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 1934
  FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2008.
  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)
  o þ
  Rule 12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer o
    Non-accelerated
    filer þ
    Smaller
    reporting
    company o   Rule 12b-2 o þ




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  FORM 10-Q
  FOR THE
    QUARTER ENDED DECEMBER 31, 2008
   
 PART I  FINANCIAL
    INFORMATION


3Item 1.


Financial Statements (unaudited)


3Condensed Consolidated Balance Sheets
    (unaudited)


3Condensed Consolidated Statements of Operations
    (unaudited)


4Condensed Consolidated Statements of Cash Flows
    (unaudited)


5Notes to Condensed Consolidated Financial
    Statements (unaudited)


6Item 2.


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


30Item 3.


Quantitative and Qualitative Disclosures About
    Market Risk


44Item 4.


Controls and Procedures


45Item 4T.


Controls and Procedures


45PART II  OTHER
    INFORMATION


45Item 1.


Legal Proceedings


45Item 1A.


Risk Factors


45Item 2.


Unregistered Sales of Equity Securities and Use
    of Proceeds


45Item 3.


Defaults Upon Senior Securities


46Item 4.


Submission of Matters to a Vote of Security
    Holders


46Item 5.


Other Information


46Item 6.


Exhibits


46   2




---



##### 



PART I 
    FINANCIAL INFORMATION  Item 1.
    Financial
    Statements (unaudited)  ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  Condensed
    Consolidated Balance Sheets (unaudited)
 As of
    December 31, 2008 and September 30, 2008
  December 31,


September 30,2008


2008(In thousands, except shareand per share information)Current assets:Cash and cash equivalents


4,830


$
16,287Accounts receivable, net


174,518



168,451Stock subscriptions receivable






2,669Prepaid expenses and other current assets


3,927



3,135Total current assets


183,275



190,542Property, plant and equipment, net


17,602



18,601Intangible assets, net


37,862



41,248Goodwill


398,871



398,871Other assets


6,080



6,684Total assets

$
643,690


$
655,946Current liabilities:Interest payable

$
14,705


$
6,543Current portion, Term B senior term loan payable


2,389



2,389Interest rate swap liability






4,629Current portion of subordinated note payable


3,000



3,000Current portion, acquisition obligations






50Trade accounts payable


51,445



57,164Accrued liabilities


33,878



39,227Accrued payroll and related liabilities


45,508



41,557Billings in excess of costs and estimated earnings on
    uncompleted contracts


3,141



2,708Total current liabilities


154,066



157,267Term B senior term loan payable, excluding current portion


229,684



229,831Senior unsecured notes


244,577



244,355Subordinated note payable


41,992



42,656Accrued compensation, excluding current portion


6,803



11,305Accrued postretirement benefit obligations


636



627Non-current portion of lease obligations


6,290



6,260Redeemable common stock warrants


38,542



39,996Redeemable common stock, $0.01 par value,
    8,000,000 shares authorized, 5,229,523 and
    5,229,756 shares issued and outstanding at
    December 31, 2008 and September 30, 2008


200,552



200,561Accumulated other comprehensive loss


(36
)


(36
)Accumulated deficit


(279,416
)


(276,876
)Total liabilities, redeemable common stock and accumulated
    deficit

$
643,690


$
655,946    3




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  Condensed
    Consolidated Statements of Operations (unaudited)
  Quarter EndedDecember 31,2008


2007(In thousands, except share and per share information)Contract revenue

$
188,796


$
183,145Direct contract expense


145,322



140,382Gross profit


43,474



42,763Operating expenses:Indirect contract expense


9,124



9,883Research and development


69



161General and administrative


10,173



15,741Rental and occupancy expense


7,738



7,671Depreciation and amortization


4,806



5,027Total operating expenses


31,910



38,483Operating income


11,564



4,280Other income (expense):Interest income


23



155Interest expense


(14,088
)


(13,276
)Other


(35
)


146Total other expenses


(14,100
)


(12,975
)Loss before income taxes


(2,536
)


(8,695
)Income tax expense


(4
)


(11
)Net loss

$
(2,540
)

$
(8,706
)Basic and diluted loss per share

$
(0.49
)

$
(1.74
)Basic and diluted weighted average common shares outstanding


5,229,523



5,012,838    4




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  Condensed
    Consolidated Statements of Cash Flows (unaudited)
  Quarter Ended December 31,2008


2007(In thousands)Cash flows from operating activities:Net loss

$
(2,540
)

$
(8,706
)Adjustments to reconcile net loss to net cash used in operating
    activities:Depreciation and amortization


4,806



5,027Accretion of debt to face value


590



246Amortization of debt issuance costs


683



442Change in fair value of redeemable common stock warrants


(1,454
)


(104
)Stock-based compensation


(4,603
)


2,046Loss on interest rate swap


18



Changes in assets and liabilities:Accounts receivable, net


(6,066
)


(39,274
)Other assets


(188
)


(1,480
)Trade accounts payable


(5,719
)


3,285Accrued liabilities


(1,197
)


3,148Interest payable


8,162



1,713Other liabilities


2,219



1,681Net cash used in operating activities


(5,289
)


(31,976
)Cash flows from investing activities:Cash paid for acquisitions-related obligations


(166
)


Capital expenditures


(407
)


(1,223
)Net cash used in investing activities


(573
)


(1,223
)Cash flows from financing activities:Change in book overdraft






2,065Cash paid under interest rate swap


(4,647
)


Payment of Term B Credit Facility principal


(608
)


(618
)Payment of subordinated note principal


(3,000
)


Revolving credit facility borrowings


97,600



113,880Revolving credit facility payments


(97,600
)


(96,580
)Purchase of redeemable common stock from ESOP Trust


(9
)


(12
)Cash received from issuance of redeemable common stock to Trust


2,669



3,377Net cash (used in) provided by financing activities


(5,595
)


