UNITED
    STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
    20549
   Form 10-K
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    September 30, 2008    Alion Science and Technology
    Corporation
 (Exact name of Registrant as
    Specified in its Charter)
   Delaware

333-89756

54-2061691(State or Other Jurisdiction
    of
    Organization)

(Commission File
    Number)

(IRS Employer Incorporation
    or 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, including
 Area Code, of Principal
    Executive Offices)
      Securities registered pursuant to Section 12(b) or 12(g)
    of the Act:
    None
  o þ
  þ o
  o þ
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
 Large
    accelerated
    filer o
    Accelerated
    filer o
    Non-accelerated
    filer þ
    Smaller
    reporting
    company o   Rule 12b-2 o þ
      Documents
    Incorporated by Reference:
    None




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##### 





ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  FORM 10-K
  TABLE OF
    CONTENTS
  PART IItem 1.


Business


2Item 1A.


Risk Factors


14Item 1B.


Unresolved Staff Comments


24Item 2.


Properties


24Item 3.


Legal Proceedings


25Item 4.


Submission of Matters to a Vote of Security
    Holders


26PART IIItem 5.


Market for Registrants Common Equity,
    Related Stockholders Matters and Issuer Purchases of Equity
    Securities


26Item 6.


Selected Financial Data


26Item 7.


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


28Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


49Item 8.


Financial Statements and Supplementary Data


50Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


91Item 9A(T).


Controls and Procedures


91Item 9B.


Other Information


91PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


93Item 11.


Executive Compensation


98Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholders Matters


117Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


118Item 14.


Principal Accountant Fees and Services


118PART IVItem 15.


Exhibits and Financial Statement Schedules


119   1




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##### 



PART I  Item 1.
    Business  Form 10-K
  and/or and/or and/or
    Overview
        2




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##### 



Revenue
    by Fiscal Year
  Core Business Area

2008


2007


2006(In millions)Naval Architecture/Marine Engineering

$
313.5



42.4
%

$
297.4



40.4
%

$
140.4



27.6
%Defense Operations


140.1



19.0
%


152.0



20.6
%


137.3



27.0
%Industrial Technology Solutions


115.6



15.6
%


102.8



13.9
%


57.5



11.3
%Chemical, Biological, Nuclear, and Environmental Sciences


53.7



7.3
%


70.8



9.8
%


50.9



10.0
%Modeling and Simulation


70.6



9.5
%


54.8



7.2
%


49.4



9.7
%Information Technology


31.8



4.3
%


38.0



5.1
%


25.8



5.1
%Wireless Communications


14.2



1.9
%


21.8



3.0
%


47.3



9.3
%Total

$
739.5



100.0
%

$
737.6



100.0
%

$
508.6



100.0
%   Naval Architecture and Marine Engineering.
  
    We provide total ship design services for military and
    commercial customers including defining requirements, analyzing
    concepts, and studying feasibility. We provide contract design,
    detail design and production support.
    We provide systems engineering/design integration, hull form
    development and performance analysis, structural design and
    analysis, weight engineering and intact and damage stability
    analysis.
    We design and engineer ship systems including propulsion,
    electrical, fluids/piping, auxiliary, HVAC, deck machinery, and
    machinery automation and control systems. We provide expertise
    for machinery integration, test and trials, failure analysis,
    modeling and simulation, and integrated logistics support.
    We provide mission and threat analysis, evaluate candidate
    warfare and combat systems, and develop specifications and
    installation drawings for topside and below-deck interface
    requirements, and ship modernizations.
    We furnish acquisition planning, business and financial
    management, configuration and data management, test and
    evaluation support, and production analysis and management in
    all life cycle phases of equipment, systems and ships.  Defense Operations.
  
    We analyze major programs and issues related to joint warfare
    experimentation and other transformational activities. We
    develop net-centric initiatives and integrate C4I (command,
    control, communication, and computer intelligence) initiatives.
    We support a broad range of U.S. Army efforts including
    analyzing, planning and implementing base realignments and
    assessing the defense industrial base.
    We help develop DoD department-wide education programs. We
    develop technology, compile courseware and translate it into
    electronic or web-based media for distance learning.
    We provide the tools and support to assess vulnerabilities and
    protect infrastructure such as ports, power plants and
    communications nodes.  Industrial Technology Solutions.
  
    We use technology to enhance production, improve performance,
    reduce cost and extend life of complex engineered products. 3




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##### 




    We develop and integrate systems for low-volume productivity and
    rapid manufacturing systems.
    We manage the DoD Advanced Materials, Manufacturing and Testing
    Information Analysis Center (AMMTIAC) and the DuPage
    Manufacturing Research Center and support DoDs Night
    Vision and Electronic Sensors Directorate.
    We provide engineering and architecture expertise and
    construction management, logistics, design oversight and
    inspection.
    We operate acoustics laboratories to test and evaluate the
    noise-related characteristics of various components.  Chemical, Biological, Nuclear and Environmental
    Sciences.
  
    We provide nuclear safety analyses to the U.S. Department
    of Energy and its National Laboratories and the commercial
    nuclear power industry
    We develop and evaluate methods for detecting chemical,
    biological and other toxic agents. Our research enhances safe
    handling of potentially-hazardous substances.
    We develop, test and implement methods for measuring air
    quality. Through laboratory analysis, we determine the
    constituents and properties of wastes and effluents and validate
    analytical methods and instruments.
    Our wholly-owned subsidiary, Human Factors Applications, Inc;
    demilitarizes conventional, toxic/radioactive and chemical
    warfare material, and decontaminates and demolishes buildings
    and equipment contaminated with explosives.  Modeling and Simulation.
  
    We design and conduct strategic and operations analytic war
    games to evaluate future operational concepts and force
    transformation initiatives. We create and implement training
    scenarios for two-dimensional and three-dimensional
    (3-D)
    simulation systems. We support Joint Forces Commands
    Millennium Challenge and Joint Conflict and Tactical Simulation
    scenarios.
    We manage the Modeling and Simulation Information Analysis
    Center (MSIAC) for the DoD.
    We develop phenomenological models for nuclear, chemical,
    biological and electromagnetic environments.  Information Technology.
  
    We design, develop and implement enterprise information systems.
    We develop web-based and stand-alone solutions, and decision
    support tools.
    We deliver data warehousing/mining, decision support, and
    information analysis solutions.
    We provide information assurance, business continuity and
    disaster planning, network planning and design virtual private
    networks.  Wireless Communications.
  
    We determine if wireless networks have the desired geographic
    coverage and operate free of interference, and how to improve
    network performance. We evaluate and recommend commercial radio
    frequency equipment designs. 4




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##### 




    We determine how best to use radio frequencies without new or
    existing users or technologies causing interference.
    The DoD uses our Spectrum
    XXItm

    software tool as its worldwide automated spectrum management
    system as do other U.S. government agencies. Our spectrum
    monitoring software locates and tracks users who violate
    spectrum use rules.  Corporate
    History
    The
    Alion ESOP
    
    rolling over an eligible retirement account balance from another
    plan into the ESOP component as part of an individual one-time
    election available to new hires;
    transferring funds to the ESOP component from the non-ESOP
    component of the KSOP during a semi-annual transfer; and/or
    directing a portion of pre-tax earnings to the ESOP component.         5




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##### 



Business
    Strategy
    Broaden our existing core competencies.
  Leverage experience and reputation to expand market
    share.
  Continue to improve financial performance and increase
    scale.
  Pursue a disciplined acquisition strategy.
  Market
    and Industry Background
    Growth in Overall DoD
    Budget/Spending.
  Growing Spending in the DoD Operations and Maintenance
    Accounts.
  Reliance on Technology Service Providers.
 6




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##### 



Expected Growth in DoD Research and Development
    Expenditures.
  Increased Budget Dollars for Homeland
    Security.
  Growing Opportunities for Sophisticated Technology Solution
    Providers. st
  
    Shift from an emphasis on ships, guns, tanks and planes to a
    focus on information, knowledge, and timely, actionable
    intelligence.
    Implement enterprise-wide changes to ensure that organizations,
    processes and procedures effectively support DoDs
    strategic direction.
    Emphasize joint command and control for homeland defense and
    civil support missions, including communication and command and
    control systems that are interoperable with other agencies and
    state and local governments.
    Nearly double unmanned aerial vehicle (UAV) coverage capacity by
    accelerating the acquisition of Predator UAVs and Global Hawk
    UAVs.
    Build a naval fleet that includes 11 Carrier Strike Groups,
    balance the need to transform and recapitalize the naval fleet,
    improve affordability and provide stability for the shipbuilding
    industry.
    Procurement of Littoral Combat Ships to provide power projection
    capabilities in littoral waters.
    Make additional investments in information assurance
    capabilities to protect information and DoD computer networks.
    Improve DoD information sharing with other U.S. agencies
    and with international allies and partners by developing
    information protection policies and exploiting the latest
    commercial technologies.
    Continue to pursue enabling technologies for transformational
    logistics and innovative operational concepts such as Seabasing.
    Increase investment to implement the Global Information Grid.
    Expand training programs to accommodate planners from other
    agencies and working with the DHS.  Continuing Impact of U.S. Government Procurement
    Reform.
 7




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##### 



We are
    primarily a government contractor.
      Contract Types. time-and-material.
  
    Cost-reimbursement contracts allow us to recover our direct
    labor and materials costs, a share of allocable indirect
    expenses, plus a fixed or variable fee depending on the
    contract. Indirect expenses are costs related to operating our
    business we recover under government contract rules.
    Fixed-price contracts oblige customers to pay us a fixed dollar
    amount to cover all direct and indirect costs, and fees. We
    assume the risk of any cost overruns and receive the benefit of
    any cost savings on fixed price contracts.
    Time-and-material
    contracts have fixed hourly billing rates that cover labor
    costs, related indirect expenses and an hourly fee, along with
    cost reimbursable provisions for materials and other direct
    costs without fee.    For the Year Ended September 30,Contract Type

2008


2007


2006*(Amounts in millions)Cost-reimbursement

$
517.1



69.9
%

$
514.9



69.8
%

$
333.3



65.5
%Fixed-price


70.8



9.6
%


68.6



9.3
%


63.3



12.4
%Time-and-material


151.6



20.5
%


154.1



20.9
%


112.0



22.0
%Total

$
739.5



100.0
%

$
737.6



100.0
%

$
508.6



100.0
%     *
    
    Revised to conform to current presentation for ID/IQ contract
    task orders. 8




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##### 



Government Oversight.
  Backlog.
   9




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##### 



September 30,2008


2007


2006(In millions)Backlog:Funded

$
340.5


$
360.0


$
386.0Unfunded


4,475.8



4,669.0



3,861.0Total

$
4,816.3


$
5,029.0


$
4,247.0       September 30,2008


2007


2006(In millions)In-process

$
529.0


$
250.0


$
650.0Submitted


1,057.0



834.0



474.0Total

$
1,586.0


$
1,084.0


$
1,124.0   Corporate
    Culture, Employees and Recruiting
       10




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##### 



Our
    Customers
    2008


2007


2006(In millions)U.S. Department of Defense

$
638.7



86.4
%

$
642.5



87.1
%

$
450.5



88.6
%Other Federal Civilian Agencies


48.1



6.5
%


45.5



6.2
%


30.2



5.9
%Commercial and International


52.7



7.1
%


49.6



6.7
%


27.9



5.5
%Total

$
739.5



100.0
%

$
737.6



100.0
%

$
508.6



100.0
%   Competition
        
    technical capabilities and approach;
    quality of personnel, including management capabilities;
    successful past contract performance; and
    price. 11




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##### 



S
    Corporation Status
          Business
    Development and Promotional Activities
       12




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##### 



Resources
    Patents
    and Proprietary Information
    Foreign
    Operations
  U.S.-based
  Company
    Information Available on the Internet
    Environmental
    Matters
  and/or
     13




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##### 



Item 1A.
    Risk
    Factors  Risks
    Related to Our Business
  We
    have incurred a significant amount of debt, and our debt load
    may limit our operational flexibility and negatively affect the
    value of an investment in the ESOP component.
          
    making it more difficult for us to satisfy our debt-related
    obligations; any failure to comply with the obligations of any
    of our debt instruments, including restrictive and financial
    covenants, could result in an event of default under the
    agreements governing our debt;
    making it more difficult for us to satisfy our repurchase
    obligations to ESOP participants;
    increasing our vulnerability to general adverse economic and
    industry conditions by making it more difficult for us to react
    to changing conditions;
    limiting our ability to obtain additional financing to fund
    working capital, capital expenditures, acquisitions or other
    business opportunities, introductions of new technologies or
    other general corporate requirements;
    requiring a substantial portion of our operating cash flow to
    pay interest on our debt and reducing our ability to use our
    cash flow to fund future working capital, capital expenditures,
    acquisitions or other business opportunities, introduce new
    technologies or meet other general corporate requirements;
    exposing us to interest rate fluctuation risks because some of
    our debt is at floating interest rates, which can result in
    higher interest expense if interest rates rise;
    limiting our flexibility in planning for, or reacting to,
    changes in our business and the industry in which we
    operate; and
    placing us at a competitive disadvantage compared to competitors
    with less debt.  Despite
    our current debt levels, we and our subsidiaries may still be
    able to incur more debt. This could further exacerbate the risks
    associated with our substantial leverage.
   14




---



##### 



Our
    Term B Senior Credit Facility and the Senior Unsecured Note
    Indenture will restrict our operations.
    
    incur additional debt other than permitted additional debt;
    pay dividends or distributions on our capital stock or purchase,
    redeem or retire our capital stock other than distributions
    necessary for the ESOP to satisfy its repurchase obligations and
    certain payments required under our equity based compensation
    plans;
    make acquisitions and investments other than permitted
    acquisitions and permitted investments;
    issue or sell preferred stock of subsidiaries;
    create liens on our assets;
    enter into certain transactions with affiliates;
    merge or consolidate with another company; and
    transfer or sell assets outside the ordinary course of business.    and/or and/or and/or
  We may
    not be able to obtain financing in the future, and the terms of
    any future financings may limit our ability to manage our
    business. Difficulties in obtaining financing on favorable terms
    would have a negative effect on our ability to execute our
    business strategy.
     15




---



##### 



We may
    be required to amend the financial covenants of our Term B
    Senior Credit Facility which could materially impact our ability
    to finance our future operations, future acquisitions or capital
    needs.
    and/or
  We
    expect to experience net losses in at least our next five years
    of operation.
    Our
    ability to meet our financial and other future obligations
    depends on our future operating results and we cannot be sure
    that we will be able to meet these obligations as they come
    due.
    
    funding of our contract backlog;
    the time within which our customers pay our accounts receivable;
    new contract awards and our performance on those contracts; 16




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##### 




    continued increase in revenue on an annual basis;
    increase in operating income on an annual basis;
    the amount of common stock our employees purchase via payroll
    deferrals and rollovers to our ESOP;
    the amount of our common stock we repurchase from our former
    employees;
    interest rate levels;
    current economic conditions and conditions in the defense
    contracting industry;
    U.S. government spending levels, both generally and by our
    particular customers;
    failure by the Congress to approve budgets timely for the
    U.S. federal agencies we support;
    operating difficulties, operating costs or pricing pressures;
    passage of legislation or other regulatory developments that
    adversely affect us; and
    delays in implementing any of our strategic projects.  paid-in-kind
    We
    face intense competition from many competitors that have greater
    resources than we do, which could result in price reductions,
    reduced profitability, and loss of market share.
      
    the effectiveness of our research and development programs;
    our ability to offer better performance than our competitors at
    a lower or comparable cost;
    the readiness of our facilities, equipment and personnel to
    perform the programs for which we compete; and
    our ability to attract and retain key personnel. 17




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##### 



Historically,
    a few contracts have provided most of our revenue. If we do not
    retain or replace these contracts our operations will
    suffer.
    1.
    SeaPort Multiple Award Contract for the Naval Sea Systems
    Command (17.3%);2.
    Technical and Analytical Support for the U.S. Air Force
    (9.0%);3.
    Engineering, Financial and Program Management Services to the
    Virtual SYSCOM for the U.S. Navy (8.6%);4.
    Weapons System Technology Information Analysis Center for the
    Defense Information Systems Agency (5.1%); and5.
    Modeling and Simulation Information Analysis Center for the
    Defense Modeling and Simulation Office (4.7%).6.
    Engineering, Financial and Program Management Services to NAVSEA
    (4.5%)    If we
    are unable to manage our growth, our business could be adversely
    affected.
    Acquisitions
    could increase our costs or liabilities or be
    disruptive.
   18




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##### 



Due to
    the inherent danger involved in some of the businesses that we
    conduct, there are risks of claims by clients and third parties
    that could have a substantial adverse economic impact upon
    us.
    We
    depend on key management and may not be able to retain those
    employees due to competition for their services.
    Our
    business could suffer if we fail to attract, train and retain
    skilled employees.
    If we
    do not, or the ESOP Trust does not, continue to be exempt from
    U.S. federal income tax and any unrelated business income tax,
    our cash flow available to meet our financial obligations and to
    reinvest in our operations may decrease.
     19




