1.1
million and $2.1 million, respectively, and included accumulated foreign
currency translation gains of $5,000.

  10. New Accounting Pronouncements

  In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments and hedging activities. As amended by SFAS
No. 137, this standard will be effective for the Company for the fiscal years
and quarters beginning after March 31, 2001, and requires that an entity
recognize all qualifying derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. The
Company has evaluated this statement and does not expect that it will have a
material affect on its financial position or results of operations.

  In December 1999, the SEC issued Staff Accounting Bulletin ("SAB") No.
101, Revenue Recognition in Financial Statements. This SAB expresses the SEC's
views on applying GAAP to revenue recognition in financial statements. This SAB
is effective beginning with the fourth fiscal quarter of the fiscal year
beginning after December 15, 1999. The Company does not expect the application
of this SAB to have a material impact on its financial statements.

                                       9
<PAGE>

  ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations

  The following discussion and analysis relates to the financial condition and
results of operations of the Company for the three and nine months ended
December 31, 2000, and should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
contained in the prospectus included in the Company's Registration Statement on
Form S-1, filed with the SEC on March 15, 2000 (No. 333-32588).

  This report contains forward-looking statements that involve substantial risks
and uncertainties. The statements contained in this report that are not purely
historical are forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. You can identify these statements by forward-looking words such as
"anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan,"
"potential," "should," "will," and "would" or similar words. You should read
statements that contain these words carefully because they discuss our future
expectations, contain projections of our future results of operations or of our
financial position or state other forward-looking information. We believe that
it is important to communicate our future expectations to our investors.
However, there may be events in the future that we are not able to predict or
control accurately. The factors listed below in the section captioned "Certain
Factors That May Affect Future Results," as well as any cautionary language
contained herein, provide examples of risks, uncertainties, and events that may
cause our actual results to differ materially from the expectations we describe
in our forward-looking statements. Further, any forward-looking statement speaks
only as of the date on which such statement is made, and we undertake no
obligation to publicly update or revise any forward-looking information.

  Overview

  We provide predictive network management software products and related
services. Our product suite consists of three primary software products: OPNET
IT DecisionGuru, OPNET Modeler, and OPNET Netbiz. We sell our OPNET suite of
products to service providers, including telecommunications carriers, ISPs, and
ASPs, large and medium-sized organizations, and network equipment manufacturers.
We market our product suite in North America primarily through a direct sales
force and, to a lesser extent, several resellers and original equipment
manufacturers. Internationally, we market our products primarily through third-
party distributors. In October 2000, we opened our first European corporate
office, OPNET Technologies Societe Par Actions Simplifiee, in Paris, France, as
part of our effort to expand our global sales and marketing capabilities.

  We sold our first products in 1987. Our operations have been financed
principally through cash provided by operations, a venture financing in
October 1997 and the proceeds of our initial public offering in August 2000. In
August 1998, we introduced our OPNET IT DecisionGuru and OPNET Netbiz products
and launched a new marketing and sales strategy to focus on these products.

  We generate revenues principally from licensing our software products and
providing related services, including maintenance and technical support,
consulting, and training.

  Our software license revenues consist of license sales of our software
products and royalty income. Software license revenues are recognized upon
delivery, provided that fees are fixed and determinable, no significant
modifications to the product are required, and collection of the related
receivable is probable. Where significant modifications are required, software
license revenues are recognized along with consulting fees on a percentage-of-
completion basis as the modifications are performed. We allow customers to
evaluate our software before purchase, and therefore it is our policy not to
allow returns.

  Our service revenues consist of fees from maintenance and technical support
agreements, consulting services, and training. The maintenance agreements
covering our products provide for technical support and periodic product
upgrades. Revenues from maintenance and technical support agreements are
deferred and recognized ratably over the support period. We offer consulting
services primarily to provide product customization and enhancements. Consulting
services are generally performed under fixed-price agreements and recognized as
the work is performed on a percentage-of-completion basis. We provide classroom
and on-site training to our customers on a daily fee basis.

  Software license revenues and service revenues for which payment has been
received, but that do not yet qualify for recognition as revenues, are reflected
as deferred revenues.

