##### 



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, DC
    20549
      Form 10-Q
   þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended
    March 31, 2006.   Commission File Number 333-89756
      
  Alion Science and Technology
    Corporation
 (Exact Name of Registrant as
    Specified in Its Charter)
  Delaware(State or Other
    Jurisdiction of
    Incorporation of Organization)

54-2061691(I.R.S. Employer
    Identification No.)   10 West
    35th Street
    Chicago, IL 60616
    (312) 567-4000

1750 Tysons Boulevard,
    Suite 1300
    McLean, VA  22102
    (703) 918-4480  (Address, including Zip Code and
    Telephone Number with
 Area Code, of Principal
    Executive Offices)
       (Former name, former address and
    former fiscal year, if changed since last report)
  þ o
  X Rule 12b-2
  Rule 12b-2 o þ




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  FORM 10-Q
  FOR THE QUARTER ENDED MARCH 31, 2006
  PART I  Financial
    Information


2Item 1.

Financial
    Statements


2Consolidated
    Balance Sheets


2Consolidated
    Statements of Operations


3Consolidated
    Statements of Cash Flows


4Item 2.

Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


31Item 3.

Quantitative and
    Qualitative Disclosures About Market Risk


48Item 4.

Controls and
    Procedures


49 PART II  Other
    Information


50Item 1.

Legal
    Proceedings


50Item 2.

Unregistered Sales
    of Equity Securities and Use of Proceeds


50Item 3.

Defaults Upon
    Senior Securities


50Item 4.

Submission of
    Matters to a Vote of Security Holders


50Item 5.

Other
    Information


50Item 6.

Exhibits


50  1




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##### 



PART I  FINANCIAL
    INFORMATION  Item 1.
    Financial
    Statements  ALION
    SCIENCE AND TECHNOLOGY CORPORATION
 CONSOLIDATED BALANCE SHEETS
    As of March 31, 2006 (Unaudited) and September 30,
    2005  March 31,


September 30,2006


2005(In thousands, except share and
    per share information)Current assets:Cash and cash equivalents

$
5,380


$
37,778Accounts receivable, less
    allowance of $3,715 and $3,539 at March 31, 2006 and
    September 30, 2005, respectively


104,475



80,898Stock subscriptions receivable


5,637



1,733Prepaid expenses


2,878



1,944Other current assets


3,064



2,802Total current assets


121,434



125,155Property, plant and equipment, net


13,214



11,174Intangible assets, net


26,666



30,198Goodwill


199,253



163,419Other assets


2,116



1,860Deferred compensation assets


2,496



2,443Total assets

$
365,179


$
334,249Current liabilities:Notes payable to bank

$
10,000


$
Current portion, Term B Senior
    Credit Facility note payable


1,698



1,404Current portion, Acquisition
    obligations


7,889



3,616Trade accounts payable and accrued
    liabilities


33,650



27,312Accrued payroll and related
    liabilities


28,795



29,161ESOP liability


4



274Current portion of accrued loss on
    operating leases


1,007



1,054Billings in excess of costs and
    estimated earnings on uncompleted contracts


1,960



2,559Total current liabilities


85,003



65,380Acquisition obligations, excluding
    current portion


3,505



7,100Term B Senior Credit Facility note
    payable, excluding current portion


168,038



137,945Subordinated note payable


44,883



42,888Deferred compensation liabilities


3,243



2,465Accrued compensation, excluding
    current portion


8,274



6,356Accrued postretirement benefit
    obligations


3,507



3,357Non-current portion of lease
    obligations


3,930



3,694Redeemable common stock warrants


31,180



44,590Total liabilities


351,563



313,775Shareholders equity, subject
    to redemption:Common stock (subject to
    redemption), $0.01 par value, 8,000,000 shares
    authorized; 5,195,271 shares and 5,149,840 shares
    issued, and 5,195,271 shares and 5,149,840 shares
    outstanding at March 31, 2006 and September 30, 2005,
    respectively


52



51Additional paid-in capital


90,318



88,479Accumulated deficit


(76,754
)


(68,056
)Total shareholders equity,
    subject to redemption


13,616



20,474Total liabilities and
    shareholders equity, subject to redemption

$
365,179


$
334,249    2




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##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
 CONSOLIDATED STATEMENTS OF OPERATIONS
    For the Quarters Ended March 31, 2006 and 2005 and
    For the Six Months Ended March 31, 2006 and 2005  Quarter


Quarter


Six Months


Six MonthsEnded


Ended


Ended


EndedMarch 31,


March 31,


March 31,


March 31,2006


2005


2006


2005(In thousands, except share and
    per share information) (Unaudited)Contract revenue

$
111,189


$
80,691


$
212,478


$
149,912Direct contract expense


81,047



59,445



157,352



109,637Gross profit


30,142



21,246



55,126



40,275Operating expenses:Indirect contract expense


6,803



4,650



12,158



9,129Research and development


525



184



770



271General and administrative


11,555



7,689



21,158



14,398Rental and occupancy expense


5,096



2,508



10,053



4,952Depreciation and amortization


2,401



3,771



7,191



7,259Stock-based compensation(1)


2,266



3,745



5,022



4,202Bad debt expense


109



123



215



415Total operating expenses


28,755



22,670



56,567



40,626Operating income (loss)


1,387



(1,424
)


(1,441
)


(351
)Other income (expense):Interest income


89



37



461



56Interest expense


(2,472
)


(15,891
)


(7,917
)


(22,885
)Other


76



(88
)


216



(99
)Loss before income taxes


(920
)


(17,366
)


(8,681
)


(23,279
)Income tax expense










(19
)


(51
)Net loss

$
(920
)

$
(17,366
)

$
(8,700
)

$
(23,330
)Basic and diluted loss per share

$
(0.19
)

$
(5.21
)

$
(1.73
)

$
(6.96
)Basic and diluted weighted average
    common shares outstanding


4,944,448



3,331,415



5,035,835



3,350,205        3




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##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
 CONSOLIDATED
    STATEMENTS OF CASH FLOWS

Six Months Ended March 31, 2006 and 2005 Six Months Ended
    March 31,2006


2005(In thousands)
    (Unaudited)Cash flows from operating
    activities:Net loss

$
(8,700
)

$
(23,330
)Adjustments to reconcile net loss
    to net cash provided by (used in) operating activities:Depreciation and amortization


7,191



7,257Accretion of debt to face value


373



2,614Amortization of debt issuance costs


660



341Decrease in value of interest rate
    cap agreement


(128
)


(24
)Change in fair value of redeemable
    common stock warrants


233



14,814Stock-based compensation


5,022



4,201Gain on disposal of assets


(1
)


Gain on investments, net


(48
)


(19
)Changes in assets and liabilities,
    net of effect of acquisitions:Accounts receivable, net


(16,776
)


6,980Other assets


(1,074
)


(775
)Trade accounts payable and accruals


2,098



5,188Other liabilities


1,019



1,593Net cash provided by (used in)
    operating activities


(10,131
)


18,840Cash flows from investing
    activities:Cash paid for acquisitions, net of
    cash acquired


(38,926
)


(17,054
)Capital expenditures


(2,276
)


(1,114
)Purchase of investment securities


(1,250
)


(1,527
)Net cash used in investing
    activities


(42,452
)


(19,695
)Cash flows from financing
    activities:Proceeds from Term B Senior Credit
    Facility note payable


32,000



22,000Payment of debt issuance costs


(1,553
)


(58
)Repayment of Term B Credit
    Facility note payable


(720
)


(360
)Repayment of mezzanine note payable






(20,201
)Repayment of mezzanine note
    warrants


(13,643
)


Payment of agreements with officers






(1,823
)Borrowings under revolving credit
    facility


10,000



Purchase of shares of common stock
    from ESOP Trust


(7,592
)


(931
)Cash received from issuance of
    common stock to Trust


1,693



Net cash provided by (used in)
    financing activities


20,185



(1,373
)Net decrease in cash


(32,398
)


(2,228
)Cash and cash equivalents at
    beginning of period


37,778



4,717Cash and cash equivalents at end
    of period

$
5,380


$
2,489Supplemental disclosure of cash
    flow information:Cash paid for interest


4,989



4,955Cash paid for taxes


90



101Non-cash financing activities:Common stock issued to ESOP Trust
    in satisfaction of employer contribution liability


3,628



2,460    4




---



##### 



ALION
    SCIENCE AND TECHNOLOGY
  NOTES TO
    FINANCIAL STATEMENTS
  (1)
    Description
    and Formation of the Business    not-for-profit
  (2)
    Summary
    of Significant Accounting Policies  Basis
    of Presentation and Principles of Consolidation
  Form 10-K No. 333-89756)
    
    Human Factors Application, Inc. (HFA), acquired in the
    Transaction,
    Innovative Technology Solution Corporation (ITSC) and
    Alion  IPS Corporation (IPS), which were
    acquired during the fiscal year ended September 30, 2004,
    Alion  METI Corporation (METI),
    Alion  CATI Corporation (CATI), Alion Canada
    (U.S.), Inc., Alion Science and Technology (Canada) Corporation,
    and Alion  JJMA Corporation (JJMA), acquired or
    established during the fiscal year ended September 30,
    2005, and
    Alion  BMH Corporation (BMH) and Washington
    Consulting, Inc. (WCI), acquired February 13, 2006.    Fiscal
    and Quarter Periods
    Use of
    Estimates
   5