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##### 



In
    order to succeed, we will have to keep up with rapid
    technological changes in a number of industries. Various factors
    could impact our ability to keep pace with these
    changes.
    An
    economic downturn could harm our business.
    Our
    employees may engage in misconduct or other improper activities,
    which could harm our business.
    The
    interests of the ESOP Trust may not be aligned with the
    interests of participants in the ESOP component of the
    KSOP.
    Environmental
    laws and regulations and our use of hazardous materials may
    subject us to significant liabilities.
    
    modifications to current laws and regulations;
    new laws and regulations;
    violations of environmental laws or the permits required for our
    operations;
    new guidance or new interpretation of existing laws and
    regulations; or
    the discovery of previously unknown contamination. 20




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##### 



Risks
    Related to Our Industry
  We
    depend on U.S. government contracts for substantially all of our
    revenue. Changes in the contracting or fiscal policies of the
    U.S. government could adversely affect our business, financial
    condition or results of operations.
    
    budgetary constraints affecting U.S. government spending
    generally, or specific departments or agencies in particular,
    changes in U.S. government fiscal policies or available
    funding;
    changes in U.S. government programs or requirements;
    curtailment of the U.S. governments use of technology
    services firms;
    adoption of new laws or regulations;
    technological developments;
    U.S. government shutdowns (such as that which occurred
    during the U.S. governments 1996 fiscal year);
    competition and consolidation in the information technology
    industry; and
    general economic conditions.      Failure
    by Congress to timely approve budgets for the federal agencies
    we support could delay or reduce spending and cause us to lose
    revenue.
    We may
    not receive the full amount of our backlog, which could lower
    future revenue.
   21




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##### 



Many
    of our U.S. government customers procure goods and services
    through ID/IQ, GWAC or GSA Schedule contracts under which we
    must compete for post-award orders.
  and/or
  U.S.
    government contracts contain termination provisions that are
    unfavorable to us.
    If we
    do not accurately estimate the expenses, time and resources
    necessary to meet our contractual obligations, our profit will
    be lower than expected.
      Our
    operating margins and operating results may suffer if
    cost-reimbursement contracts increase in proportion to our total
    contract mix.
   22




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##### 



If the
    volume of services we provide under fixed-price contracts
    decreases in total or as a proportion of our total business, or
    if profit rates on these contracts decline, our operating
    margins and operating results may suffer.
    Our
    subcontractors failure to perform contractual obligations
    could damage our reputation as a prime contractor and our
    ability to obtain future business.
    Because
    U.S. government contracts are subject to government audits,
    contract payments are subject to adjustment and repayment which
    may result in revenue attributed to a contract being lower than
    expected.
    If we
    fail to recover at- risk contract costs, it may result in
    reduced fees or in losses.
    Actual
    or perceived conflicts of interest may prevent us from being
    able to bid on or perform contracts.
    As a
    U.S. government contractor, we must comply with complex
    procurement laws and regulations and our failure to do so could
    have a negative impact upon our business.
  and/or
 23




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##### 



We
    derive significant revenue from U.S. government contracts
    awarded through competitive bidding which is an inherently
    unpredictable process.
    
    the frequent need to bid on programs in advance of the
    completion of their design, which can result in unforeseen
    technological difficulties
    and/or cost
    overruns;
    the substantial time and effort, including design, development
    and promotional activities, required to prepare bids and
    proposals for contracts that may not be awarded to us; and
    the rapid rate of technological advancement and design
    complexity of most of our research offerings.    Our
    failure to obtain and maintain necessary security clearances may
    limit our ability to carry out confidential work for U.S.
    government customers, which could cause our revenue to
    decline.
  and/or
  Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties   24




---



##### 



Item 3.
    Legal
    Proceedings  Estate
    of Joseph Hudert vs. Alion Science and Technology Corporation;
    Estate of Frank Stotmeister vs. Alion Science and Technology
    Corporation.
             25




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##### 



Item 4.
    Submission
    of Matters to a Vote of Security Holders   PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholders
    Matters and Issuer Purchases of Equity Securities      Valuation Date

Share PriceSeptember 30, 2008

$
38.35March 31, 2008

$
41.00September 30, 2007

$
40.05March 31, 2007

$
43.37     Form 8-K.
  Dividend
    Policy
    Item 6.
    Selected
    Financial Data   26




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##### 



Selected
    Financial Data of Alion Science and Technology Corporation
    For Years Ended September 30,
  2008(1)


2007(2)


2006(3)


2005(4)


2004(5)(In thousands, except share and per share data)Consolidated Operating Data:Contract revenue

$
739,482


$
737,587


$
508,628


$
369,231


$
269,940Direct contract expenses


566,408



562,139



381,467



267,241



196,388Operating expenses


152,117



161,283



129,466



104,081



73,703Operating income (loss)


20,957



14,165



(2,305
)


(2,091
)


(151
)Interest expense(6)


47,382



51,226



29,691



38,696



16,212Net loss

$
(25,334
)

$
(42,770
)

$
(31,115
)

$
(40,238
)

$
(15,111
)Basic and diluted loss per share

$
(5.01
)

$
(8.35
)

$
(6.19
)

$
(9.50
)

$
(4.91
)Basic and diluted weighted-average common shares outstanding


5,057,337



5,121,033



5,029,670



4,235,947



3,074,709Consolidated Balance Sheet Data at End of Period:Net accounts receivable

$
168,451


$
186,660


$
150,412


$
80,898


$
68,949Total assets


655,946



683,970



650,969



334,249



188,461Working capital


33,275



60,880



52,284



59,775



30,411Current portion of long-term debt(7)


11,932



14,541



2,816



1,404



468Long-term debt, excluding current portion(7)


516,842



533,152



463,743



180,833



99,631Redeemable common stock warrants


39,996



33,610



35,234



44,590



20,777Redeemable common stock


200,561



200,768



213,719



184,828



67,321Accumulated deficit


(276,912
)


(260,147
)


(221,009
)


(164,354
)


(57,573
)Other Data:Depreciation and amortization

$
20,715


$
21,824


$
16,566


$
17,771


$
13,447Cash flows provided by (used in):Operating activities

$
29,320


$
(5,008
)

$
(15,678
)

$
35,140


$
5,675Investing activities


(12,152
)


(25,438
)


(284,423
)


(78,017
)


(23,625
)Financing activities


(12,565
)


39,375



265,078



75,938



22,173     (1)
    
    There were no significant acquisitions in 2008.(2)
    
    In July 2007, the Company acquired substantially all assets of
    LogConGroup, Inc. for $1.7 million plus up to
    $0.9 million in contingent earn-out obligations over six
    years. LogConGroup operating results are included in
    Alions results from its July acquisition date.(3)
    
    Alion completed four acquisitions in 2006. Each
    acquisitions results of operations are included in
    Alions operations from its acquisition date. In February
    2006, Alion purchased BMH Associates, Inc. for approximately
    $20.0 million plus $3.0 million additional contingent
    earn-out obligations over a two year period. Also in February
    2006, Alion bought Washington Consulting, Inc. for
    $18.0 million plus $1.0 million additional contingent
    earn-out obligations over a two year period. In May 2006, Alion
    acquired Micro Analysis and Design, Inc. for approximately
    $16.9 million plus additional contingent earn-out
    obligations over a two year period. In June 2006, Alion paid
    Anteon Corporation approximately $221.4 million for a group
    of assets consisting primarily of customer contracts.(4)
    
    During 2005, Alion completed four acquisitions. Each
    acquisitions results of operations are included in
    Alions results from its acquisition date. In October 2004,
    Alion purchased substantially all of the assets of
    Countermeasures Inc. for approximately $2.4 million. In
    February 2005, Alion acquired METI Corporation for approximately
    $7.0 million. In February 2005, Alion bought Carmel Applied
    Technologies, Inc. for 27




---



##### 



approximately $7.3 million plus a maximum three-year
    earn-out of $8.3 million. In April 2005, the Company
    acquired JJMA Corporation (JJMA) for approximately
    $99.8 million including acquisition costs.(5)
    
    In October 2003, Alion bought Innovative Technology Solutions
    Corporation for $4.0 million and $1.8 million in
    subsequent earn outs. In February 2004, Alion acquired Identix
    Public Sector, Inc. for $8.0 million in cash and
    $4.3 million of intercompany payables. Each
    acquisitions results of operations are included in
    Alions results from its acquisition date.(6)
    
    Interest Expense includes cash pay interest and non-cash
    expenses for amortization of original issue discount and debt
    issue costs, and changes in the value of redeemable stock
    warrants due to fluctuations in Alions share price.(7)
    
    Current and long-term debt includes senior and subordinated debt
    net of debt issue costs and original issue discount for
    redeemable common stock warrants.  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations    About
    This Managements Discussion and Analysis
    
    provide an overview of our business;
    explain the year-over-year trends in our operating results;
    describe our liquidity and capital resources;
    explain our critical accounting policies;
    explain certain of our other obligations; and
    disclose market and other risks.  Overview
    For the Years Ended September 30,2008


2007


2006(In millions)Revenue

$
739.5


$
737.6


$
508.6Net loss

$
(25.3
)

$
(42.8
)

$
(31.1
)Contract Backlog:Funded

$
340.5


$
360.0


$
386.0Unfunded


4,475.8



4,669.0



3,861.0Total

$
4,816.3


$
5,029.0


$
4,247.0  28




---



##### 



For the Years Ended September 30,2008


2007


2006(In millions)U.S. Department of Defense

$
638.7



86.4
%

$
642.5



87.1
%

$
450.5



88.6
%Other Federal Civilian Agencies


48.1



6.5
%


45.5



6.2
%


30.2



5.9
%Commercial and International


52.7



7.1
%


49.6



6.7
%


27.9



5.5
%Total

$
739.5



100.0
%

$
737.6



100.0
%

$
508.6



100.0
%       time-and-material) time-and-material time-and-material
  For the Year Ended September 30,Contract Type

2008


2007


2006*(In millions)Cost-reimbursement

$
517.1



69.9
%

$
514.9



69.8
%

$
333.3



65.5
%Fixed-price


70.8



9.6
%


68.6



9.3
%


63.3



12.5
%Time-and-material


151.6



20.5
%


154.1



20.9
%


112.0



22.0
%Total

$
739.5



100.0
%

$
737.6



100.0
%

$
508.6



100.0
%     *
    
    The 2006 amounts were revised to conform to current presentation
    of ID/IQ contracts. 29




---



##### 



Results
    of Operations
    Year
    ended September 30, 2008 Compared to Year ended
    September 30, 2007
  Form 10-K.
  Year Ended September 30,Selected Financial Information

2008


2007%





%Revenue





Revenue(In millions)Total revenue

$
739.5






$
737.6Material and subcontract revenue


305.9



41.4
%


306.8



41.6
%Total direct contract expenses


566.4



76.6
%


562.1



76.2
%Major components of direct contract expense:Direct labor expense


248.4



33.6
%


245.8



33.3
%Material and subcontract expense


295.1



39.9
%


295.1



40.0
%Other direct expense


22.9



3.1
%


21.2



2.9
%Gross profit


173.1



23.4
%


175.4



23.8
%Total operating expense


152.1



20.6
%


161.3



21.9
%Major components of operating expense:Indirect personnel and facilities


70.9



9.6
%


76.4



10.4
%General and administrative (excluding stock-based compensation)


59.0



8.0
%


52.4



7.1
%Stock-based compensation


0.5



0.1
%


8.3



1.1
%Depreciation and amortization


20.7



2.8
%


21.8



3.0
%Income from operations

$
21.0



2.8
%

$
14.2



1.9
%   Contract Revenue.
 30




---



##### 



Direct Contract Expenses.
  
    Direct labor expense for the year ended September 30, 2008
    increased $2.6 million or 1.1% over the year ended
    September 30, 2007. Direct labor was 33.6% and 33.3% of
    revenue for fiscal years 2008 and 2007.
    M&S expense at $295.1 million for fiscal 2008 was
    unchanged from fiscal 2007 levels and was 39.9% and 40.0% of
    each years revenue. Fiscal year 2008 M&S expense was
    approximately 96.5% of M&S revenue compared to 96.2% for
    the prior year.  Gross Profit.
  Operating Expenses.
  
    Indirect personnel and facilities expenses for the year ended
    September 30, 2008 decreased approximately
    $5.5 million or 7.2% over the year ended September 30,
    2007. We achieved this expense reduction by reducing facility
    costs by approximately $4.1 million and by increasing labor
    productivity which reduced indirect labor by approximately
    $1.5 million. Operating expenses for indirect personnel and
    facilities were 9.6% and 10.4% of revenue for the years ended
    September 30, 2008 and 2007.
    General and administrative (G&A) expense, for fiscal year
    2008 decreased approximately $1.2 million or 2.0% compared
    to fiscal year 2007. Increased expense came from approximately
    $3.3 million for settlements with senior executives;
    approximately $1.4 million in legal, accounting and other
    fees for capital structuring and regulatory filings;
    approximately $1.2 million for Alion University and human
    resources programs, and approximately $0.8 million for
    other administrative expenses. Stock-based compensation expense
    declined approximately $7.8 million in fiscal 2008 because
    of a decline in the estimated value of Alion common stock and
    forfeitures of previously recognized grants. Bad debt expense
    decreased due to improved collections of accounts receivable.
    Depreciation and amortization expense for fiscal year 2008
    decreased approximately $1.1 million or 5.0% over the year
    ended September 30, 2007. A $0.5 million increase in
    depreciation expense for fixed assets partially offset a
    $1.6 million decline in amortization expense for
    intangibles. Depreciation and amortization expense was 2.8% and
    3.0% of revenue for the years ended September 30, 2008 and
    2007.  Operating Income.
 31




---



##### 



Other Expense.
  Year Ended September 30,2008


2007(In millions)Interest ExpenseCash Pay InterestTerm B Revolving Credit Facility

$
1.9



2.1Term B Senior Loan


16.5



19.6Senior Unsecured Notes


25.6



16.6Bridge Loan






6.8Other cash pay interest and fees


0.4



0.3Sub-total cash pay interest


44.4



45.4Deferred and Non- cash InterestDebt issue costs and other non-cash items


1.7



3.2Subordinated Note interest


4.0



3.3Redeemable warrants


(2.7
)


(0.7
)Sub-total non-cash interest


3.0



5.8Total interest expense

$
47.4


$
51.2   Income Tax Expense.
  Net Loss.
  Year
    ended September 30, 2007 Compared to Year ended
    September 30, 2006
  Form 10-K.
  32




---



##### 



Year Ended September 30,Financial information

2007


2006%





%Revenue





Revenue(In millions)Total revenue

$
737.6






$
508.6Material and subcontract revenue


306.8



41.6
%


172.2



33.9
%Total direct contract expenses


562.1



76.2
%


381.5



75.0
%Major components of direct contract expense:Direct labor expense


245.8



33.3
%


202.6



39.8
%Material and subcontract expense


295.1



40.0
%


162.3



31.9
%Other direct expense


21.2



2.9
%


16.5



3.2
%Gross profit


175.4



23.8
%


127.2



25.0
%Total operating expense


161.3



21.9
%


129.5



25.5
%Major components of operating expense:Indirect personnel and facilities


76.4



10.4
%


52.1



10.2
%General and administrative (excluding stock-based compensation)


50.5



6.8
%


47.4



9.3
%Stock-based compensation


8.3



1.1
%


10.7



2.1
%Depreciation and amortization


21.8



3.0
%


16.6



3.3
%Operating income (loss)

$
14.2



1.9
%

$
(2.3
)


(0.5
)%   Contract Revenue.
    Direct Contract Expenses.
  
    Direct labor expense for the year ended September 30, 2007
    increased $43.2 million or 21.3% over the year ended
    September 30, 2006. Direct labor expense was 33.3% and
    39.8% of revenue for fiscal years 2007 and 2006. Although direct
    labor dollars increased as a result of 2006 acquisitions being
    online for a full year in 2007, the Anteon Contracts utilize a
    higher proportion of subcontractors leading to a decline in the
    relative proportion of revenue and expense derived from Alion
    staff.
    M&S expense for the year ended September 30, 2007
    increased $132.8 million or 81.8% over the year ended
    September 30, 2006. M&S expense was 40.0% and 31.9%
    for fiscal years 2007 and 2006. This is primarily a result of
    increased use of subcontractors. M&S expense increased to
    96.2% of M&S revenue in fiscal 2007 compared to 94.3% of
    M&S revenue in fiscal 2006, primarily as a result of lower
    profit margins on M&S work on acquired contracts.  Gross Profit.
 33




---



##### 



Operating Expenses.
  