                                       10
<PAGE>

  Results of Operations

  The following table sets forth items from our statements of operations
expressed as a percentage of total revenues for the periods indicated:

<TABLE>
<CAPTION>
                                                  Three Months Ended          Nine Months Ended
                                                      December 31,               December 31,
                                                  ----------------------      ---------------------
                                                      2000          1999         2000          1999
                                                      ----          ----         ----          ----
<S>                                               <C>             <C>          <C>          <C>
         Revenues:
             Software licenses                        58.5 %       54.8 %        57.0 %        54.9 %
             Services                                 41.5         45.2          43.0          45.1
                                                     -----        -----         -----         -----
                Total revenues                       100.0        100.0         100.0         100.0
                                                     -----        -----         -----         -----
         Cost of revenues:
             Software licenses                         0.7          4.0           1.6           3.5
             Services                                 13.9         14.9          14.5          15.2
                                                     -----        -----         -----         -----
                Total cost of revenues                14.6         18.9          16.1          18.7
                                                     -----        -----         -----         -----

         Gross profit                                 85.4         81.1          83.9          81.3
                                                     -----        -----         -----         -----
         Operating expenses:
             Research and development                 24.9         30.2          25.3          30.4
             Sales and marketing                      41.7         38.8          42.0          38.2
             General and administrative               10.1         10.3          10.2          11.2
                                                     -----        -----         -----         -----
                Total operating expenses              76.7         79.3          77.5          79.8
                                                     -----        -----         -----         -----

         Income from operations                        8.7          1.8           6.4           1.5
         Interest and other income                    12.2          2.1           8.2           2.0
                                                     -----        -----         -----         -----

         Income before provision for income taxes     20.9          3.9          14.6           3.5
         Provision for income taxes                    7.8          1.1           5.4           1.0
                                                     -----        -----         -----         -----

         Net income                                   13.1 %        2.8 %         9.2 %         2.5 %
                                                     =====        =====         =====         =====
</TABLE>

    The following table sets forth, for each component of revenues, the cost of
these revenues as a percentage of the related revenues for the periods
indicated:

                                        Three Months Ended     Nine Months Ended
                                           December 31,          December 31,
                                        -------------------   ------------------
                                        2000         1999     2000         1999
                                        ----         ----     ----         ----
    Cost of software license revenues      1.1%          7.3%     2.7%      6.4%
    Cost of service revenues              33.5          33.0     33.7      33.8

                                       11
<PAGE>

Comparison of Three Months Ended December 31, 2000 and 1999

  Revenues

  Total revenues increased 71.1% from $5.1 million for the three months ended
December 31, 1999 to $8.7 million for the three months ended December 31, 2000.
Software license revenues were 54.8% and 58.5% of total revenues for the three
months ended December 31, 1999 and 2000, respectively. We believe that the
percentage increase in our total revenues achieved in this period is not
necessarily indicative of future results.

  Software License Revenues. Software license revenues increased 82.6% from $2.8
million for the three months ended December 31, 1999 to $5.1 million for the
three months ended December 31, 2000. The increase was primarily attributable to
the substantial growth in overall demand for our predictive network management
products and related models and modules, as well as increased market acceptance
of our newer product solutions.

  Service Revenues. Service revenues increased 57.2% from $2.3 million for the
three months ended December 31, 1999 to $3.6 million for the three months ended
December 31, 2000. This growth in service revenues was primarily due to an
increase in maintenance and technical support contracts related to new license
sales, continued renewals of contracts by our existing customer base, and
increased demand for consulting and training services.

  Cost of Revenues

  Cost of software license revenues consists primarily of royalties, media,
manuals, and distribution costs. Cost of service revenues consists primarily of
personnel-related costs in providing maintenance and technical support,
consulting, and training to customers. Gross margin on software license revenues
is substantially higher than gross margin on service revenues, reflecting the
low materials, packaging, and other costs of software products compared with the
relatively high personnel costs associated with providing services. Cost of
service revenues varies based upon the relative mix of maintenance and technical
support, consulting, and training services.

  Cost of Software License Revenues. Cost of software license revenues decreased
72.5% from $204,000 for the three months ended December 31, 1999 to $56,000 for
the three months ended December 31, 2000. Gross margin on software license
revenues increased from 92.7% for the three months ended December 31, 1999 to
98.9% for the three months ended December 31, 2000. The increase in margin was
primarily due to a reduction in the level of sales requiring royalty payments
under the March 1999 agreement with Cadence Design Systems that requires us to
pay a 50% royalty for specified sales of OPNET Modeler to the portion of
Cadence's customer base that uses an existing Cadence product. This agreement
ends on March 31, 2001 and may depress these margins through that date.

  Cost of Service Revenues. Cost of service revenues increased 59.4% from
$762,000 for the three months ended December 31, 1999 to $1.2 million for the
three months ended December 31, 2000. Gross margin on service revenues decreased
from 67.0% for the three months ended December 31, 1999 to 66.5% for the three
months ended December 31, 2000. This decrease in margin is primarily due to a
higher proportion of service revenues derived from consulting which has a lower
gross margin than maintenance services.