---



##### 



ALION
    SCIENCE AND TECHNOLOGY
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
   Cash
    and Cash Equivalents
    Revenue
    Recognition
  time-and-material
  time-and-material time-and-material
  percentage-of-completion
        SOP 81-1, Accounting for Performance on Construction-Type and Certain
    Production-Type Contracts.
  Income
    Taxes
   6




---



##### 



ALION
    SCIENCE AND TECHNOLOGY
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Accounts
    Receivable and Billings in Excess of Costs and Estimated
    Earnings on Uncompleted Contracts
      Goodwill
    and Other Intangibles
  Business Combinations.
  Fixed
    Assets
    Fair
    Value of Financial Instruments
   7




---



##### 



ALION
    SCIENCE AND TECHNOLOGY
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
   Cash,
    cash equivalents, accounts payable and accounts
    receivable
    Marketable
    securities
    Senior
    long-term debt
    Interest
    rate caps
    Redeemable
    common stock warrants
    (3)
    Employee
    Stock Ownership Plan (ESOP) and Stock Ownership Trust    (4)
    Postretirement
    Benefits         8




---



##### 



ALION
    SCIENCE AND TECHNOLOGY
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    (5)
    Loss Per
    Share    (6)
    Shareholders
    Equity, Subject to Redemption      (7)
    Goodwill
    and Intangible Assets      AccumulatedGross


Depreciation


Net(In millions)Purchased contracts

$
60.5


$
36.3


$
24.2Internal use software and
    engineering designs


2.2



0.2



2.0Non-compete agreements


0.7



0.2



0.5Total

$
63.4


$
36.7


$
26.7    9




---



##### 



ALION
    SCIENCE AND TECHNOLOGY
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    (In millions)For the remaining six months:

2006

$
2.6For the year ending
    September 30:

2007


5.32008


4.92009


4.62010


4.62011


1.0and thereafter


3.7Total

$
26.7   (8)
    Long-Term
    Debt      Term B
    Senior Credit Facility
    
    a senior term loan in the current approximate amount of
    $210.2 million including the incremental term loans of
    which approximately $174.2 million had been drawn down as
    of March 31, 2006;
    a senior revolving credit facility, in the amount of
    $50.0 million, of which approximately $10.0 million
    was actually borrowed as of March 31, 2006 and
    approximately $2.6 million was deemed borrowed as of
    March 31, 2006, for letters of credit; and
    An uncommitted incremental term loan accordion
    facility in the amount of $150.0 million in addition to the
    two incremental term loan facilities the Company entered into as
    of April 1, 2005 and March 24, 2006.   10




---



##### 



ALION
    SCIENCE AND TECHNOLOGY
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
           Use of Proceeds.
   11




---



##### 



ALION
    SCIENCE AND TECHNOLOGY
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
     Security.
  Interest and Fees.
  Eurodollar


Federal Funds


Prime RateSpread


ABR Spread


ABR SpreadLeverage Ratio

(in basis points)


(in basis points)


(in basis points)Category 1


275



225



175Greater than or equal to 3.00 to
    1.00Category 2


250



200



150Greater than or equal to 2.50 to
    1.00 but less than 3.00 to 1.00Category 3


225



175



125Greater than or equal to 2.00 to
    1.00 but less than 2.50 to 1.00Category 4


200



150



100Less than 2.00 to 1.00        12




---



##### 



ALION
    SCIENCE AND TECHNOLOGY
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
                Financial Covenants.
 13




---



##### 



ALION
    SCIENCE AND TECHNOLOGY
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  Form 10-Q
          
    Consolidated EBITDA does not reflect the Companys cash
    expenditures, or future requirements for capital expenditures or
    contractual commitments;
    Consolidated EBITDA does not reflect changes in, or cash
    requirements for, the Companys working capital needs;
    Consolidated EBITDA does not reflect interest expense, or the
    cash requirements necessary to service interest or principal
    payments, on the Companys debt; and
    although depreciation and amortization are non-cash charges, the
    assets being depreciated and amortized will often have to be
    replaced in the future, and Consolidated EBITDA does not reflect
    any cash requirements for such replacements. 14




---



##### 



ALION
    SCIENCE AND TECHNOLOGY
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
     Alion
    Science and Technology Corporation
    Non-GAAP Measures  EBITDA and Consolidated
    EBITDA
    For the Twelve Months Ended March 31, 2006 and
    2005
  Calculation of EBITDA

2006


2005(Dollars in thousands)
    (Unaudited)Net loss

$
(25,603
)

$
(30,712
)Plus: Interest expense


23,729



32,763Plus: Income tax expense


34



64Plus: Depreciation and
    amortization expense


17,644



14,345EBITDA

$
15,805


$
16,460   Calculation of Consolidated
    EBITDA

2006


2005EBITDA

$
15,805


$
16,460Plus: Cash contributions to ESOP
    in respect of the repurchase liability


4,760



Plus: Non-cash expenses with
    respect to the stock appreciation rights and phantom stock plans
    (Stock-based compensation less cash settlements)


11,449



5,806Plus: Non-cash contributions to
    the ESOP (including Company
    401-k match)


6,189



4,613Plus: Any nonrecurring charges and
    adjustments by third-party valuation firm that prepares
    valuation reports in connection with the ESOP


8,986



1,841Plus/Minus: Per the Term B Senior
    Credit Facility Agreement, the net adjustment to Consolidated
    EBITDA as of June 30, 2004






2,386Plus: Acquisition-related pro
    forma adjustment to EBITDA attributable to the METI, CATI and
    JJMA acquisitions


3,900



Consolidated EBITDA

$
51,088


$
31,106   Leverage Ratio.
  Period

RatioApril 1, 2005 through
    March 23, 2006


3.75 to 1.00March 24, 2006 through
    September 30, 2006


4.50 to 1.00October 1, 2006 through
    September 30, 2007


3.75 to 1.00October 1, 2007 through
    September 30, 2008


3.25 to 1.00Thereafter


3.00 to 1.00  15




---



##### 



ALION
    SCIENCE AND TECHNOLOGY
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
     Alion
    Science and Technology Corporation
    Computation of Leverage Ratio
    Under the Term B Senior Credit Facility
    For the Twelve Months Ended March 31, 2006 and
    2005
  Numerator:

2006


2005(Dollars in thousands)
    (Unaudited)Revolving credit facility

$
10,000


$
Term B Senior Credit facility debt
    outstanding, at face value


174,200



143,280Total debt outstanding

$
184,200


$
143,280   Denominator:Consolidated EBITDA (from Table A)

$
51,088



31,106Leverage ratio


3.61



4.61   Interest Coverage Ratio.
  Period

RatioApril 1, 2004 through
    September 30, 2005


3.75 to 1.00October 1, 2005 through
    March 23, 2006


4.00 to 1.00March 24, 2006 through
    September 30, 2006


3.00 to 1.00October 1, 2006 through
    September 30, 2007


3.25 to 1.00October 1, 2007 through
    September 30, 2008


3.50 to 1.00Thereafter


4.00 to 1.00  16




---



##### 





ALION
    SCIENCE AND TECHNOLOGY




NOTES TO
    FINANCIAL STATEMENTS  (Continued)










Alion
    Science and Technology Corporation
    Computation of Interest Coverage Ratio
    Under the Term B Senior Credit Facility
    For the Twelve Months Ended March 31, 2006 and
    2005




|                                                  |  |                                        |        |  |      |   |        | 
|------------------------------------------------- |  | -------------------------------------- | ------ |  | ---- | - | ------ | 
|Numerator:                                        |  | 2006                                   |        |  | 2005 |  
|                                                  |  | (Dollars in thousands)
    (Unaudited) |       
|                                                 
|Consolidated EBITDA ( from Table A)               |  | $                                      | 51,088 |  |      | $ | 31,106 | 
|Less: Capital expenditures                        |  |                                        | 5,000  |  |      |   | 27,151 | 
|                                                  |  |                                        |        |  |      |   |        | 
|Consolidated EBITDA less capital
    expenditures |  | $                                      | 46,088 |  |      | $ | 27,141 | 
|                                                  |  |                                        |        |  |      |   |        | 





|                         |  |   |       |  |  |   |       | 
|------------------------ |  | - | ----- |  |  | - | ----- | 
|Denominator:             |  |   |       |  |  |  
|                        
|Annual cash pay interest |  | $ | 9,175 |  |  | $ | 4,378 | 
|Interest coverage ratio  |  |   | 5.02  |  |  |   | 6.20  | 









| |   |                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | incur additional indebtedness other than permitted additional
    indebtedness;                                                                                                                                  
|
| |  | consolidate, merge or sell all or substantially all of the
    Companys assets;                                                                                                                                 
|
| |  | make certain loans and investments including acquisitions of
    businesses, other than permitted acquisitions;                                                                                                  
|
| |  | pay dividends or distributions other than distributions needed
    for the ESOP to satisfy its repurchase obligations and for
    certain payments required under the Companys equity based
    incentive plans;
|
| |  | enter into transactions with the Companys shareholders and
    affiliates;                                                                                                                                      
|
| |  | enter into certain transactions not permitted under ERISA;                                                                                                                                                       
|
| |  | grant certain liens and security interests;                                                                                                                                                                      
|
| |  | enter into sale and leaseback transactions;                                                                                                                                                                      
|
| |  | change lines of business;                                                                                                                                                                                        
|
| |  | repay subordinated indebtedness and redeem or repurchase certain
    equity; or                                                                                                                                  
|
| |  | use the proceeds of the Companys borrowings other than as
    permitted by the Term B Senior Credit Facility.                                                                                                   