    Indirect personnel and facilities expenses increased
    approximately $24.3 million or 46.6% in fiscal 2007
    compared to fiscal year 2006, principally for personnel and
    facilities costs related to the Anteon contract acquisition.
    Despite the increase, indirect personnel and facility operating
    expenses were relatively constant at 10.4% and 10.2% of revenue
    for fiscal years 2007 and 2006.
    General and administrative (G&A) expense for fiscal year
    2007 increased approximately $1.9 million or 3.2% over
    fiscal year 2006. G&A expenses were 11.9% and 15.9% of
    revenue for fiscal 2007 and 2006. The percentage decline
    reflects the economies of scale achieved from Alions
    increased size. Cost increases included: $2.6 million in
    legal and accounting fees related to issuing the senior
    unsecured notes; $3.4 million for infrastructure costs to
    support and integrate prior year acquisitions; $1.1 million
    in bad debt expense for growth in the Companys receivables
    and $0.4 million in legal and accounting fees for the
    LogConGroup purchase. These increases were offset by a
    $3.3 million gain on curtailing postretirement medical plan
    benefits. Stock-based compensation expense declined
    approximately $2.4 million in fiscal 2007 because of a
    decline in the estimated value of Alion common stock.
    Depreciation and amortization expense for fiscal year 2007
    increased approximately $5.2 million or 31.3% over fiscal
    year 2006. This was principally for amortization of
    contract-related intangibles acquired in 2006. Depreciation and
    amortization expense was 3.0% and 3.3% of revenue for the years
    ended September 30, 2007 and 2006.  Operating Income (Loss).
 34




---



##### 



Other Expense.
  Interest Expense
  Year Ended September 30,2007


2006(In millions)Interest ExpenseCash Pay InterestTerm B Revolving Credit Facility

$
2.1


$
0.7Term B Senior Loan


19.6



13.6Senior Unsecured Notes


16.6



Bridge Loan


6.8



4.8Other cash pay interest and fees


0.3



0.4Sub-total cash pay interest


45.4



19.5Deferred and Non- cash Interest Debt issue costs and other
    non-cash items


3.2



1.8Subordinated Note interest


3.3



3.2Redeemable warrants(a)


(0.7
)


5.2Sub-total non-cash interest


5.8



10.2Total interest expense

$
51.2


$
29.7     (a)
    
    Reflects change in value assigned to the detachable warrants
    associated with the Subordinated Note and/or the Mezzanine Note
    based on the change in the value of Alion common stock and the
    number of warrants outstanding; the warrants associated with the
    Mezzanine Note were redeemed on March 28, 2006.  Loss on extinguishment of debt.
    Income Tax Expense.
  Net Loss.
  Liquidity
    and Capital Resources
    Cash
    Flows.
   35




---



##### 



Discussion
    of Debt Structure
    Term B
    Senior Credit Facility
    
    a senior term loan in the approximate amount of
    $239.0 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 September 30, 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. 36




---



##### 




    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.
    On September 30, 2008, the fifth amendment made certain
    changes.  (a)
    It increased the interest rate by 350 basis points to a
    minimum Eurodollar interest rate of 3.50% plus 600 basis
    points, and a minimum alternate base rate of 4.50% plus
    500 basis points.(b)
    If the Company refinances, replaces or extends the maturity of
    its existing revolving line of credit with an interest rate
    spread which is more than 50 basis points higher than the
    then-current interest rate spread applicable to the
    Companys senior term loan, Alions interest rate
    spread would increase by the difference between the higher
    revolving credit facility interest rate spread and 50 basis
    points.(c)
    Alion is required to use all (formerly half) of excess annual
    cash flow to prepay outstanding senior term loans.(d)
    It amended financial covenants to provide Alion flexibility
    through September 30, 2009.(e)
    It restricts the Companys ability to pay the CEO or COO
    for previously awarded shares of phantom stock.(f)
    It permits Alion to incur additional second lien debt, subject
    to certain conditions.          Use of Proceeds.
 37




---



##### 



Security.
  Interest and Fees.
      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    38




---



##### 



Interest Rate Swap.
  Other Fees and Expenses.
    Financial Covenants.
    
    incur additional indebtedness other than permitted additional
    indebtedness after satisfying a senior secured leverage-based
    incurrence test;
    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 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. 39




---



##### 



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).    Bridge
    Loan Agreement
    Subordinated
    Note  Redeemable Common Stock Warrants
   40




---



##### 



paid-in-kind
      00-19, Accounting for Derivative Financial Instruments Indexed to,
    and Potentially Settled in, a Company Own Stock.
  Senior
    Unsecured Notes
    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; 41




---



##### 




    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.
     42




---



##### 



12-month
  Period

Redemption Price2011


105.125
%2012


102.563
%2013 and thereafter


100.000
%   Exchange Offer; Registration Rights.
  7-Fiscal Year Period ($ In thousands)2009


2010


2011


2012


2013


2014


2015Bank revolving credit facility- Interest(1)

$
1,150


$
1,150


$
970


$
511


$
559


$
250


$
250Senior Term Loan- Interest(2)


22,935



22,701



24,760



27,993



11,383







- Principal(3)


2,433



2,433



2,433



2,433



229,298







Interest Rate Swap(4)


4,647























Senior Unsecured Notes- Interest


25,625



25,625



25,625



25,625



25,625



25,625



12,813- Principal


























250,000Subordinated Note- Interest


2,447



3,223



3,369



3,594



3,332







- Principal


3,000



3,000



3,000



2,000



70,311







Total cash - pay interest


56,804



52,699



54,724



57,723



40,899



25,875



13,063Total cash - pay principal


5,433



5,433



5,433



4,433



299,609







250,000Total

$
62,237


$
58,132


$
60,157


$
62,156


$
340,508


$
25,875


$
263,063     (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; $10.0 million for fiscal year 2010,
    $8.0 million for 2011, $2.5 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 9.9% for all periods presented.(2)
    
    Alion estimates the average annual senior term loan balance
    under the Term B Senior Credit Facility will be:
    $237.8 million, $235.3 million, $232.9 million,
    $230.4 million, and $114.6 million for fiscal years
    2009 through 2013. The senior term loan matures February 2013.
    The Company expects it will need to refinance the Term B Senior
    term loan before it matures and forecasts interest expense to
    continue at levels similar to prior years. Based on an estimated
    LIBOR rate plus the Credit Suisse Eurodollar spread, Alion
    estimates the effective annual interest rates for the fiscal
    years 2009 through 2013 will be approximately 9.6%, 9.6%, 10.6%,
    12.1%, and 13.9%. Interest expense includes estimated senior
    term loan commitment fees.(3)
    
    The Term B Senior Credit Facility requires Alion to repay
    approximately 1.0 percent of the principal balance
    outstanding under the senior term loan annually. On a cumulative
    basis, Alion will 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
    $239.0 million as of 43




---



##### 



September 30, 2008, resulting in approximately
    $2.4 million in each of fiscal years 2009 through 2012,
    approximately $0.6 million for the first quarter of fiscal
    year 2013, and the remaining principal balance of approximately
    $229.3 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 September 30, 2008, no mandatory
    prepayments are due.(4)
    
    The interest rate swap has one remaining net settlement on
    November 1, 2008. Alion paid approximately
    $4.6 million on November 1, 2008 based on a floating
    rate of 5.49% and a fixed rate of 6.52%.  Contingent
    Obligations
  Earn-outs
    Amount


AmountAcquisition



Maximum


Expiration


Basis of

paid in


to be paid inDate

Business Unit

Earn-out


Date


Earn-outs

FY2008


FY2009 *2/10/06

BMH


6.00M



12/31/07


Business unit revenue

$
3.0


2/24/06

WCI


2.60M



9/30/07


Business unit revenue

$
1.0


7/20/07

LogConGroup


0.90M



7/20/13


Business unit revenue





$0.1M     *
    
    Amounts accrued as of September 30, 2008.    Other
    Contingent obligations which will impact the Companys cash
    flow
    
    IITs Subordinated Note warrant put rights;
    Stock based compensation plan obligations; and
    KSOP share repurchases and diversification options.    Number of Shares





Total ValueDate

Repurchased


Share Price


PurchasedJune 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



800 44




---



##### 



Number of Shares





Total ValueDate

Repurchased


Share Price


PurchasedDecember 2004


46,816


$
19.94



934March 2005


5,691


$
19.94



113June 2005


45,846


$
29.81



1,367August 2005


1,090


$
33.78



37September 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



2,789Total


1,684,950






$
62,395      45




---



##### 



Payments Due by Fiscal YearTotal


2009


2010


2011


2012


2013


Thereafter(In thousands)Contractual Obligations:Long-term debt(1)

$
872,128


$
62,237


$
58,132


$
60,157


$
62,156


$
340,508


$
288,938Lease Obligations


115,396



24,319



20,480



17,878



14,103



12,958



25,658Total contractual obligations

$
987,524


$
86,556


$
78,612


$
78,035


$
76,259


$
353,466


$
314,596     (1)
    
    Includes interest payments and forecasted debt obligations.  Off-Balance
    Sheet Financing Arrangements
  Accounting for
    Leases
  Summary
    of Critical Accounting Policies
  Revenue
    Recognition
  time-and-material
  time-and-material
   46




---



##### 



SOP 81-1, Accounting for Performance on Construction-Type and Certain
    Production-Type Contracts
  Goodwill
    and Intangible Assets
    Business Combinations.
    Redeemable
    Common Stock
   47




---



##### 



Recently
    Issued Accounting Pronouncements
  Fair Value Measurements,
  The Fair Value Option for Financial
    Assets and Liabilities  including an amendment of
    FASB Statement No. 115,
  Business Combinations,
  Noncontrolling Interests in Consolidated Financial
    Statements,
    Disclosures about Derivative Instruments and Hedging
    Activities, Accounting for Derivative Instruments
    and Hedging Activities
 48




---



##### 



Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk  Interest
    rate risk
      Foreign
    currency risk
    Risk
    associated with value of Alion common stock
     49




---



##### 



Item 8.
    Financial
    Statements and Supplementary Data  INDEX TO
    FINANCIAL STATEMENTS
   
 Consolidated Financial Statements of Alion Science and
    Technology CorporationReports of Independent Registered Public
    Accounting Firms


51Consolidated Financial Statements:Consolidated Balance Sheets as of
    September 30, 2008 and 2007


52Consolidated Statements of Operations for the
    years ended September 30, 2008, 2007 and 2006


53Consolidated Statements of Redeemable Common
    Stock and Accumulated Deficit for the years ended
    September 30, 2008, 2007, and 2006


54Consolidated Statements of Cash Flows for the
    years ended September 30, 2008, 2007, and 2006


55Notes to Consolidated Financial Statements


56Consolidated Financial Statement ScheduleSchedule II  Valuation and Qualifying Accounts


119   50




---



##### 



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM            /s/  DELOITTE &
    TOUCHE LLP    51




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  CONSOLIDATED
    BALANCE SHEETS
  September 30,


September 30,2008


2007(In thousands, except shareand per share information)Current assets:Cash and cash equivalents

$
16,287


$
11,684Accounts receivable, net


168,451



186,660Stock subscriptions receivable


2,669



3,378Prepaid expenses and other current assets


3,135



3,634Total current assets


190,542



205,356Property, plant and equipment, net


18,601



19,552Intangible assets, net


41,248



55,659Goodwill


398,871



395,926Other assets


6,684



7,477Total assets

$
655,946


$
683,970Current liabilities:Interest payable

$
6,543


$
12,111Current portion, Term B senior term loan payable


2,389



2,430Interest rate swap liability


4,629



Current portion of subordinated note payable


3,000



Current portion, acquisition obligations


50



4,832Trade accounts payable


57,164



46,104Accrued liabilities


39,227



33,238Accrued payroll and related liabilities


41,557



43,702Billings in excess of costs and estimated earnings on
    uncompleted contracts


2,708



2,059Total current liabilities


157,267



144,476Notes payable to bank






9,250Term B senior term loan payable, excluding current portion


229,831



238,356Senior unsecured notes


244,355



243,483Subordinated note payable


42,656



51,313Accrued compensation, excluding current portion


11,305



15,483Accrued postretirement benefit obligations


627



1,175Non-current portion of lease obligations


6,260



6,203Redeemable common stock warrants


39,996



33,610Redeemable common stock, $0.01 par value,
    8,000,000 shares authorized, 5,229,756 and
    5,012,934 shares issued and outstanding at
    September 30, 2008 and September 30, 2007


200,561



200,768Accumulated other comprehensive loss


(36
)


Accumulated deficit


(276,876
)


(260,147
)Total liabilities, redeemable common stock and accumulated
    deficit

$
655,946


$
683,970    52




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  CONSOLIDATED STATEMENTS OF OPERATIONS
  Year Ended September 30,2008


2007


2006(In thousands, except share andper share information)Contract revenue

$
739,482


$
737,587


$
508,628Direct contract expense


566,408



562,139



381,467Gross profit


173,074



175,448



127,161Operating expenses:Indirect contract expense


40,050



43,972



29,907Research and development


988



2,379



2,025General and administrative


59,484



60,698



58,760Rental and occupancy expense


30,880



32,410



22,208Depreciation and amortization


20,715



21,824



16,566Total operating expenses


152,117



161,283



129,466Operating income (loss)


20,957



14,165



(2,305
)Other income (expense):Interest income


423



319



590Interest expense


(47,382
)


(51,226
)


(29,691
)Loss on extinguishment on debt






(6,170
)


Other


655



132



317Total other expenses


(46,304
)


(56,945
)


(28,784
)Loss before income taxes


(25,347
)


(42,780
)


(31,089
)Income tax benefit (expense)


13



10



(26
)Net loss

$
(25,334
)

$
(42,770
)

$
(31,115
)Basic and diluted loss per share

$
(5.01
)

$
(8.35
)

$
(6.19
)Basic and diluted weighted average common shares outstanding


5,057,337



5,121,033



5,029,670    53




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  CONSOLIDATED STATEMENTS OF REDEEMABLE COMMON
    STOCK AND ACCUMULATED DEFICIT
  Redeemable Common Stock


Comprehensive


AccumulatedShares


Amount


Income


Deficit(In thousands, except share and per share information)Balances at October 1, 2005


5,149,840


$
184,828


$



$
(164,354
)Issuance of redeemable common stock


579,739



22,354







Retirement of redeemable common stock


(519,453
)


(19,003
)






Increase in common stock redemption value






25,540







(25,540
)Net loss for year ended September 30, 2006









$
(31,115
)


(31,115
)Balances at September 30, 2006


5,210,126


$
213,719






$
(221,009
)Issuance of redeemable common stock


493,740



20,265







Retirement of redeemable common stock


(690,932
)


(29,584
)






Reduction in common stock redemption value






(3,632
)






3,632Net loss for year ended September 30, 2007









$
(42,770
)


(42,770
)Balances at September 30, 2007


5,012,934


$
200,768






$
(260,147
)Issuance of redeemable common stock


316,117


$
12,449


$



$
Retirement of redeemable common stock


(99,295
)


(4,051
)






Reduction in common stock redemption value






(8,605
)






8,605Postretirement medical plan actuarial cost










(36
)


Net loss for year ended September 30, 2008










(25,334
)Comprehensive loss for year ended September 30, 2008









$
(25,370
)


(25,370
)Balances at September 30, 2008


5,229,756


$
200,561






$
(276,912
)    54




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  CONSOLIDATED STATEMENTS OF CASH FLOWS
  Year Ended September 30,2008


2007


2006(In thousands)Cash flows from operating activities:Net loss

$
(25,334
)

$
(42,770
)

$
(31,115
)Adjustments to reconcile net loss to net cash used in operating
    activities:Depreciation and amortization


20,715



21,824



16,566Accretion of debt to face value


1,146



969



922Amortization of debt issuance costs


1,766



2,768



1,669Loss on extinguishment of debt






6,170



Postretirement benefits curtailment gain






(3,320
)


Decrease (increase) in value of interest rate cap agreement






413



(94
)Change in fair value of redeemable common stock warrants


(3,895
)


(1,624
)


4,287Stock-based compensation


500



8,340



10,738Other


33



(28
)


(33
)Gain on sale of CATI-related assets


(750
)






Loss on interest rate swap


295







Changes in assets and liabilities, net of effect of acquisitions:Accounts receivable, net


18,363



(35,771
)


(59,687
)Other assets


771



(773
)


(1,316
)Trade accounts payable


11,059



10,229



22,192Accrued liabilities


6,119



10,734



16,917Interest payable


(5,568
)


11,871



183Other liabilities


4,100



5,960



3,093Net cash provided by/(used in) operating activities


29,320



(5,008
)


(15,678
)Cash flows from investing activities:Cash paid for acquisitions related obligations


(7,946
)


(14,751
)


(279,196
)Capital expenditures


(4,986
)


(10,687
)


(5,227
)Proceeds from sale of non-operating assets


780







Net cash used in investing activities


(12,152
)


(25,438
)


(284,423
)Cash flows from financing activities:Proceeds from Term B Senior Credit Facility note payable






40,000



118,000Proceeds from Senior Unsecured Notes






250,000



Cash received from interest rate swap


4,333







Repayment of Term B Credit Facility note payable


(6,474
)


(53,513
)


(1,905
)(Repayment) proceeds of Bridge loan






(170,000
)


170,000Payment of debt issuance costs


(500
)


(10,796
)


(7,758
)Repayment of mezzanine warrants










(13,643
)Revolving credit facility borrowings


450,505



465,245



194,160Revolving credit facility payments


(459,755
)