22,112Net decrease in cash and cash equivalents


(11,457
)


(11,087
)Cash and cash equivalents at beginning of period


16,287



11,684Cash and cash equivalents at end of period

$
4,830


$
597Supplemental disclosure of cash flow information:Cash paid for interest

$
4,282


$
10,086Cash paid for taxes


4



11    5




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (UNAUDITED)
  (1)
    Description
    and Formation of the Business      (2)
    Summary
    of Significant Accounting Policies  Basis
    of Presentation and Principles of Consolidation
  Form 10-K
    Fiscal,
    Quarter and Interim Periods
    Use of
    Estimates
    Reclassifications
    Revenue
    Recognition
  time-and-material
 6




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  time-and-material
        SOP 81-1, Accounting for Performance on Construction-Type and Certain
    Production-Type Contracts
  Income
    Taxes
   7




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Cash
    and Cash Equivalents
    Accounts
    Receivable and Billings in Excess of Costs and Estimated
    Earnings on Uncompleted Contracts
    Property,
    Plant and Equipment
    Goodwill
    and Other Intangibles
  Goodwill and Other Intangible
    Assets
  Purchased contracts


1-13 yearsInternal use software and engineering designs


2-3 yearsNon-compete agreements


3-6 years   Postretirement
    Benefits
  Employers
    Accounting for Postretirement Benefits Other Than Pension Employers Accounting for
    Defined Benefit Pension and Other Postretirement Plans
 8




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Redeemable
    Common Stock
    Concentration
    of Credit Risk
    Fair
    Value of Financial Instruments
    Recently
    Issued Accounting Pronouncements
  Business Combinations,
  Noncontrolling Interests in Consolidated Financial
    Statements,
 9




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Disclosures about Derivative Instruments and Hedging
    Activities, Accounting for Derivative Instruments
    and Hedging Activities
  (3)
    Employee
    Stock Ownership Plan (ESOP) and Stock Ownership Trust    (4)
    Postretirement
    Benefits    (5)
    Loss Per
    Share    (6)
    Redeemable
    Common Stock Owned by ESOP Trust   10




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        (7)
    Accounts
    Receivable    December 31,


September 30,2008


2008(In thousands)Billed receivables

$
102,415


$
99,794Unbilled receivables:Amounts currently billable


30,716



37,883Revenues recorded in excess of milestone billings on fixed price
    contracts


3,084



2,651Revenues recorded in excess of estimated contract value or
    funding


30,415



18,925Retainages and other amounts billable upon contract completion


12,104



13,160Allowance for doubtful accounts


(4,216
)


(3,962
)Total Accounts Receivable

$
174,518


$
168,451    11




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  (8)
    Property,
    Plant and Equipment  December 31,


September 30,2008


2008(In thousands)Leasehold improvements

$
9,451


$
9,451Equipment and software


31,800



31,393Total cost


41,251



40,844Less: accumulated depreciation and amortization


23,649



22,243Net Property, Plant and Equipment

$
17,602


$
18,601     (9)
    Goodwill
    and Intangible Assets      December 31, 2008


September 30, 2008Weighted











WeightedAverage











AverageRemaining











RemainingAccumulated





Amortization





Accumulated





AmortizationGross


Amortization


Net


Period


Gross


Amortization


Net


PeriodPurchased contracts

$
111,635


$
(74,692
)

$
36,943



6.1 yrs


$
111,635


$
(71,410
)

$
40,225



6.3 yrsInternal use software and engineering designs


2,155



(1,276
)


879



2.7 yrs



2,155



(1,178
)


977



2.9 yrsNon-compete agreements


725



(685
)


40



1.6 yrs



725



(679
)


46



1.8 yrsTotal

$
114,515


$
(76,653
)

$
37,862



6.0 yrs


$
114,515


$
(73,267
)

$
41,248



6.0 yrs     (In thousands)For the remaining nine months:2009


9,181For the year ending September 30:2010


10,9852011


6,8432012


5,7672013


3,2462014


879Thereafter


96137,862  12




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  (10)
    Long-Term
    Debt  Term B
    Senior Credit Facility
      Interest and Fees.
  Other Fees and Expenses.
    Financial Covenants.
  Senior
    Unsecured Notes
   13




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Interest and Fees.
  Interest
    Payable
    December 31,


September 30,2008


2008(In thousands)Senior Unsecured Notes

$
10,677


$
4,271Term B Senior Credit Facility Note Payable


3,933



2,272Subordinated Note Payable


95Total

$
14,705


$
6,543   Subordinated
    Note
    paid-in-kind
    2009


2010


2011


2012


2013


2014


2015


Total(In thousands)Senior Secured Term B Loan(1)

$
1,825


$
2,433


$
2,433


$
2,433


$
229,297


$



$



$
238,421Senior Unsecured Notes(2)


























250,000



250,000Subordinated Seller Note(3)






3,000



3,000



2,000



70,311











78,311Total Principal Payments

$
1,825


$
5,433


$
5,433


$
4,433


$
299,608


$



$
250,000


$
566,732     (1)
    
    The table does not include any Term B Senior Credit Facility
    principal pre-payments. The timing and amount of such payments
    is uncertain. The total on the face of the balance sheet for the
    Term B Senior Term Loan includes 14




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  approximately $238.4 million in principal and
    $6.3 million in unamortized debt issue costs as of
    December 31, 2008. Debt issue costs for the original loan
    and subsequent modifications totaled $12.5 million. The
    Company anticipates that it will need to refinance the Term B
    Senior Credit Facility before it matures.(2)
    
    The Senior Unsecured Notes on the face of the balance sheet
    include $250 million in principal and $5.4 million in
    unamortized debt issue costs as of December 31, 2008
    (originally $7.1 million).(3)
    