Events of Default.




| |   |                                                             
| | - | ------------------------------------------------------------
| |  | payment default;                                            
|
| |  | breach of representations and warranties;                   
|
| |  | uncured covenant breaches;                                  
|
| |  | default under certain other debt exceeding an agreed amount;
|
| |  | bankruptcy and insolvency events;                           

17



---



##### 





ALION
    SCIENCE AND TECHNOLOGY




NOTES TO
    FINANCIAL STATEMENTS  (Continued)






| |   |                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------
| |  | notice of debarment, suspension or termination under a material
    government contract;                         
|
| |  | certain ERISA violations;                                                                                        
|
| |  | unstayed judgments in excess of an agreed amount;                                                                
|
| |  | failure of the subordinated note to be subordinated to the Term
    B Senior Credit Facility;                    
|
| |  | failure of the guarantee of the Term B Senior Credit Facility to
    be in effect;                               
|
| |  | failure of the security interests to be valid, perfected first
    priority security interests in the collateral;
|
| |  | failure of the Company to remain an S-corporation;                                                               
|
| |  | imposition on the Trust of certain taxes in excess of an agreed
    amount;                                      
|
| |  | final determination that the ESOP is not a qualified
    plan; or                                                
|
| |  | change of control (as defined below).                                                                            











Mezzanine
    Note












Subordinated
    Note




(paid-in-kind


18



---



##### 





ALION
    SCIENCE AND TECHNOLOGY




NOTES TO
    FINANCIAL STATEMENTS  (Continued)








Other
    Notes and Agreements
















|                                  |  |                      |      |  |      |   |      |      |  |   |      |  |  |      |        |  |       |   |       |  |  |   |        | 
|--------------------------------- |  | -------------------- | ---- |  | ---- | - | ---- | ---- |  | - | ---- |  |  | ---- | ------ |  | ----- | - | ----- |  |  | - | ------ | 
|                                  |  | 5-Fiscal Year Period |     
|                                  |  | 2006                 |      |  | 2007 |   |      | 2008 |  |   | 2009 |  |  | 2010 |        |  | Total |  
|                                  |  | ($ In millions)      |     
|                                 
|Senior Secured Term B Loan(1)     |  | $                    | 0.87 |  |      | $ | 1.74 |      |  | $ | 1.74 |  |  | $    | 169.84 |  |       | $ |      |  |  | $ | 174.20 | 
|Subordinated Seller Note(2)       |  |                      |     |  |      |   |     |      |  |   |     |  |  |      | 19.95  |  |       |   | 19.95 |  |  |   | 39.90  | 
|Subordinated Paid in Kind Note(3) |  |                      |     |  |      |   |     |      |  |   |     |  |  |      | 7.18   |  |       |   | 7.18  |  |  |   | 14.36  | 
|                                  |  |                      |      |  |      |   |      |      |  |   |      |  |  |      |        |  |       |   |       |  |  |   |        | 
|Total principal payments          |  | $                    | 0.87 |  |      | $ | 1.74 |      |  | $ | 1.74 |  |  | $    | 196.97 |  |       | $ | 27.13 |  |  | $ | 228.46 | 
|                                  |  |                      |      |  |      |   |      |      |  |   |      |  |  |      |        |  |       |   |       |  |  |   |        | 









|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) |  | The table reflects the balance drawn of $174.2 as of
    March 31, 2006, resulting in expected annual principal
    payments of approximately $0.87 million and
    $1.7 million each year for the remainder of fiscal year
    2006 and for fiscal years 2007 and 2008. During 2009, we expect
    to pay approximately $169.8 million in principal. The Term
    B Senior Credit Facility also requires the Company to make
    mandatory prepayments of principal depending upon whether the
    Company generates certain excess cash flow in a given fiscal
    year, issues certain equity, issues or incurs certain debt, or
    sells certain assets. Due to the uncertainty of these amounts,
    the table does not reflect any such payments. The approximate
    $174.2 million includes, as of March 31, 2006,
    approximately $4.5 million of unamortized debt discount.
    Approximately $6.2 million of debt issuance costs were
    recorded as debt discount.
|   
|(2) |  | Repayment of $39.9 million for the face value of the
    Subordinated Seller Note in two equal payments of
    $19.95 million in years 2009 and 2010. The
    $39.9 million includes, as of March 31, 2006,
    approximately $4.6 million of unamortized debt discount
    assigned to fair value of the detachable warrants. On the date
    of issuance, December 20, 2002, approximately
    $7.1 million was assigned as the fair value of the warrants
    in accordance with Emerging Issues Task Force Issue
    No. 00-19,
    Accounting for Derivative Financial Instruments Indexed
    to, and Potentially settled in, a Companys Own Stock.                                                                                                                                                                                                                                                                                                                      

19



---



##### 





ALION
    SCIENCE AND TECHNOLOGY




NOTES TO
    FINANCIAL STATEMENTS  (Continued)






|    |  |                                                                                                                                                                                                                                                                                                                                                              
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) |  | During the eight-year term of the Subordinated Note,
    approximately $14.4 million of principal accretes to the
    note and is included in the principal payments in fiscal years
    2009 and 2010. The principal, together with the outstanding
    balance of the PIK notes will be paid in equal amounts at the
    end of fiscal years 2009 and 2010.



|    |                                     
|--- | ------------------------------------
|(9) | Redeemable
    Common Stock Warrants



00-19,


20



---



##### 





ALION
    SCIENCE AND TECHNOLOGY




NOTES TO
    FINANCIAL STATEMENTS  (Continued)






|     |       
|---- | ------
|(10) | Leases











|                                            |  |                |        | 
|------------------------------------------- |  | -------------- | ------ | 
|Fiscal Years Ending                         |  | (In thousands) |       
|                                           
|2006 (for the remainder of fiscal
    year) |  | $              | 9,630  | 
|2007                                        |  |                | 16,434 | 
|2008                                        |  |                | 15,026 | 
|2009                                        |  |                | 11,905 | 
|2010                                        |  |                | 7,512  | 
|2011                                        |  |                | 4,609  | 
|and thereafter                              |  |                | 1,927  | 
|                                            |  |                |        | 
|Gross lease payments                        |  | $              | 67,043 | 
|Less: non-cancelable subtenant
    receipts |  |                | 7,192  | 
|                                            |  |                |        | 
|Net lease payments                          |  | $              | 59,851 | 
|                                            |  |                |        | 









|     |                 
|---- | ----------------
|(11) | Fixed
    Assets







|                                                   |  |                |         |   |               |   |        |  
|-------------------------------------------------- |  | -------------- | ------- | - | ------------- | - | ------ | -
|                                                   |  | March 31,      |         |   | September 30, |  
|                                                   |  | 2006           |         |   | 2005          |  
|                                                   |  | (In thousands) |        
|                                                  
|Leasehold improvements                             |  | $              | 2,683   |   |               | $ | 2,302  |  
|Equipment and software                             |  |                | 21,651  |   |               |   | 17,395 |  
|                                                   |  |                |         |   |               |   |        |  
|Total cost                                         |  |                | 24,334  |   |               |   | 19,697 |  
|Less accumulated depreciation and
    amortization |  |                | (11,120 | ) |               |   | (8,523 | )
|                                                   |  |                |         |   |               |   |        |  
|Net fixed assets                                   |  | $              | 13,214  |   |               | $ | 11,174 |  
|                                                   |  |                |         |   |               |   |        |  







21



---



##### 



ALION
    SCIENCE AND TECHNOLOGY
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
   (12)
    Stock
    Appreciation Rights        10-year
       22




---



##### 



ALION
    SCIENCE AND TECHNOLOGY
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Alion
    Science and Technology Corporation
    Stock-based Compensation Disclosures per FAS 123
    Stock Appreciation Rights
    As of March 31, 2006
  Shares


Shares


Total



































RemainingDate of

Granted to


Granted to


Shares


Exercise


Outstanding


Outstanding











Vested


Exercisable


Risk Free





Expected


LifeGrant

Employees


Directors


Granted


Price


at 10/1/05


3/31/06


Forfeited


Exercised


Expired


3/31/06


at 3/31/06


Interest Rate


Volatility


Life


(months)December 2002


64,250



29,400



93,650


$
10.00



53,450



48,005



140



5,305







27,505



860



4.06%-4.49%



60
%


5 yrs



19.5May 2003


300







300


$
11.13



300



240







60







60







2.70%-3.30%



55
%


5 yrs



24.9June 2003


300







300


$
11.13



300



300















120







2.70%-3.30%



55
%


5 yrs



25.7November 2003


129,550



12,600



142,150


$
14.71



127,920



110,610



3,530



13,780







46,440



4,120



4.06%-4.49%



60
%


5 yrs



31.3November 2004






12,600



12,600


$
19.94



12,600



12,600















4,200



4,200



3.10%-3.60%



45
%


3 yrs



19.5February 2005


164,750







164,750


$
19.94



152,400



152,400























3.10%-3.60%



45
%


4 yrs



33.9March 2005


2,000







2,000


$
19.94



2,000



2,000























3.10%-3.60%



45
%


4 yrs



35.0April 2005


33,000







33,000


$
29.81



31,000



29,000



2,000



















4.10%-4.20%



45
%


4 yrs



35.9June 2005


2,000







2,000


$
29.81



2,000



2,000























4.10%-4.20%



45
%


4 yrs



38.1December 2005


272,675







272,675


$
35.89



267,075



261,475



5,600



















4.20%-4.20%



40
%


4 yrs



44.7February 2006


13,000







13,000


$
35.89



13,000



13,000























4.20%-4.20%



40
%


4 yrs



46.4February 2006


7,500







7,500


$
35.89



7,500



7,500























4.20%-4.20%



40
%


4 yrs



46.9Total


689,325



54,600



743,925







669,545



639,130



11,270



19,145







78,325



9,180Wtd Avg Exercise Price

$
25.31


$
13.38


$
24.43






$
25.48


$
25.80


$
27.86


$
13.39


$



$
13.33


$
16.66















37.0  23




---



##### 



ALION
    SCIENCE AND TECHNOLOGY
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
   (13)
    Phantom
    Stock Plans        Initial
    Phantom Stock Plan
      The Vested Amountfor Grant inFebruary