(468,295
)


(181,860
)Proceeds from interest rate cap agreement






360



Purchase of interest rate cap agreement










(44
)Loan to ESOP Trust


(3,369
)






ESOP loan repayment


3,369







Purchase of redeemable common stock from ESOP Trust


(4,051
)


(29,584
)


(19,003
)Cash received from issuance of redeemable common stock to Trust


3,377



15,958



7,131Net cash (used in)/provided by financing activities


(12,565
)


39,375



265,078Net increase (decrease) in cash and cash equivalents


4,603



8,929



(35,023
)Cash and cash equivalents at beginning of year


11,684



2,755



37,778Cash and cash equivalents at end of year

$
16,287


$
11,684


$
2,755Supplemental disclosure of cash flow information:Cash paid for interest

$
49,909


$
33,695


$
19,349Cash paid for taxes


28



68



157Non-cash financing activities:Common stock issued to ESOP Trust in satisfaction of employer
    contribution liability

$
9,781


$
9,920


$
7,871    55




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  (1)
    Description
    and Formation of the Business      (2)
    Summary
    of Significant Accounting Policies  Basis
    of Presentation and Principles of Consolidation
    
    Human Factors Application, Inc. (HFA)  acquired
    November 1998
    Innovative Technology Solution Corporation (ITSC) 
    acquired October 2003
    Alion  IPS Corporation (IPS) 
    acquired February 2004
    Alion  METI Corporation (METI)  acquired
    February 2005
    Alion  CATI Corporation (CATI)  acquired
    February 2005
    Alion Canada (US) Corporation  established February
    2005
    Alion Science and Technology (Canada) Corporation 
    established February 2005
    Alion  JJMA Corporation (JJMA)  acquired
    April 2005
    Alion Technical Services Corporation (Virginia) 
    established July 2005
    Alion  BMH Corporation (BMH)  acquired
    February 2006
    Washington Consulting, Inc. (WCI)  acquired February
    2006
    Alion  MA&D Corporation (MA&D) 
    acquired May 2006
    Alion Technical Services Corporation (Delaware) 
    established May 2006
    Washington Consulting Government Services, Inc.
    (WCGS)  established July 2007  Fiscal,
    Quarter and Interim Periods
   56




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Use of
    Estimates
    Reclassifications
    Revenue
    Recognition
  time-and-material
  time-and-material
       57




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    SOP 81-1, Accounting for Performance on Construction-Type and Certain
    Production-Type Contracts
  Income
    Taxes
    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
 58




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    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
  Redeemable
    Common Stock
    Fair
    Value of Financial Instruments
    Cash, cash equivalents, accounts payable and accounts
    receivable.
  Senior long-term debt.
  Redeemable common stock warrants.
 59




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Redeemable Alion Common Stock.
  Recently
    Issued Accounting Pronouncements
  Fair Value Measurements,
  The Fair Value Option for Financial
    Assets and Liabilities  including an amendment of
    FASB Statement No. 115,
  Business Combinations,
  Noncontrolling Interests in Consolidated Financial
    Statements,
 60




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Disclosures about Derivative Instruments and Hedging
    Activities, Accounting for Derivative Instruments
    and Hedging Activities
  (3)
    Business
    Combinations  Fiscal
    Year 2008 Acquisitions
  Business
    Combinations
  Fiscal
    Year 2007 Acquisitions
  LogConGroup, Inc.
  Fiscal
    Year 2006 Acquisitions
  BMH Associates, Inc.
  Washington Consulting, Inc.
  Micro Analysis and Design, Inc.
  Certain assets of Anteon Corporation.
   61




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Twelve Months Ended September 30, 2006Anteon Pro


Alion ProAlion


Forma


Forma(In thousands, except share and per share information)Pro Forma Revenue

$
508,628


$
191,362


$
699,990Pro Forma Loss

$
(31,115
)

$
(8,861
)

$
(39,976
)Weighted Average Shares Outstanding


5,029,670







5,029,670Loss Per Share

$
(6.19
)

$



$
(7.95
)     (4)
    Employee
    Stock Ownership Plan (ESOP) and Stock Ownership Trust    (5)
    Postretirement
    Benefits    Curtailment.
  Employers Accounting for Defined Benefit Pension and
    Other Postretirement Plans
 62




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2008


2007(In thousands)Accumulated postretirement benefit obligation as of September 30:Retirees

$
627


$
1,053Fully eligible active plan participants






122Total active plan participants

$
627


$
1,175   2008


2007(In thousands)Reconciliation of beginning and ending benefit obligation:Benefit obligation at beginning of year

$
1,175


$
9,034Service cost






454Interest cost


52



531Actuarial (gain) loss


36



(321
)Plan amendment






(7,840
)Benefits paid


(636
)


(683
)Benefit obligation at end of year

$
627


$
1,175   2008


2007(In thousands)Funded status of the plan:Obligation at September 30

$
(627
)

$
(1,175
)Unrecognized prior service cost






Unrecognized net actuarial loss






Accrued postretirement benefits included in the consolidated
    balance sheet

$
(627
)

$
(1,175
)Amounts recognized in the statement of financial position
    consist of:Current assets

$



$
Noncurrent assets






Current liabilities






Noncurrent liabilities


627



1,175$
627


$
1,175   63




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  2008


2007(In thousands)Components of net periodic postretirement benefit cost:Service cost

$



$
454Interest cost


52



531Amortization of unrecognized prior service cost






140Amortization of unrecognized net actuarial loss






331Net curtailment gain






(3,320
)Net periodic postretirement benefit cost

$
52


$
(1,864
)     2008


2007(In thousands)Net loss

$
36


$
Prior service cost






Transition obligation






$
36


$
       2008


2007Accumulated post retirement benefit obligation at September 30


7.00
%


6.15
%Service and interest cost portions of net periodic
    postretirement benefit cost


6.15
%


5.75
%     2008


2007Health care cost trend rate assumed for next year


10.0
%


10.0
%Rate to which the cost trend rate is assumed to decline
    (ultimate trend rates)


6.0
%


6.0
%Year the rate reaches the ultimate trend rate


2017



2016     One-Percentage-


One-Percentage-Point Increase


Point Decrease(In thousands)Effect on total service and interest cost

$
2


$
2Effect on accumulated postretirement benefit obligation

$
35


$
32  64




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (In thousands)2009

$
1522010


542011


562012


582013


582014-2018


244     (6)  Loss
    Per Share
    (7)  Redeemable
    common stock owned by ESOP Trust
       65




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  (8)  Accounts
    Receivable
    2008


2007(In thousands)Billed receivables

$
99,794


$
126,430Unbilled receivables:Amounts currently billable


37,883



40,539Revenues recorded in excess of milestone billings on fixed price
    contracts


2,651



2,059Revenues recorded in excess of estimated contract value or
    funding


18,925



17,661Retainages and other amounts billable upon contract completion


13,160



5,243Allowance for doubtful accounts


(3,962
)


(5,272
)Total Accounts Receivable

$
168,451


$
186,660     (9)  Property,
    Plant and Equipment
  September 30,


September 30,2008


2007(In thousands)Leasehold improvements

$
9,451


$
7,212Equipment and software


31,393



31,388Total cost


40,844



38,600Less: accumulated depreciation and amortization


22,243



19,048Net Property, Plant and Equipment

$
18,601


$
19,552     (10)  Goodwill
    and Intangible Assets
  Goodwill and other
    Intangible Assets
 66




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Total(In thousands)Balance as of October 1, 2006

$
387,927Goodwill acquired during the year


1,594Adjustment to initial allocation (includes earn out obligations)


6,405Balance as of September 30, 2007

$
395,926Goodwill acquired during the year


Adjustment to initial allocation (includes earn out obligations)


2,945Balance as of September 30, 2008

$
398,871     September 30, 2008


September 30, 2007Accumulated








AccumulatedGross


Amortization


Net


Gross


Amortization


Net(In thousands)Purchased contracts

$
111,635


$
(71,410
)

$
40,225


$
111,519


$
(57,296
)

$
54,223Internal use software and engineering designs


2,155



(1,178
)


977



2,155



(790
)


1,365Non-compete agreements


725



(679
)


46



725



(654
)


71Total

$
114,515


$
(73,267
)

$
41,248


$
114,399


$
(58,740
)

$
55,659     (In thousands)For the year ended September 30:2009

$
12,5662010


10,9862011


6,8432012


5,7672013


3,246Thereafter


1,840$
41,248   (11)  Long-Term
    Debt
  Term B
    Senior Credit Facility
   67




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    
    In April 2005, the first amendment to the Term B Senior Credit
    Facility made certain changes to the Term B Senior Credit
    Facility and added $72.0 million in term loans to total
    Term B Senior Credit Facility debt.
    In March 2006, the second amendment to the Term B Senior Credit
    Facility made certain changes to the Term B Senior Credit
    Facility, increased the term loan commitment by
    $68.0 million, (drawn in full by June 2006), and increased
    the revolving credit commitment from $30.0 million to
    $50.0 million.
    In June 2006, the third amendment to the Term B Senior Credit
    Facility made certain changes to the Term B Senior Credit
    Facility and added $50.0 million in term loans to the
    Companys total Term B Senior Credit Facility debt.
    In January 2007, the fourth increment to the Term B Senior
    Credit Facility added $15.0 million in term loans to the
    Companys total Term B Senior Credit Facility debt.
    In February 2007, the fourth amendment to the Term B Senior
    Credit Facility made certain changes to the Term B Senior Credit
    Facility, extended the maturity date of the senior term loans to
    February 2013, adjusted the principal repayment schedule to
    require a balloon payment at maturity, and added an incurrence
    test as an additional condition precedent to incurring permitted
    indebtedness.
    In July 2007, the fifth increment to the Term B Senior Credit
    Facility added $25.0 million in term loans to the
    Companys Term B Senior Credit Facility.
    On September 30, 2008, the fifth amendment made certain
    changes.  (a)
    It increased interest rates by 350 basis points to a
    minimum Eurodollar interest rate of 3.50% plus 600 basis
    points, and a minimum alternate base rate of 4.50% plus
    500 basis points;(b)
    The senior term loan interest rate spread will increase if the
    Company refinances, replaces or extends the maturity of its
    existing revolving line of credit at an interest rate more than
    50 basis points higher than the then-current senior term
    loan rate. The senior term loan spread will increase by the
    difference in the higher revolving credit facility rate less
    50 basis points.(c)
    Alion is required to use all (formerly half) of excess annual
    cash flow to prepay outstanding senior term loans.(d)
    It amended financial covenants.(e)
    It restricts the Companys ability to pay the CEO or COO
    for previously awarded shares of phantom stock.(f)
    It permits Alion to incur additional second lien debt, subject
    to certain conditions.    
    a senior term loan in the approximate amount of
    $239.0 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 September 30, 2008; and
    a $110.0 million uncommitted incremental term loan
    accordion facility for which loans may be permitted
    subject to satisfying the leverage based incurrence test. 68




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
           Use of Proceeds.
    Security.
  Interest and Fees.
  *Senior Term Loan.
  Senior Revolving Credit Facility.
 69




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Interest Rate Cap Agreements.
  Other Fees and Expenses.
    Financial Covenants.
  Senior
    Unsecured Notes
    Use of Proceeds.
  Security.
  Ranking.
  Interest and Fees.
 70




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Optional Redemption.
    Covenants.
  Exchange Offer; Registration Rights.
  Bridge
    Loan
    Interest
    Payable
    September 30,


September 30,2008


2007(In thousands)Senior Unsecured Notes

$
4,271


$
4,271Term B Senior Credit Facility Note Payable


2,272



7,840Total

$
6,543


$
12,111   Subordinated
    Note
   71




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    paid-in-kind
    2009


2010


2011


2012


2013


2014


2015


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

$
2,433


$
2,433


$
2,433


$
2,433


$
229,297


$



$



$
239,029Senior Unsecured Notes(2)


























250,000



250,000Subordinated Seller Note(3)


3,000



3,000



3,000



2,000



70,311











81,311Total Principal Payments

$
5,433


$
5,433


$
5,433


$
4,433


$
299,608


$



$
250,000


$
570,340     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 approximately
    $239.0 million in principal and $6.8 million in
    unamortized debt issue costs as of September 30, 2008. Debt
    issue costs for the original loan and subsequent modifications
    totaled $12.5 million through September 2008. The Company
    estimates 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 $5.6 million in
    unamortized debt issue costs as of September 30, 2008
    (originally $7.1 million).3.
    
    The Subordinated Note on the face of the balance sheet includes
    approximately $12.5 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 Subordinated Note
    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.  (12)
    Interest
    Rate Swap   72




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    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

$
24,3192010


20,4802011


17,8782012


14,1032013


12,958And thereafter


25,658Gross lease payments

$
115,396Less: non-cancelable subtenant receipts


(6,489
)Net lease payments

$
108,907  73




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Composition
    of Total Rent Expense
    (In thousands)
  September 30,2008


2007


2006Minimum rentals

$
24,794


$
25,574


$
18,045Less: Sublease rental income


(3,559
)


(2,687
)


(2,624
)Total rent expense, net

$
21,235


$
22,887


$
15,421   (15)  Stock
    Appreciation Rights
  2002
    SAR Plan
      2004
    SAR Plan
  10-year
     74




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Share-Based Payment
  Alion
    Science and Technology Corporation
    Stock-based Compensation Disclosures per FAS 123 and
    FAS 123R
    Stock Appreciation Rights
    As of September 30, 2008
  Shares


Shares


TotalGranted to


Granted to


Shares


Exercise


Outstanding


Outstanding











Vested


ExercisableDate of Grant

Employees


Directors


Granted


Price


at 9/30/07


at 9/30/08


Forfeited


Exercised


Expired


at 9/30/08


at 9/30/08December 2002


64,450







64,450


$
10.00



38,705







1,740



36,965











December 2002






29,400



29,400


$
10.00



























May 2003


300







300


$
11.13



90











90











June 2003


300







300


$
11.13



























November 2003


129,550







129,550


$
14.71



81,721



68,335



2,346



11,040







51,650



6,277November 2003






12,600



12,600


$
14.71



























February 2004


2,000







2,000


$
14.71



2,000



2,000















1,600



November 2004






12,600



12,600


$
19.94



8,400











8,400











February 2005


164,750







164,750


$
19.94



109,800



89,162



6,563



14,075







62,663



March 2005


2,000







2,000


$
19.94



2,000



2,000















1,500



April 2005


33,000







33,000


$
29.81



24,000



20,250



500



3,250







13,500



June 2005


2,000







2,000


$
29.81



2,000



2,000















1,500



December 2005


276,675







276,675


$
35.89



229,288



203,774



14,491



11,023







103,071



February 2006


13,000







13,000


$
35.89



10,250



7,750



1,250



1,250







3,875



February 2006


7,500







7,500


$
35.89



5,000



3,750



625



625







1,875



May 2006


7,000







7,000


$
37.06



7,000



6,000



500



500







3,000



July 2006


15,000







15,000


$
37.06



15,000



10,500



3,750



750







5,500



August 2006


1,250







1,250


$
37.06



1,250







938



313











October 2006


2,500







2,500


$
41.02



2,500



2,500















625



December 2006


239,290







239,290


$
41.02



225,600



201,083



20,420



4,098







51,405



February 2007


33,450







33,450


$
41.02



31,700



24,700



6,062



938







6,738



May 2007


2,000







2,000


$
43.37



2,000



2,000















500



September 2007


2,000







2,000


$
43.37



2,000



2,000















500



December 2007


232,385







232,385


$
40.05







210,310



22,075















April 2008


2,000







2,000


$
41.00







2,000



















September 2008


2,000







2,000


$
41.00







2,000



















Total


1,234,400



54,600



1,289,000







800,304



862,114



81,259



93,316







309,502



6,277Wtd Avg Exercise Price

$
31.93


$
13.38


$
31.15






$
31.56


$
34.77


$
36.28


$
19.35


$



$
29.68


$
14.71  75




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Alion
    Science and Technology Corporation
    Stock-based Compensation Disclosures per FAS 123 and
    123R
    Stock Appreciation Rights
    As of September 30, 2008
  RemainingRisk Free