  Operating Expenses

  Research and Development. Research and development expenses consist primarily
of salaries, related benefits, and other engineering related costs. Research and
development expenses increased 41.1% from $1.5 million for the three months
ended December 31, 1999 to $2.2 million for the three months ended December 31,
2000. The increase was primarily related to growth in research and development
staffing levels and increased spending on research and development programs for
the development of new products. As a percentage of total revenues, research and
development expenses decreased from 30.2% for the three months ended December
31, 1999 to 24.9% for the three months ended December 31, 2000. This decrease as
a percentage of total revenues resulted from a proportionally smaller increase
in costs of research and development programs relative to the higher level of
revenues in the three months ended December 31, 2000. We believe that a
significant level of research and development investment will be required to
maintain our competitive advantage, and expect that the dollar amount of these
expenditures will continue to grow in future periods.

  Sales and Marketing. Sales and marketing expenses increased 84.1% from $2.0
million for the three months ended December 31, 1999 to $3.6 million for the
three months ended December 31, 2000. This increase was primarily due to a
substantial increase in the size of our direct sales force, increased
commissions associated with the growth in revenues, and an overall increase in
our sales and marketing efforts. As a percentage of total revenues, sales and
marketing expenses increased from 38.8% for the three months ended December 31,
1999 to 41.7% for the three months ended December 31, 2000. The increase as a
percentage of total revenues was due primarily to our additional investment of
resources associated with developing a market for our OPNET IT DecisionGuru and
OPNET Netbiz products. We intend to continue to expand our global sales and
marketing infrastructure and, accordingly, expect our sales and marketing
expenses to increase in the future.

                                       12
<PAGE>

  General and Administrative. General and administrative expenses consist
primarily of salaries, related benefits, and fees for recruiting, legal,
accounting, and other services. General and administrative expenses increased
68.8% from $523,000 for the three months ended December 31, 1999 to $883,000 for
the three months ended December 31, 2000. The increase in spending was primarily
due to additional personnel costs and other expenses associated with the
expansion of our supporting infrastructure, as well as the increased costs
associated with operating a public company. As a percentage of total revenues,
general and administrative expenses decreased from 10.3% for the three months
ended December 31, 1999 to 10.1% for the three months ended December 31, 2000.
We expect that the dollar amount of general and administrative expenses will
increase as we expand our operations.

  Interest and Other Income

  Interest and other income increased from $105,000 for the three months ended
December 31, 1999 to $1.1 million for the three months ended December 31, 2000.
The increase was primarily due to interest earned on the proceeds from the
initial public offering and to a lesser extent, the contribution of
additional cash produced by our operations offset by fees associated with our
$3.4 million letter of credit outstanding at December 31, 2000.

  Provision for Income Taxes

  The provision for income taxes increased from $53,000 for the three months
ended December 31, 1999 to $678,000 for the three months ended December 31,
2000. The increase resulted from a growth in earnings offset by research and
development tax credits that should be available to us in fiscal year 2001.

Comparison of Nine Months Ended December 31, 2000 and 1999

  Revenues

  Total revenues increased 70.5% from $13.5 million for the nine months ended
December 31, 1999 to $22.9 million for the nine months ended December 31, 2000.
Software license revenues were 54.9% and 57.0% of total revenues for the nine
months ended December 31, 1999 and December 31, 2000, respectively. As mentioned
above under the comparison of quarterly results, we believe that the percentage
increase in our total revenues achieved in this period is not necessarily
indicative of future results.

  Software License Revenues. Software license revenues increased 77.1% from $7.4
million for the nine months ended December 31, 1999 to $13.1 million for the
nine months ended December 31, 2000. The increase was primarily attributable to
the substantial growth in overall demand for our predictive network management
products and related models and modules, as well as increased market acceptance
of our newer product solutions.

  Service Revenues. Service revenues increased 62.6% from $6.1 million for the
nine months ended December 31, 1999 to $9.9 million for the nine months ended
December 31, 2000. The growth in service revenues was primarily due to an
increase in maintenance and technical support contracts related to new license
sales, continued renewals of contracts by our existing customer base, and
increased demand for consulting and training services.

  Cost of Revenues

  Cost of Software License Revenues. Cost of software license revenues decreased
24.7% from $474,000 for the nine months ended December 31, 1999 to $357,000 for
the nine months ended December 31, 2000. Gross margin on software license
revenues increased from 93.6% for the nine months ended December 31, 1999 to
97.3% for the nine months ended December 31, 2000. The increase in margin was
primarily due to a reduction in the level of sales requiring royalty payments
under our March 1999 agreement with Cadence that requires us to pay a 50%
royalty for specified sales of OPNET Modeler to the portion of Cadence's
customer base that uses an existing Cadence product.

  Cost of Service Revenues. Cost of service revenues increased 62.5% from $2.0
million for the nine months ended December 31, 1999 to $3.3 million for the nine
months ended December 31, 2000. Gross margin on service revenues increased from
66.2% for the nine months ended December 31, 1999 to 66.3% for the nine months
ended December 31, 2000. This slight increase in margin was primarily due to the
increased proportion of maintenance services relative to total revenues, which
provides higher gross margins than consulting services.