    The Subordinated Note on the face of the balance sheet includes
    approximately $11.9 million of unamortized original issue
    discount for the fair value of the detachable warrants Alion
    issued in December 2002 and the warrants Alion issued for the
    September 2008 amendment. The first set of warrants had an
    initial fair value of approximately $7.1 million The
    amendment to the first set of warrants had an initial fair value
    of $1.3 million and the additional warrants had an initial
    fair value of approximately $9.0 million. The Company
    recognized original issue discount for the fair value of the
    warrants in accordance with Emerging Issues Task Force Issue
    00-19
    Accounting for Derivative Financial Instruments Indexed to
    and Potentially Settled in, a Companys Own Stock.  (11)
    Fair
    Value Measurement  FSP 157-1, FSP 157-2, FSP 157-3 FSP 157-2, SFAS 157-2 SFAS 157-2
       15




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Assets
    and Liabilities Measured at Fair Value on a Recurring
    Basis
    Level 1


Level 2


Level 3Liabilities:Redeemable common stock warrants

$



$



$
(38,542
)     Quarter EndedDecember 31, 2008Redeemable CommonStock WarrantsBalance, beginning of period

$
(39,996
)Total realized and unrealized gains and (losses)Included in interest expense


1,454Included in other comprehensive income (loss)


Issuances and settlements


Transfers in (out)


Balance, end of period

$
(38,542
)   Assets
    and Liabilities Measured at Fair Value on a Nonrecurring
    Basis
    (12)
    Interest
    Rate Swap   16




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  (13)
    Redeemable
    Common Stock Warrants      00-19, Accounting for Derivative Financial Instruments Indexed to,
    and Potentially Settled in, a Company Own Stock.
  (14)
    Leases    Lease Payments for Fiscal Years Ending

(In thousands)2009 (for the remainder of fiscal year)

$
18,6352010


21,3282011


18,9172012


14,9822013


13,7732014


7,399And thereafter


20,900Gross lease payments

$
115,934Less: non-cancelable subtenant receipts


(6,052
)Net lease payments

$
109,882  17




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Composition
    of Total Rent Expense
  December 31,2008


2007(In thousands)Minimum rentals

$
6,183


$
6,356Less: Sublease rental income


(743
)


(835
)Total rent expense, net

$
5,440


$
5,521   (15)
    Long Term
    Incentive Compensation Plan    (16)
    Stock
    Appreciation Rights    Share-Based
    Payment
 18




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Stock-based
    Compensation Disclosures per FAS 123 and FAS 123R
    Stock Appreciation Rights
    As of December 31, 2008
  SharesGranted to


Exercise


Outstanding


Outstanding











Vested


ExercisableDate of Grant

Employees


Price


at 9/30/08


at 12/31/08


Forfeited


Exercised


Expired


at 12/31/08


at 12/31/08November 2003


129,550


$
14.71



68,335



63,235



540



4,560







63,235



6,277February 2004


2,000


$
14.71



2,000



2,000















1,600



February 2005


164,750


$
19.94



89,162



87,837



1,325











62,663



March 2005


2,000


$
19.94



2,000



2,000















1,500



April 2005


33,000


$
29.81



20,250



20,250















13,500



June 2005


2,000


$
29.81



2,000



2,000















1,500



December 2005


276,675


$
35.89



203,774



200,329



3,445











151,700



February 2006


13,000


$
35.89



7,750



7,750















3,875



February 2006


7,500


$
35.89



3,750



3,125



625











1,875



May 2006


7,000


$
37.06



6,000



6,000















3,000



July 2006


15,000


$
37.06



10,500



10,500















5,500



October 2006


2,500


$
41.02



2,500



2,500















1,250



December 2006


239,290


$
41.02



201,083



191,783



9,300











46,168



February 2007


33,450


$
41.02



24,700



24,700















6,738



May 2007


2,000


$
43.37



2,000



2,000















500



September 2007


2,000


$
43.37



2,000



2,000















500



December 2007


232,385


$
40.05



210,310



206,060



4,250











51,515



April 2008


2,000


$
41.00



2,000



2,000



















September 2008


2,000


$
41.00



2,000



2,000



















Total


1,168,100







862,114



838,069



19,485



4,560







416,619



6,277Wtd Avg Exercise Price

$
33.15






$
34.77


$
34.82


$
37.57


$
14.71


$



$
31.14


$
14.71  19




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Stock-based
    Compensation Disclosures per FAS 123 and 123R
    Stock Appreciation Rights
    As of December 31, 2008
  Risk Free





Remaining LifeDate of Grant

Interest Rate

Volatility

Expected Life

(Months)November 2003

4.06% - 4.49%

60%

3 yrs

February 2004

4.06% - 4.49%

60%

5 yrs

1.6February 2005

3.10% - 3.60%

45%

4 yrs

1.0March 2005

3.10% - 3.60%

45%

4 yrs

2.1April 2005

4.10% - 4.20%

45%

4 yrs

3.0June 2005

4.10% - 4.20%

45%

4 yrs

5.2December 2005

4.20% - 4.20%

40%

4 yrs

11.7February 2006

4.20% - 4.20%

40%

4 yrs

13.3February 2006

4.20% - 4.20%

40%

4 yrs

13.8May 2006

4.82% - 4.83%

35%

4 yrs

16.6July 2006

4.82% - 4.83%

35%

4 yrs

18.0October 2006

4.82% - 4.83%

35%

4 yrs

21.8December 2006

4.54% - 4.58%

35%

4 yrs

23.7February 2007

4.54% - 4.58%

35%

4 yrs

25.7May 2007

4.54% - 4.58%

35%

4 yrs

28.6September 2007

4.54% - 4.54%

35%

4 yrs

32.1December 2007

4.23% - 4.23%

35%

4 yrs

35.7April 2008

4.23% - 4.23%

35%

4 yrs

39.9September 2008

4.23% - 4.23%

35%

4 yrs

44.5Wtd Avg Remaining Life (months)