Expected


LifeDate of Grant

Interest Rate

Volatility


Life


(months)December 2002

4.06%-4.49%


60
%


5 yrs



0.0December 2002

4.06%-4.49%


60
%


3 yrs



0.0May 2003

2.70%-3.30%


55
%


5 yrs



0.0June 2003

2.70%-3.30%


55
%


5 yrs



0.0November 2003

4.06%-4.49%


60
%


5 yrs



4.7November 2003

4.06%-4.49%


60
%


3 yrs



0.0February 2004

4.06%-4.49%


60
%


5 yrs



4.6November 2004

3.10%-3.60%


45
%


3 yrs



0.0February 2005

3.10%-3.60%


45
%


4 yrs



7.1March 2005

3.10%-3.60%


45
%


4 yrs



8.2April 2005

4.10%-4.20%


45
%


4 yrs



9.0June 2005

4.10%-4.20%


45
%


4 yrs



11.2December 2005

4.20%-4.20%


40
%


4 yrs



17.7February 2006

4.20%-4.20%


40
%


4 yrs



19.4February 2006

4.20%-4.20%


40
%


4 yrs



19.9May 2006

4.82%-4.83%


35
%


4 yrs



22.6July 2006

4.82%-4.83%


35
%


4 yrs



24.0August 2006

4.82%-4.83%


35
%


4 yrs



25.9October 2006

4.82%-4.83%


35
%


4 yrs



27.8December 2006

4.54%-4.58%


35
%


4 yrs



29.8February 2007

4.54%-4.58%


35
%


4 yrs



31.8May 2007

4.54%-4.58%


35
%


4 yrs



34.7September 2007

4.54%-4.54%


35
%


4 yrs



38.1December 2007

4.23%-4.23%


35
%


4 yrs



41.8April 2008

4.23%-4.23%


35
%


4 yrs



45.9September 2008

4.23%-4.23%


35
%


4 yrs



47.5Wtd Avg Remaining Life (months)












21.8   (16)
    Phantom
    Stock Plans   76




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Initial
    Phantom Stock Plan
    Vesting.
  Second
    Phantom Stock Plan
    Vesting.
  Director
    Phantom Stock Plan
     77




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Share-Based Payment
  Alion
    Science and Technology Corporation
    Stock-based Compensation Disclosures per FAS 123 and
    FAS 123R
    Phantom Stock
    as of September 30, 2008
  SharesShares


Granted


Total


Grant DateGranted to


to


Shares


Price per


Outstanding


Outstanding











Vested


ExercisableDate of Grant

Employees


Directors


Granted


Share


at 9/30/07


at 9/30/08


Forfeited


Exercised


Expired


at 9/30/08


at 9/30/08February 2003


171,000







171,000


$
10.00



26,000







2,500



23,500










$
November 2003


52,685







52,685


$
14.71



19,715



11,897



1,359



6,459







6,118



6,118February 2005


213,215







213,215


$
19.94



188,140



66,436



46,798



74,906







66,436



30,287February 2005


98,399







98,399


$
19.94



98,399



16,696



30,297



51,406







16,696



16,696February 2005


5,015







5,015


$
19.94



5,015



5,015















3,761



August 2005


2,960







2,960


$
33.78



2,960



2,960















2,960



November 2005


66,592







66,592


$
35.89



62,413



51,268



11,145











8,080



8,080November 2005






7,808



7,808


$
35.89



6,181



5,531







651







3,253



3,253November 2005


55,726







55,726


$
35.89



55,726



41,795



13,931















November 2006






5,978



5,978


$
41.02



5,978



5,409







569







1,423



1,423November 2006


65,456







65,456


$
41.02



60,580



50,341



10,239











3,657



3,657November 2007






6,993



6,993


$
40.05







6,993



















November 2007


42,447







42,447


$
40.05







39,950



2,497











4,994



4,994January 2008


2,497







2,497


$
40.05







2,497



















May 2008


1,220







1,220


$
41.00







1,220



















Total


777,212



20,779



797,991







531,107



308,006



118,766



157,492







117,379



74,508Wtd Avg Grant Date Fair Value Price per Share

$
22.93


$
38.77


$
23.34






$
25.71


$
32.10


$
25.28


$
18.38






$
23.32


$
24.72  78




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Alion
    Science and Technology Corporation
    Stock-based Compensation Disclosures per FAS 123 and
    FAS 123R
    Phantom Stock
    as of September 30, 2008
  RemainingRisk Free




Expected


LifeDate of Grant

Interest Rate

Volatility


Life


(months)February 2003

4.06%-4.49%


60
%


5 yrs



November 2003

4.06%-4.49%


60
%


5 yrs



1.3February 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



4.0August 2005

3.72%-3.77%


45
%


3 yrs



November 2005

4.20%-4.20%


40
%


3 yrs



1.3November 2005

4.20%-4.20%


40
%


3 yrs



1.3November 2005

4.20%-4.20%


40
%


5 yrs



25.3November 2006

4.54%-4.58%


35
%


3 yrs



13.4November 2006

4.54%-4.58%


35
%


3 yrs



13.4November 2007

4.23%-4.23%


35
%


3 yrs



25.4November 2007

4.23%-4.23%


35
%


3 yrs



25.4January 2008

4.23%-4.23%


35
%


3 yrs



27.5May 2008

4.23%-4.23%


35
%


3 yrs



31.4Wtd Avg Remaining Life (months)












10.4   (17)
    Segment
    Information and Customer Concentration      For The Years Ended September 30,Government Agency

Contract

2008


2007


2006DoD - Navy

SeaPort Multiple Award Contract


17.3
%


17.9
%


5.1
%DoD - Air Force

Secretary of the Air Force
    NAVSEA  Seaport Multiple


9.0
%


8.7
%


3.2
%DoD - Navy

Award Contract


8.6
%


6.7
%


9.2
%DoD - DISA

Modeling & Simulation IAC


4.7
%


5.9
%


12.5
%  79




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  (18)
    Guarantor/Non-guarantor
    Condensed Consolidated Financial Information   80




---



##### 



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


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  81




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Condensed
    Consolidating Balance Sheet Information at September 30,
    2007
  Non-Guarantor


GuarantorParent


Companies


Companies


Eliminations


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

$
11,718


$
(33
)

$
(1
)

$



$
11,684Accounts receivable


180,431



6,224



5







186,660Stock subscriptions receivable


3,378















3,378Prepaid expenses and other current assets


3,569



64



1







3,634Total current assets


199,096



6,255



5







205,356Property, plant and equipment, net


19,350



202











19,552Intangible assets, net


55,659















55,659Goodwill


395,926















395,926Investment in subsidiaries


7,679











(7,679
)


Intercompany receivables






5,996







(5,996
)


Other assets


7,461



16











7,477Total assets

$
685,171


$
12,469


$
5


$
(13,675
)

$
683,970Current liabilities:Interest payable

$
12,111


$



$



$



$
12,111Current portion, Term B Senior Credit Facility note payable


2,430















2,430Current portion, acquisition obligations


4,832















4,832Trade accounts payable


45,124



980











46,104Accrued liabilities


31,638



1,594



6







33,238Accrued payroll and related liabilities


42,582



968



152







43,702Billings in excess of costs and estimated earnings on
    uncompleted contracts


2,059















2,059Total current liabilities


140,776



3,542



158







144,476Intercompany payables


5,760







236



(5,996
)


Notes payable to bank


9,250















9,250Term B Senior Credit Facility note payable, excluding current
    portion


238,356















238,356Senior Unsecured Notes


243,483















243,483Subordinated note payable


51,313















51,313Accrued compensation, excluding current portion


14,733



750











15,483Accrued postretirement benefit obligations


1,175















1,175Non-current portion of lease obligations


6,094



109











6,203Redeemable common stock warrants


33,610















33,610Common stock of subsidiaries






2,799







(2,799
)


Redeemable common stock


200,768















200,768Accumulated surplus (deficit)


(260,147
)


5,269



(389
)


(4,880
)


(260,147
)Total liabilities, redeemable common stock and accumulated
    deficit

$
685,171


$
12,469


$
5


$
(13,675
)

$
683,970  82




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Condensed
    Consolidating Statement of Operations for the Year Ended
    September 30, 2008
    (In thousands)
  Non-Guarantor


GuarantorParent


Companies


Companies


Eliminations


ConsolidatedContract revenue

$
706,699


$
22,914


$
9,869


$



$
739,482Direct contract expense


542,674



16,289



7,445







566,408Gross profit


164,025



6,625



2,424







173,074Operating expenses:Indirect contract expense


34,779



4,388



883







40,050Research and development


944







44







988General and administrative


58,582



886



16







59,484Rental and occupancy expense


30,869







11







30,880Depreciation and amortization


20,572



125



18







20,715Total operating expenses


145,746



5,399



972







152,117Operating income (loss)


18,279



1,226



1,452







20,957Other income (expense):Interest income


412



11











423Interest expense


(47,382
)














(47,382
)Other


193



471



(9
)






655Equity in operations of subsidiaries


3,151











(3,151
)


Total other income (expenses)


(43,626
)


482



(9
)


(3,151
)


(46,304
)Income (loss) before income taxes


(25,347
)


1,708



1,443



(3,151
)


(25,347
)Income tax benefit


13















13Net income (loss)

$
(25,334
)

$
1,708


$
1,443


$
(3,151
)

$
(25,334
)  83




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Condensed
    Consolidating Statement of Operations for the Year Ended
    September 30, 2007
    (In thousands)
  Non-Guarantor


GuarantorParent


Companies


Companies


Eliminations


ConsolidatedContract revenue

$
709,980


$
27,375


$
232


$



$
737,587Direct contract expense


542,085



19904



150







562,139Gross profit


167,895



7,471



82







175,448Operating expenses:Indirect contract expense


39,206



4,629



137







43,972Research and development


2,158



8



213







2,379General and administrative


57,567



1,445



(126
)






58,886Rental and occupancy expense


32,098



273



39







32,410Depreciation and amortization


23,450



186











23,636Total operating expenses


154,479



6,541



263







161,283Operating income (loss)


13,416



930



(181
)






14,165Other income (expense):Interest income


319















319Interest expense


(51,226
)














(51,226
)Loss on extinguishment of debt


(6,170
)














(6,170
)Other


1,191



(1,146
)


87







132Equity in operations of subsidiaries


(300
)










300



Total other income (expenses)


(58,186
)


(1,146
)


87



300



(56,945
)Income (loss) before income taxes


(42,770
)


(216
)


(94
)


300



(42,780
)Income tax benefit






10











10Net income (loss)

$
(42,770
)

$
(206
)

$
(94
)

$
300


$
(42,770
)  84




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Condensed
    Consolidating Statement of Operations for the Year Ended
    September 30, 2006
    (In thousands)
  Non-Guarantor


GuarantorParent


Companies


Companies


Eliminations


ConsolidatedContract revenue

$
489,013


$
19,146


$
469


$



$
508,628Direct contract expense


367,585



13,590



292







381,467Gross profit


121,428



5,556



177







127,161Operating expenses:Indirect contract expense


27,491



2,312



104







29,907Research and development


1,884







141







2,025General and administrative


56,931



894



268







58,093Rental and occupancy expense


22,166



6



36







22,208Depreciation and amortization


17,158



75











17,233Total operating expenses


125,630



3,287



549







129,466Operating income (loss)


(4,202
)


2,269



(372
)






(2,305
)Other income (expense):Interest income


590















590Interest expense


(26,691
)














(29,691
)Equity in operations of subsidiaries


766











(766
)


Other


1,448



(1,033
)


(98
)






317Total other expenses


(23,887
)


(1,033
)


(98
)


(766
)


(28,784
)Income (loss) before income taxes


(31,089
)


1,236



(470
)


(766
)


(31,089
)Income tax expense


(26
)














(26
)Net income (loss)

$
(31,115
)

$
1,236


$
(470
)

$
(766
)

$
(31,115
)  85




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Condensed
    Consolidating Statement of Cash Flows
    Year Ended September 30, 2008
    (In thousands)
  Non-Guarantor


GuarantorParent


Companies


Companies


ConsolidatedNet cash provided by (used in) operating activities

$
29,268


$
(9
)

$
61


$
29,320Cash flows from investing activities:Cash paid for acquisitions, net of cash acquired


(7,946
)










(7,946
)Capital expenditures


(4,863
)


(20
)


(103
)


(4,986
)Proceeds from sale of non-operating assets


780











780Net cash used in investing activities


(12,029
)


(20
)


(103
)


(12,152
)Cash flows from financing activities:Net cash received from interest rate swap


4,333











4,333Payment of debt issuance costs


(500
)










(500
)Repayment of Term B Credit Facility note payable


(6,474
)










(6,474
)Payments under revolving credit facility


(9,250
)










(9,250
)Loan to ESOP Trust


(3,369
)










(3,369
)ESOP to loan repayment


3,369











3,369Purchase of redeemable common stock from ESOP Trust


(4,051
)










(4,051
)Cash received from issuance of redeemable common stock to ESOP
    Trust


3,377











3,377Net cash used in financing activities


(12,565
)










(12,565
)Net increase (decrease) in cash and cash equivalents


4,674



(29
)


(42
)


4,603Cash and cash equivalents at beginning of year


11,718



(33
)


(1
)


11,684Cash and cash equivalents at end of year

$
16,392


$
(62
)

$
(43
)

$
16,287  86




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Condensed
    Consolidating Statement of Cash Flows
    Year Ended September 30, 2007
    (In thousands)
  Non-Guarantor


GuarantorParent


Companies


Companies


ConsolidatedNet cash provided by (used in) operating activities

$
(4,986
)

$
38


$
(60
)

$
(5,008
)Cash flows from investing activities:Cash paid for acquisitions, net of cash acquired


(14,751
)










(14,751
)Capital expenditures


(10,648
)


(39
)






(10,687
)Net cash used in investing activities


(25,399
)


(39
)






(25,438
)Cash flows from financing activities:Proceeds from Term B Senior Credit Facility note payable


40,000











40,000Proceeds from Senior Unsecured Notes


250,000











250,000Repayment of Bridge Loan


(170,000
)










(170,000
)Payment of debt issuance costs


(10,796
)










(10,796
)Repayment of Term B Credit Facility note payable


(53,513
)










(53,513
)Payments under revolving credit facility


(3,050
)










(3,050
)Proceeds from interest rate cap agreement


360











360Purchase of redeemable common stock from ESOP Trust


(29,584
)










(29,584
)Cash received from issuance of redeemable common stock to ESOP
    Trust


15,958











15,958Net cash provided by financing activities


39,375











39,375Net increase (decrease) in cash and cash equivalents


8,990



(1
)


(60
)


8,929Cash and cash equivalents at beginning of year


2,728



(32
)


59



2,755Cash and cash equivalents at end of year

$
11,718


$
(33
)

$
(1
)

$
11,684  87




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Condensed
    Consolidating Statement of Cash Flows
    Year Ended September 30, 2006
    (In thousands)
  Non-Guarantor


GuarantorParent


Companies


Companies


ConsolidatedNet cash provided by (used in) operating activities

$
(15,787
)

$
(256
)

$
366


$
(15,678
)Cash flows from investing activities:Cash paid for acquisitions, net of cash acquired


(279,196
)










(279,196
)Capital expenditures


(4,878
)


(37
)


(312
)


(5,227
)Net cash used in investing activities


(284,074
)


(37
)


(312
)


(284,423
)Cash flows from financing activities:Proceeds from Term B Senior Credit Facility note payable


118,000











118,000Repayment of mezzanine note warrants


(13,643
)










(13,643
)Proceeds from Bridge Loan


170,000











170,000Payment of debt issuance costs


(7,758
)










(7,758
)Repayment of Term B Credit Facility note payable


(1,905
)










(1,905
)Borrowings under revolving credit facility


12,300











12,300Purchase interest rate cap agreement


(44
)










(44
)Purchase of redeemable common stock from ESOP Trust


(19,003
)










(19,003
)Cash received from issuance of redeemable common stock to Trust


7,131











7,131Net cash provided by financing activities


265,078











265,078Net (decrease) increase in cash and cash equivalents


(34,783
)


(293
)


54



(35,023
)Cash and cash equivalents at beginning of year


37,512



261



5



37,778Cash and cash equivalents at end of year

$
2,728


$
(32
)

$
59


$
2,755  88




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  (19)
    Related
    Party Transactions    (20)
    Commitments
    and Contingencies  Earn-Out
    and Hold-Back Commitments
    Legal
    Proceedings
  Estate of
    Joseph Hudert vs. Alion Science and Technology Corporation;
    Estate of Frank Stotmeister vs. Alion Science and Technology
    Corporation.
           89




---



##### 



ALION
    SCIENCE AND TECHNOLOGY CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Government
    Audits
    (21)
    Interim
    Period Information (Unaudited, in thousands except per share
    information)  2008 Quarters1st


2nd


3rd


4thRevenue

$
183,145


$
189,243


$
185,876


$
181,218Gross profit

$
42,763


$
46,213


$
43,014


$
41,084Net income (loss)

$
(8,706
)

$
(9,805
)

$
(7,893
)

$
1,070Income (loss) per share

$
(1.74
)

$
(1.96
)

$
(1.55
)

$
0.23   2007 Quarters1st


2nd


3rd


4thRevenue

$
181,139


$
187,899


$
184,933


$
183,616Gross profit

$
41,038


$
46,387


$
42,761


$
45,262Net income (loss)

$
(14,112
)

$
(15,694
)

$
(13,827
)

$
863Loss per share

$
(2.71
)

$
(3.07
)

$
(2.63
)

$
0.06   (22)
    Subsequent
    Event   90




---



##### 



Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A(T).
    Controls
    and Procedures  Disclosure Controls and Procedure.
  Limitations on the Effectiveness of
    Controls.
  Managements Report on Internal Control Over Financial
    Reporting. Rule 13a-15(f)
  Internal
    Control  Integrated Framework Internal Control 
    Integrated Framework
  Changes in Internal Control Over Financial
    Reporting.
  Scope of the Assessment.
  Item 9B.
    Other
    Information  Form 8-K.
 91




---



##### 



Form 10-K Form 8-K
    Form 10-K
  Form 10-K
 92




---



##### 



PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance  Information
    Regarding the Directors of the Registrant
    Term

DirectorName

Age

Position

Expires

SinceBahman Atefi


55


President, Chief Executive Officer and Chairman


2011



2001Edward C. (Pete) Aldridge, Jr.


