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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-K





(Mark One)



|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended March 31, 2009

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

Commission file number: 000-30931





OPNET TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|DELAWARE                                                       |  | 52-1483235                          
|(State or other jurisdiction of Incorporation or organization) |  | (I.R.S. Employer Identification No.)

7255 Woodmont Avenue, Bethesda, Maryland 20814-7900

(Address of principal executive offices) (Zip Code)

Registrants telephone number, including area code: (240) 497-3000

Securities registered
pursuant to Section 12(b) of the Act: Common Stock, $0.001 par value

Securities registered pursuant to Section 12(g)
of the Act: None





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.    YES   ̈    NO  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    YES   ̈    NO  x

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
See definitions of large accelerated filer, accelerated filer, or smaller reporting company in Rule 12b-2 of the Exchange Act (check one).



|                           |  |                      |  |                          |  |                             
|-------------------------- |  | -------------------- |  | ------------------------ |  | ----------------------------
|Large accelerated filer   ̈ |  | Accelerated filer  x |  | Non-accelerated filer   ̈ |  | Smaller reporting company   ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).    YES   ̈    NO  x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of
Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES   ̈    NO   ̈

The aggregate market value of the
voting stock held by non-affiliates of the registrant, computed using the closing sale price of the registrants Common Stock on September 30, 2008, as reported on the NASDAQ Global Select Market, was approximately $114,393,391. Shares of
Common Stock held by each officer and director and by each person who owns 5% or more of the outstanding Common Stock have been excluded because such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily
conclusive for other purposes.

The number of shares of the registrants Common Stock outstanding on June 2, 2009 was 20,670,562.

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of the registrants definitive Proxy Statement for the 2009 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K.









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OPNET TECHNOLOGIES, INC.

ANNUAL REPORT ON FORM 10-K

FOR THE FISCAL YEAR ENDED MARCH 31, 2009



|              |  |    |  |                                                                                                              |  |     
|------------- |  | -- |  | ------------------------------------------------------------------------------------------------------------ |  | ----
|ITEM          |  |    |  | TABLE OF CONTENTS                                                                                            |  | PAGE
|              |  |    | 
|              |  |    |  | PART I                                                                                                       |  |     
|1.            |  |   |  | Business                                                                                                     |  | 1   
|1A.           |  |   |  | Risk Factors                                                                                                 |  | 12  
|1B.           |  |   |  | Unresolved Staff Comments                                                                                    |  | 20  
|2.            |  |   |  | Properties                                                                                                   |  | 20  
|3.            |  |   |  | Legal Proceedings                                                                                            |  | 20  
|4.            |  |   |  | Submission of Matters to a Vote of Security Holders                                                          |  | 20  
|              |  |    | 
|              |  |    |  | PART II                                                                                                      |  |     
|              |  |    | 
|5.            |  |   |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 21  
|6.            |  |   |  | Selected Financial Data                                                                                      |  | 23  
|7.            |  |   |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 24  
|7A.           |  |   |  | Quantitative and Qualitative Disclosures About Market Risk                                                   |  | 43  
|8.            |  |   |  | Financial Statements and Supplementary Data                                                                  |  | 43  
|9.            |  |   |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                         |  | 43  
|9A.           |  |   |  | Controls and Procedures                                                                                      |  | 44  
|9B.           |  |   |  | Other Information                                                                                            |  | 47  
|              |  |    | 
|              |  |    |  | PART III                                                                                                     |  |     
|              |  |    | 
|10.           |  |   |  | Directors, Executive Officers and Corporate Governance                                                       |  | 48  
|11.           |  |   |  | Executive Compensation                                                                                       |  | 48  
|12.           |  |   |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |  | 48  
|13.           |  |   |  | Certain Relationships and Related Transactions, and Director Independence                                    |  | 48  
|14.           |  |   |  | Principal Accounting Fees and Services                                                                       |  | 48  
|              |  |    | 
|              |  |    |  | PART IV                                                                                                      |  |     
|              |  |    | 
|15.           |  |   |  | Exhibits and Financial Statement Schedules                                                                   |  | 49  
|              | 
|SIGNATURES    |  | 50
|              | 
|EXHIBIT INDEX |  | 82



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PART I

Forward Looking Information

This Annual Report contains forward-looking statements that involve
substantial risks and uncertainties. You can identify these statements by forward-looking words such as anticipate, believe, could, estimate, expect, intend, may,
plan, potential, should, and would or similar words. You should read statements that contain these words carefully because they discuss our future expectations, contain projections of our future
results of operations or of our financial position, or state other forward-looking information. We believe that it is important to communicate our future expectations to our investors. However, there may be events in the future that we are not able
to predict accurately or control. The factors listed in this Annual Report on Form 10-K under Risk Factors, as well as any cautionary language in this Annual Report on Form 10-K, provide examples of risks, uncertainties, and events that
may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. You should also carefully review the risks outlined in other documents that we file from time to time with the Securities and
Exchange Commission, including our Quarterly Reports on Form 10-Q that we will file in fiscal 2010.

The forward-looking statements
provided in this Annual Report on Form 10-K represent our expectations as of June 5, 2009. We anticipate that subsequent events and developments may cause our expectations to change. However, while we may elect to update this forward-looking
information at some point in the future, we specifically disclaim any obligation to do so. This forward-looking information should not be relied upon as representing our expectations as of any date subsequent to June 5, 2009.

Fiscal Year Convention

The years ended
March 31, 2009, 2008, and 2007, are referred to as fiscal 2009, fiscal 2008, and fiscal 2007, respectively, in this Annual Report on Form 10-K.



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|ITEM 1. | BUSINESS
|------- | --------

In this Annual Report on
Form 10-K, or Annual Report, the Company we, us, and our refer to OPNET Technologies, Inc. and its wholly owned subsidiaries unless the context otherwise indicates.

OPNET Technologies, Inc. is a provider of software products and related services for managing networks and applications. Our software products address
application performance management, network planning, engineering and operations, and network research and development. Our customers include corporate enterprises, government and defense agencies, network service providers, and network equipment
manufacturers. Our software products and related services are designed to help our customers make better use of resources, reduce operational problems, and improve competitiveness.

OPNET differentiates itself from traditional providers of network and application management products by focusing on analytics and producing actionable
results. Traditional application and network management products focus on data collection and monitoring. These systems typically report on historical trends and the status of networks and systems. They are limited by their lack of understanding of
the underlying technologies that support applications, and the relationships among these technologies. While they provide useful information, they do not automate the next important step, which is analyzing collected data to transform it into
actionable information. OPNETs analysis capabilities drive the rapid resolution of performance problems, and also proactively prevent problems from occurring. These problems include, for example, network configuration errors, network
congestion, poor interaction between the network and applications, inefficient use of the network by applications, application bugs, and database inefficiencies. We believe that OPNETs analytics and real-time performance monitoring can
significantly improve the performance and availability of mission-critical networks and applications.