                                       13
<PAGE>

  Operating Expenses

  Research and Development. Research and development expenses increased 41.8%
from $4.1 million for the nine months ended December 31, 1999 to $5.8 million
for the nine months ended December 31, 2000. The increase was primarily related
to increased research and development staffing levels for the development of new
products. As a percentage of total revenues, research and development expenses
decreased from 30.4% for the nine months ended December 31, 1999 to 25.3% for
the nine months ended December 31, 2000.

  Sales and Marketing. Sales and marketing expenses increased 87.6% from $5.1
million for the nine months ended December 31, 1999 to $9.6 million for the nine
months ended December 31, 2000. This increase was primarily due to a substantial
increase in the size of our direct sales force, increased commissions associated
with the growth in revenues, and an overall increase in our sales and marketing
efforts. As a percentage of total revenues, sales and marketing expenses
increased from 38.2% for the nine months ended December 31, 1999 to 42.0% for
the nine months ended December 31, 2000.

  General and Administrative. General and administrative expenses increased
55.5% from $1.5 million for the nine months ended December 31, 1999 to $2.3
million for the nine months ended December 31, 2000. The increase in spending
was primarily due to additional personnel costs and other expenses associated
with the expansion of our supporting infrastructure, as well as increased costs
associated with operating a public company. As a percentage of total revenues,
general and administrative expenses decreased from 11.2% for the nine months
ended December 31, 1999 to 10.2% for the nine months ended December 31, 2000.

  Interest and Other Income

    Interest and other income increased from $273,000 for the nine months ended
December 31, 1999 to $1.9 million for the nine months ended December 31, 2000.
The increase was primarily due to interest earned on the proceeds from the
initial public offering and to a lesser extent, the contribution of additional
cash produced by our operations offset by fees associated with our $3.4 million
letter of credit outstanding at December 31, 2000.

  Provision for Income Taxes

    The provision for income taxes increased from $128,000 for the nine months
ended December 31, 1999 to $1.2 million for the nine months ended December 31,
2000. The increase resulted from a growth in earnings offset by research and
development tax credits that should be available to us in fiscal year 2001.

  Liquidity and Capital Resources

  Since inception, we have funded our operations primarily through cash provided
by operating activities. In October 1997, we raised $7.0 million in venture
financing, of which we used $3.4 million to repurchase stock from our existing
stockholders. In August 2000, we completed our initial public offering in which
we raised approximately $54.0 million, net of underwriting discounts and
commissions and estimated offering expenses payable by us. As of December 31,
2000, we had cash, cash equivalents, and short-term marketable securities
totaling $67.4 million.

  Cash provided by operating activities was $3.8 million and $7.2 million for
the nine months ended December 31, 1999 and 2000, respectively. Cash provided by
operating activities is primarily derived from net income, as adjusted for
depreciation and amortization and increases in deferred revenue. Cash used in
investing activities was $5.6 million and $3.0 million for the nine months ended
December 31, 1999 and 2000, respectively. The funds were used primarily to
purchase property, equipment, and software. For the quarter ended December 31,
1999, investing activities also included the purchase of marketing support
rights from Cadence as well as the purchase of short-term marketable securities.
Cash provided by financing activities was $54.4 million for the nine months
ended December 31, 2000. This primarily reflected cash received from the initial
public offering net of cash paid for costs incurred as discussed in Note 2 of
Notes to Consolidated Financial Statements.

  We have a $5.0 million revolving line of credit with a commercial bank, which
expires in June 2001. Borrowings under this line of credit bear interest an
annual rate equal to LIBOR plus 2% to 2.5%. We have currently used $3.4 million
of this facility for a letter of credit that secures the lease for our new
headquarters in Bethesda, Maryland.

  We expect to experience growth in our working capital needs for the
foreseeable future as we execute our business plan. We anticipate that operating
activities, as well as planned capital expenditures, will constitute a material
use of our cash resources. We recently entered into a new headquarters lease
agreement which will increase our facilities costs beginning in February 2001.
In addition, we may utilize cash resources to further extend the facility, fund
acquisitions or investments in complementary businesses, technologies, or
products.

                                       14
<PAGE>

  We believe that our current cash and cash equivalents and cash generated from
operations, along with available borrowings under our line of credit, will be
sufficient to meet our anticipated cash requirements for working capital and
capital expenditures for at least the next 12 months. If we require further
capital resources in excess of the resources currently available to us to grow
our business, execute our operating plan, or acquire complementary technologies
or businesses at any time in the future, we may seek to sell additional equity
or debt securities, which may result in additional dilution to our stockholders.
If additional funding is required, we cannot be certain that it will be
available on acceptable terms, or at all.