70


Director


2009



2003Leslie L. Armitage


40


Director


2010



2002Lewis Collens


70


Director


2010



2002Admiral (Ret.) Harold W. Gehman, Jr.


65


Director


2010



2002Donald E. Goss


77


Director


2009



2002General (Ret.) George A. Joulwan


68


Director


2011



2002General (Ret.) Michael E. Ryan


66


Director


2011



2002       Bahman Atefi 600-person
  Edward C. (Pete) Aldridge, Jr.
  Leslie L. Armitage
 93




---



##### 



Lewis Collens
  Admiral (Ret.) Harold W. Gehman, Jr.
  Donald E. Goss
  General (Ret.) George A. Joulwan 1990-1993 1993-1997.
  General (Ret.) Michael E. Ryan
 94




---



##### 



Establishment
    of Committees
    Committee

Chairperson

MembersAudit and Finance Committee

Leslie Armitage

Donald Goss, Harold Gehman, Michael RyanCompensation Committee

Harold Gehman

Pete Aldridge, Leslie Armitage, Lewis Collens, George JoulwanGovernance and Compliance Committee

Michael Ryan

Bahman Atefi, George Joulwan, Harold Gehman   Regulation S-K,
  Audit
    and Finance Committee
    
    professional services provided by our independent registered
    public accounting firm;
    independence of our independent registered public accounting
    firm from our management;
    our quarterly and annual financial statements and our system of
    internal control over financial reporting;
    our capital structure, including the issuance of equity and debt
    securities, the incurrence of indebtedness, and related matters;
    general financial planning, including cash flow and working
    capital management, capital budgeting and expenditures, tax
    planning and compliance and related matters;
    mergers, acquisitions and strategic transactions;
    investment policies, financial performance and funding of our
    employee benefit plans; and
    other transactions or financial issues that the Board of
    Directors or management presents to the committee to review.    Compensation
    Committee
    
    determining the compensation of our Chief Executive Officer and
    reviewing and approving the compensation of our other executive
    officers;
    exercising all rights, authority and functions under our KSOP,
    retirement and other compensation plans;
    approving and making recommendations to the Board regarding
    non-employee director compensation;
    preparing an annual report on executive compensation for
    inclusion in our annual report on
    Form 10-K
    in accordance with the rules and regulations of the Securities
    and Exchange Commission;
    establishing, implementing and monitoring adherence to the
    Companys compensation philosophy; and
    evaluating performance and compensation to ensure that the
    Company maintains its ability to attract and retain superior
    employees in key positions and that compensation provided to key
    employees remains competitive relative to the compensation paid
    to similarly situated executives of other companies. 95




---



##### 



Corporate
    Governance and Compliance Committee
    Information
    Regarding the Executive Officers of the Registrant
    Name

Age

Office

Position SinceBahman Atefi


55


President, Chief Executive Officer and Chairman of the Board of
    Directors(1)

December 2001Stacy Mendler


45


Chief Operating Officer and Executive Vice President(1)

September 2006Michael Alber


51


Chief Financial Officer, Senior Vice President and Treasurer(1)

November 2008Scott Fry


59


Sector Senior Vice President -- Engineering and Integration
    Solutions Sector(1)

October 2005Walter (Buck) Buchanan


58


Sector Senior Vice President -- Engineering and Information
    Technology Sector

June 2007James Fontana


50


Senior Vice President, General Counsel and Secretary

January 2004     (1)
    
    Member of the ESOP committee    Stacy Mendler
 96




---



##### 



Michael Alber
  Scott Fry
  Walter E. Buchanan III
  James C. Fontana
    Code of
    Ethics
   97




---



##### 



Item 11.
    Executive
    Compensation  Compensation
    Discussion and Analysis
  Objectives
    of Executive Compensation Program
      What Our
    Compensation Program is Designed to Reward
  Form 10-K,
  Roles and
    Responsibilities for Our Compensation Program
  Role
    of the Compensation Committee
    Role
    of the Chief Executive Officer
    Role
    of the Compensation Consultant
   98




---



##### 



Elements
    of Companys Executive Compensation Plan
    Base
    Salary
      Named Executive Officer

Fiscal 2008 Base SalaryBahman Atefi

$
620,000Stacy Mendler

$
335,000Michael Alber

$
260,000Rob Goff

$
320,010Scott Fry

$
320,008Jack Hughes*

$
315,155     *
    
    Mr. Hughes resigned as Executive Vice President, Chief
    Financial Officer and Treasurer in February 2008.      
    market data provided by the Companys outside compensation
    consultant;
    the executives compensation, individually and relative to
    other officers;
    the executives individual performance; and
    Alions financial and operating results.    Annual
    Bonus
   99




---



##### 



Long-term
    Incentives/Awards
    Long-Term
    Incentive Plan
      
    provide certain employees an incentive for excellence in
    achieving certain Company and business unit or departmental
    goals;
    facilitate key employee retention and recruitment;
    provide award opportunities that are at-risk and contingent on
    achievement of selected performance criteria over an extended
    period; and
    provide a meaningful incentive to achieve long-term growth and
    improve profitability.    
    selecting individuals to participate in the LTIP from certain of
    our key employees;
    determining the period during which a given participant must
    achieve his or her performance goals, (performance
    period);
    setting each participants award opportunities with respect
    to a given performance period; and
    establishing the conditions for vesting of awards. 100




---



##### 



Minimum/Form of Award





MaximumAgreement

Date of Grant

Performance Cycles

Award Amount

Vesting DateCategory A

November 1, 2008

November 1, 2008 until performance goals achieved

N/A

Date performance goals achievedCategory B

November 1, 2008

November 1, 2008- October 31, 2009

80%/120%

November 15, 2009Category C

November 1, 2008

November 1, 2008- October 31, 2009

50%/150%

November 15, 2010November 1, 2009- October 31, 2010Category D

November 1, 2008

November 1, 2008- October 31, 2009

50%/150%

November 15, 2011November 1, 2009- October 31, 2010November 1, 2010- October 31, 2011Ongoing

November 1, 2008

November 1, 2008- October 31, 2009

50%/150%

November 15, 2011November 1, 2009- October 31, 2010November 1, 2010- October 31, 2011      101




---



##### 



Name

Category A


Category B


Category C


Category D


OngoingBahman Atefi

$
998,223


$
934,910


$
1,738,830






$
800,000Stacy Mendler

$
479,559


$
411,360


$
725,782






$
300,000Scott Fry





$
211,023


$
191,511






$
250,000Michael Alber













$
94,646


$
150,000     Phantom
    Stock Plans
    Stock
    Appreciation Rights (SAR) Plan
  2002 SAR Plan. 10-year
  2004 SAR Plan. 10-year
  Severance/Change
    in Control and Provisions in Employment Agreements
    Change in
    Control
  and/or
 102




---



##### 



Termination
    without Cause
    Health
    and Welfare Benefits
    KSOP
   103




---



##### 



Summary
    Compensation Table
    Non-EquityPhantom





Incentive


DeferredName and Principal










Stock


SAR


Plan


Compensation


All OtherPosition

Year


Salary


Bonus(1)


Awards(2)


Awards(2)


Compensation(3)


Earnings


Compensation(4)


TotalBahman Atefi


2008


$
604,749






$
1,630,296






$
500,000






$
138,822


$
2,873,867Chief Executive Officer and PresidentStacy Mendler


2008


$
333,185






$
759,346






$
200,000






$
92,500


$
1,385,031Chief Operating Officer and Executive VPMichael Alber


2008


$
220,000


$
95,000


$
15,836


$
3,000


$
150,000






$
29,911


$
513,747Senior Vice President and Chief Financial OfficerRob Goff


2008


$
318,090






$
662,625














$
51,120


$
1,031,835Defense Operations Integration Sector Senior VPScott Fry


2008


$
316,171






$
183,937






$
225,000






$
41,878


$
766,986Engineering and Integration Solutions Sector Senior VPJack Hughes(5)


2008


$
283,962






















$
3,045,634


$
3,329,596Executive VP, Chief Financial Officer and Treasurer     (1)
    
    This column includes non-incentive based cash bonuses, such as
    sign-on bonuses, paid to named executive officers(2)
    
    These columns reflect the fiscal year 2008 expense Alion
    recognized under SFAS 123(R) for current and prior year
    phantom stock and SAR awards to named executive officers.(3)
    
    This column includes cash bonuses awarded to our named executive
    officers under the non-equity incentive plan for their service
    in fiscal year 2008.(4)
    
    This column includes the following amounts paid by Alion: 401(k) matching and profit sharing contributions
    under Alions KSOP; Company contributions for long and short term
    disability insurance; Alions portion of life insurance premiums; Amounts paid or reimbursed with respect to health
    and welfare; Amounts paid or reimbursed for social club
    membership; and Amounts paid or reimbursed for car leases and
    automotive expenses.Please see table below for detailed information regarding all
    other compensation.  All Other
    Compensation
  Company





Long and Short





Term LifeMatching


Health and


Term Disability


Club


Insurance PaidName and Principal

Contributions  Under


Welfare


Paid by the


Membership


by thePosition

Alions KSOP


Benefits


Company


Fees


Company


Leased Cars


Settlement


TotalBahman Atefi

$
14,625


$
94,337


$
4,840


$
5,120


$
735


$
19,165






$
138,822Stacy Mendler

$
14,625


$
55,208


$
3,210






$
531


$
18,926






$
92,500Michael Alber






12,530


$
2,421






$
356


$
14,603






$
29,911Rob Goff

$
14,625


$
12,812


$
3,120






$
512


$
20,051






$
51,120Scott Fry

$
10,228


$
13,748


$
3,108






$
512


$
14,281






$
41,878Jack Hughes

$
10,473


$
18,260


$
1,095






$
191


$
15,615


$
3,000,000


$
3,045,634   (5)
    
    Mr. Hughes resigned as Executive Vice President, Chief
    Financial Officer and Treasurer in February 2008. Mr. Alber
    was appointed as Senior Vice President, Chief Financial Officer
    and Treasurer in November 2008.(6)
    
    Mr. Goff resigned as Sector Senior Vice President and
    Sector Manager of the Defense Operations Integration Sector in
    October 2008. 104




---



##### 



Summary
    Compensation Table Fiscal Year 2007
    Non-EquityPhantom





Incentive


DeferredName and Principal










Stock


SAR


Plan


Compensation


All OtherPosition

Year


Salary


Bonus(1)


Awards(2)


Awards(2)


Compensation(3)


Earnings


Compensation(4)


TotalBahman AtefiChief Executive Officer and President


2007


$
532,997






$
976,353






$
490,000






$
87,120


$
2,086,470Stacy MendlerChief Operating Officer and Executive VP


2007


$
321,206






$
429,595






$
180,000






$
65,618


$
996,419Jack HughesExecutive VP, Chief Financial Officer and Treasurer


2007


$
308,913






$
410,068






$
150,000






$
58,083


$
957,064Rob GoffDefense Operations Integration Sector Senior VP


2007


$
308,562






$
146,453






$
160,000






$
45,119


$
755,134Scott FryEngineering and Integration Solutions Sector Senior VP


2007


$
295,431






$
195,271






$
160,000






$
38,120


$
678,822     (1)
    
    This column includes non-incentive based cash bonuses awarded to
    our named executive officers, such as sign-on bonuses. None of
    our named executive officers received any non-incentive bonuses
    in fiscal year 2007. See the column entitled Non-equity
    Incentive Plan Compensation for other bonuses awarded for
    their service in fiscal year 2007.(2)
    
    These columns reflect the dollar amounts that were recognized in
    fiscal 2007 for financial statement reporting purposes under
    SFAS 123(R) with respect to phantom stock and SAR awards
    granted to our named executive officers in fiscal year 2007.(3)
    
    This column includes cash bonuses awarded to our named executive
    officers under the Non-Equity Incentive Plan for their service
    in fiscal year 2007.(4)
    
    This column includes the following amounts with respect to our
    Named Executive Officers:  
    
    401(k) matching and profit sharing contributions under
    Alions KSOP;
    
    Company contributions for long and short term disability;
    
    Amounts paid by the Company for life insurance premiums;
    
    Amounts paid or reimbursed with respect to health and welfare;
    
    Amounts paid or reimbursed with respect to social club
    membership; and
    
    Amounts paid or reimbursed with respect to leased cars.    All Other
    Compensation Fiscal Year 2007
  Company





Long and Short





Term LifeMatching


Health and


Term Disability


Club


Insurance PaidName and Principal

Contributions Under


Welfare


Paid by the


Membership


by thePosition

Alions KSOP


Benefits


Company


Fees


Company


Leased Cars


TotalBahman Atefi

$
14,869


$
43,758


$
3,921


$
4,920


$
486


$
19,165


$
87,120Stacy Mendler

$
14,300


$
29,262


$
2,644






$
486


$
18,926


$
65,618Jack Hughes

$
14,300


$
23,696


$
2,567






$
486


$
17,034


$
58,083Rob Goff

$
14,300


$
15,168


$
2,565






$
486


$
12,600


$
45,119Scott Fry

$
10,341


$
13,075


$
2,491






$
481


$
11,733


$
38,120Randy Crawford

$
12,242


$
64,821


$
1,725






$
333


$
9,981


$
89,102  105




---



##### 



Phantom
    Stock Plans
  Initial
    Phantom Stock Plan
    Vesting.
  Vested Amount for Grant inFebruary


NovemberAnniversary from Grant Date

2003


20031st






20
%2nd






20
%3rd


50
%


20
%4th


25
%


20
%5th


25
%


20
%     
    the numerator of which is the number of months from the date of
    grant of the phantom stock through the end of the month of such
    termination; and
    the denominator of which is 60.    Payments.
  Amendment.
 106




---



##### 



Second
    Phantom Stock Plan
    Vesting.
  Payments.
  Amendment.
    Director
    Phantom Stock Plan
   107




---



##### 



Vesting.
  Payments.
      
    Date of grant;
    Number of shares of the phantom stock awarded; and
    Provisions governing vesting of the phantom stock awarded.             108




---



##### 



Cumulative SharesShares Issued by


Cumulative Shares


Authorized underDate of Issuance

Plan


Issued by Plan


all PlansFebruary 2003


171,000
(1)


171,000
(1)


173,000
(1)November 2003


52,685
(1)


223,685
(1)


225,000
(1)February 2005


316,629
(2)


316,629
(2)


2,000,000
(2)August 2005


2,960
(2)


319,589
(2)


2,000,000
(2)November 2005


122,318
(2)


441,907
(2)


2,000,000
(2)November 2006


65,456
(2)


507,363
(2)


2,000,000
(2)November 2007


42,447
(2)


549,810



2,000,000
(2)January 2008


2,497
(2)


552,307



2,000,000
(2)May 2008


1,120
(2)


553,427



2,000,000
(2)November 2005


7,808
(3)


7,808
(3)


2,000,000
(3)November 2006


5,978
(3)


13,786
(3)


2,000,000
(3)November 2007


6,993
(3)


20,779



2,000,000
(3)     (1)
    
    Number of shares authorized under the Initial Phantom Stock Plan
    as periodically amended and approved by the Compensation
    Committee of Alions Board of Directors.(2)
    
    Number of shares authorized under the Second Phantom Stock Plan
    as periodically amended and approved by the Compensation
    Committee of Alions Board of Directors.(3)
    
    Number of shares authorized under the Director Phantom Stock
    Plan as periodically amended and approved by the Compensation
    Committee of Alions Board of Directors.    Name

Number of shares


Grant Date

Grant Type

Full vesting period

Period(s) until payoutBahman Atefi


65,500
(1)

February 2003

Retention

February 2008(2)

February 2006, 2007, 2008(3)18,695
(1)

November 2003

Retention

November 2008(2)

November 2006, 2007, 2008(3)43,951


February 2005

Retention

February 2008(4)

February 2008(4)67,888
(5)

February 2005

Performance

February 2008(4)

February 2008(4)22,290


November 2005

Retention

November 2008(4)

November 2008(4)(6)27,863


November 2005

Retention

November 2010(4)

November 2010(4)(6)24,378


November 2006

Retention

November 2009(4)

November 2009(4)(6)17,478


November 2007

Retention

November 2010(4)

November 2010(4)(6)Michael Alber


1,248


January 2008

Retention

January 2011(4)

January 2011(4)(6)1,219


May 2008

Retention

May 2011(4)

May 2011(4)(6)Stacy Mendler


28,500
(1)

February 2003

Retention

February 2008(2)

February 2006, 2007, 2008(3)6,798
(1)

November 2003

Retention

November 2008(2)