Embedded in OPNET software is expert
knowledge about how network devices, network protocols, applications, and servers operate and interact. This intelligence enables users in application development, network operations, engineering, planning, and security functions to be more
effective in optimizing performance and availability of their networks and applications. We believe our software products can appeal to a broad customer base, including corporate enterprises, government and defense agencies, network service
providers, and network equipment manufacturers, empowering them to make better use of resources, rapidly troubleshoot operational problems, and improve competitiveness.

We market focused software products for each of our target markets. We sell our products to both Fortune 1000 and mid-size companies. Some examples of our customers include:



| |  |  | corporate enterprises, such as BNP Paribas, CSX Corporation, GEICO Insurance, GlaxoSmithKline, GoDaddy.Com, The Hershey Company, IBM Global Services, Medtronic,
Moodys, NBC Universal, Saudi Aramco, and T. Rowe Price;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | government agencies, such as the Federal Bureau of Investigations, the Federal Communications Commission, the Internal Revenue Service, the United States Department
of Defense, the United States Department of Homeland Security, and the United States Government Accountability Office; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | service providers, such as British Telecom, France Telecom, Cox Communications, Deutsche Telekom, NTT, Telus, and Videotron; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | network equipment manufacturers, such as Cisco Systems, Ericsson, Research in Motion, and Samsung.
| | - |  | --------------------------------------------------------------------------------------------------

Industry Background

Growth and
Increased Complexity of Networks and Dependence on Applications

Organizations rely on networks and enterprise software applications to
successfully execute their strategies. The increasing use of applications, such as enterprise resource planning, business intelligence, corporate



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intranets, e-mail, web meetings, virtualization, portals, web services, voice over IP, wireless, and streaming multimedia has resulted in significant growth
in underlying network and application infrastructures. In addition, the proliferation and widespread adoption of the Internet and web services architectures have expanded the role of networks beyond organizational boundaries.

Enterprises and service providers must now manage the convergence of voice, data, and video traffic over traditional, wireless, and optical architectures
by integrating numerous existing and emerging technologies. The complexity is exacerbated by the current corporate regulatory environment, which requires improved management processes and documentation. As a result of these factors, businesses
and government entities are forced to confront significant challenges related to the cost, risk, and performance of information technology, or IT.

IT infrastructures are sophisticated, dynamic systems that evolve on a daily basis. Applications are typically distributed across many clients, servers, and network segments. New and enhanced business applications are regularly being
deployed and re-deployed. The geographic distribution of users relative to IT services shifts due to the consolidation of organizations and resources. Traffic levels exhibit steady growth, necessitating constant evaluation of and improvements to the
underlying network infrastructure in order to maintain business and application performance. However, due to the dependencies among network, server, and application configurations, it is very difficult for IT professionals to identify the true root
cause of performance problems when they occur. The data required to diagnose problems is often difficult to obtain, and processes for analyzing this data are often manual and time consuming, requiring significant experience and expertise. When an
end-user experiences performance problems with an important business application, the challenge facing a typical IT manager is to determine: whether there is enough bandwidth available; whether the database server has enough capacity; whether
network routing protocols are tuned properly; whether protocols on the client and server are likewise tuned properly; and whether the application was designed and implemented efficiently with end-user performance in mind.

Without a clear understanding of the source of problems and the specific changes required to solve them, IT managers resort to uninformed decision-making
that often results in wasteful spending on unnecessary and ineffective server and network upgrades. IT professionals need software products that enable them to focus their time and resources in the right places when problems occur in distributed
enterprise applications, and to maximize the use of existing infrastructure. Further, since modifications to infrastructure have the potential to cause service level degradation or even network failures, there is a growing need to plan and implement
network changes in a controlled manner, taking into account the potential consequences of each action.

Market Opportunity for OPNET
Software Products

Organizations need network and application management software products that possess the analytics required to
overcome the limitations of traditional tools for rapidly detecting and resolving complex problems and proactively preventing problems from occurring. OPNET software products are focused on these areas. Our software products have embedded knowledge
and operational understanding of networks, applications, and systems for quickly troubleshooting problems and automatically predicting the impact of changes. We believe business executives and IT professionals require software products like ours to:



| |  |  | reduce down time of mission critical applications;
| | - |  | --------------------------------------------------



| |  |  | reduce operating and capital costs;
| | - |  | -----------------------------------



| |  |  | increase business productivity; and
| | - |  | -----------------------------------



| |  |  | manage risk, enabling faster deployment of critical, IT-dependent strategic business initiatives.
| | - |  | -------------------------------------------------------------------------------------------------

We believe the value proposition from OPNET software products apply to a broad range of potential customers including:



| |  |  | large and medium-sized enterprises that rely on IT to conduct business;
| | - |  | -----------------------------------------------------------------------



| |  |  | government/defense agencies;
| | - |  | ----------------------------



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| |  |  | service providers, including telecommunications carriers, internet service providers, or ISPs, and managed service providers, or MSPs; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | network equipment manufacturers.
| | - |  | --------------------------------

Enterprises require analytics for more effectively identifying the root causes of application performance problems, ensuring the successful deployment of new applications, auditing device configurations for security and policy compliance,
validating changes, and performing critical operational and strategic planning functions.

Government and defense agencies have needs
similar to those of enterprises, service providers, and network equipment manufacturers. These agencies also sometimes require specialized services to support large projects that incorporate OPNETs technology. United States government
customers, including the Department of Defense, utilize our software and professional services to take advantage of our extensive expertise and intellectual property in networking, applications, and protocols. For the Department of Defense, our
software products and related services are used for both network and application performance management, as well as for analyzing and developing communications technologies for network-centric transformational programs. Our ability to model and
simulate end-to-end network and application performance is valuable in determining the impact of tactical or strategic changes to networks, planning for contingencies, and evaluating the impact of new network technologies and protocols. In addition,
our software products are scalable and address large, complex military systems and networks, such as mobile networks, with a variety of operationally proven, advanced predictive performance techniques.

Service providers require analytics for optimizing their investments in network infrastructure, more effectively troubleshooting network issues, ensuring
network configuration integrity and security, planning for services based on new technologies including wireless and optical, and making better use of network resources to increase competitiveness.

Network equipment manufacturers require advanced modeling and simulation software products for accelerating network research and development, reducing
time-to-market for new technologies, developing custom network design and analysis software, and for reducing sales cycles for sophisticated technology products.

OPNET Software Products

Our software products use a variety of advanced technologies to support the
analysis of application, network, and server performance under a wide range of current and future operating conditions. Many OPNET software products share a significant amount of core software based on an open architecture. Our software architecture
enables us to create new software more efficiently, to foster interoperability of our software products, and to provide interfaces to a wide range of external data sources including third party management tools and network topology, traffic, and
configuration information. We also deliver extensive cross-product integration, to enable our users to realize added value when products are deployed together.