  Certain Factors That May Affect Future Results

  The following important factors, among others, could cause actual results to
differ materially from those indicated by forward-looking statements made in
this Quarterly Report on Form 10-Q and presented elsewhere by management from
time to time.

  Our operating results may fluctuate significantly as a result of factors
outside of our control, which could cause the market price of our stock to
decline

  Our operating results have fluctuated in the past, and are likely to fluctuate
significantly in the future. Our financial results may as a consequence fall
short of the expectations of public market analysts or investors, which could
cause the price of our common stock to decline. Our revenues and operating
results may vary significantly from quarter to quarter due to a number of
factors, many of which are beyond our control. Factors that could affect our
operating results include:

  .  the timing of large orders;

  .  changes in the mix of our sales, including the mix between higher margin
     software products and somewhat lower margin services and maintenance, and
     the proportion of our license sales requiring us to make royalty payments;

  .  the timing and amount of our marketing, sales, and product development
     expenses;

  .  the cost and time required to develop new software products;

  .  the introduction, timing, and market acceptance of new products introduced
     by us or our competitors;

  .  changes in network technology or in applications, which could require us to
     modify our products or develop new products;

  .  general economic conditions, which can affect our customers' purchasing
     decisions and the length of our sales cycle;

  .  changes in our pricing policies or those of our competitors; and

  .  the timing and size of potential acquisitions by us.

  We expect to make significant expenditures in all areas of our business,
particularly sales and marketing operations, in order to promote future growth.
Because the expenses associated with these activities are relatively fixed in
the short term, we may be unable to adjust spending quickly enough to offset any
unexpected shortfall in revenue growth or any decrease in revenue levels. In
addition, our revenues in any quarter depend substantially on orders we receive
and ship in that quarter. We typically receive a significant portion of orders
in any quarter during the last month of the quarter, and we cannot predict
whether those orders will be placed and shipped in that period. If we have lower
revenues than we expect, we probably will not be able to reduce our operating
expenses quickly in response. Therefore, any significant shortfall in revenues
or delay of customer orders could have an immediate adverse effect on our
operating results in that quarter.

  For all of these reasons, quarterly comparisons of our financial results are
not necessarily meaningful and you should not rely on them as an indication of
our future performance.

                                       15
<PAGE>

  The market for predictive network management software is new and evolving, and
if this market does not develop as anticipated, our revenues could decline

  We derive all of our revenues from the sale of products and services that are
designed to allow our customers to manage the performance of networks and
applications. Accordingly, if the market for predictive network management
software does not continue to grow, we could face declining revenues, which
could ultimately lead to our becoming unprofitable. The market for predictive
network management software solutions is in an early stage of development.
Therefore, we cannot accurately assess the size of the market and may be unable
to identify an effective distribution strategy, the competitive environment that
will develop, and the appropriate features and prices for products to address
the market. If we are to be successful, our current and potential customers must
recognize the value of predictive network management software solutions, decide
to invest in the management of their networks, and, in particular, adopt and
continue to use our software solutions.

  We will not be able to grow our business if service providers do not buy our
products

  A key element of our strategy is to increase sales to service providers, and
our future performance will be significantly dependent upon increased adoption
by service providers of our software products. Accordingly, the failure of our
products to perform favorably in the service provider environment or to gain
wider adoption by service providers could have a negative effect on our business
and future operating results.

    If our newest products, OPNET IT DecisionGuru and OPNET Netbiz, do not gain
widespread market acceptance, our revenues might not increase and could even
decline

  We expect to derive a substantial portion of our revenues in the future from
OPNET IT DecisionGuru and OPNET Netbiz, both of which were released in August
1998. Our business depends on customer acceptance of these products and our
revenues may not increase, or may decline, if our target customers do not adopt
and expand their use of OPNET IT DecisionGuru and OPNET Netbiz. To date, we have
not achieved widespread market acceptance of either product. In addition, if our
OPNET Modeler product, which we have been selling since 1987, encounters
declining sales, which could occur for a variety of reasons, including market
saturation, and sales of our newer products do not grow at a rate sufficient to
offset the shortfall, our revenues would decline.

  If we do not successfully expand our sales force, we may be unable to increase
our sales

  We sell our products primarily through our direct sales force, and we must
expand the size of our sales force to increase revenues. If we are unable to
hire or retain qualified sales personnel, if newly hired personnel fail to
develop the necessary skills to be productive, or if they reach productivity
more slowly than anticipated, our ability to increase our revenues and grow our
business could be compromised. Our sales people require a long period of time to
become productive, typically three to six months. The time required to reach
productivity, as well as the challenge of attracting, training, and retaining
qualified candidates, may make it difficult to meet our sales force growth
targets. Further, we may not generate sufficient sales to offset the increased
expense resulting from growing our sales force or we may be unable to manage a
larger sales force.