18.9   (17)
    Phantom
    Stock Plans    Share-Based Payment
 20




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Stock-based
    Compensation Disclosures per FAS 123 and FAS 123R
    Phantom Stock
    as of December 31, 2008
  GrantShares


Shares


Total


DateGranted to


Granted to


Shares


Price


Outstanding


Outstanding











Vested


ExercisableDate of Grant

Employees


Directors


Granted


per Share


at 9/30/08


at 12/31/08


Forfeited


Exercised


Expired


at 12/31/08


at 12/31/08November 2003


52,685







52,685


$
14.71



11,897



5,098







6,799







5,098



5,098February 2005


213,215







213,215


$
19.94



66,436



30,287



10,328



25,821







30,287



30,287February 2005


98,399







98,399


$
19.94



16,696



16,696















16,696



16,696February 2005


5,015







5,015


$
19.94



5,015







2,558



2,457











August 2005


2,960







2,960


$
33.78



2,960







2,960















November 2005


66,592







66,592


$
35.89



51,268







43,188



8,080











November 2005






7,808



7,808


$
35.89



5,531



5,531















5,531



5,531November 2005


55,726







55,726


$
35.89



41,795







41,795















November 2006






5,978



5,978


$
41.02



5,409



5,409















3,416



3,416November 2006


65,456







65,456


$
41.02



50,341







46,684



3,657











November 2007






6,993



6,993


$
40.05



6,993



6,993















2,331



1,665November 2007


42,447







42,447


$
40.05



39,950







34,956



4,994











January 2008


2,497







2,497


$
40.05



2,497







2,497















May 2008


1,220







1,220


$
41.00



1,220







1,220















Total


606,212



20,779



626,991







308,006



70,014



186,186



51,808







63,359



62,693Wtd Avg Grant Date Fair Value Price per Share

$
26.58


$
38.77


$
26.98






$
32.10


$
39.06


$
36.91


$
25.17






$
22.79


$
22.60   Stock-based
    Compensation Disclosures per FAS 123 and FAS 123R
    Phantom Stock
    as of December 31, 2008
  Risk Free





Remaining LifeDate of Grant

Interest Rate

Volatility

Expected Life

(Months)November 2003

4.06% - 4.49%

60%

5 yrs

February 2005

3.10% - 3.60%

45%

3 yrs

February 2005

3.10% - 3.60%

45%

3 yrs

February 2005

3.10% - 3.60%

45%

4 yrs

1.0August 2005

3.72% - 3.77%

45%

3 yrs

November 2005

4.20% - 4.20%

40%

3 yrs

November 2005

4.20% - 4.20%

40%

3 yrs

November 2005

4.20% - 4.20%

40%

5 yrs

22.3November 2006

4.54% - 4.58%

35%

3 yrs

10.4November 2006

4.54% - 4.58%

35%

3 yrs

10.4November 2007

4.23% - 4.23%

35%

3 yrs

22.4November 2007

4.23% - 4.23%

35%

3 yrs

22.4January 2008

4.23% - 4.23%

35%

3 yrs

24.4May 2008

4.23% - 4.23%

35%

3 yrs

28.4Wtd Avg Remaining Life (months)







11.9   (18)
    Segment
    Information and Customer Concentration   21




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      (19)
    Guarantor/Non-guarantor
    Condensed Consolidated Financial Information   22




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Condensed
    Consolidating Balance Sheet Information at December 31,
    2008
  Guarantor


Non-GuarantorParent


Companies


Companies


Eliminations


Consolidated(In thousands)Current assets:Cash and cash equivalents

$
4,912


$
(77
)

$
(5
)

$



$
4,830Accounts receivable


165,274



4,776



4,468







174,518Prepaid expenses and other current assets


3,820



40



67







3,927Total current assets


174,006



4,739



4,530







183,275Property, plant and equipment, net


17,456



68



78







17,602Intangible assets, net


37,862















37,862Goodwill


398,871















398,871Investment in subsidiaries


11,902











(11,902
)


Intercompany receivables






8,155







(8,155
)


Other assets


6,067



13











6,080Total assets

$
646,164


$
12,975


$
4,608


$
(20,057
)

$
643,690Current liabilities:Interest payable


14,705















14,705Current portion, Term B Senior Credit Facility note payable


2,389















2,389Current portion, subordinated note payable


3,000















3,000Trade accounts payable


50,024



668



753







51,445Accrued liabilities


32,244



1,085



549







33,878Accrued payroll and related liabilities


44,103



866



539







45,508Billings in excess of costs and estimated earnings on
    uncompleted contracts


3,141















3,141Total current liabilities


149,606



2,619



1,841







154,066Intercompany payables


7,012







1,143



(8,155
)


Term B Senior Credit Facility note payable, excluding current
    portion


229,684















229,684Senior Unsecured Notes


244,577















244,577Subordinated note payable


41,992















41,992Accrued compensation, excluding current portion


6,803















6,803Accrued postretirement benefit obligations


636















636Non-current portion of lease obligations


6,212



59



19







6,290Redeemable common stock warrants


38,542















38,542Common stock of subsidiaries






2,799



(1
)


(2,800
)


Redeemable common stock


200,552















200,552Accumulated other comprehensive loss


(36
)














(36
)Accumulated surplus (deficit)


(279,416
)


7,498



1,604



(9,012
)


(279,416
)Total liabilities, redeemable common stock and accumulated
    deficit

$
646,164


$
12,975


$
4,608


$
(20,057
)

$
643,690  23




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Condensed
    Consolidating Balance Sheet Information at September 30,
    2008
   Guarantor


Non-GuarantorParent


Companies


Companies


Eliminations


Consolidated(In thousands)Current assets:Cash and cash equivalents

$
16,392


$
(62
)

$
(43
)