The following sections summarize the OPNET software product portfolio by target market:

Primary Target
Market: Enterprise IT (Corporate and Government/Defense)



| |  |  | ACE Analyst, first introduced in May 2000 as ACE, enables application performance management through advanced analytics. ACE Analyst is used to troubleshoot
performance problems in production applications and to enable successful application deployment during quality assurance.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | ACE Live was introduced in November 2007 following OPNETs acquisition of specified assets from Network Physics. ACE Live performs real-time end user
experience monitoring, leveraging on-board analytics to quickly determine the root source of application performance problems. ACE Live is a hardware appliance, and can also be deployed as a software solution on an existing PC or server, or on
selected models of the Riverbed Steelhead solution for accelerating application traffic over a wide area network.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | IT Guru Network Planner was first introduced in August 1998 as IT Guru. It provides predictive network capacity planning and design optimization, as well as
validation of network configuration changes.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | IT Guru Systems Plannerwas introduced in December 2006 as an option for IT Guru. It provides capacity planning for servers, including planning for migration
from physical-to-virtual server environments.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | nCompass for Enterprises was first introduced in September 2003 as NETCOP. It provides enterprises with centralized, real-time visibility of network
topology, traffic, and status in a single, integrated view. nCompass for Enterprises provides a unified view to quickly recognize the impact of network events, and assisted troubleshooting to rapidly resolve problems.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | IT Sentinelwas first introduced in August 2004. IT Sentinel provides automatic and continuous network configuration integrity and security auditing, and
proactive change validation.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | OPNET Panoramawas first introduced in December 2004 following OPNETs acquisition of Altaworks Corporation. Panorama provides real-time system
analytics for application performance management. Like ACE Analyst, it is used throughout the application life cycle to ensure the successful deployment of applications, and rapidly troubleshoot performance problems in production applications. With
Panorama focusing on advanced application analysis from the server perspective, and ACE Analysts network perspective, we believe that we are well positioned to address the complex issues that our clients may face as they migrate to web
services architectures.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | VNE Server was first introduced in June 2002. VNE Server, or Virtual Network Environment Server automatically maintains a detailed, near real-time data model
of the production IT network. VNE Server includes a suite of adapters that obtain topology, traffic, and other information from network devices as well as a broad range of third party data sources. VNE Server automates the data collection process
for other OPNET products, including IT Guru Network Planner and SP Guru Network Planner. VNE Server capabilities are included in IT Sentinel and SP Sentinel.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Primary Target Market: Network Service Providers (both Commercial and Government/Defense)



| |  |  | SP Guru Network Plannerwas first introduced in June 2001. SP Guru Network Planner is built on the IT Guru Network Planner product, and contains analytics
that are valuable to service providers for planning, network design optimization, and validation of configuration changes. SP Guru Network Planner includes modeling and analysis technologies for IP, MPLS, and ATM networks, and when combined with SP
Guru Transport Planner, provides a single environment for network-level and optical transport-level analysis.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | SP Guru Transport Planner,formerly WDM Guru, was first introduced in December 2001. SP Guru Transport Planner is an optical network-planning product
for designing resilient, cost-efficient optical networks. SP Guru Transport Planner is also sold to network equipment manufacturers.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | nCompass for Service Providers was first introduced in September 2003 as NETCOP. nCompass for Service Providers provides service providers with centralized,
real-time visibility of network topology, traffic, and status in a single, integrated view. nCompass for Service Providers provides a unified view to quickly recognize the impact of network events, and assisted troubleshooting to rapidly resolve
problems.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | SP Sentinelwas first introduced in August 2004. SP Sentinel provides automated and continuous network configuration integrity and security auditing for
service providers, and proactive change validation.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | ACE Liveis used by service providers who deliver managed network and data center services to enterprises to ensure application performance.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------



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Primary Target Market: Network R&D Organizations (Defense and Equipment Manufacturers)



| |  |  | OPNET Modeler was OPNETs first product, introduced in 1987. OPNET Modeler is a network modeling and simulation product. It enables users to evaluate
how networking equipment, communications technologies, systems, and protocols will perform under simulated network conditions.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Modeler Wireless Suiteis based on OPNET Modeler, and incorporates additional functionality germane to wireless network R&D organizations.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Modeler Wireless Suite for Defenseis based on OPNET Modeler, and incorporates additional functionality that supports unique network R&D undertaken by
the defense community.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

OPNET Modules

We develop and sell a variety of software modules that provide additional functions to our application and network management software products.

OPNET Model Libraries

The model libraries are used by OPNET software to simulate and analyze major networking technologies and communication protocols. These libraries provide the building blocks used to generate models of networks. A network model consists of
software objects that correspond to the devices, computers, and links that constitute the actual network of interest. The behavior of these objects is controlled by models of devices, computers, applications, communication protocols, and links.
IT Guru Network Planner, IT Guru Systems Planner, IT Netcop, IT Sentinel, SP Guru Network Planner, SP Netcop, SP Sentinel,andOPNET Modeler include extensive libraries of popular and emerging networking technologies and communication
protocols, such as TCP/IP, hypertext transfer protocol, or HTTP, open shortest path first routing, or OSPF, asynchronous transfer mode, or ATM, frame relay, IP-QoS, 802.11, or Wi-Fi, and 802.16, or WiMAX. Some of our model libraries are included in
our base products and others are available for an additional fee as modules.

Our software license agreements provide our customers with
perpetual and term licenses for use by a specified number of concurrent users or for use by an unlimited number of concurrent users.

Customers

For fiscal 2009, 2008, and 2007 we generated 21.1%, 20.2% and 21.1%, respectively, of our total revenue from
customers located outside the United States. No single customer accounted for 10% or more of revenue for fiscal 2009, 2008 or 2007. As of March 31, 2009, 98% of our property and equipment were held inside the United States. As of March 31,
2009, all of our intangible assets were held inside the United States. Note 15 to our consolidated financial statements presents information regarding revenue generated in the United States and internationally.

We derive a substantial portion of our revenue from sales directly or indirectly to United States government agencies. For fiscal 2009, 2008 and 2007,
revenue from transactions with United States government agencies was approximately 35%, 41% and 43%, respectively, of our total revenue. Government sales are subject to a variety of risks, including appropriation of funds by the United States
Congress, termination for convenience, contract renegotiations/extensions and a decline in government spending.

Sales and Marketing

We sell our software products and related services through our direct sales force, our international subsidiaries, third-party
distributors, and a number of original equipment manufacturers, or OEMs, and value-added resellers, or VARs. To date, OEMs and VARs have not accounted for more than 10% of our revenue. In



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North America, our direct sales force accounts for the majority of our sales. As of March 31, 2009, our sales and marketing teams consisted of 192
employees, including 94 quota-carrying and inside salespersons located in our headquarters in Bethesda, Maryland and our domestic offices in Cary, North Carolina; Dallas, Texas; Nashua, New Hampshire; and Santa Clara, California; our overseas
subsidiaries in Paris, France; Slough, United Kingdom; Mainz, Germany; Ghent, Belgium; and Singapore; and our branch office in Beijing, China.