  Our ability to increase our sales will be impaired if we do not expand and
manage our indirect distribution channels

  To increase our sales, we must, among other things, further expand and manage
our indirect distribution channels, which consist primarily of international
distributors and original equipment manufacturers and resellers. If we are
unable to expand and manage our relationships with our distributors, our
distributors are unable or unwilling to effectively market and sell our
products, or we lose existing distributor relationships, we might not be able to
increase our revenues. Our international distributors and original equipment
manufacturers and resellers have no obligation to market or purchase our
products. In addition, they could partner with our competitors, bundle or resell
competitors' products, or internally develop products that compete with our
products.

                                       16
<PAGE>

  We may not be able to successfully manage our expanding operations, which
could impair our ability to operate profitably

  We may be unable to operate our business profitably if we fail to manage our
growth. Our rapid growth has sometimes strained, and may in the future continue
to strain, our managerial, administrative, operational, and financial resources
and controls. We plan to continue to expand our operations and increase the
number of our full-time employees. Our ability to manage growth will depend in
part on our ability to continue to enhance our operating, financial, and
management information systems. Our personnel, systems, and controls may not be
adequate to support our growth. In addition, our revenues may not continue to
grow at a sufficient rate to absorb the costs associated with a larger overall
employee base.

  If we are unable to introduce new and enhanced products on a timely basis
that respond effectively to changing technology, our revenues may decline

  Our market is characterized by rapid technological change, changes in
customer requirements, frequent new product and service introductions and
enhancements, and evolving industry standards. If we fail to develop and
introduce new and enhanced products on a timely basis that respond to these
changes, our products could become obsolete, demand for our products could
decline and our revenues could fall. Advances in network management technology,
software engineering, simulation technology, or the emergence of new industry
standards, could lead to new competitive products that have better performance,
more features, or lower prices than our products and could render our products
unmarketable. In addition, the introduction and adoption of future network
technologies or application architectures could reduce or eliminate the need for
predictive network management software.

  If we fail to retain our key personnel and attract and retain additional
qualified personnel, we might not be able to sustain our revenue growth

  Our future success and our ability to sustain our revenue growth depend upon
the continued service of our executive officers and other key sales and research
and development personnel. The loss of any of our key employees, in particular
Marc A. Cohen, our chairman of the board and chief executive officer, and Alain
J. Cohen, our president and chief technology officer, could adversely affect our
ability to pursue our growth strategy. We do not have employment agreements or
any other agreements that obligate any of our officers or key employees to
remain with us.

  We must also continue to hire large numbers of highly qualified individuals,
particularly software engineers and sales and marketing personnel. Our failure
to attract and retain technical personnel for our product development,
consulting services, and technical support teams may limit our ability to
develop new products or product enhancements. Competition for these individuals
is intense, and we may not be able to attract and retain additional highly
qualified personnel in the future. In addition, limitations imposed by federal
immigration laws and the availability of visas could impair our ability to
recruit and employ skilled technical professionals from other countries to work
in the United States.

  Our international operations subject our business to additional risks which
could cause our sales or profitability to decline

  We plan to increase our international sales activities, but these plans are
subject to a number of risks that could cause our sales to decline or could
otherwise cause a decline in profitability. These risks include:

  .  greater difficulty in accounts receivable collection and longer collection
     periods;

  .  political and economic instability;

  .  difficulty in attracting distributors that will market and support our
     products effectively;

  .  the need to comply with varying employment policies and regulations that
     could make it more difficult and expensive to manage our employees if we
     need to establish direct sales or support staff outside the United States;

  .  potentially adverse tax consequences; and

  .  the effects of currency fluctuations.

                                       17
<PAGE>

  Expanding our OPNET Netbiz consulting services business will be costly and
may not result in any compensating increase in sales or profitability

  We have recently begun to place additional emphasis on consulting services
delivered in conjunction with sales of OPNET Netbiz. The significant additional
expenditures and operational resources required to expand our OPNET Netbiz
consulting services business will place additional strain on our management,
financial, and operational resources and may make it more difficult for us to
maintain profitability. If OPNET Netbiz does not achieve significant market
acceptance, our customers will not engage our consulting services organization
to assist with consulting, custom development, implementation support, and
training for OPNET Netbiz. In addition, we may be unable to attract or retain a
sufficient number of the highly qualified consulting services personnel that we
expect the expansion of our consulting services business will require.

  We face intense competition, which could cause us to lose sales, resulting
in lower revenues and profitability

  The intense and increasing competition in our market could cause us to lose
sales, which could result in lower revenues and could cause us to become
unprofitable. The market for predictive network management software is evolving
rapidly and is highly competitive. We believe that this market is likely to
become more competitive as the demand for predictive network management
solutions continues to increase. Many of our current and potential competitors
are larger and have substantially greater financial and technical resources than
we do. In addition, it is possible that other vendors as well as some of our
customers or distributors will develop and market solutions that compete with
our products in the future.