NovemberAnniversary from Grant
    Date

2003


20031st






20
%2nd






20
%3rd


50
%


20
%4th


25
%


20
%5th


25
%


20
%     Second
    Phantom Stock Plan
     24




---



##### 



ALION
    SCIENCE AND TECHNOLOGY
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
         Director
    Phantom Stock Plan
           25




---



##### 



ALION
    SCIENCE AND TECHNOLOGY
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
     Alion
    Science and Technology Corporation
    Stock-based Compensation Disclosures per FAS 123
    Phantom Stock
    as of March 31, 2006
  Shares


Shares


Total


Grant Date
































RemainingGranted to


Granted to


Shares


Price


Outstanding


Outstanding











Vested


Exercisable


Risk Free





Expected


LifeDate of Grant

Employees


Directors


Granted


per Share


10/01/05


3/31/06


Forfeited


Exercised


Expired


3/31/06


3/31/06


Interest Rate


Volatility


Life


(months)February 2003


171,000







171,000


$
10.00



171,000



171,000















85,500



52,000



4.06%-4.49%



60
%


5 yrs



21.9November 2003


52,685







52,685


$
14.71



52,685



52,685







12,916







8,158







4.06%-4.49%



60
%


5 yrs



31.3January 2005


202,763







202,763


$
19.94



202,763



202,763















67,588



34,051



3.10%-3.60%



45
%


3 yrs



21.7January 2005


103,414







103,414


$
19.94



103,414



103,414















34,471







3.10%-3.60%



45
%


4 yrs



33.7January 2005


5,015







5,015


$
19.94



5,015



5,015















1,254







3.10%-3.60%



45
%


4 yrs



33.7August 2005


2,960







2,960


$
33.78



2,960



2,960























3.72%-3.77%



45
%


3 yrs



28.1November 2005


66,592



7,808



74,400


$
35.89







74,400























4.20%-4.20%



40
%


3 yrs



31.3November 2005


55,726







55,726


$
35.89







55,726























4.20%-4.20%



40
%


5 yrs



55.3Total


660,156



7,808



667,964







537,838



667,964







12,916







196,970



86,051Wtd Avg Grant Date Fair Value
    Price per Share

$
19.97


$
35.89


$
20.15






$
16.34


$
20.15


$



$
14.71


$



$
15.41


$
13.93















26.5  26




---



##### 



ALION
    SCIENCE AND TECHNOLOGY
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
   (14)
    Segment
    Information and Customer Concentration      (15)
    Business
    Combinations  Fiscal
    Year 2005 Acquisitions
  Acquisition
    of Assets of Countermeasures, Inc.
    Acquisition
    of ManTech Environmental Technology, Inc.
    Acquisition
    of Carmel Applied Technologies, Inc.
  not-to-exceed not-to-exceed
  Investment
    in VectorCommand Ltd.
   27




---



##### 



ALION
    SCIENCE AND TECHNOLOGY
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
   Acquisition
    of John J. McMullen Associates, Inc.
    Form of Consideration

Fair Value(In millions)Cash paid, net of cash acquired

$
52.9Stock issued


37.3Future payments


8.3Acquisition costs


1.3Total consideration

$
99.8     Accounts receivable

$
21.5Property and equipment


1.0Other assets


1.4Identifiable intangible assets


29.6Goodwill


57.8Accounts payable and other accrued
    liabilities


(11.5
)Total

$
99.8     Fiscal
    Year 2006 Acquisitions
  Acquisition
    of BMH Associates, Inc.
    Acquisition
    of Washington Consulting, Inc.
   28




---



##### 



ALION
    SCIENCE AND TECHNOLOGY
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    (16)
    Commitments
    and Contingencies  Earn
    Out Commitments
              Legal
    Proceedings
  AB
    Tech settlement
     29




---



##### 



ALION
    SCIENCE AND TECHNOLOGY
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
   Joseph
    Hudert vs. Alion; Frank Stotmeister vs. Alion
            Government
    Audits
    (17)
    Subsequent
    Event   30




---



##### 



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations    and/or and/or and/or Form 10-K No. 333-89756)
    Critical
    Accounting Estimates and Policies
  Form 10-K
      Revenue
    Recognition, Cost Estimation and Payment
   31




---



##### 



time-and-material
  
    Cost-reimbursement contracts  revenue is
    recognized as costs are incurred and include an estimate of
    applicable fees earned.
    Fixed-price contracts  revenue is recognized
    using the
    percentage-of-completion
    method based on various performance measures. From time to time,
    facts develop that require the Company to revise its estimated
    total costs or revenues expected. The cumulative effect of
    revised estimates is recorded in the period in which the facts
    requiring revisions become known. The full amount of anticipated
    losses on any type of contract is recognized in the period in
    which they become known.
    Time-and-material
    contracts  revenue is recognized at
    contractually billable rates as labor hours and direct expenses
    are incurred. Labor and related costs are reimbursed at
    negotiated, fixed hourly rates.    For the Six Months EndedMarch 31,Contract Type

2006


2005(In millions)Cost-reimbursement

$
130



61%


$
90



60%Fixed-price


42



20%



28



19%Time-and-material


40



19%



32



21%Total

$
212



100%


$
150



100%          32




---



##### 



For the Six Months EndedMarch 31,Contract Type

2006


2005(In millions)U.S. Department of Defense
    (DoD)

$
190



90%


$
139



93%Other Federal Civilian Agencies


13



6%


$
8



5%Commercial/State/Local and
    International


9



4%


$
3



2%Total

$
212



100%


$
150



100%   SOP 81-1, Accounting for Performance on Construction-Type and Certain
    Production-Type Contracts.
  Goodwill
    and Identifiable Intangible Assets
    
    Significant underperformance relative to expected historical or
    projected future operating results;
    Significant changes in the manner of use of acquired assets or
    overall business strategy;
    Significant negative industry or economic trends; and
    Significant decline in Alions stock price for a sustained
    period.   33




---



##### 



Stock-Based
    Compensation
  Share Based
    Payments.
  Comparison
    of Results of Operations
   34




---



##### 



Quarter
    Ended March 31, 2006 Compared to Quarter Ended
    March 31, 2005
    Quarter Ended March 31,
    2006


Quarter Ended March 31,
    2005Consolidated








ConsolidatedConsolidated





Operations Less


Consolidated





Operations LessOperations


Acquired


Acquired


Operations


Acquired


AcquiredFinancial information

of Alion


Operations*


Operations


of Alion


Operations*


Operations(Dollars in millions)


(Dollars in millions)%





%





%





%





%





%revenue





revenue





revenue





revenue





revenue





revenueTotal revenue

$
111.2






$
35.9






$
75.3






$
80.7






$
9.4






$
71.3Material and subcontract revenue


32.8



29.5%



10.4



29.0%



22.4



29.8%



22.5



27.9
%


2.8



29.7%



19.7



27.6
%Total direct contract expenses


81.0



72.9%



25.6



71.4%



55.4



73.6%



59.4



73.7
%


6.9



73.1%



52.5



73.6
%Major components of direct contract
    expenseDirect labor expense


47.2



42.5%



15.3



42.7%



31.9



42.3%



35.8



44.4
%


4.0



43.1%



31.8



44.6
%Other direct expense (ODC)


2.6



2.3%



0.6



1.7%



2.0



2.6%



1.8



2.3
%


0.1



1.2%



1.7



2.4
%Material and subcontract (M&S)
    expense


31.2



28.1%



9.7



26.9%



21.5



28.5%



21.8



27.0
%


2.7



28.8%



19.1



26.8
%Gross profit


30.1



27.1%



10.3



28.6%



19.9



26.4%



21.2



26.3
%


2.5



26.9%



18.7



26.3
%Total operating expense


28.8



25.9%



9.9



27.7%



18.6



25.0%



22.7



28.1
%


2.1



22.0%



20.6



28.9
%Major components of operating
    expenseIndirect personnel and facilities


11.9



10.7%



4.5



12.4%



7.4



9.9%



7.2



8.9
%


1.0



11.9%



6.2



8.7
%General and administrative


11.6



10.4%



4.3



12.1%



7.3



9.7%



7.7



9.5
%


0.8



8.8%



6.9



9.6
%Depreciation and amortization


2.4



2.2%



1.1



3.1%



1.3



1.7%



3.8



4.7
%


0.1



1.3%



3.7



5.1
%Stock-based compensation


2.3



2.0%







0.0%



2.3



3.0%



3.7



4.6
%






0.0%



3.7



5.3
%Income (loss) from operations

$
1.4



1.3%


$
0.3



1.0%


$
1.1



1.5%


$
(1.4
)


(1.8
)%

$
0.4



4.9%


$
(1.8
)


(2.5
)%     *
    
    For the quarters ended March 31, 2006 and 2005, METI, CATI,
    JJMA, BMH and WCI have been fully integrated within Alion on a
    consolidated basis. The selected financial data provided in the
    table are approximations of the actual results for the Acquired
    and Non-Acquired operations of Alion.  Contract Revenues.
  