Our international sales activities are also supported by 45 VARs that offer our products in Australia, Austria, Brazil, Finland, France, Germany, Greece, India, Indonesia, Israel, Japan, Netherlands, New Zealand, Norway, Poland, Romania,
Russia, South Africa, South Korea, Spain, Sweden, Switzerland, Turkey and the United Kingdom. Our marketing division works internally with our engineering and sales teams to develop customer value propositions and product messages, and externally
with various third parties to develop brand awareness and leads for sales. Our external marketing activities are aimed at existing customers, new customer prospects, the media, and industry analysts. These include:



| |  |  | participation in industry tradeshows;
| | - |  | -------------------------------------



| |  |  | technology seminars and user group meetings;
| | - |  | --------------------------------------------



| |  |  | advertisements in trade journals and online;
| | - |  | --------------------------------------------



| |  |  | direct mailings;
| | - |  | ----------------



| |  |  | product collateral development and maintaining OPNETs website;
| | - |  | ---------------------------------------------------------------



| |  |  | free software for academic use at universities;
| | - |  | -----------------------------------------------



| |  |  | specialized product sales support;
| | - |  | ----------------------------------



| |  |  | specialized sales support with OPNET resellers;
| | - |  | -----------------------------------------------



| |  |  | briefings with industry analysts; and
| | - |  | -------------------------------------



| |  |  | a variety of public relations activities.
| | - |  | -----------------------------------------

For each of the last twelve years, we have sponsored OPNETWORK, an annual international technology conference convened in Washington, D.C. that focuses on application and network management for professionals in all areas of networking and
information technology. OPNETWORK 2008, which was held in August 2008, included approximately 775 hours of classes, labs, and panels led by OPNET employees and outside experts. Not including OPNET employees, more than 1,672 IT and engineering
professionals, representing 30 countries, participated in the conference. We will not be holding the event this year, based on feedback from our users that indicated travel budgets have been significantly reduced or eliminated. Instead, we will
expand our regular program of regional user group meetings. OPNET sponsored fifteen such meetings around the world in fiscal year 2009.

Service and Support

Our service and support offerings include:



| |  |  | consulting services;
| | - |  | --------------------



| |  |  | software license updates, technical support and services, which includes license updates, training for customers with current maintenance agreements, and technical
support (by telephone, e-mail or fax), all provided on a when-and-if-available basis (except technical support) under our maintenance agreement; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | training for customers without current maintenance agreements, which includes courses that enable our customers to more effectively use our products.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------

We offer consulting services to assist our clients to facilitate the adoption of our software products and to provide
installation services for our product offerings. Installation services are performed by our consulting staff,



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which consists of software development engineers, quality assurance engineers, technical documentation specialists, and project managers. Some customers also
choose to engage our consulting services for troubleshooting application performance problems, network planning, network design, communication protocol design and customization services. As of March 31, 2009, our consulting staff consisted of
118 employees.

Our customers may purchase software license updates, technical support and services, all provided on a when-and-if
available basis (except technical support) under our maintenance agreement. Payments for software license updates, technical support and services whether on initial order or on renewal, are generally made in advance and are nonrefundable.

Software license updates consist of the right to unspecified software updates on a when-and-if-available basis and are typically entered
into in connection with the initial software license purchase. Software license updates, technical support and services may be renewed upon expiration of the term, which is generally one year. Customers can purchase software license updates
separately from technical support and services. Customers purchasing technical support are still required to purchase periodic unspecified product updates.

We provide customer support from our support center at our headquarters in Bethesda, Maryland, as well as from support staff in France, the United Kingdom and Singapore. We have designed and implemented a
comprehensive information system to ensure that customer inquiries are addressed promptly, tracked until fully resolved, and recorded for future reference. Reports on the overall responsiveness of the technical support infrastructure, and the status
of pending customer inquiries, are provided regularly to our technical support staff, technical support management, and executive management.

We have a core team of 15 technical support staff supplemented by a number of product developers and consultants who perform technical support on a rotational basis. We believe this staffing approach maximizes the access customers have to
the best available product expertise, while providing product developers with direct customer feedback, which in turn helps us improve our software products.

We regularly offer training courses to our customers to assist them in maximizing the benefit they receive from using our products. Our training classes cover a broad range of topics. Training classes are offered at
our headquarters in Bethesda, Maryland, our facilities in Santa Clara, California; Cary, North Carolina; Paris, France; and Slough, United Kingdom; and at our customers locations. As of March 31, 2009, our full-time training staff
consisted of 5 employees.

Research and Development

We believe that our ability to enhance our current software products and create new software products in response to the needs of our customer base is an important factor for our future success. Accordingly, we intend
to continue to commit significant resources to product research and development. We expect to accomplish a large part of our software product improvements and new software product development through internal development efforts. New capabilities
may also be integrated into our product lines through the acquisition of technologies or businesses, or the licensing of externally developed technologies.

Our total expenses for research and development for fiscal 2009, 2008, and 2007 were approximately $30.8 million, $27.5 million, and $21.7 million, respectively. Our research and development efforts to date have been
conducted at our offices in Bethesda, Maryland; Cary, North Carolina; Nashua, New Hampshire; Santa Clara, California: and Ghent, Belgium. All related costs have been expensed as incurred. As of March 31, 2009, our research and development staff
consisted of 196 engineers and technical professionals.

Our research and development efforts are directed at increasing our revenue by
expanding the scope of our software products and service offerings to address additional customer requirements. Our existing customers provide a meaningful source of information, which we use in order to guide our future research and development
activities. In addition, we invest in research and analysis of trends in our industry and our product markets, and we expect that our future software products may reflect the results of these analyses.



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Competition

The market for our software products and related services is evolving rapidly and is highly competitive. We believe that this market is likely to become more competitive as the demand for intelligent application and
network management software products continues to increase. Although we believe that none of our competitors offer software products that are identical to ours, we are subject to current and potential competition from:



| |  |  | software and hardware vendors with network and application performance management offerings, such as Computer Associates, or CA, Compuware Corporation, or
Compuware, IBM Tivoli, NetQoS, NetScout Systems, and Quest Software;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | consultants who offer advisory services related to network and application performance management; and
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | customers who develop their own network and application management capabilities, either internally or through outsourcing.
| | - |  | --------------------------------------------------------------------------------------------------------------------------

Also, it is possible that other vendors as well as some of our customers or distributors may develop and market competitive products in the future. Many
of our current and potential competitors are larger and have substantially greater financial and technical resources than we do. We believe the principal competitive factors affecting the market for our software products and related services are the
following:



| |  |  | scope, quality, and cost-effectiveness of application and network management software products;
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | industry knowledge and expertise embedded in the software;
| | - |  | ----------------------------------------------------------



| |  |  | the interoperability of software products with existing network management software products;
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | product performance, accuracy, technical features, ease of use, and price;
| | - |  | --------------------------------------------------------------------------



| |  |  | customer service and support;
| | - |  | -----------------------------



| |  |  | consultants who offer advisory services related to network and application performance management; and
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | customers who develop their own network and application management capabilities, either internally or through outsourcing.
| | - |  | --------------------------------------------------------------------------------------------------------------------------

Intellectual Property

We rely on a
combination of copyright, trademark, patent, and trade secret laws, confidentiality agreements, and contractual provisions to protect our intellectual property. However, we believe that these laws and agreements afford us only limited protection.
Despite our efforts to protect and oversee our intellectual property rights, there may be unauthorized parties who encroach upon our proprietary rights. We reasonably endeavor to identify, prevent, and remedy such conduct as
appropriate. In addition, the laws of some foreign countries do not provide as much protection of our proprietary rights as do the laws of the United States.