November 2006, 2007, 2008(3)24,151


February 2005

Retention

February 2008(4)

February 2008(4)37,305
(5)

February 2005

Performance

February 2008(4)

February 2008(4)11,145


November 2005

Retention

November 2008(4)

November 2008(4)(6)13,931


November 2005

Retention

November 2010(4)

November 2010(4)(6)10,726


November 2006

Retention

November 2009(4)

November 2009(4)(6)4,994


November 2007

Retention

November 2010(4)

November 2010(4)(6)Robert Goff


3,399
(1)

November 2003

Retention

November 2008(2)

November 2008(3)25,821
(5)

February 2005

Performance

February 2008(4)

November 2010(4)8,080


November 2005

Retention

November 2008(4)

November 2008(4)3,657


November 2006

Retention

November 2009(4)

November 2009(4)4,994


November 2007

Retention

November 2010(4)

November 2010(4)Scott Fry


2,507


February 2005

Retention

February 2009 (4)

February 2010(4)(6)4,179


November 2005

Retention

November 2008(4)

November 2008(4)(6)4,876


November 2006

Retention

November 2009(4)

November 2009(4)(6)4,994


November 2007

Retention

November 2010(4)

November 2010(4)(6) 109




---



##### 



Name

Number of shares


Grant Date

Grant Type

Full vesting period

Period(s) until payoutJack Hughes


10,000
(1)

February 2003

Retention

February 2008(2)

February 2006, 2007, 2008(3)(7)6,798
(1)

November 2003

Retention

November 2008(2)

November 2006, 2007, 2008(3)(7)30,297


February 2005

Retention

February 2008(4)

February 2008(4)(7)46,797
(5)

February 2005

Performance

February 2008(4)

February 2008(4)(7)11,145


November 2005

Retention

November 2008(4)

November 2008(4)(7)13,931


November 2005

Retention

November 2010(4)

November 2010(4)(7)10,239


November 2006

Retention

November 2009(4)

November 2009(4)(7)2,497


November 2007

Retention

November 2010(4)

November 2010(4)(7)     (1)
    
    The initial set of awards made in February 2003 was made solely
    to Alions executive management team. The awards made in
    November 2003 were made to executive and senior management of
    Alion.(2)
    
    Pursuant to the Initial Phantom Stock Plan, recipients become
    fully vested on the fifth year from the grant date,
    approximately February 2008 and November 2008.(3)
    
    Pursuant to the Initial Phantom Stock Plan, recipients will be
    paid commencing on the fifth year from the date of grant.
    However, in November 2005, the Initial Phantom Stock Plan was
    amended to permit employees to make a one- time election to
    receive payment for phantom shares as they vest each year or
    when fully vested. Dr. Atefi, Mr. Hughes, and
    Ms. Mendler made this election; Mr. Goff did not.(4)
    
    Pursuant to the Second Phantom Stock Plan, recipients may be
    awarded performance-based or retention-based phantom stock.
    Performance-based phantom stock becomes fully vested three years
    from the date of grant; retention-based phantom stock becomes
    fully vested as specified in the individual agreements.
    Recipients of performance-based and retention-based phantom
    stock will be paid as specified in individual agreements.(5)
    
    Pursuant to the Second Phantom Stock Plan, performance awards
    are subject to change at the vesting date. The performance-based
    grants in February 2005 were fixed based on the
    September 30, 2007 share price.(6)
    
    In December 2008, Dr. Atefi, Ms. Mendler, and
    Mr. Fry forfeited their right to receive payment for
    certain vested, unpaid phantom stock awards. Along with
    Mr. Alber, Dr. Atefi, Ms. Mendler and
    Mr. Fry forfeited all phantom stock awards that had not yet
    vested.(7)
    
    In connection with his settlement agreement, Mr. Hughes
    forfeited the right to receive payment for all unpaid, vested
    and unvested phantom stock awards.  Stock
    Appreciation Rights (SAR) Plans
  2002
    SAR Plan
  10-year
  Amendment #1.
 110




---



##### 



Amendment #2.
  Vesting.
  Payments.
    2004 SAR
    Plan
  10-year
  Vesting.
  Payments. 5-year
 111




---



##### 



Amendment.
    Grants of
    Plan-Based Awards
    Allotherstock


Allawards:


otherNumber


SAR


Exercise


Grantof


awards:


or


dateshares


Number


base


fairof


of


price


valueEstimated future payments


Estimated future payments


stock


securities


of


of stockunder Non-equity incentive


under Equity incentive plan


or


underlying


SAR


andGrant


plan awards(1)


awards(2)


units


options


awards


SARName

date


Minimum


Target


Maximum


Minimum


Target


Maximum


(#)(3)


(#)


($/Sh)


awardsBahman Atefi


11/13/2007



























17,478










$
700,000
(4)Stacy Mendler


11/13/2007



























4,994










$
200,000
(4)Michael Alber


12/24/2007































5,000


$
40.05


$
67,391
(5)01/14/2008



























1,248










$
50,000
(4)05/13/2008



























1,219










$
50,000
(6)Rob Goff


11/13/2007



























4,994










$
200,000
(4)Scott Fry


11/13/2007



























4,994










$
200,000
(4)Jack Hughes


11/13/2007



























2,497










$
100,000
(4)     (1)
    
    Threshold, target and maximum amounts do not apply to the
    Companys bonus program.(2)
    
    Threshold, target and maximum amounts only apply to performance
    based phantom stock, and not to retention based phantom stock.
    Only retention based phantom stock was issued to the Named
    Executive Officers in fiscal year 2008.(3)
    
    This column represents the amount of Phantom stock awards given
    to the Named Executive Officers.(4)
    
    The share price at the grant date of November 13, 2007 and
    January 14, 2008 was $40.05.(5)
    
    The share price at the grant date of December 24, 2007 was
    $40.05.(6)
    
    The share price at the grant date of May 13, 2008 was
    $41.00. 112




---



##### 



Outstanding
    Equity Awards at Fiscal Year-End
    SAR Awards


Phantom Stock AwardsNumber ofsecurities


Number ofunderlying


securities








Number of


Market value ofunexercised


underlying


SAR





shares or


shares or units ofSARs


unexercised SARs


exercise





units of stock that


stock that have not(#)


(#)


price





have not vested


vested (4)Name

Exercisable


Unexercisable


($)


SAR expiration date


(#)


($)Bahman Atefi


















95,749


$
3,671,963
(5)Stacy Mendler


















42,156


$
1,616,701
(6)Jack Hughes






















Rob Goff(1)






500


$
14.71



12/01/08







Scott Fry(2)


2,000



2,000


$
19.94



12/01/09



14,676


$
562,815
(7)Michael Alber(3)






5,000


$
40.05



12/13/12



2,467


$
94,646
(8)     (1)
    
    In December 2003, Mr. Goff was awarded 2,500 SARs at the
    exercise price of $14.71 per share, of which 500 SARs were
    outstanding as of September 30, 2008.(2)
    
    In February 2005, Mr. Fry was awarded 4,000 SARs at the
    exercise price of $19.94 per share, all of which were
    outstanding as of September 30, 2008.(3)
    
    In December 2007, Mr. Alber was awarded 5,000 SARs at the
    exercise price of $40.05 per share, all of which were
    outstanding as of September 30, 2008.(4)
    
    The market value is based on the share price of $38.35 as of
    September 30, 2008.(5)
    
    In December 2008, Dr. Atefi forfeited the right to receive
    $3,528,574 in cash for 92,010 unvested shares of phantom stock,
    based on Alions $38.35 September 2008 share
    price.(6)
    
    In December 2008, Ms. Mendler forfeited the right to
    receive $1,564,559 in cash for 40,797 unvested shares of phantom
    stock, based on Alions $38.35 September
    2008 share price.(7)
    
    In December 2008, Mr. Fry forfeited the right to receive
    $562,815 in cash for 14,676 unvested shares of phantom stock,
    based on Alions $38.35 September 2008 share
    price.(8)
    
    In December 2008, Mr. Alber forfeited the right to receive
    $94,646 in cash for 2,467 unvested shares of phantom stock,
    based on Alions $38.35 September 2008 share
    price.  SAR
    Exercises and Phantom Stock Vested
    SAR Awards


Phantom Stock Awards(2)Number of sharesacquired on


Value realized on


Number of shares


Value realized onexercise


exercise


acquired on vesting


vestingName

(#)


($)


(#)


($)Bahman Atefi










131,953


$
5,284,711Stacy Mendler










69,941


$
2,801,124Michael Alber














Rob Goff










43,912


$
1,800,375740


$
19,882
(1)Scott Fry(3)










627


$
24,041Jack Hughes(4)










1,360


$
54,453     (1)
    
    Mr. Goff exercised 240 shares at $10.00 and
    500 shares at $14.71 per share and the September 30,
    2007 share price of $40.05 per share. 113




---



##### 



(2)
    
    The Company paid vested phantom stock shares at the
    September 30, 2007 of $40.05 share price. Vested
    unpaid shares are valued at the share price on the date each
    award vested.(3)
    
    In December 2008, Mr. Fry forfeited the right to receive
    $72,123 in cash for 1,881 vested shares of phantom stock based
    on Alions $38.35 September 2008 share price.(4)
    
    In connection with his settlement agreement, Mr. Hughes
    forfeited the right to receive payment for all unpaid, vested
    and unvested phantom stock awards.  Deferred
    Compensation Plans
    and/or
      Executive


Registrant


Aggregate


Aggregate


AggregateContributions in


Contributions


Earnings in


Withdrawals/


Balance atLast FY


in Last FY


Last FY


Distributions


Last FYEName

($)


($)


($)


($)


($)Bahman Atefi


















Michael Alber


















Stacy Mendler


















Rob Goff


















Scott Fry

$
157,680






$
(87,929
)





$
374,072   Other
    Potential Post-Termination Payments
    Employment Agreements.
  Stock Incentive and Deferred Compensation Plans.
 114




---



##### 



Termination
    by the Company without Cause;
    Termination by Executive based upon Constructive Termination;
    Termination in the event of Death or Disability;
    Termination upon Expiration of the Employment Agreement due to
    Company Election
    Not to Extend; Change in Control
  Early VestingSeverance


of StockAmount


Awards


Other


TotalName

(a)


(b)


(c)


(d)Bahman Atefi

$
2,300,000


$
3,671,963


$
25,000


$
5,996,963Stacy Mendler

$
862,500


$
1,616,701


$
25,000


$
2,504,201Michael Alber

$
450,000


$
94,646


$
25,000


$
569,646Jack Hughes














Rob Goff

$
480,000


$
713,833


$
25,000


$
1,218,833Scott Fry

$
565,000


$
562,815


$
25,000


$
1,152,815     (a)
    
    Represents payment of a percentage of the executives
    annual salary and a percentage of the bonus the executive would
    have earned as of such date based upon the actual bonus paid for
    fiscal 2008 performance.  Name

Salary


BonusBahman Atefi


200
%


200
%Stacy Mendler


150
%


150
%Michael Alber


100
%


100
%Rob Goff


100
%


100
%Scott Fry


100
%


100
%Jack Hughes


150
%


150
%   (b)
    
    Represents the value of the unvested phantom stock and SARs held
    by the executive as of September 30, 2008. Phantom stock
    value equals the number of unvested shares multiplied by the
    September 30, 2008 price of a share of Alion common stock.
    SAR value equals the number of unvested shares multiplied by the
    September 30, 2008 price of a share of Alion common stock
    less the exercise price for each such award. The amount in this
    column applies and would be received by the executive if
    termination occurs within one year following execution of a
    definitive change in control agreement, which transaction is
    subsequently consummated.(c)
    
    Represents outplacement services in an amount not to exceed
    $25,000 with a firm selected by the Company and at the
    reasonable expense of the Company; provided, however, that under
    no circumstances shall such outplacement services be provided
    beyond the December 31 of the second calendar year following the
    calendar year in which the executives separation from
    service occurred.In addition, the Company is obligated to pay the executive, if
    he or she is eligible for and elects to receive, medical and/or
    dental benefits pursuant to the provisions of COBRA for himself
    and/or any qualifying beneficiaries. The Company shall pay on
    the executives behalf the amount of the applicable COBRA
    that exceeds the amount of premium payable by the executive for
    the same level of coverage immediately prior to the effective
    date of termination. 115




---



##### 



(d)
    
    Represents the maximum amount that the executive can receive,
    including in the event the executive is entitled to full vesting
    of his or her stock and SARs in the event of a termination
    occurring within one year following the execution of a
    definitive agreement for a change in control, which transaction
    is subsequently consummated.  Director
    Compensation
  Fees








Non-equity


Change inearned or


Phantom





incentive


nonqualifiedpaid in


Stock


SAR


plan


deferred


All othercash


awards


awards


compensation


compensation


compensation


TotalName

($)(1)


($)(2)


($)


($)


earnings


($)(3)


($)Bahman Atefi


























Edward C. (Pete) Aldridge, Jr.

$
45,000


$
40,000














$
3,719


$
88,719Leslie Armitage

$
46,000


$
40,000














$
620


$
86,620Lewis Collens

$
44,500


$
40,000














$
3,706


$
88,206Admiral (Ret.) Harold W. Gehman, Jr.

$
51,500


$
40,000














$
1,868


$
93,368Donald E. Goss

$
54,500


$
40,000














$
4,005


$
98,505General (Ret.) George A. Joulwan

$
49,000


$
40,000














$
711


$
89,711General (Ret.) Michael E. Ryan

$
56,000


$
40,000














$
3,925


$
99,925     (1)
    
    This column represents the total fees including the annual
    retainer fee to non-employee directors. The Companys
    employee directors do not receive any additional compensation
    for their services as members of the Board of Directors. For the
    year ended September 30, 2008, the Companys
    non-employee directors received an annual retainer of $30,000,
    payable in quarterly installments, for their services as members
    of the Board of Directors. In addition, each director receives a
    fee of $2,500 for in-person attendance at a Board of Directors
    meeting, and $1,000 for telephone attendance at a Board of
    Directors meeting. The chairman of the Audit and Finance
    Committee receives $7,500 per year for each year he or she
    serves in such capacity. The other board committee chairs
    receive $5,000 per year for each year he or she serves in such
    capacity. Board committee members receive $1,000 per committee
    meeting if the committee meeting occurs on a day other than the
    day of a full Alion Board of Directors meeting. Alion reimburses
    directors for reasonable travel expenses in connection with
    attendance at Board of Directors and board committee meetings.(2)
    
    The awards represent a grant made to directors of the Company.
    For the year ended September 30, 2008, each of the
    Companys non-employee directors received an annual award
    of $40,000 in shares of phantom stock under our Director Phantom
    Stock Plan. Each award vests ratably over a three year period
    from the respective grant date. The amount in this column
    represents the expense recognized by the Company for fiscal year
    2008 under Financial Accounting Standard Board Statement of
    Financial Accounting Standards No 123 (revised
    2004) Share-Based Payment (FAS 123R). The
    Companys calculation of the expense amount for
    FAS 123R purposes is based on a model that includes
    subjective assumptions, which are set forth in and discussed in
    more detail in the footnotes to the financial statements for the
    Company contained in this annual report. The Companys
    directors also have the option to participate in a deferred
    compensation plan for tax deferral of their annual compensation
    and/or payments to be made upon exercise of their phantom stock
    awards. For more information about the Alion Science and
    Technology Corporation Director Phantom Stock Plan, please read
    Item 11. Executive Compensation  Phantom
    Stock Plans  Director Phantom Stock Plan.(3)
    
    The amounts included in this column represent the amount paid by
    the Company for travel expenses to attend Board of Directors
    meetings. 116




---



##### 



Compensation
    Committee Interlocks and Insider Participation
    Compensation
    Committee Report
  Regulation S-K
  
  Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholders Matters    Amount and Natureof Beneficial


PercentageName of Beneficial Owner

Title of Class


Ownership


of Class(1)Five Percent Security Holders:Illinois Institute of Technology(2)


Common stock



1,080,437
(3)


17.1Directors(4) and Executive Officers:Bahman Atefi


Common stock



61,668
(5)


1.2Jack Hughes


Common stock



8,486
(5)


*Michael Alber


Common stock



-0-
(5)


*Stacy Mendler


Common stock



73,462
(5)


1.4Rob Goff


Common stock



12,259
(5)


*Scott Fry


Common stock



4,026
(5)


*All Directors and Executive Officers as a Group
    (6 Persons )


Common stock



159,901
(5)


3.1     *
    
    less than 1%.(1)
    
    Applicable percentages are based on 5,229,756 shares
    outstanding on September 30, 2008, and also include shares
    of common stock subject to warrants. Warrant related shares are
    deemed to be outstanding in computing IITs percentage, but
    are not deemed outstanding in computing ownership percentages of
    any other person shown in the table. This table is based upon
    information in the Companys possession and believed to be
    accurate. Unless indicated in the footnotes to this table and
    subject to community property laws where applicable, the Company
    believes that each of the shareholders named in this table has
    sole voting and investment power with respect to the shares
    indicated as beneficially owned. 117




---



##### 



(2)
    