  OPNET Modeler and OPNET IT DecisionGuru currently face or potentially will
face competition from several sources, including:

  .  software vendors with predictive network management offerings, such as
     Compuware, and application performance diagnosis solutions, such as Optimal
     Networks;

  .  consultants who offer predictive network management advisory services; and

  .  customers who develop their own predictive network management capabilities,
     either internally or through outsourcing.

  OPNET Netbiz competes with solutions designed to facilitate and automate
sales processes in general.

  If Internet infrastructure does not grow as currently anticipated, sales of
our OPNET Netbiz product may not grow and our revenues may decline

  Our OPNET Netbiz product addresses a new and emerging market for sales
process automation, including over the Internet, by service providers and
network equipment manufacturers. The failure of this market to develop, or a
delay in the development of this market, would reduce demand for OPNET Netbiz
and cause our revenues to decline. The success of OPNET Netbiz depends
substantially upon the widespread adoption of the Internet as a primary medium
for commerce and business applications. Moreover, critical issues concerning the
commercial use of the Internet, such as security, reliability, cost,
accessibility, and quality of service, remain unresolved and may negatively
affect the growth of Internet use or the attractiveness of commerce and business
communication over the Internet.

  Errors in our products and our inability to correct those errors could harm
our reputation and could cause our customers to demand refunds from us or assert
claims for damages against us

  Our software products could contain significant errors or bugs that may
result in:

  .  the loss of or delay in market acceptance and sales of our products;

  .  the delay in introduction of new products;

  .  diversion of our resources;

  .  injury to our reputation; and

  .  increased support costs.

                                       18
<PAGE>

  Bugs may be discovered at any point in a product's life cycle. We expect that
errors in our products will be found in the future, particularly in new product
offerings and new releases of our current products.

  Because our customers use our products to manage networks that are critical to
their business operations, any failure of our products could expose us to
product liability claims. In addition, errors in our products could cause our
customers' networks and systems to fail or compromise their data, which could
also result in liability to us. Product liability claims brought against us
could divert the attention of management and key personnel, could be expensive
to defend, and may result in adverse settlements and judgments.

  Our software products rely on our intellectual property, and any failure to
protect our intellectual property could enable our competitors to market
products with similar features that may reduce our revenues by decreasing demand
for our products, and could allow the use of our products by users who have not
paid the required license fee

  If we are unable to protect our intellectual property, our competitors could
use our intellectual property to market products similar to our products, which
could reduce our revenues by decreasing demand for our products. In addition, we
may be unable to prevent the use of our products by persons who have not paid
the required license fee, which could reduce our revenues. Our success and
ability to compete depend substantially upon the internally developed technology
that is incorporated in our products. Policing unauthorized use of our products
is difficult, and we may not be able to prevent misappropriation of our
technology, particularly in foreign countries where the laws may not protect our
proprietary rights as fully as those in the United States. Others may circumvent
the patents, copyrights, and trade secrets we own. In the ordinary course of
business, we enter into a combination of confidentiality, non-competition, and
non-disclosure agreements with our employees. These measures afford only limited
protection and may be inadequate, especially because our employees are highly
sought after and may leave our employ with significant knowledge of our
proprietary information. In addition, any confidentiality, non-competition, and
non-disclosure agreements we enter into may be found to be unenforceable, or our
copy protection mechanisms embedded in our software products could fail or could
be circumvented.

  Our products employ technology that may infringe on the proprietary rights of
others, and, as a result, we could become liable for significant damages

  We expect that our software products may be increasingly subject to third-
party infringement claims as the number of competitors in our industry segment
grows and the functionalities of products in different industry segments
overlap. Regardless of whether these claims have any merit, they could:

  .  be time-consuming to defend;

  .  result in costly litigation;

  .  divert our management's attention and resources;

  .  cause us to cease or delay product shipments; or

  .  require us to enter into royalty or licensing agreements.

  These royalty or licensing agreements may not be available on terms acceptable
to us, if at all. A successful claim of product infringement against us or our
failure or inability to license the infringed or similar technology could
adversely affect our business because we would not be able to sell the affected
product without redeveloping it or incurring significant additional expense.

  If we undertake acquisitions, they may be expensive and disruptive to our
business and could cause the market price of our common stock to decline

  We may acquire or make investments in companies, products, or technologies if
opportunities arise. Any acquisitions could be expensive, disrupt our ongoing
business, distract our management and employees, and adversely affect our
financial results and the market price of our common stock. We may not be able
to identify suitable acquisition or investment candidates, and if we do identify
suitable candidates, we may not be able to make these acquisitions or
investments on commercially acceptable terms or at all. If we make an
acquisition, we could have difficulty integrating the acquired technology,
employees, or operations. In addition, the key personnel of the acquired company
may decide not to work for us. We also expect that we would incur substantial
expenses if we acquired other businesses or technologies. We might use the net
proceeds of this offering, incur debt, or issue equity securities to pay for any
future acquisitions. If we issue additional equity securities, our stockholders
could experience dilution and the market price of our stock may decline.