We currently hold registered trademarks in the United States for all of our primary marks including the following: OPNET, OPNETWORK, IT Guru, IT Sentinel, Netbiz, NetDoctor, OPNET Modeler, SP Guru, SP Sentinel, VNE
Server, WDM Guru, OPNET LoadScaler, and OPNET TestCreator. We have pending applications in the United States for the trademark registrations of OPNET Omniview , OPNET Panorama, and OPNET NCompass , all of which have been approved by the U.S.
Patent and Trademark Office. We also hold additional registered and unregistered trademarks in the United States and have additional pending applications. We fully intend to maintain our trademark portfolio commensurate with the continued
use of these marks, especially our house mark OPNET. As appropriate and in accordance with our use of our marks internationally, we have applied for and obtained numerous registrations for our marks in foreign countries. In particular for
the term OPNET, we hold registrations in the following countries: Benelux, France, Germany, Japan, the Peoples



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Republic of China, Taiwan and the United Kingdom and have applications pending in Italy and Spain. Currently, we are negotiating in Spain for a consent
agreement that will allow us to receive a registration in that jurisdiction. Other trademarks or service marks appearing in this Annual Report on Form 10-K are the property of their respective holders.

In addition, we have twenty-four patents granted by the United States Patent and Trademark Office. Our patents will expire in 2018 (one), 2019
(one), 2020 (one), 2022 (four), 2023 (seven), 2024 (seven), 2025 (one), and 2026 (two). We also have seventy-six pending United States patent applications that, if granted, would expire approximately twenty years from their respective filing
dates. Six of these are provisional patent applications for which we expect to pursue non-provisional applications within the next year. With regard to foreign patent protection, we currently have three pending European patent applications
and we plan on pursuing three more within the next year. We believe that, because of the rapid pace of change in our industry, intellectual property protection for our products and the knowledge, abilities, and experience of our employees will be
significant factors for our future success.

Executive Officers and Directors of the Registrant

Our executive officers and directors, and their ages as of June 5, 2009, are as follows:



|                                |  |     |  |                                                  
|------------------------------- |  | --- |  | -------------------------------------------------
|Name                            |  | Age |  | Position                                         
|Marc A. Cohen                   |  | 45  |  | Chairman of the Board and Chief Executive Officer
|Alain J. Cohen                  |  | 42  |  | President, Chief Technology Officer and Director 
|Mel F. Wesley                   |  | 37  |  | Vice President and Chief Financial Officer       
|Steven G. Finn, Ph.D. (1)(2)(3) |  | 63  |  | Director                                         
|Ronald W. Kaiser (1)(2)(3)      |  | 55  |  | Director                                         
|William F. Stasior (1)(2)(3)    |  | 68  |  | Director                                         



|(1) | Member of the Audit Committee
|--- | -----------------------------

|(2) | Member of the Compensation Committee
|--- | ------------------------------------

|(3) | Member of the Nominating Committee
|--- | ----------------------------------

Set forth below is
information regarding the professional experience for each of our executive officers and directors. These executive officers and directors were elected to serve until their successors have been elected. Marc A. Cohen and Alain J. Cohen are brothers.
There is no other family relationship between any of our other executive officers or between any of these officers and any of our directors.

Marc A. Cohen,one of our founders, has served as our Chairman of the Board since our inception in 1986 and as our Chief Executive Officer since 1994. From 1986 to 1992, Mr. Cohen was also a consultant with Booz Allen Hamilton
Inc., or Booz Allen, an international management and consulting company. Mr. Cohen received a bachelors degree in engineering science from Harvard University and a masters degree in electrical engineering from Stanford University.
Mr. Cohen also serves as a Trustee and as a member of the Board of Directors of the Dana-Farber Cancer Institute in Boston, Massachusetts.

Alain J. Cohen, one of our founders, has served as our President and Chief Technology Officer and as a member of our Board of Directors since our inception in 1986. Mr. Cohen received a bachelors degree in electrical
engineering from the Massachusetts Institute of Technology, or M.I.T.

Mel F. Wesleyhas served as our Vice President and Chief
Financial Officer since July 2005. Mr. Wesley served as our Acting Chief Financial Officer from December 2004 to July 2005 and our Corporate Controller from June to December 2004. From August 2003 to June 2004, Mr. Wesley served as
Corporate Controller for SteelCloud, Inc., a publicly traded corporation that provides design, development and manufacturing of network appliances and infrastructure server products. From October 2000 to August 2003, Mr. Wesley served as an
Assistant Controller for Learning Tree International, Inc., a publicly traded corporation that provides training to information technology professionals and managers.



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Dr. Steven G. Finn has served as a member of our Board of Directors since March 1998.
Dr. Finn has been a principal research scientist and lecturer at M.I.T. since 1991. Dr. Finn has also served as a consultant with Matrix Partners, a venture capital firm, since 1991.

Ronald W. Kaiser has served as a member of our Board of Directors since October 2003. Since January 2008, Mr. Kaiser has served as an
independent consultant and board member. From January 2007 through December 2008, Mr. Kaiser served as Chief Financial Officer of Sucampo Pharmaceuticals, Inc., a specialty pharmaceutical company. Mr. Kaiser served as Chief Financial
Officer of Pharmathene, Inc, a privately held bio-defense company from April of 2005 through December of 2006. Mr. Kaiser served as Chief Financial Officer, Treasurer and Secretary of Air Cargo, Inc., a privately held provider of United States
and European cargo transportation logistics from February 2003 through March 2005. Air Cargo filed for Chapter 11 bankruptcy on December 7, 2004. Mr. Kaiser served as Chief Financial Officer and Treasurer of OTG Software, Inc., or OTG,
from June 1998 until the sale of OTG to Legato Systems, Inc. in May 2002. OTG was a publicly traded corporation that provided online data storage and data access software products for business applications, email management and related services.
Mr. Kaiser serves on the board of directors of Vocus, Inc., a provider of public relations management software.

William F.
Stasiorhas served as a member of our Board of Directors since March 1998. Since October 1999, Mr. Stasior has served as Senior Chairman of Booz Allen. From 1991 to 1999, he served as Chairman and Chief Executive Officer of Booz Allen.
Mr. Stasior currently serves on the Board of Directors of SkyTerra Communications, Inc., a telecommunications service provider.

Employees

As of March 31, 2009, we had 593 full-time employees, 543 of whom were located in the United States. The 593
full-time employees included 192 in sales and marketing, 143 in professional services and support, 196 in engineering, research and development, and 62 in general and administrative functions. Our employees are not represented by a collective
bargaining agreement and we consider our relations with our employees to be good.

Corporate Information

We are a Delaware corporation that was incorporated in November 1988, our principal executive office is located at 7255 Woodmont Avenue, Bethesda,
Maryland 20814-7900 and our telephone number is (240) 497-3000. Our website address is www.opnet.com. The information on our website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered to be a part
of this Annual Report on Form 10-K. Our website address is included in this Annual Report on Form 10-K as an inactive textual reference only.

Availability of SEC Reports

Our website address is www.opnet.com. We make available free of charge on our website our
Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to these reports, as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the
Securities and Exchange Commission, or SEC.