Increase in revenue generated by
    the activities of the acquired operations

$26.5 million

Increase in revenue generated by
    the activities of the non-acquired operations

$4.0 millionTotal:

$30.5 million    35




---



##### 



Direct Contract Expenses.
  
    Direct labor expense for the quarter ended March 31, 2006
    increased by $11.4 million, or 31.8%, to $47.2 million
    from $35.8 million for the quarter ended March 31,
    2006. Direct labor expense was 42.5% and 44.4% of revenue for
    the quarters ended March 31, 2006, and 2005, due to a shift
    from direct labor to M&S expense.
    M&S expense increased approximately $9.4 million, or
    43.1%, to $31.2 million for the quarter ended
    March 31, 2006, compared to $21.8 million for the
    quarter ended March 31, 2005. M&S expense was
    approximately 95.2% and 96.9% of M&S revenue for the
    quarters ended March 31, 2006 and 2005. M&S expense
    increased to 28.1% from 27.0% of revenue for the quarters ended
    March 31, 2006 and 2005, primarily due to work under the
    Night Vision contract.  Gross Profit.
  Operating Expenses.
  
    Operating expenses for indirect personnel and rental and
    occupancy expenses increased approximately $4.7 million, or
    65.3%, to $11.9 million from $7.2 million for the
    quarter ended March 31, 2006, compared to $7.2 million
    for the quarter ended March 31, 2005. Operating expenses
    for indirect personnel and facilities were 10.7% and 8.9% of
    revenue for the quarters ended March 31, 2006 and 2005. The
    increase is partially attributable to expense associated with
    integrating the BMH and WCI acquisitions in the second quarter
    of fiscal year 2006.
    General and administrative (G&A) expense increased
    approximately $3.9 million, or 50.6%, to $11.6 million
    for the quarter ended March 31, 2006, compared to
    $7.7 million for the quarter ended March 31, 2005.
    G&A expenses were 10.4% and 9.5% of revenue for the quarters
    ended March 31, 2006 and 2005, respectively. For the
    quarter ended March 31, 2006, approximately
    $1.3 million in additional external accounting and legal
    fees were related to the completion of an independent
    investigation relating to an anonymous letter received by the
    Company shortly before the deadline for filing the Annual
    Report. The anonymous letter alleged, 36




---



##### 



among other things, that one of the Companys business
    units had engaged in illegal activities with respect to certain
    of its business operations. The independent investigators
    concluded that there was no material basis for the allegations.
    Approximately $0.2 million of additional third-party legal
    and accounting fees were associated with acquisitions. These
    additional expenses represent approximately 1.4% of revenue.  
    Depreciation and amortization expense decreased approximately
    $1.4 million, or 36.8%, to $2.4 million for the
    quarter ended March 31, 2006, compared to $3.8 million
    for the quarter ended March 31, 2005, principally related
    to amortization of purchased contracts. Depreciation expense
    primarily arises from fixed assets while amortization expense
    derives primarily from purchased contracts. Amortization expense
    decreased because amortization of contracts purchased
    from IITRI ended in December 2005. Depreciation and
    amortization expense was 2.2% and 4.7% of revenue for the
    quarters ended March 31, 2006 and 2005.
    Stock-based compensation expense relates to the SAR and phantom
    stock plans. This expense decreased approximately
    $1.4 million, or 37.8% to $2.3 million for the quarter
    ended March 31, 2006, compared to approximately
    $3.7 million for the quarter ended March 31, 2005. The
    decrease in stock-based compensation and deferred compensation
    expense results from the relative change in price of a share of
    Alion common stock in the quarters ended March 31, 2006 and
    2005. For the quarter ended March 31, 2006, the
    Companys stock increased $1.17 per share to $37.06
    from $35.89. For the quarter ended March 31, 2005, the
    Companys stock increased $9.87 per share to $29.81
    from $19.94. Stock-based compensation was approximately 2.0% and
    4.6% of revenue for the quarters ended March 31, 2006 and
    2005.  Income loss) from Operations.
  Other Income (Expense).
  Quarter EndedMarch 31,2006


2005(In millions)Revolving facility

$
0.2


$
0.1Senior term loan


2.6



1.0Subordinated
    Note  PIK interest


0.6



0.6- long-term deferred interest


0.2



0.2- amortization of debt issue costs


0.2



0.2Accretion of warrants(a)


(1.4
)


13.8Other


0.1



Total

$
2.5


$
15.9     (a)
    
    Reflects change in value assigned to the detachable warrants
    associated with Mezzanine and Subordinated notes based on the
    change in the value of Alion common stock.  Income Tax (Expense) Benefit.
 37




---



##### 



Net Loss.
  Six
    Months Ended March 31, 2006 Compared to Six Months Ended
    March 31, 2005
    Six Months Ended March 31,
    2006


Six Months Ended March 31,
    2005Consolidated








ConsolidatedConsolidated





Operations Less


Consolidated





Operations LessFinancial information

Operations of Alion


Acquired Operations*


Acquired Operations


Operations of Alion


Acquired Operations*


Acquired Operations(Dollars in millions)


(Dollars in millions)%





%





%





%





%





%revenue





revenue





revenue





revenue





revenue





revenueTotal revenue

$
212.5






$
66.2






$
146.3






$
149.9






$
16.3






$
133.6Material and subcontract revenue


66.6



31.3
%


20.1



30.4
%


46.5



31.8
%


38.6



25.8
%


4.1



25.4
%


34.5Total direct contract expenses


157.4



74.1
%


48.0



72.6
%


109.4



74.3
%


109.6



73.1
%


10.0



61.1
%


99.6



74.6
%Major components of direct contract
    expenseDirect labor expense


88.7



41.7
%


27.6



41.7
%


61.1



41.7
%


67.6



45.1
%


5.8



35.3
%


61.8



46.3
%Other direct expense (ODC)


5.2



2.5
%


1.3



1.9
%


4.0



2.7
%


3.8



2.6
%


0.1



0.8
%


3.7



2.8
%Material and subcontract (M&S)
    expense


63.5



29.9
%


19.2



29.0
%


44.3



30.3
%


38.2



25.5
%


4.1



25.1
%


34.1



25.5
%Gross profit


55.1



25.9
%


18.2



27.5
%


36.9



25.2
%


40.3



26.9
%


4.4



26.7
%


35.9



26.9
%Total operating expense


56.8



26.6
%


18.5



27.9
%


38.1



26.0
%


40.6



27.1
%


3.6



22.2
%


37.0



27.7
%Major components of operating
    expenseIndirect personnel and facilities


22.2



10.5
%


8.3



12.6
%


13.9



9.5
%


14.1



9.4
%


1.9



11.8
%


12.2



9.1
%General and administrative


21.2



10.0
%


7.9



11.9
%


13.3



9.1
%


14.4



9.6
%


1.5



9.0
%


12.9



9.7
%Depreciation and amortization


7.2



3.4
%


2.3



3.4
%


4.9



3.4
%


7.3



4.8
%


0.2



1.4
%


7.1



5.3
%Stock-based compensation


5.0



2.4
%






0.0
%


5.0



3.4
%


4.2



2.8
%






0.0
%


4.2



3.1
%Income (loss) from operations

$
(1.4
)


(1.2
)%

$
(0.3
)


(0.4
)%

$
(1.1
)


0.7
%

$
(0.4
)


(0.2
)%

$
0.7



4.5
%

$
(1.1
)


(0.8
)%     *
    
    For the six month periods ended March 31, 2006 and 2005,
    the operations of the acquired entities, METI, CATI, JJMA, BMH
    and WCI, respectively, have been fully integrated within Alion
    on a consolidated basis. The selected financial information
    provided in the table are approximations of the actual results
    for the Acquired and Non-Acquired operations of Alion.  Revenues.
 38




---



##### 



Direct Contract Expenses.
  
    Direct labor expense for the six months ended March 31,
    2006 increased by $21.1 million, or 31.2%, to
    $88.7 million from $67.6 million for the six months
    ended March 31, 2005. Direct labor expense decreased to
    41.7% from 45.1% of revenue for the six-month periods ended
    March 31, 2006 and 2005 due to a shift from direct labor to
    M&S expense.
    M&S expense increased approximately $25.3 million, or
    66.2%, to $63.5 million for the six months ended
    March 31, 2006, compared to $38.2 million for the six
    months ended March 31, 2005. M&S expense was 29.9% and
    25.5% of revenue for the six months ended March 31, 2006
    and 2005. The increased expense is associated with the increased
    M&S work described above. M&S expense as a percentage of
    M&S revenue, decreased to approximately 95.3% from 98.9% for
    the six months ended March 31, 2006 and 2005, primarily as
    a result of increased profit margins on M&S work by acquired
    operations.  Gross Profit.
    Operating Expenses.
  