$



$
16,287Accounts receivable


161,519



3,872



3,060







168,451Stock subscriptions receivable


2,669















2,669Prepaid expenses and other current assets


3,024



47



64







3,135Total current assets


183,604



3,857



3,081







190,542Property, plant and equipment, net


18,419



97



85







18,601Intangible assets, net


41,248















41,248Goodwill


398,871















398,871Investment in subsidiaries


10,831











(10,831
)


Intercompany receivables






8,038



72



(8,110
)


Other assets


6,668



16











6,684Total assets

$
659,641


$
12,008


$
3,238


$
(18,941
)

$
655,946Current liabilities:Interest payable

$
6,543


$



$



$



$
6,543Interest rate swap liability


4,629















4,629Current portion, Term B Senior Credit Facility note payable


2,389















2,389Current portion, subordinated note payable


3,000















3,000Current portion, acquisition obligations


50















50Trade accounts payable


55,933



467



765







57,164Accrued liabilities


37,678



1,007



542







39,227Accrued payroll and related liabilities


40,569



696



292







41,557Billings in excess of costs and estimated earnings on
    uncompleted contracts


2,708















2,708Total current liabilities


153,498



2,170



1,599







157,267Intercompany payables


7,543







567



(8,110
)


Term B Senior Credit Facility note payable, excluding current
    portion


229,831















229,831Senior Unsecured Notes


244,355















244,355Subordinated note payable


42,656















42,656Accrued compensation, excluding current portion


11,305















11,305Accrued postretirement benefit obligations


627















627Non-current portion of lease obligations


6,181



62



17







6,260Redeemable common stock warrants


39,996















39,996Common stock of subsidiaries






2,799



1



(2,800
)


Redeemable common stock


200,561















200,561Accumulated other comprehensive loss


(36
)














(36
)Accumulated surplus (deficit)


(276,876
)


6,977



1,054



(8,031
)


(276,876
)Total liabilities, redeemable common stock and accumulated
    deficit

$
659,641


$
12,008


$
3,238


$
(18,941
)

$
655,946  24




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Condensed
    Consolidating Statement of Operations for the Three Months Ended
    December 31, 2008
  Guarantor


Non-GuarantorParent


Companies


Companies


Eliminations


Consolidated(In thousands)Contract revenue

$
179,964


$
5,650


$
3,182


$



$
188,796Direct contract expense


138,720



4,168



2,434







145,322Gross profit


41,244



1,482



748







43,474Operating expenses:Indirect contract expense


8,154



842



128







9,124Research and development


69















69General and administrative


10,062



111











10,173Rental and occupancy expense


7,613



64



61







7,738Depreciation and amortization


4,794



5



7







4,806Total operating expenses


30,692



1,022



196







31,910Operating income


10,552



460



552







11,564Other income (expense):Interest income


23















23Interest expense


(14,088
)














(14,088
)Other


(94
)


61



(2
)






(35
)Equity in net income (loss) of subsidiaries


1,071











(1,071
)


Income (loss) before income taxes


(2,536
)


521



550



(1,071
)


(2,536
)Income tax expense


(4
)














(4
)Net income (loss)

$
(2,540
)

$
521


$
550


$
(1,071
)

$
(2,540
)  25




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Condensed
    Consolidating Statement of Operations for the Three Months Ended
    December 31, 2007
  Guarantor


Non-GuarantorParent


Companies


Companies


Eliminations


Consolidated(In thousands)Contract revenue

$
175,001


$
6,349


$
1,795


$



$
183,145Direct contract expense


134,569



4,549



1,264







140,382Gross profit


40,432



1,800



531







42,763Operating expenses:Indirect contract expense


8,517



1,191



175







9,883Research and development


161















161General and administrative


15,457



264



20







15,741Rental and occupancy expense


7,509



77



85







7,671Depreciation and amortization


5,003



21



3







5,027Total operating expenses


36,647



1,553



283







38,483Operating income


3,785



247



248







4,280Other income (expense):Interest income


155















155Interest expense


(13,276
)














(13,276
)Other


63



84



(1
)






146Equity in net income (loss) of subsidiaries


578











(578
)


Income (loss) before income taxes


(8,695
)


331



247



(578
)


(8,695
)Income tax expense


(11
)














(11
)Net income (loss)

$
(8,706
)

$
331


$
247


$
(578
)

$
(8,706
)  26




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Condensed
    Consolidating Statement of Cash Flows
    Three Months Ended December 31, 2008
  Guarantor


Non-GuarantorParent


Companies


Companies


Consolidated(In thousands)Net cash (used in) provided by operating activities

$
(5,288
)

$
(39
)

$
38


$
(5,289
)Cash flows from investing activities:Cash paid for acquisitions


(166
)










(166
)Capital expenditures


(431
)


24







(407
)Net cash (used in) provided by investing activities


(597
)


24







(573
)Cash flows from financing activities:Change in book overdraftNet cash paid from interest rate swap


(4,647
)










(4,647
)Repayment of Term B Credit Facility note payable


(608
)










(608
)Repayment of subordinated note payable


(3,000
)










(3,000
)Net borrowings under revolving credit facility


97,600











97,600Repayment under revolving credit facility


(97,600
)










(97,600
)Purchase of common stock from ESOP Trust


(9
)










(9
)Cash received from sale of common stock to ESOP Trust


2,669











2,669Net cash used in financing activities


(5,595
)










(5,595
)Net increase (decrease) in cash and cash equivalents


(11,480
)


(15
)


38



(11,457
)Cash and cash equivalents at beginning of period


16,392



(62
)


(43
)


16,287Cash and cash equivalents at end of period

$
4,912


$
(77
)

$
(5
)

$
4,830  27




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Condensed
    Consolidating Statement of Cash Flows
    Three Months Ended December 31, 2007
  Guarantor


Non-GuarantorParent


Companies


Companies


Consolidated(In thousands)Net cash (used in) provided by operating activities

$
(31,530
)

$
(456
)

$
10


$
(31,976
)Cash flows from investing activities:Capital expenditures


(1,156
)


(12
)


(55
)