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  Our products are subject to changing computing environments, including
operating system software and hardware platforms, which could render our
products obsolete

  The evolution of existing computing environments and the introduction of new
popular computing environments may require us to redesign our products or
develop new products. Computing environments, including operating system
software and hardware platforms, are complex and change rapidly. Our products
are designed to operate in currently popular computing environments. Due to the
long development and testing periods required to adapt our products to new or
modified computing environments, we could experience significant delays in
product releases or shipments, which could result in lost revenues and
significant additional expense.

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

  We consider all highly liquid investments purchased with a maturity of three
months or less to be cash equivalents, and those with maturities greater than
three months are considered to be marketable securities. Cash equivalents and
marketable securities are stated at amortized cost plus accrued interest, which
approximates fair value. Cash equivalents and marketable securities consist
primarily of money instruments and U.S. Treasury bills. We currently do not
hedge interest rate exposure, but do not believe that an increase in interest
rates would have a material effect on the value of our marketable securities.

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                          PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

  The Company is not party to any material legal proceedings.

ITEM 2. Changes in Securities and Use of Proceeds

  On August 7, 2000, the Company closed an initial public offering of 4,000,000
shares of its Common Stock (the "Offering"). The shares of Common Stock sold in
the Offering were registered under the Securities Act on a Registration
Statement on Form S-1 (No. 333-32588) (the "Registration Statement") that was
declared effective by the Securities and Exchange Commission on August 1, 2000.
Morgan Stanley & Co. Incorporated, FleetBoston Robertson Stephens Inc. and
Friedman, Billings, Ramsey & Co., Inc., the managing underwriters of the
Offering, also exercised their over-allotment option to purchase an additional
600,000 shares of Common Stock from the Company, which closed on August 9, 2000.

  The Offering commenced on August 1, 2000 and terminated on August 1, 2000
after the sale of all securities registered under the Registration Statement. In
the Offering, for the account of the Company, (i) an aggregate of 4,600,000
shares of Common Stock were registered pursuant to the Registration Statement,
(ii) the aggregate offering price of the amount registered was $59.8 million,
(iii) the amount sold pursuant to the Offering was an aggregate of 4,600,000
shares of Common Stock and (iv) the aggregate offering price of the amount sold
was $59.8 million, at $13.00 per share.

  In connection with the Offering, the Company paid an aggregate of $4.2 million
in underwriting discounts and commissions and incurred approximately $1.6
million of other expenses. These expenses included $150,000 of registration,
filing and application fees, $280,000 of printing fees, $420,000 of legal fees,
$424,000 of accounting fees and $326,000 of miscellaneous expenses. None of
these amounts were paid directly or indirectly to any director, officer, general
partners of the Company or their associates, persons owning 10% or more of any
class of equity securities of the Company, or any affiliate of the Company.
After deducting the underwriting discounts and commissions and the estimated
Offering expenses, the net proceeds to the Company from the Offering were
approximately $54.0 million.

  The Company intends to use the net proceeds of the Offering for general
corporate purposes, including working capital and capital expenditures. From the
date of the Offering through December 31, 2000, the Company used approximately
$1.7 million of the net proceeds for capital expenditures and leasehold
improvements related to its new headquarters facility in Bethesda, Maryland and
expects to use an additional $2.3 million of the net proceeds in the remainder
of fiscal 2001 for similar expenditures. In addition, the Company expects to use
approximately $500,000 of the net proceeds for other capital expenditures,
including furniture and equipment, throughout the remainder of fiscal 2001. The
Company has not allocated any of the remaining net proceeds to any identifiable
uses. The Company may also use a portion of the net proceeds to acquire
businesses, products, or technologies that are complementary to its business.
Pending their use, the Company plans to invest the net proceeds in investment
grade, interest-bearing securities.

ITEM 3. Defaults Upon Senior Securities

  None

ITEM 4. Submission of Matters to a Vote of Security Holders

  None

ITEM 5. Other Information

  None

ITEM 6. Exhibits and Reports on Form 8-K

  A. Exhibits

  27      Financial Data Schedule

  B. Reports on Form 8-K

     None

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                                  SIGNATURES

  Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                             OPNET TECHNOLOGIES, INC.
                             (Registrant)

                             By: /s/ Joseph F. Greeves
                                ---------------------------------------------
                                Name: Joseph F. Greeves
                                Title: Senior Vice President and
                                       Chief Financial Officer (Principal
                                       Financial and Accounting Officer)

Date: February 13, 2001

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