    Operating expenses for indirect personnel and rental and
    occupancy expenses increased approximately $8.1 million, or
    57.5%, to $22.2 million for the six months ended
    March 31, 2006, from $14.1 million for the 39




---



##### 



six months ended March 31, 2005. Operating expenses for
    indirect personnel and facilities were 10.5% and 9.4% of revenue
    for the six months ended March 31, 2006 and 2005. The
    increase is partially attributable to expense associated with
    integrating the BMH and WCI acquisitions in the second quarter
    of fiscal year 2006.  
    General and administrative (G&A) expense increased
    approximately $6.8 million, or 47.2%, to $21.2 million
    for the six months ended March 31, 2006, compared to
    $14.4 million for the six months ended March 31, 2005.
    G&A expenses were 10.0% and 9.6% of revenue for the six
    months ended March 31, 2006 and 2005. For the six months
    ended March 31, 2006, approximately $1.3 million in
    additional external accounting and legal fees were related to
    the completion of an independent investigation relating to an
    anonymous letter received by the Company shortly before the
    deadline for filing the Annual Report. The anonymous letter
    alleged, among other things, that one of the Companys
    business units had engaged in illegal activities. The
    independent investigators concluded there was no material basis
    for the allegations. Approximately $0.8 million of
    additional third-party legal and accounting fees were associated
    with acquisitions. These additional expenses represent
    approximately 1.0% of revenue.
    Depreciation and amortization expense decreased approximately
    $0.1 million, or 1.4%, to $7.2 million for the six
    months ended March 31, 2006, compared to $7.3 million
    for the six months ended March 31, 2005. Depreciation
    expense primarily arises from fixed assets while amortization
    expense derives primarily from purchased contracts. Amortization
    expense decreased approximately $0.9 million because
    amortization of contracts purchased from IITRI ended in
    December 2005. This was offset by approximately
    $0.3 million of amortization expense for other intangibles.
    Depreciation expense increased approximately $0.5 million.
    Depreciation and amortization expense was 3.4% and 4.9% of
    revenue for the six months ended March 31, 2006 and 2005.
    Stock-based compensation expense relates to the SAR and phantom
    stock plans. This expense increased approximately
    $0.8 million, or 19.0% to $5.0 million for the six
    months ended March 31, 2006, compared to approximately
    $4.2 million for the six months ended March 31, 2005.
    The increase in stock-based compensation expense results from
    the relative change in price of a share of Alion common stock in
    the six months ended March 31, 2006 and 2005 and, to a
    lesser extent, the increase in awards granted. For the six
    months ended March 31, 2006, the Companys stock
    increased $1.17 per share to $37.06 from $35.89. For the
    six months ended March 31, 2005, the Companys stock
    increased $9.87 per share to $29.81 from $19.94.
    Stock-based compensation was approximately 2.4% and 2.8% of
    revenue for the six months ended March 31, 2006 and 2005,
    respectively.  Operating Loss.
 40




---



##### 



Other Income (Expense).
  For Six Months Ended
    March 31,2006


2005Revolving facility

$
0.3


$
0.1Senior term loan


5.3



2.1Mezzanine
    note  cash pay interest






1.8- accretion of debt discount






2.1Subordinated
    note  PIK interest


1.2



1.2- accretion of long-term deferred
    interest


0.3



0.3- accretion of debt discount


0.5



0.4Agreements with officers






0.1Accretion of warrant liability(a)


0.3



14.7Other


0.0



0.1$
7.9


$
22.9     (a)
    
    Reflects change in value assigned to the detachable warrants
    associated with the change in the value of Alion common stock.  Income Tax (Expense) Benefit.
  Net Loss.
  Liquidity
    and Capital Resources
         41




---



##### 



Discussion
    of Debt Structure
      Term B
    Senior Credit Facility
    
    a senior term loan in the current approximate amount of
    $210.2 million including the incremental term loans of
    which approximately $174.2 million had been drawn down as
    of March 31, 2006;
    a senior revolving credit facility, in the amount of
    $50.0 million, of which approximately $10.0 million
    was actually borrowed as of March 31, 2006 and
    approximately $2.6 million was deemed borrowed as of
    March 31, 2006, for letters of credit; and
    An uncommitted incremental term loan accordion
    facility in the amount of $150.0 million in addition to the
    two incremental term loan facilities we entered into as of
    April 1, 2005 and March 24, 2006.       42




---



##### 



Use of Proceeds.
      Security.
  Interest and Fees.
 43




---



##### 



Eurodollar


Federal Funds


Prime RateSpread


ABR Spread


ABR SpreadLeverage Ratio

(in basis points)


(in basis points)


(in basis points)Category 1


275



225



175Greater than or equal to 3.00 to
    1.00Category 2


250



200



150Greater than or equal to 2.50 to
    1.00
    but less than 3.00 to 1.00Category 3


225



175



125Greater than or equal to 2.00 to
    1.00
    but less than 2.50 to 1.00Category 4


200



150



100Less than 2.00 to 1.00          44




---



##### 



5-Fiscal Year Period2006*


2007


2008


2009


2010($ In thousands)Bank revolving credit facility
    - Interest(1)

$
308


$
250


$
250


$
150


$
Senior Secured Term B Loan
    - Interest(2)


6,389



12,609



12,636



6,456



- Principal(3)


871



1,742



1,742



169,845



Subordinated note
    - Interest(4)














6,384



3,192- Principal(4)














27,132



27,132Total cash  Pay
    interest


6,697



12,859



12,886



13,090



3,192Total cash  Pay
    principal


871



1,742



1,742



196,977



27,132Total

$
7,568


$
14,601


$
14,628


$
210,067


$
30,324     *
    
    Estimated interest expense for the remainder of fiscal 2006(1)
    
    We anticipate accessing, from time to time, our
    $50.0 million bank revolving credit facility to finance our
    ongoing working capital needs. The term of the revolving credit
    facility is five years. For the remainder of fiscal year 2006,
    we anticipate the balance drawn on the revolving credit facility
    will be approximately $4.75 million, which will decline
    during the remainder of fiscal year 2006 as we anticipate
    improved collections on outstanding accounts receivable. For the
    fiscal years 2007 through 2009, we anticipate the balance drawn
    on the revolving credit facility will be minimal. Interest
    expense value includes an estimate for the unused balance fee on
    the $50.0 million revolving credit facility. 45




---



##### 



(2)
    
    The projected average annual balance we estimate will be drawn
    under the Senior Secured Term B Loan is as follows:
    $173.7 million, $172.5 million, $170.7 million,
    and $84.9 million for the remainder of fiscal year 2006 and
    for fiscal years ending September 30, 2007, 2008, and 2009,
    respectively. The Company expects it will need to refinance the
    Term B Senior Credit Facility before the end of fiscal year
    2008 and expects interest expense to continue at levels similar
    to prior years. Based on an estimated LIBOR rate plus the CS
    Eurodollar spread, the effective annual interest rate for the
    remainder of fiscal year 2006 and for fiscal years 2007, 2008,
    and 2009 is estimated to be approximately 7.3%, 7.2%, 7.3%, and
    7.6%, respectively. The effective interest rate takes into
    account the interest rate cap agreements which limit the
    interest rate on a portion, but not all, of the outstanding
    principal balance of the Term B Senior Credit Facility. The
    current cap agreements expire in September 2007. Outstanding
    principal balances not under the cap agreements had interest
    based on the Eurodollar rate. The term of the Senior Secured
    Term B Loan is five years. The approximate impact of a 1%
    increase in the interest rate, as applied to principal balances
    drawn under the Senior Secured Term B Loan not covered by the
    current interest rate cap agreements would be $0.4 million,
    $0.8 million, $0.8 million, and $1.7 million for
    the remainder of fiscal year 2006 and for fiscal years ending
    September 30, 2007, 2008, and 2009, respectively. Estimated
    interest expense includes an estimate for the commitment fee on
    the Senior Secured Term B Loan.(3)
    
    The Term B Senior Credit Facility requires us to repay
    1 percent of the principal balance outstanding under the
    senior term loan during each of the fiscal years 2006 through
    2008 and 96 percent of the principal balance outstanding
    during fiscal year 2009 of the term. The table reflects the
    balance drawn of $174.2 million as of March 31, 2006,
    resulting in expected annual principal payments of approximately
    $0.9 million for the remainder of fiscal year 2006 and
    $1.7 million in each of fiscal years 2007, and 2008. During
    the fifth year, or 2009, we are scheduled to pay principal in
    the amount of $168.9 million. The Term B Senior Credit
    Facility also requires us to make mandatory prepayments of
    principal depending upon whether we generate certain excess cash
    flow in a given fiscal year, we issue certain equity, we issue
    or incur certain debt or we sell certain assets. As of
    March 31, 2006, no mandatory prepayments are due.(4)
    