(1,223
)Net cash used in investing activities


(1,156
)


(12
)


(55
)


(1,223
)Cash flows from financing activities:Change in book overdraft


2,065











2,065Repayment of Term B Credit Facility note payable


(618
)










(618
)Revolving credit facility borrowings


113,880











113,880Revolving credit facility payments


(96,580
)










(96,580
)Purchase of common stock from ESOP Trust


(12
)










(12
)Cash received from sale of common stock to ESOP Trust


3,377











3,377Net cash provided by financing activities


22,112











22,112Net decrease in cash and cash equivalents


(10,574
)


(468
)


(45
)


(11,087
)Cash and cash equivalents at beginning of period


11,718



(33
)


(1
)


11,684Cash and cash equivalents at end of period

$
1,144


$
(501
)

$
(46
)

$
597   (20)
    Commitments
    and Contingencies  Earn-Out
    Commitments
    Legal
    Proceedings
  Estate of Joseph Hudert vs. Alion Science and Technology
    Corporation; Estate of Frank Stotmeister vs. Alion Science and
    Technology Corporation.
     28




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          Government
    Audits
   29




---



##### 



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Form 10-K
  Overview
      For the Three Months Ended December 31,Revenue by Contract Type

2008


2007(In thousands)Cost-reimbursement


134,068



71.0
%

$
128,303



70.1
%Fixed-price


18,850



10.0
%


20,221



11.0
%Time-and-material


35,878



19.0
%


34,620



18.9
%Total

$
188,796



100.0
%

$
183,145



100.0
%     For the Three Months Ended December 31,Revenue by Customer Type

2008


2007(In thousands)U.S. Department of Defense (DoD)


172,360



91.3
%

$
156,111



85.3
%Other Federal Civilian Agencies


7,868



4.2
%


11,939



6.5
%Commercial/State/Local and International


8,568



4.5
%


15,095



8.2
%Total

$
188,796



100.0
%

$
183,145



100.0
%     For the Three Months Ended December 31,Core Business Area

2008


2007(In thousands)Naval Architecture and Marine Engineering

$
85,641



45.4
%

$
77,584



42.4
%Defense Operations Support


33,285



17.6
%


40,929



22.3
%Industrial Technology Solutions


28,708



15.2
%


26,703



14.6
%Modeling and Simulation


21,440



11.4
%


15,834



8.6
%Chemical, Biological, Nuclear and Environmental Sciences


13,496



7.1
%


13,466



7.4
%Information Technology


6,226



3.3
%


8,629



4.7
%Total

$
188,796



100.0
%

$
183,145



100.0
%  30




---



##### 



Backlog.
  Results
    of Operations
  Quarter
    Ended December 31, 2008 Compared to Quarter Ended
    December 31, 2007
  Consolidated Operations of AlionQuarter Ended December 31,2008


2007%





%Revenue





Revenue(Dollars in thousands)Selected Financial InformationTotal contract revenue

$
188,796






$
183,145Alion labor-related revenue


113,593



60.2
%


103,644



56.6
%Material and subcontract revenue


75,203



39.8
%


79,501



43.4
%Total direct contract costs


145,322



77.0
%


140,382



76.7
%Direct labor costs


66,829



35.4
%


58,601



32.0
%Material and subcontract costs


72,464



38.4
%


76,561



41.8
%Other direct costs


6,029



3.2
%


5,220



2.9
%Gross profit


43,474



23.0
%


42,763



23.3
%Total operating expense


31,910



16.9
%


38,483



21.0
%Major components of operating expenseIndirect expenses including facilities costs


16,862



8.9
%


17,554



9.6
%General and administrative (excluding stock-based compensation)


14,776



7.8
%


13,695



7.5
%Stock-based compensation


(4,603
)


(2.4
)%


2,046



1.1
%Depreciation and amortization


4,806



2.5
%


5,027



2.7
%Income from operations

$
11,564



6.1
%

$
4,280



2.3
%   Revenue, Direct Contract Expense and Gross
    Profit.
    Operating Expenses.
 31




---



##### 



Income from Operations.
  Other Expense.
    Quarter Ended December 31,2008


2007(In thousands)Cash Pay InterestTerm B Revolving Credit Facility

$
132


$
644Term B Senior Loan


5,793



4,692Senior Unsecured Notes


6,406



6,406Subordinated Note


95



Other cash pay interest and fees


98



98Sub-total
    cash pay interest


12,524



11,840Deferred and Non- cash InterestDebt issue costs and other non-cash items


1,272



688Subordinated Note interest


1,746



852Redeemable warrants


(1,454
)


(104
)Sub-total
    non-cash interest


1,564



1,436Total interest expense

$
14,088


$
13,276   Income Tax Expense.
  Net Loss.
 32




---



##### 



Liquidity
    and Capital Resources
    Cash
    Flows
            Cash
    flow effects and risks associated with equity-related
    obligations
       33




---



##### 



Discussion
    of Debt Structure
    Term B
    Senior Credit Facility
    
    a senior term loan in the approximate amount of
    $238.4 million;
    a $50.0 million senior revolving credit facility
    approximately $3.5 million of which was allocated to
    letters of credit and deemed borrowed, but none of which was
    actually drawn as of December 31, 2008; and
    a $110.0 million uncommitted incremental term loan
    accordion facility which the Company may be able to
    access in future subject to satisfying a leverage-based
    incurrence test.    
    In April 2005, the first amendment made certain changes and
    added $72.0 million in senior term loans to the total Term
    B Senior Credit Facility debt.
    In March 2006, the second amendment made certain changes,
    increased the senior term loan commitment by $68.0 million
    (drawn in full) and increased the revolving credit commitment
    from $30.0 million to $50.0 million.
    In June 2006, the third amendment made certain changes and added
    $50.0 million in senior term loans to the total Term B
    Senior Credit Facility debt.
    In January 2007, the fourth increment added $15.0 million
    in senior term loans to the total Term B Senior Credit Facility
    debt.
    In February 2007, the fourth amendment made certain changes,
    extended the senior term loan maturity date to February 6,
    2013, adjusted the principal repayment schedule to require a
    balloon principal payment at maturity, and added an incurrence
    test as an additional condition precedent to Alions
    ability to borrow additional funds.
    In July 2007, the fifth increment added $25.0 million in
    senior term loans to the Term B Senior Credit Facility.   34