We file our reports with the SEC electronically via the SECs Electronic Data Gathering,
Analysis and Retrieval system, or EDGAR. The SEC maintains a website that contains reports, proxy and information statements, and other information regarding companies that file electronically with the SEC via EDGAR. The address of this website is
www.sec.gov.

Any reports, statements or other information that we file with the SEC may be read or copied at the SECs Public
Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Copies of these documents



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can be requested upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at 1 (800) SEC-0330 for further information on the
operation of the Public Reference Room. Upon request, we make available free of charge, electronic or paper copies of any reports, statements or other information that we file with the SEC.

Code of Business Conduct and Ethics

On May 4, 2004 we adopted a code of business conduct and ethics for all directors, officers, and employees pursuant to Section 406 of the Sarbanes-Oxley Act of 2002. The Code of Business Conduct and Ethics is available on our
website at www.opnet.com.Suspected violations of this Code may be reported on a confidential or anonymous basis by facsimile or by e-mail to our General Counsel and to the Chairman of the Audit Committee of the Board of Directors. We
intend to disclose any amendment to, and any waiver from, any provision of this Code that applies to any director, the Chief Executive Officer, Chief Financial Officer, or any other executive officer and that relates to any element of this Code
enumerated in Item 406(b) of Regulation S-K, on Form 8-K.



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|ITEM 1A. | RISK FACTORS
|-------- | ------------

The following important factors,
among others, could cause actual results to differ materially from those indicated by forward-looking statements made in this Annual Report and presented elsewhere by management from time to time. You should consider carefully the following
information before making an investment in our securities.

General economic conditions, including concerns regarding the depth and
duration of the global recession and credit constraints, or unfavorable economic conditions in a particular region, business or industry sector, may cause our customers to postpone or forego technology investments and could have other impacts, any
of which could hurt our business, financial results and cash flow.

Our products are designed to enhance our customers
ability to manage their networks and applications. However, a general slowdown or recession in the global economy, or in a particular region, or business or industry sector, such as the financial services sector, or tightening of credit markets,
could cause our customers to



| |  |  | have difficulty accessing credit sources;
| | - |  | -----------------------------------------



| |  |  | delay contractual payments;
| | - |  | ---------------------------



| |  |  | postpone or forego decisions to purchase our products and services, or maintain them at originally purchased levels.
| | - |  | --------------------------------------------------------------------------------------------------------------------

The global economy is currently experiencing a severe recession, which has hurt our product and services revenue. We cannot provide any assurance
that the global recession and credit crisis will end or not become more severe. The longer these conditions persist or intensify, the greater the probability that these factors could hurt our business, financial results and cash flow.

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

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



| |  |  | general economic conditions, which can affect our customers purchasing decisions, the length of our sales cycle, and our customers ability to pay us on
time, if at all;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the timing of large orders;
| | - |  | ---------------------------



| |  |  | changes in the proportion of software arrangements requiring contract accounting;
| | - |  | ---------------------------------------------------------------------------------



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



| |  |  | the timing and amount of our marketing, sales, and product development expenses;
| | - |  | --------------------------------------------------------------------------------



| |  |  | the cost and time required to develop new software products;
| | - |  | ------------------------------------------------------------



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



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



| |  |  | changes in our pricing policies or those of our competitors; and
| | - |  | ----------------------------------------------------------------



| |  |  | the timing and size of potential acquisitions by us.
| | - |  | ----------------------------------------------------



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

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

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

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

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

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

Our customers are primarily in four target
groups and our operating results may be adversely affected by changes in one or more of these groups.

Our software products and
related services are designed to meet the needs of enterprises, United States government agencies, service providers, and network equipment manufacturers, and we market our software products and related services to those four customer groups.
Consequently, our financial results depend, in significant part, upon the economic conditions of enterprises, United States government agencies, service providers, and network equipment manufacturers. An economic downturn or adverse change in the
regulatory environment or business prospects for one or more of these customer groups may decrease our revenue or lower our growth rate.

A decline in information technology spending may result in a decrease in our revenue or lower our growth rate.

A
decline in the demand for information technology among our current and prospective customers may result in decreased revenue or a lower growth rate for us because our sales depend, in part, on our customers



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budgets for new or additional information technology systems and services. A continued economic downturn may cause our customers to reduce or eliminate
information technology spending and force us to lower prices of our software products and related services, which would substantially reduce the number of new software licenses we sell and the average sales price for these licenses. Accordingly, we
cannot assure you that we will be able to increase or maintain our revenue.

Our sales to United States government agencies subject
us to special risks that could adversely affect our business.

We derive a substantial portion of our revenue
from sales directly or indirectly to United States government agencies. Transactions with United States government agencies accounted for approximately 35%, 41%, and 43% of our total revenue for fiscal 2009, 2008 and 2007, respectively. Government
sales entail a variety of risks including:



| |  |  | Government contracts are subject to the approval of appropriations by the United States Congress to fund the expenditures by the agencies under these contracts.
Congress often appropriates funds for government agencies on a yearly basis, even though their contracts may call for performance over a number of years.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A significant decline in government expenditures generally, or a shift in budget priorities away from agencies or programs that we support, could cause a material
decline in our government business. In particular, a decline in government spending on information technology or related services could hurt our government business.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our products and services are included on a General Services Administration, or GSA schedule. We believe that the GSA schedule facilitates our sales to United
States government agencies. The loss of the GSA schedule covering our products and services could adversely affect our results of operations.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We must comply with complex federal procurement laws and regulations in connection with government contracts, which may impose added costs on our business.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Some of our government business requires that we maintain facility security clearances, and requires some of our employees to maintain individual security
clearances. If we were to lose these clearances, our government business might decline.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The federal government audits and reviews the performance of federal contractors on contracts, pricing practices, cost structure, and compliance with applicable
laws, regulations, and standards. An audit of our work could result in a finding that we overcharged the government, which could result in an adjustment to our previously reported operating results. If a government audit uncovers improper or illegal
activities, we may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines, and suspension or debarment from doing business with United States
federal government agencies.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Many of our government contracts are firm fixed-price contracts. To the extent that the assumptions we have used in pricing these contracts prove inaccurate, we
could incur and accrue losses on contracts, which would adversely affect our operating results.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A portion of our sales to the United States government are made indirectly as a subcontractor to another government contractor, referred to as the prime contractor,
who has the direct relationship with the government. We also team with prime contractors to bid on competitive government opportunities for which we hope to serve as a subcontractor. If prime contractors lose existing business on which we serve as a
subcontractor, or fail to win the competitive bids on which we team with them, our government business would be hurt.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We could face expense and delay if any of our competitors, or competitors of the prime contractors to which we serve as a subcontractor, protest or challenge
contract awards made to us or our prime contractors pursuant to competitive bidding.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Federal government contracts contain provisions and are subject to laws and regulations that provide government clients with rights and remedies not typically found
in commercial contracts. These rights and remedies allow government clients, among other things, to terminate existing contracts, with short notice, for convenience without cause; reduce or modify contracts or subcontracts; and claim rights in
products, systems, and technology produced by us.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

If our newest products, particularly those targeted primarily
for enterprises and United States government agencies, do not gain widespread market acceptance, our revenue might not increase and could even decline.