    Interest expense on the subordinated note during the four fiscal
    years from 2006 to 2008 is 6% simple interest,
    paid-in-kind
    by the issuance of PIK notes. These interest amounts accrue to
    principal increasing the principal value of the subordinated
    note. PIK notes do not bear interest. Interest obligations paid
    by issuance of the PIK notes does not compound. In the years
    2006 through 2008, the PIK interest on the Subordinated Note
    will be approximately $2.4 million in each year. During the
    eight-year term of the Subordinated Note, approximately
    $14.2 million of principal accretes to the note through the
    PIK notes. These amounts are included in the principal payments
    in fiscal years 2009 and 2010. In years 2009 and 2010, interest
    will be 16% paid quarterly in cash on the original principal of
    $39.9 million. The principal, together with the outstanding
    balance of the PIK notes, will be paid in equal amounts at the
    end of fiscal years 2009 and 2010.  Other
    Obligations
  Earn-outs
         46




---



##### 



Lease
    Payments
    Other
    Obligations
    
    Repurchase obligations under the KSOP;
    Obligations related to the holders put rights associated
    with the Subordinated Note warrants; and
    Obligations relating to our stock based compensation plans.    Number of Shares





Total ValueDate

Repurchased


Share Price


PurchasedJune 2003


5,248


$
11.13


$
58,412July 2003


2,696


$
11.13


$
30,000December 2003


50,031


$
14.71


$
735,956May 2004


117


$
16.56


$
1,945June 2004


727


$
16.56


$
12,039June 2004


743


$
16.56


$
12,297July 2004


48,309


$
16.56


$
799,997December 2004


46,816


$
19.94


$
933,505March 2005


5,691


$
19.94


$
113,486June 2005


45,846


$
29.81


$
1,366,674August 2005


1,090


$
33.78


$
36,803September 2005


170,657


$
33.78


$
5,764,784December 2005


211,537


$
35.89


$
7,592,079    47




---



##### 



Contract
    performance  Joint Spectrum Center
    Contract
    Item 3.
    Quantitative
    and Qualitative Disclosures About Market Risk  Interest
    rate risk
   48




---



##### 



Foreign
    currency risk
    Risk
    associated with the value of Alion common stock
      Item 4.
    Controls
    and Procedures  Disclosure Controls and
    Procedures. Rule 15d-15(e)
  Internal Control Over Financial
    Reporting. Rule 15d-15(f)
 49




---



##### 



PART II  OTHER
    INFORMATION  Item 1.
    Legal
    Proceedings        Item 2.
    Unregistered
    Sales of Equity Securities and Use of Proceeds  Form 8-K.
  Item 3.
    Defaults
    Upon Senior Securities    Item 4.
    Submission
    of Matters to a Vote of Security Holders    Item 5.
    Other
    Information    Item 6.
    Exhibits  Exhibit No.

Description2
.1

Stock Purchase Agreement by and
    among Identix Public Sector, Inc. Identix Incorporated and Alion
    Science and Technology Corporation, dated February 13,
    2004.(4)3
.1

Third Amended and Restated
    Certificate of Incorporation of Alion Science and Technology
    Corporation.(16)3
.2

Amended and Restated By-laws of
    Alion Science and Technology Corporation.(18)4
.1

Amended and Restated Alion Science
    and Technology Corporation Employee Ownership, Savings and
    Investment Plan.(1)4
.2

First Amendment to The Alion
    Science and Technology Corporation Employee Ownership, Savings
    and Investment Plan.(2)4
.3

Second Amendment to The Alion
    Science and Technology Corporation Employee Ownership, Savings
    and Investment Plan.(3)4
.4

Third Amendment to The Alion
    Science and Technology Corporation Employee Ownership, Savings
    and Investment Plan.(3)4
.5

Fourth Amendment to The Alion
    Science and Technology Corporation Employee Ownership, Savings
    and Investment Plan.(3)4
.6

Fifth Amendment to The Alion
    Science and Technology Corporation Employee Ownership, Savings
    and Investment Plan.(5)4
.7

Sixth Amendment to The Alion
    Science and Technology Corporation Employee Ownership, Savings
    and Investment Plan.(5)4
.8

Seventh Amendment to The Alion
    Science and Technology Corporation Employee Ownership, Savings
    and Investment Plan.(5) 50




---



##### 



Exhibit No.

Description4
.9

Eighth Amendment to The Alion
    Science and Technology Corporation Employee Ownership, Savings
    and Investment Plan.(5)4
.10

Ninth Amendment to The Alion
    Science and Technology Corporation Employee Ownership, Savings
    and Investment Plan.(9)4
.11

Tenth Amendment to The Alion
    Science and Technology Corporation Employee Ownership, Savings
    and Investment Plan.(18)4
.12

Eleventh Amendment to The Alion
    Science and Technology Corporation Employee Ownership, Savings
    and Investment Plan.(18)10
.5

Seller Note Securities
    Purchase Agreement by and between IITRI and Alion Science
    and Technology Corporation.(2)10
.8

Rights Agreement.(2)10
.9

First Amendment to The Alion
    Science and Technology Corporation 2002 Stock Appreciation
    Rights Plan.(3)*10
.14

Employment Agreement between Alion
    Science and Technology Corporation and Bahman Atefi.(2)*10
.15

Employment Agreement between Alion
    Science and Technology Corporation and Stacy Mendler.(2)*10
.16

Employment Agreement between Alion
    Science and Technology Corporation and Randy Crawford.(2)*10
.17

Employment Agreement between Alion
    Science and Technology Corporation and Barry Watson.(2)*10
.18

Employment Agreement between Alion
    Science and Technology Corporation and John Hughes.(2)*10
.23

Alion Executive Deferred
    Compensation Plan.(2)*10
.24

Alion Director Deferred
    Compensation Plan.(2)*10
.25

First Amendment to The Alion
    Science and Technology Corporation Director Deferred
    Compensation Plan.(3)*10
.26

Alion Science and Technology
    Corporation Phantom Stock Plan.(2)*10
.27

First Amendment to The Alion
    Science and Technology Corporation Phantom Stock Plan.(9)*10
.29

First Amendment to the Credit
    Agreement by and among LaSalle Bank National Association as
    agent, various lenders and Alion Science and Technology
    Corporation.(6)10
.30

Second Amendment to the Credit
    Agreement by and among LaSalle Bank National Association as
    agent, various lenders and Alion Science and Technology
    Corporation.(8)10
.31

Agreement between Alion Science
    and Technology Corporation and James Fontana.(8)*10
.32

Employment Agreement between Alion
    Science and Technology Corporation and Leroy R.
    Goff III.(8)*10
.33

Third Amendment to the Credit
    Agreement by and among LaSalle Bank National Association as
    agent, various lenders and Alion Science and Technology
    Corporation.(7)10
.34

Addendum to Employment Agreement
    between Alion Science and Technology Corporation and James
    Fontana.(7)*10
.35

Second Amendment to the Alion
    Science and Technology Corporation Phantom Stock Plan.(7)*10
.36

Senior Secured Credit facility
    that includes a revolving credit facility and Term B note, by
    and among Credit Suisse First Boston as arranger, various
    lenders, and Alion Science and Technology Corporation.(9)10
.37

First Amendment to the Mezzanine
    Warrant Agreement.(9)10
.38

First Amendment to the Seller
    Warrant Agreement.(9)10
.39

First Amendment to the Alion
    Mezzanine Warrant Agreement between Alion Science and Technology
    Corporation, Alion Science and Technology Corporation Employee
    Ownership, Savings and Investment Trust, and Bahman Atefi.(9)*10
.40

Third Amendment to the Alion
    Science and Technology Corporation Phantom Stock Plan.(10)*10
.41

Alion Science and Technology
    Corporation Performance Shares and Retention Phantom Stock
    Plan.(10)* 51




---



##### 



Exhibit No.

Description10
.42

Second Amendment to the Alion
    Science and Technology Corporation 2002 Stock Appreciation
    Rights Plan.(10)*10
.43

Alion Science and Technology
    Corporation 2004 Stock Appreciation Rights Plan.(10)*10
.44

Second Amendment to the Alion
    Science and Technology Corporation Directors Deferred
    Compensation Plan.(10)*10
.45

Second Amendment to the Alion
    Science and Technology Corporation Executive Deferred
    Compensation Plan.(10)*10
.46

Second Amendment to the Seller
    Warrant Agreement.(10)10
.47

Second Amendment to the Mezzanine
    Warrant Agreement.(10)10
.48

Second Amendment to the Alion
    Mezzanine Warrant Agreement between Alion Science and Technology
    Corporation, Alion Science and Technology Corporation Employee
    Ownership, Savings and Investment Trust, and Bahman Atefi.(10)10
.49

Commitment letter by and between
    Alion Science and Technology Corporation and Credit Suisse First
    Boston for a $72 million Incremental Term
    Loan Facility under existing Senior Credit Facility.(11)10
.50

Third Amendment to the Seller
    Warrant Agreement.(12)10
.51

Third Amendment to Mezzanine
    Warrant Agreement.(12)10
.52

Third Amendment to the Alion
    Mezzanine Warrant Agreement between Alion Science and Technology
    Corporation, Alion Science and Technology Corporation Employee
    Ownership, Savings and Investment Trust, and Bahman Atefi.(12)10
.53

Stock Purchase Agreement by and
    among Alion Science and Technology Corporation, John J. McMullen
    Associates, Inc., Marshall and Ilsley Trust Company, N.A. as
    Trustee to the John J. McMullen, Inc. Employee Stock Ownership
    Trust and P. Thomas Diamant, Anthony Serro, and David
    Hanafourde.(13)10
.54