    Illinois Institute of Technologys address is 3300 South
    Federal Street, Chicago, IL 60616.(3)
    
    The number of shares deemed to be beneficially held by IIT
    represents currently exercisable warrants held by IIT under the
    Subordinated Warrant for an aggregate of 1,080,437 shares
    of common stock.(4)
    
    No directors (other than Dr. Atefi) are believed by the
    Company to be beneficial owners of its common stock.(5)
    
    Includes beneficial ownership of shares of Alions common
    stock held by the Alion KSOP.  Changes
    in Control
    Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence      Independent
    Directors
          Item 14.
    Principal
    Accountant Fees and Services   118




---



##### 



Fee Category

2008


2007Audit Fees(1)

$
1,052,885


$
1,213,767Audit-Related Fees(2)


142,115



225,900Tax Fees and All Other Fees


154,485



56,775Total Fees

$
1,349,485


$
1,496,442     (1)
    
    Audit fees include fees for auditing Alions financial
    statements, reviewing interim financial statements included in
    quarterly reports on
    Form 10-Q,
    and providing other professional services in connection with
    statutory and regulatory filings or engagements.(2)
    
    Audit-related fees are fees for assurance and similar services
    for employee benefit plan audits and services provided in
    conjunction with acquisitions and accounting consultations.
    These services were approved by the Audit and Finance Committee. PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules  (a) Consolidated Financial Statements of Alion Science and
    Technology CorporationReports of Independent Registered Public Accounting Firm


51Consolidated Financial Statements:Consolidated Balance Sheets as of September 30, 2008 and 2007


52Consolidated Statements of Operations for the years ended
    September 30, 2008, 2007 and 2006


53Consolidated Statements of Redeemable Common Stock and
    Accumulated Deficit, for the years ended September 30, 2008,
    2007 and 2006


54Consolidated Statements of Cash Flows for the years ended
    September 30, 2008, 2007 and 2006


55Notes to Consolidated Financial Statements


56(b) Consolidated Financial Statement ScheduleSchedule II  Valuation and Qualifying
    Accounts (in thousands)


119   Balance at


Charged to








Balance atBeginning


Costs and








End ofAllowance for Doubtful Accounts Receivable

of Year


Expenses


Deductions(1)


Acquisitions


YearFiscal year ended 2008

$
5,272


$
(578
)

$
(732
)

$



$
3,962Fiscal year ended 2007

$
3,961


$
2,176


$
(865
)

$



$
5,272Fiscal year ended 2006

$
3,539


$
667


$
(462
)

$
217
(2)

$
3,961     (1)
    
    Accounts receivable written off against the allowance for
    doubtful accounts.(2)
    
    Adjustments from BMH, WCI and MA&D purchase price
    allocations. 119




---



##### 



(c) Exhibits
  ExhibitNo.

Description3
.2

Amended and Restated By-laws of Alion Science and Technology
    Corporation.(24)3
.3

Third Amended and Restated Certificate of Incorporation of Alion
    Science and Technology Corporation.(15)4
.1

Indenture dated as of February 8, 2007, among Alion Science
    and Technology Corporation, certain subsidiary guarantors and
    Wilmington Trust Company, as trustee.(27)4
.2

Form of 10.25% Senior Notes due 2015.(27)4
.3

Amended and Restated Alion Science and Technology Corporation
    Employee Ownership, Savings and Investment Plan.(28)4
.4

First Amendment to Amended and Restated Alion Science and
    Technology Corporation Employee Ownership, Savings and
    Investment Plan.(30)4
.5

Second Amendment to Amended and Restated Alion Science and
    Technology Corporation Employee Ownership, Savings and
    Investment Plan.10
.1

Seller Note Securities Purchase Agreement by and between IIT
    Research Institute and Alion Science and Technology Corporation
    (Seller Note Agreement).(2)10
.2

Seller Warrant Agreement by and among Alion Science and
    Technology Corporation, IIT Research Institute and Alion
    Science and Technology Employee Ownership, Savings and
    Investment Trust (Seller Warrant Agreement).(3)10
.3

Rights Agreement by and among Alion Science and Technology
    Corporation, IIT Research Institute and Alion Science and
    Technology Employee Ownership, Savings and Investment Trust.(2)10
.4

Term B Senior Credit Facility (the Credit Agreement)
    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.(8)10
.5

First Amendment to the Seller Warrant Agreement.(8)10
.6

Second Amendment to the Seller Warrant Agreement.(9)10
.7

Commitment letter agreement by and between Alion Science and
    Technology Corporation and Credit Suisse First Boston.(10)10
.8

Third Amendment to the Seller Warrant Agreement.(11)10
.9

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.(12)10
.10

Incremental Term Loan Assumption Agreement and Amendment
    No. 1 under the Credit Agreement .(13)10
.11

Employment Agreement between Alion Science and Technology
    Corporation and Anthony Serro.(14)*10
.12

Employment Agreement between Alion Science and Technology
    Corporation and P. Thomas Diamant.(14)*10
.13

Alion Science and Technology Corporation Board of Directors
    Phantom Stock Plan.(16)*10
.14

Amended and Restated Alion Science and Technology Corporation
    Phantom Stock Plan.(16)*10
.15

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

Amended and Restated Alion Science and Technology Corporation
    2002 Stock Appreciation Rights Plan.(16)*10
.17

Amended and Restated Alion Science and Technology Corporation
    2004 Stock Appreciation Rights Plan.(16)*10
.18

Amended and Restated Alion Science and Technology Corporation
    Executive Deferred Compensation Plan.(16)*10
.19

Amended and Restated Alion Science and Technology Corporation
    Director Deferred Compensation Plan.(16)* 120




---



##### 



ExhibitNo.

Description10
.20

Commitment letter by and between Alion Science and Technology
    Corporation, Credit Suisse and Credit Suisse Securities (USA)
    LLC.(18)10
.21

Incremental Term Loan Assumption Agreement and Amendment
    No. 2 under the Credit Agreement.(19)10
.22

Fourth Amendment to the Seller Warrant Agreement.(20)10
.23

Mezzanine Warrant Redemption Agreement by and between Alion
    Science and Technology Corporation and Illinois Institute of
    Technology.(20)10
.24

Alion Mezzanine Warrant Redemption Agreement by and among
    Alion Science and Technology Corporation, Alion Science and
    Technology Employee Ownership, Savings and Investment Trust and
    Bahman Atefi.(20)10
.25

Asset Purchase Agreement dated as of June 4, 2006, by and
    between Anteon Corporation, Alion Technical Services Corporation
    and Alion Science and Technology Corporation.(21)10
.26

Incremental Term Loan Assumption Agreement and Amendment
    No. 3 under the Credit Agreement.(21)10
.27

Bridge Loan Agreement dated as of June 30, 2006, by and
    among Alion Science and Technology Corporation, HFA, METI, CATI,
    JJMA, BMH, WCI, MA&D, CS, and the lenders party thereto
    (Bridge Loan Agreement).(21)10
.28

Closing Letter Agreement dated as of June 30, 2006, by and
    among Alion Science and Technology Corporation, Alion Technical
    Services Corporation and Anteon Corporation.(21)10
.29

First Amendment to Seller Note Agreement.(21)10
.30

Commitment letter by and between Alion Science and Technology
    Corporation, Credit Suisse and Credit Suisse Securities (USA)
    LLC.(22)10
.31

Amendment No. 1 to Bridge Loan Agreement.(25)10
.32

Incremental Term Loan Assumption Agreement under the Credit
    Agreement.(26)10
.33

Purchase Agreement dated January 26, 2007 among Alion
    Science and Technology Corporation, certain subsidiary
    guarantors and Credit Suisse Securities (USA) LLC.(27)10
.34

Amendment No. 4 to the Credit Agreement.(27)10
.35

Registration Rights Agreement dated February 8, 2007 among
    Alion Science and Technology Corporation, certain subsidiary
    guarantors and Credit Suisse Securities (USA) LLC.(27)10
.36

Employment Agreement between Alion Science and Technology
    Corporation and Dr. Bahman Atefi.(29)*10
.37

Employment Agreement between Alion Science and Technology
    Corporation and Stacy Mendler.(31)*10
.38

Employment Agreement between Alion Science and Technology
    Corporation and John M. Hughes.(31)*10
.39

Employment Agreement between Alion Science and Technology
    Corporation and James Fontana.(38)*10
.40

Employment Agreement between Alion Science and Technology
    Corporation and Rob Goff.(31)*10
.41

Employment Agreement between Alion Science and Technology
    Corporation and Scott Fry.(38)*10
.42

Employment Agreement between Alion Science and Technology
    Corporation and Buck Buchanan.(38)*10
.43

Incremental Term Loan Assumption Agreement under the Credit
    Agreement.(32)10
.44

Employment Agreement by and between Alion Science and Technology
    Corporation and Michael J. Alber.*(34)10
.45

Separation Agreement and General Release with John M.
    Hughes.*(35)10
.46

Third Amendment to the Seller Note Securities Purchase Agreement
    and First Amendment to Rights Agreement dated as August 29,
    2008, by and between Alion Science and Technology Corporation,
    Illinois Institute of Technology, Alion Science and Technology
    Corporation Employee Ownership, Savings and Investment Trust,
    Bahman Atefi and Stacy Mendler.(36)10
.47

Junior Subordinated Second Amended and Restated Seller Note made
    by Alion Science and Technology Corporation to the order of
    Illinois Institute of Technology dated as of August 29,
    2008.(36)10
.48

Amended and Restated Seller Warrant Agreement dated as
    August 29, 2008, by and between Alion Science and
    Technology Corporation, Illinois Institute of Technology and
    Alion Science and Technology Corporation Employee Ownership,
    Savings and Investment Trust.(36) 121




---



##### 



ExhibitNo.

Description10
.50

Amendment No. 5 dated as of September 30, 2008, by and
    among the Company, Human Factors Applications, Inc.
    (HFA), Alion  METI Corporation
    (METI), Alion  CATI Corporation
    (CATI), Alion  JJMA Corporation
    (JJMA), Alion  BMH Corporation
    (BMH), Washington Consulting, Inc.
    (WCI), Alion  MA&D Corporation
    (MA&D), Washington Consulting Government
    Services, Inc. (WCGS), CS, and the lenders party
    thereto, related to the Credit Agreement (as amended from time
    to time) dated as of August 2, 2004, by and among the
    Company, HFA, METI, CATI, JJMA, BMH, WCI, MA&D and WCGS,
    the lenders from time to time party to the Credit Agreement (the
    Lenders), and CS, as administrative agent and as
    collateral agent for the Lenders.(37)10
.51

Separation Agreement and General Release with Leroy R.
    Goff, III.*10
.52

Settlement Agreement and General Release with John M. Hughes.*10
.53

Alion Science and Technology Corporation Long-Term Incentive
    Plan.*10
.54

2008 Executive Bonus Agreement dated as of November 21,
    2008, by and between Alion Science and Technology Corporation
    and Scott Fry.*10
.55

Form of Alion Science and Technology Corporation Category A Long
    Term Incentive Plan Award Agreement.*10
.56

Form of Alion Science and Technology Corporation Category B Long
    Term Incentive Plan Award Agreement.*10
.57

Form of Alion Science and Technology Corporation Category C Long
    Term Incentive Plan Award Agreement.*10
.58

Form of Alion Science and Technology Corporation Category D Long
    Term Incentive Plan Award Agreement.*10
.59

Form of Alion Science and Technology Corporation Ongoing Long
    Term Incentive Plan Award Agreement.*12


Computation of Ratios.14


Third Edition of The Alion Code of Ethics, Conduct and
    Responsibility(33)21


Subsidiaries of Alion Science and Technology Corporation.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. 122




---



##### 



(8)
    
    Incorporated by reference from the Companys September 2004
    Form 10-K
    filed with the SEC on December 28, 2004.(9)
    
    Companys Post-effective Amendment No. 5 to the
    Registration Statement on
    Form S-1
    filed with the SEC on January 24, 2005.(10)
    
    Incorporated by reference from the Companys
    Form 8-K
    filed with the SEC on March 9, 2005.(11)
    
    Incorporated by reference from the Companys
    Form 8-K
    filed with the SEC on March 14, 2005.(12)
    
    Incorporated by reference from the Companys
    Form 8-K/A
    filed with the SEC on April 6, 2005.(13)
    
    Incorporated by reference from the Companys
    Form 8-K
    filed with the SEC on April 6, 2005.(14)
    
    Incorporated by reference from the Companys
    Form 8-K
    filed with the SEC on April 7, 2005.(15)
    
    Incorporated by reference from the Companys March 2005
    Form 10-Q
    filed with the SEC on May 13, 2005.(16)
    
    Incorporated by reference from the Companys
    Form 8-K
    filed with the SEC on December 2, 2005.(17)
    
    Incorporated by reference from the Companys September 2004
    Form 10-K
    filed with the SEC on January 31, 2006.(18)
    
    Incorporated by reference from the Companys
    Form 8-K
    filed with the SEC on February 23, 2006.(19)
    
    Incorporated by reference from the Companys
    Form 8-K
    filed with the SEC on March 29, 2006.(20)
    
    Incorporated by reference from the Companys
    Form 8-K
    filed with the SEC on March 31, 2006.(21)
    
    Incorporated by reference from the Companys
    Form 8-K
    filed with the SEC on June 7, 2006.(22)
    
    Incorporated by reference from the Companys June 2006
    Form 10-Q
    filed with the SEC on August 14, 2006(23)
    
    Incorporated by reference from the Companys
    Form 8-K/A
    filed with the SEC on June 1, 2006.(24)
    
    Incorporated by reference from the Companys September 2006
    Form 10-K
    filed with the SEC on December 1, 2006.(25)
    
    Incorporated by reference from the Companys
    Form 8-K
    filed with the SEC on December 14, 2006.(26)
    
    Incorporated by reference from the Companys
    Form 8-K
    filed with the SEC on January 10, 2007.(27)
    
    Incorporated by reference from the Companys
    Form 8-K
    filed with the SEC on February 8, 2007.(28)
    
    Incorporated by reference from the Companys
    Form S-4
    filed with the SEC on April 30, 2007.(29)
    
    Incorporated by reference from the Companys
    Form S-4
    (8-K) filed
    with the SEC on June 21, 2007. 123




---



##### 



(30)
    
    Incorporated by reference from the Companys
    Form 8-K
    filed with the SEC on July 13, 2007.(31)
    
    Incorporated by reference from the Companys
    Form 8-K
    filed with the SEC on July 20, 2007.(32)
    
    Incorporated by reference from the Companys
    Form 8-K
    filed with the SEC on July 20, 2007.(33)
    
    Incorporated by reference from the Companys
    Form 8-K
    filed with the SEC on November 15, 2007.(34)
    
    Incorporated by reference from the Companys
    Form 8-K
    filed with the SEC on April 8, 2008.(35)
    
    Incorporated by reference from the Companys Quarterly
    Report on Form
    10-Q for the
    fiscal quarter ended June 30, 2008 filed with the SEC on
    August 13, 2008.(36)
    
    Incorporated by reference from the Companys
    Form 8-K
    filed with the SEC on September 4, 2008.(37)
    
    Incorporated by reference from the Companys
    Form 8-K
    filed with the SEC on October 6, 2008.(38)
    
    Incorporated by reference from the Companys
    Form 10-K
    filed with the SEC on December 28, 2007.*
    
    Denotes management contract and/or compensatory plan/arrangement. 124




---



##### 



SIGNATURES
  Pursuant to the requirements of Section 13 or 15(d) of
    the Securities Exchange Act of 1934, as amended, the registrant
    has duly caused this report to be signed on its behalf by the
    undersigned, thereunto duly authorized.
  Alion Science and
    Technology Corporation
   By:
    /s/  Bahman
    Atefi     Chairman, Chief Executive Officer and Director
      Signature

Title

Date/s/  Bahman
    AtefiBahman
    Atefi

Chairman, Chief Executive Officer
    and Director

December 23, 2008/s/  Michael
    J. AlberMichael
    J. Alber

Senior Vice President and
    Chief Financial Officer

December 23, 2008/s/  Gary
    N. AmstutzGary
    N. Amstutz

Senior Vice President and
    Chief Accounting Officer

December 23, 2008/s/  Leslie
    L. ArmitageLeslie
    L. Armitage

Director

December 23, 2008/s/  Lewis
    CollensLewis
    Collens

Director

December 23, 2008/s/  Harold
    W. Gehman, Jr.Harold
    Gehman

Director

December 23, 2008/s/  Donald
    E. GossDonald
    E. Goss

Director

December 23, 2008/s/  George
    A. JoulwanGeorge
    A. Joulwan

Director

December 23, 2008/s/  Michael
    E. RyanMichael
    E. Ryan

Director

December 23, 2008/s/  Edward
    C. Aldridge, Jr.Edward
    C. (Pete) Aldridge, Jr.

Director

December 23, 2008   Supplemental Information to be Furnished with Reports Filed
    Pursuant to Section 15(d) of the Act by Registrants which
    Have Not Registered Securities Pursuant to Section 12 of
    the Act
   125