---



##### 



Interest and Fees.
      Use of Proceeds.
   35




---



##### 



Security.
    Federal Funds ABRSpread


Prime Rate ABRLeverage Ratio

Eurodollar Spread


(in Basis Points)


SpreadCategory 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     Interest Rate Swap.
  Other Fees and Expenses.
    Financial Covenants.
    
    incur additional indebtedness other than permitted additional
    indebtedness after satisfying a leverage-based incurrence test;
    consolidate, merge or sell all or substantially all of the
    Companys assets; 36




---



##### 




    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 certain
    payments required under the Companys equity based
    incentive plans;
    enter into certain 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 before it is due and redeem or
    repurchase certain equity;
    pay certain earn-outs in connection with permitted acquisitions;
    make payments to directors, officers, and employees of the
    Company or its subsidiaries in connection with warrants, stock
    appreciation rights, phantom stock plans or similar incentives
    or equity-based incentives in excess of $20 million in the
    aggregate; 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;
    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 remain subordinated to the
    Term B Senior Credit Facility;
    failure of any 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 ESOP Trust of certain taxes in excess of an
    agreed amount;
    final determination the ESOP is not a qualified plan;
    incurrence of a civil or criminal liability in excess of
    $5 million of the Company or any subsidiary arising from a
    government investigation;
    actual termination of a material contract due to alleged fraud,
    willful misconduct, negligence, default or any other
    wrongdoing; or
    change of control (as defined below).   37




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##### 



Subordinated
    Note  Redeemable Common Stock Warrants
    paid-in-kind
      00-19, Accounting for Derivative Financial Instruments Indexed to,
    and Potentially Settled in, a Company Own Stock.
  Senior
    Unsecured Notes
   38




---



##### 



Interest and Fees.
  Covenants.
  
    incur or guarantee additional indebtedness;
    pay dividends on capital stock or redeem, repurchase or retire
    capital stock or subordinated indebtedness, except in certain
    circumstances for the junior subordinated notes and junior
    warrants;
    repurchase or redeem shares of Company stock in connection with
    distributions and diversifications from the ESOP component of
    the KSOP;
    transfer or sell assets including shares of stock of certain
    subsidiaries outside the ordinary course of business;
    make investments other than certain permitted investments;
    engage in business unrelated to Alions existing business;
    incur certain liens and enter into sale/leaseback transactions;
    enter into certain transactions with affiliates;
    pay dividends and make distributions and loans to the
    Company; and
    merge or consolidate with other companies.  Events of Default.
  
    payment default;
    uncured covenant breaches;
    default under an acceleration of certain other debt exceeding
    $30 million;
    certain bankruptcy and insolvency events;
    a judgment for payment in excess of $30 million entered
    against the Company or any material subsidiary that remains
    outstanding for a period of 60 days and is not discharged,
    waived or stayed; and
    failure of any guarantee of the Senior Unsecured Notes to be in
    effect or the denial or disaffirmation by any subsidiary
    guarantor of its guaranty obligations.  Change of Control.
  
    subject to certain exceptions, a person, other than the ESOP
    Trust, is or becomes the beneficial owner, directly or
    indirectly, of more than 35% of the total voting power or voting
    stock of Alion;
    individuals who constituted Alions board of directors on
    the date the Senior Unsecured Notes were issued, cease for any
    reason to constitute a majority of the Companys board of
    directors;
    the adoption of a plan relating to Alions liquidation or
    dissolution; and
    subject to certain exceptions, the merger or consolidation of
    the Company with or into another person or the merger of another
    person with or into the Company, or the sale of all or
    substantially all the assets of Alion to another person.  Optional Redemption.
 39




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##### 



12-month
  RedemptionPeriod

Price2011


105.125
%2012


102.563
%2013 and thereafter


100.000
%     7-Fiscal Year Period2009*


2010


2011


2012


2013


2014


2015($ in thousands)Bank revolving credit facility Interest(1)

$
872


$
983


$
710


$
483


$
482


$
253


$
253Senior Term Loan Interest(2)


17,161



22,759



22,525



22,352



7,820







 Principal(3)


1,825



2,433



2,433



2,433



229,297







Senior Unsecured Notes Interest


25,625



25,625



25,625



25,625



25,625



25,625



12,813 Principal


























250,000Subordinated Note Interest


2,353



3,223



3,369



3,594



3,332







 Principal






3,000



3,000



2,000



70,311







Total cash  pay interest


46,011



52,590



52,229



52,054



37,259



25,878



13,066Total cash  pay principal


1,825



5,433



5,433



4,433



299,608







250,000Total

$
47,836


$
58,023


$
57,662


$
56,487


$
336,867


$
25,878


$
263,066     *
    
    Estimated interest and principal payments for the remainder of
    fiscal year 2009.(1)
    
    Alion anticipates regularly accessing a $50.0 million
    revolving credit facility to finance working capital needs. The
    present revolving credit facility matures in August 2009. The
    Company expects to replace it with a similar facility for
    working capital needs at least through 2013. Alion estimates the
    average revolver balance will be $10.0 million for fiscal
    year 2009; $8.0 million for fiscal year 2010,
    $5.0 million for 2011, $2.5 million for 2012 and 2013
    and minimal thereafter. Interest expense includes estimated fees
    for the unused balance of a $50.0 million revolving credit
    facility. The Company estimates the effective average cash-pay
    interest rate, excluding fees for the unused balance on the
    revolver, will be 9.5% for all periods presented.(2)
    