Incremental Term
    Loan Assumption Agreement and Amendment Number One to
    existing Term Loan Facility with Credit Suisse First
    Boston.(14)10
.55

Employment Agreement between Alion
    Science and Technology Corporation and Anthony Serro.(15)*10
.56

Employment Agreement between Alion
    Science and Technology Corporation and P. Thomas Diamant.(15)*10
.57

Alion Science and Technology
    Corporation Board of Directors Phantom Stock Plan.(16)*10
.58

Amended and Restated Alion Science
    and Technology Corporation Phantom Stock Plan.(16)*10
.59

Amended and Restated Alion Science
    and Technology Corporation Performance Shares and Retention
    Phantom Stock Plan.(16)*10
.60

Amended and Restated Alion Science
    and Technology Corporation 2002 Stock Appreciation Rights
    Plan.(16)*10
.61

Amended and Restated Alion Science
    and Technology Corporation 2004 Stock Appreciation Rights
    Plan.(16)*10
.62

Amended and Restated Alion Science
    and Technology Corporation Executive Deferred Compensation
    Plan.(16)*10
.63

Amended and Restated Alion Science
    and Technology Corporation Director Deferred Compensation
    Plan.(16)*10
.64

Commitment letter by and between
    Alion Science and Technology Corporation, Credit Suisse and
    Credit Suisse Securities (USA) LLC for the $50 million
    Incremental Term Loan Facility under existing Senior Credit
    Facility.(19)10
.65

Incremental Term
    Loan Assumption Agreement and Amendment Number Two to
    existing Term Loan Facility with Credit Suisse.(20)10
.66

Fourth Amendment to the Seller
    Warrant Agreement.(21)10
.67

Mezzanine Warrant
    Redemption Agreement between Alion Science and Technology
    Corporation and Illinois Institute of Technology.(21) 52




---



##### 



Exhibit No.

Description10
.68

Alion Mezzanine Warrant
    Redemption Agreement between Alion Science and Technology
    Corporation and Bahman Atefi.(21)21


Subsidiaries of Alion Science and
    Technology Corporation:(i) Human Factors Applications, Inc.,
    incorporated in the Commonwealth of Pennsylvania,
    (ii) Innovative Technology Solutions Corporation,
    incorporated in the State of New Mexico,
    (iii) Alion-IPS Corporation, incorporated in the
    Commonwealth of Virginia, (iv) Alion-METI Corporation,
    incorporated in the Commonwealth of
    Virginia, (v) Alion- CATI Corporation, incorporated in
    the State of California, (vi) Alion-JJMA Corporation,
    incorporated in the State of New York, (vii) Alion
    Technical Services Corporation, incorporated in the Commonwealth
    of Virginia, (viii) Alion Canada (U.S.), Inc., incorporated
    in the State of Delaware, (ix) Alion Science and Technology
    (Canada) Corporation, incorporated in the Province of Nova
    Scotia, are wholly-owned (either directly or indirectly) by
    Alion Science and Technology
    Corporation, (x) Alion-BMH Corporation, incorporated
    in the Commonwealth of Virginia, and (xi) Washington
    Consulting, Inc., incorporated in the Commonwealth of Virginia.31
.1

Certification of Chief Executive
    Officer of Alion Science and Technology Corporation pursuant to
    Rule 15d-14(a)
    promulgated under the Securities Exchange Act of 1934, as
    amended.31
.2

Certification of Chief Financial
    Officer of Alion Science and Technology Corporation pursuant to
    15d-14a)
    promulgated under the Securities Exchange Act of 1934, as
    amended.32
.1

Certification of Chief Executive
    Officer of Alion Science and Technology Corporation, 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 Chief Executive
    Officer of Alion Science and Technology Corporation, pursuant to
    18 U.S.C. Section 1350 as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.     (1)
    
    Incorporated by reference to the corresponding exhibit
    previously filed as an exhibit to the Companys
    Pre-Effective Amendment No. 3 to the Registration Statement
    on
    Form S-1
    filed with the Securities and Exchange Commission on
    October 7, 2002 (File
    no. 333-89756).(2)
    
    Incorporated by reference to the corresponding exhibit
    previously filed as an exhibit to the Companys
    Post-Effective Amendment No. 3 to the Registration
    Statement on
    Form S-1
    filed with the Securities and Exchange Commission on
    March 24, 2003 (File
    no. 333-89756).(3)
    
    Incorporated by reference to the corresponding exhibit
    previously filed as an exhibit to the Companys quarterly
    report on
    Form 10-Q
    for the quarterly period ended July 4, 2003, filed with the
    Securities and Exchange Commission on August 15, 2003 (File
    no.
    333-89756).(4)
    
    Incorporated by reference to the corresponding exhibit
    previously filed as an exhibit to Companys current report
    on
    Form 8-K/A,
    filed with the Securities and Exchange Commission on
    March 5, 2004 (File
    no. 333-89756).(5)
    
    Incorporated by reference to the corresponding exhibit
    previously filed as an exhibit to the Companys
    Registration Statement on Form
    S-8 filed
    with the Securities and Exchange Commission on April 28,
    2004 (File
    no. 333-89756).(6)
    
    Incorporated by reference to the corresponding exhibit
    previously filed as an exhibit to the Companys quarterly
    report on
    Form 10-Q
    for the quarterly period ended December 31, 2003, filed
    with the Securities and Exchange Commission on February 17,
    2004 (File no.
    333-89756).(7)
    
    Incorporated by reference to the corresponding exhibit
    previously filed as an exhibit to the Companys quarterly
    report on
    Form 10-Q
    for the quarterly period ended June 30, 2004, filed with
    the Securities and Exchange Commission on August 13, 2004
    (File no.
    333-89756).(8)
    
    Incorporated by reference to the corresponding exhibit
    previously filed as an exhibit to the Companys quarterly
    report on
    Form 10-Q
    for the quarterly period ended March 31, 2004, filed with
    the Securities and Exchange Commission on May 17, 2004
    (File no.
    333-89756).(9)
    
    Incorporated by reference to the corresponding exhibit
    previously filed as an exhibit to the Companys annual
    report on
    Form 10-K
    for the fiscal year ended September 30, 2004, filed with
    the Securities and Exchange Commission on December 28, 2004
    (File
    no. 333-89756). 53




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##### 



(10)
    
    Incorporated by reference to the corresponding exhibit
    previously filed as an exhibit to the Companys
    Post-effective Amendment No. 5 to the Registration
    Statement on
    Form S-1
    filed with the Securities and Exchange Commission on
    January 24, 2005 (File
    no. 333-89756).(11)
    
    Incorporated by reference to the corresponding exhibit
    previously filed as an exhibit to the Companys
    Form 8-K
    filed with the Securities and Exchange Commission on
    March 9, 2005 (File no.
    333-89756).(12)
    
    Incorporated by reference to the corresponding exhibit
    previously filed as an exhibit to the Companys
    Form 8-K
    filed with the Securities and Exchange Commission on
    March 14, 2005 (File no.
    333-89756).(13)
    
    Incorporated by reference to the corresponding exhibit
    previously filed as an exhibit to the Companys
    Form 8-K
    filed with the Securities and Exchange Commission on
    April 6, 2005 (File no.
    333-89756).(14)
    
    Incorporated by reference to the corresponding exhibit
    previously filed as an exhibit to the Companys
    Form 8-K
    filed with the Securities and Exchange Commission on
    April 6, 2005 (File no.
    333-89756).(15)
    
    Incorporated by reference to the corresponding exhibit
    previously filed as an exhibit to the Companys
    Form 8-K
    filed with the Securities and Exchange Commission on
    April 7, 2005 (File no.
    333-89756).(16)
    
    Incorporated by reference to the corresponding exhibit
    previously filed as an exhibit to the Companys quarterly
    report on
    Form 10-Q
    for the quarterly period ended March 31, 2005, filed with
    the Securities and Exchange Commission on May 13, 2005
    (File no.
    333-89756).(17)
    
    Incorporated by reference to the corresponding exhibit
    previously filed as an exhibit to the Companys
    Form 8-K
    filed with the Securities and Exchange Commission on
    December 2, 2005 (File no.
    333-89756).(18)
    
    Incorporated by reference to the corresponding exhibit
    previously filed as an exhibit to the Companys annual
    report on
    Form 10-K
    for the fiscal year ended September 30, 2004, filed with
    the Securities and Exchange Commission on January 31, 2005
    (File
    no. 333-89756).(19)
    
    Incorporated by reference to the corresponding exhibit
    previously filed as an exhibit to the Companys
    Form 8-K
    filed with the Securities and Exchange Commission on
    February 23, 2006 (File no.
    333-89756).(20)
    
    Incorporated by reference to the corresponding exhibit
    previously filed as an exhibit to the Companys
    Form 8-K
    filed with the Securities and Exchange Commission on
    March 29, 2006 (File no.
    333-89756).(21)
    
    Incorporated by reference to the corresponding exhibit
    previously filed as an exhibit to the Companys
    Form 8-K
    filed with the Securities and Exchange Commission on
    March 31, 2006 (File no.
    333-89756).*
    
    Denotes management contract
    and/or
    compensatory arrangement. 54




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##### 



SIGNATURES
      By:
    /s/  John M. Hughes         55