We expect to derive a substantial portion of our revenue in the future from sales to enterprises and United States government agencies of our Application Performance Management and Network Operations product
offerings. Our business depends on customer acceptance of these products and our revenue may not increase, or may even decline, if our target customers do not adopt and expand their use of our products.

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

An element of our strategy is to continue selling to service providers our Network Planning and Design and our Network Operations product offerings.
Accordingly, if our products fail to perform favorably in the service provider environment, or fail to gain wider adoption by service providers, our business and future operating results could suffer.

Our lengthy and variable sales cycle makes it difficult to predict operating results.

It is difficult for us to forecast the timing and recognition of revenue from sales of our products because prospective customers often take significant
time evaluating our products before licensing them. The period between initial customer contact and a purchase by a customer may vary from three months to more than a year. During the sales process, the customer may decide not to purchase or may
reduce proposed orders of our products for various reasons, including changes in budgets and purchasing priorities. Our prospective customers routinely require education regarding the use and benefit of our products. This may also lead to delays in
receiving customers orders.

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

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

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

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



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

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

Our future revenue is substantially dependent upon our existing customers continuing to license additional products, renew maintenance agreements, and purchase additional services.

Our existing customers have traditionally generated additional revenue from consulting services, renewed maintenance agreements, and the purchase of
additional software licenses, which represent the majority of our annual revenue. The maintenance agreements are generally renewable at the option of the customers and there are no mandatory payment obligations or obligations to license additional
software. In addition, customers may decide not to purchase additional products or services. If our existing customers fail to renew their maintenance agreements or purchase additional products or services, our revenue could decrease.

Increases in professional services revenue as a percentage of total revenue could decrease overall margin.

We realize significantly lower margin on professional service revenue than we do on other types of revenue. As a result, if professional services revenue
increases as a proportion of total revenue, our gross margin will be lower.

Professional services accounted for 23.3%, 27.4% and 25.1% of
our total revenue for fiscal 2009, 2008, and 2007, respectively.

If we fail to retain our key personnel and attract and retain
additional qualified personnel, we might not be able to maintain our current level of revenue.

Our future success and our ability
to maintain our current level of revenue depend upon the continued service of our executive officers and other key sales and research and development personnel. The loss of any of our key employees, in particular Marc A. Cohen, our Chairman of the
Board and Chief Executive Officer, who is also acting as our principal sales executive, and Alain J. Cohen, our President and Chief Technology Officer, could also adversely affect our ability to pursue our growth strategy. We do not have employment
agreements or any other agreements that obligate any of our officers or key employees to remain with us.

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



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

In fiscal 2009, 21.1% of our revenue, or $26.0 million, was generated from
customers outside the United States. In fiscal 2008, 20.2% of our revenue, or $20.5 million, was generated from customers outside the United States. In fiscal 2007, 21.1% of our revenue, or $20.1 million, was generated from customers outside the
United States. We plan to increase our international sales activities, but these plans are subject to a number of risks that could cause our sales to decline or could otherwise cause a decline in profitability. These risks include:



| |  |  | difficulty in attracting distributors that will market and support our software products effectively;
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | greater difficulty in accounts receivable collection and longer collection periods;
| | - |  | -----------------------------------------------------------------------------------



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



| |  |  | potentially adverse tax consequences;
| | - |  | -------------------------------------



| |  |  | the effects of currency fluctuations; and
| | - |  | -----------------------------------------



| |  |  | political and economic instability.
| | - |  | -----------------------------------

We expect to face increased competition, which could cause us to lose sales, resulting in lower profitability.

Increasing competition in our market could cause us to lose sales and become unprofitable. We believe that the market for intelligent network management software is likely to become more competitive as it evolves and
the demand for intelligent network management software products continues to increase. At least one of our current competitors and many of our potential competitors are larger and have substantially greater financial and technical resources than we
do. In addition, it is possible that other vendors as well as some of our customers or distributors may develop and market software products that compete with our software products in the future.

If our products contain errors and we are unable to correct those errors, our reputation could be harmed and our customers could demand refunds
from us or assert claims for damages against us.

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



| |  |  | the loss of or delay in market acceptance and sales of our products;
| | - |  | --------------------------------------------------------------------



| |  |  | the delay in introduction of new products or updates to existing products;
| | - |  | --------------------------------------------------------------------------



| |  |  | diversion of our resources;
| | - |  | ---------------------------



| |  |  | injury to our reputation; and
| | - |  | -----------------------------



| |  |  | increased support costs.
| | - |  | ------------------------

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

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



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

If we are unable to protect our intellectual property, our competitors could use our intellectual property to market products
similar to our products, which could reduce our revenue. In addition, we may be unable to prevent the use of our products by persons who have not paid the required license fee, which could reduce our revenue. Our success and ability to compete
depend substantially upon the internally-developed technology that is incorporated in our products. Policing unauthorized use of our products is difficult, and we may not be able to prevent misappropriation of our technology, particularly in foreign
countries where the laws may not protect our proprietary rights as fully as those in the United States. Others may circumvent the patents, copyrights, and trade secrets we own. In the ordinary course of business, we enter into a combination of
confidentiality, non-competition, and non-disclosure agreements with our employees.

These measures afford only limited protection and may
be inadequate, especially because our employees are highly sought after and may leave our employ with significant knowledge of our proprietary information. In addition, any confidentiality, non-competition and non-disclosure agreements we enter into
may be found to be unenforceable, or our copy protection mechanisms embedded in our software products could fail or could be circumvented.

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

We expect that our software products may be increasingly subject to third-party infringement claims as the number of competitors in our industry segment
grows and the functionalities of products in different industry segments overlap.

Regardless of whether these claims have any merit, they
could:



| |  |  | be time-consuming to defend;
| | - |  | ----------------------------



| |  |  | result in costly litigation;
| | - |  | ----------------------------



| |  |  | divert our managements attention and resources;
| | - |  | ------------------------------------------------



| |  |  | cause us to delay or cease product shipments; or
| | - |  | ------------------------------------------------



| |  |  | require us to enter into royalty or licensing agreements.
| | - |  | ---------------------------------------------------------

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

Future interpretations of existing accounting standards could adversely affect our operating results.

The Securities and Exchange Commission, American Institute of Certified Public Accountants, Financial Accounting Standards Board, and various other
authoritative accounting bodies continue to issue interpretations and guidance for applying the relevant standards to a wide range of sales contract terms and business arrangements that are prevalent in the software industry. Future interpretations
of existing accounting standards or changes in our business practices could result in future changes in our revenue recognition accounting policies that could have a material adverse effect on our results of operations.



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As with other software vendors, we may be required to delay revenue recognition into future
periods, which could adversely affect our operating results.