    Alion estimates the average annual senior term loan balance
    under the Term B Senior Credit Facility will be:
    $238.1 million, $235.7 million, $233.3 million,
    $230.8 million, and $81.0 million for fiscal years
    2009 through 2013. The senior term loan matures February 2013.
    The Company expects it will need to refinance the senior 40




---



##### 



term loan before it matures and forecasts interest expense to
    continue at levels similar to prior years based on Alions
    current minimum interest rate of 9.5%.(3)
    
    The Term B Senior Credit Facility requires Alion to repay
    approximately 1.0% of the principal balance outstanding under
    the senior term loan annually. On a cumulative basis, Alion is
    required to pay approximately 4.3% of the principal through the
    first quarter of fiscal year 2013. The remaining principal
    balance is due on February 6, 2013, the senior term loan
    maturity date. The table reflects the balance drawn of
    $238.4 million as of December 31, 2008, resulting in
    approximately $2.4 million in principal payments each
    fiscal year from 2009 through 2012, approximately
    $0.6 million for the first quarter of fiscal year 2013, and
    the remaining principal balance of approximately
    $228.7 million on February 6, 2013. If Alion generates
    certain excess cash flow in a given fiscal year, issues or
    incurs certain debt or sells certain assets, the Term B Senior
    Credit Facility requires the Company to prepay a portion of the
    principal. As of December 31, 2008, no mandatory
    prepayments are due.  Contingent
    Obligations
  Earn-outs
    Other
    Contingent obligations which will impact the Companys cash
    flow
    
    IITs Subordinated Note warrant put rights;
    Stock-based and long-term incentive compensation plan
    obligations; and
    KSOP share repurchases and diversification options.    Number of Shares





Total ValueDate

Repurchased


Share Price


Purchased(In thousands)June 2003


5,248


$
11.13


$
58July 2003


2,696


$
11.13



30December 2003


50,031


$
14.71



736May 2004


117


$
16.56



2June 2004


727


$
16.56



12June 2004


743


$
16.56



12July 2004


48,309


$
16.56



800December 2004


46,816


$
19.94



934March 2005


5,691


$
19.94



113June 2005


45,846


$
29.81



1,367August 2005


1,090


$
33.78



37 41




---



##### 



Number of Shares





Total ValueDate

Repurchased


Share Price


Purchased(In thousands)September 2005


170,657


$
33.78



5,765December 2005


211,537


$
35.89



7,592June 2006


273,800


$
37.06



10,147July 2005


32,420


$
37.06



1,202August 2006


1,747


$
37.06



65December 2006


2,243


$
41.02



92January 2007


14


$
41.02



1February 2007


157,320


$
41.02



6,453March 2007


73


$
41.02



3May 2007


238


$
43.37



10June 2007


152


$
43.37



7July 2007


276,877


$
43.37



12,008August 2007


251,248


$
43.37



10,897September 2007


15


$
43.37



1October 2007


90


$
40.05



4December 2007


210


$
40.05



8February 2008


648


$
40.05



26March 2008


19,961


$
40.05



799March 2008


10,011


$
41.00



410April 2008


60


$
40.05



2July 2008


306


$
41.00



13September 2008


68,009


$
41.00



2,788December 2008


233


$
38.35



9Total


1,685,183






$
62,403      42




---



##### 



Recently
    Issued Accounting Pronouncements
  Business Combinations,
  Noncontrolling Interests in Consolidated Financial
    Statements,
    Disclosures about Derivative Instruments and Hedging
    Activities, Accounting for Derivative Instruments
    and Hedging Activities
  Forward
    Looking Statements
      
    changes to the ERISA laws related to the KSOP;
    changes to Alions subchapter S status, or any change in
    Alions effective tax rate;
    additional costs associated with complying with the
    Sarbanes-Oxley Act of 2002, including any changes in the
    SECs rules, and other corporate governance requirements;
    failure of government customers to exercise options under
    contracts; 43




---



##### 




    funding decisions relating to U.S. Government projects;
    government contract procurement (such as bid protest) and
    termination risks;
    competitive factors such as pricing pressures
    and/or
    competition to hire and retain employees;
    results of current
    and/or
    future legal proceedings and government agency proceedings which
    may arise out of Alions operations and the attendant risks
    of fines, liabilities, penalties, suspension
    and/or
    debarment;
    undertaking acquisitions that could increase costs or
    liabilities or be disruptive;
    taking on additional debt to fund acquisitions;
    failure to adequately integrate acquired businesses;
    material changes in laws or regulations applicable to
    Alions businesses;
    other risk factors discussed in the Companys annual report
    on Form 10-K
    for the year ended September 30, 2008 filed with the SEC on
    December 23, 2008.    Item 3.
    Quantitative
    and Qualitative Disclosures About Market Risk  Interest
    rate risk
      Foreign
    currency risk
    Risk
    associated with value of Alion common stock
     44




---



##### 



Item 4.
    Controls
    and Procedures  Disclosure Controls and Procedures.
  Limitations on the Effectiveness of
    Controls.
  Changes in Internal Control Over Financial
    Reporting.
  Item 4T.
    Controls
    and Procedures   PART II 
    OTHER INFORMATION  Item 1.
    Legal
    Proceedings      Item 1A.
    Risk
    Factors  Form 10-K
  Item 2.
    Unregistered
    Sales of Equity Securities and Use of Proceeds   45




---



##### 



Item 3.
    Defaults
    Upon Senior Securities    Item 4.
    Submission
    of Matters to a Vote of Security Holders    Item 5.
    Other
    Information    Item 6.
    Exhibits  ExhibitNo.

Description31
.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-14(a) 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 Financial 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.  46




---



##### 



SIGNATURES
      By:
    /s/  Michael
    J. Alber   Title:
    Principal Financial Officer and
    Duly Authorized Officer   47