We have in the past had to, and in the future
may have to, defer recognition for license fees due to several factors, including whether:



| |  |  | software arrangements include undelivered elements for which we do not have vendor specific evidence of fair value;
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | we must deliver services for significant customization, enhancements and modifications of our software;
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | the transaction involves material acceptance criteria or there are other identified product-related issues;
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | the transaction involves contingent payment terms or fees; or
| | - |  | -------------------------------------------------------------



| |  |  | we are required to accept extended payment terms.
| | - |  | -------------------------------------------------

Because of the factors listed above and other specific requirements under accounting principles generally accepted in the United States of America for software revenue recognition, we must have very precise terms in
our software arrangements in order to recognize revenue when we initially deliver software or perform services. Negotiation of mutually acceptable terms and conditions can extend the sales cycle, and sometimes we do not obtain terms and conditions
that permit revenue recognition at the time of delivery.

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

We completed our acquisition of
specified assets of Network Physics in October 2007. We may continue to acquire or make investments in companies, products or technologies if opportunities arise. Any acquisition could be expensive, disrupt our ongoing business, distract our
management and employees, and adversely affect our financial results and the market price of our common stock. We may not be able to identify suitable acquisition or investment candidates, and if we do identify suitable candidates, we may not be
able to make these acquisitions or investments on commercially acceptable terms or at all. If we make an acquisition, we could have difficulty integrating the acquired technology, employees, or operations. In addition, the key personnel of the
acquired company may decide not to work for us.

We also expect that we would incur substantial expenses if we acquire other businesses or
technologies. We might use cash on hand, incur debt, or issue equity securities to pay for any future acquisitions. If we issue additional equity securities, our stockholders could experience dilution and the market price of our stock may decline.

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

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



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The impairment of a significant amount of goodwill on our balance sheet could result in a decrease
in earnings and, as a result, our stock price could decline.

In the course of our operating history, we have acquired assets and
businesses. Some of our acquisitions have resulted in the recording of a significant amount of goodwill on our financial statements. We recorded approximately $14.6 million of goodwill as of March 31, 2009. The goodwill was recorded because the
fair value of the net tangible assets acquired was less than the purchase price. We may not realize the full value of the goodwill. We evaluate goodwill with an indefinite useful life for impairment on an annual basis or more frequently if events
and circumstances suggest that the asset may be impaired. If goodwill is determined to be impaired, we will write off the unrecoverable portion as a charge to our earnings. If we acquire new assets and businesses in the future, we may record
additional goodwill. The possible write-off of the associated goodwill could negatively impact our future earnings and, as a result, the market price of our common stock could decline.



|ITEM 1B. | UNRESOLVED STAFF COMMENTS
|-------- | -------------------------

Not applicable.



|ITEM 2. | PROPERTIES
|------- | ----------

Our corporate office and principal
facilities are located in Bethesda, Maryland and consist of approximately 82,000 square feet of office space held under two leases. The lease for 60,000 square feet expires on January 31, 2011, exclusive of renewal options, and the lease for
22,000 square feet expires on January 31, 2016, exclusive of renewal options. We also lease office space in the following locations: Cary, North Carolina; Dallas, Texas; Santa Clara, California; Nashua, New Hampshire; Ghent, Belgium; Paris,
France; Slough, United Kingdom; Singapore; Beijing China; and Mainz, Germany.



|ITEM 3. | LEGAL PROCEEDINGS
|------- | -----------------

We are involved in various
claims and legal proceedings arising from our normal operations. We do not regard any of those matters to be material.



|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- | ---------------------------------------------------

No matters were submitted to a vote of our stockholders during the fourth quarter of fiscal 2009.



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##### Table of Contents

PART II



|ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|------- | ------------------------------------------------------------------------------------------------------------

Market for Common Stock

Our common
stock began trading on the NASDAQ Global Select Market on August 2, 2000, under the symbol OPNT. The following table sets forth, on a per share basis, for the indicated periods, the intra-day high and low sale prices of our common
stock as reported by the NASDAQ Global Select Market.



|                   |  |      |       |     |   |     
|------------------ |  | ---- | ----- | --- | - | ----
|Quarter ended      |  | High |       | Low
|June 30, 2007      |  | $    | 14.17 |     | $ | 9.90
|September 30, 2007 |  |      | 11.92 |     |   | 9.41
|December 31, 2007  |  |      | 12.89 |     |   | 8.07
|March 31, 2008     |  |      | 9.50  |     |   | 7.52
|June 30, 2008      |  |      | 10.50 |     |   | 7.84
|September 30, 2008 |  |      | 14.39 |     |   | 8.02
|December 31, 2008  |  |      | 12.80 |     |   | 8.48
|March 31, 2009     |  |      | 10.81 |     |   | 7.37

Number of Stockholders of Record

As of June 2, 2009, we had approximately 115 holders of record of common stock. Because many of these shares are held by brokers and other
institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these holders of record.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table provides information regarding our
current equity compensation plans as of March 31, 2009.

Equity Compensation Plan Information



|                                                           |  |                                                                       |  |                                                     |       |                                                                                                                                      |           |       
|---------------------------------------------------------- |  | --------------------------------------------------------------------- |  | --------------------------------------------------- | ----- | ------------------------------------------------------------------------------------------------------------------------------------ | --------- | ------
|Plan Category                                              |  | Number ofsecurities to beissued uponexercise ofoutstandingoptions (a) |  | Weighted-average exerciseprice ofoutstandingoptions |       | Number of securitiesremaining availablefor future issuanceunder equitycompensation plans(excluding
securitiesreflectedin column (a)) |          
|Equity compensation plans approved by security holders     |  | 2,556,723                                                             |  | $                                                   | 10.89 |                                                                                                                                      | 2,213,208 | (1)(2)
|Equity compensation plans not approved by security holders |  |                                                                      |  |                                                     |      |                                                                                                                                      |          |       
|                                                           |  |                                                                       |  |                                                     |       |                                                                                                                                      |           |       
|Total                                                      |  | 2,556,723                                                             |  | $                                                   | 10.89 |                                                                                                                                      | 2,213,208 |       



|(1) | In addition to being available for future issuance upon exercise of options that may be granted after March 31, 2009, all of the remaining 2,151,016 shares under our Amended
and Restated 2000 Stock Incentive Plan, or the 2000 Plan, may instead be issued in the form of restricted stock, stock appreciation rights or other stock-based awards.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes 62,192 shares issuable under our 2000 Employee Stock Purchase Plan, including shares issuable in connection with the current offering period which ends on
July 31, 2009. Also includes 2,151,016 shares
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| | issuable under the 2000 Plan. Under the 2000 Plan, the number of shares available for issuance automatically increases on the first trading day of each
calendar year by an amount equal to 3% of the shares of common stock outstanding on the last trading day of the preceding calendar year, not to exceed an annual increase of 1,000,000 shares, or a lesser amount determined by the Board of Directors,
or the Board. The Board did not approve any increase in shares for issuance on the first trading day of calendar year 2009.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Dividends

On May 13, 2009, the Board approved a quarterly cash dividend in the amount of $0.09 per share, which will
be paid on June 29, 2009 to stockholders of record as of the close of business on June 15, 2009.

The declaration of cash
dividends in the future is subject to final determination each quarter by the Board based on a number of factors, including our financial performance and available cash resources, our cash requirements and alternative uses of cash that the Board may
conclude would represent an opportunity to generate a greater return on investment for us. The Board may decide that future dividends will be in amounts that are different than the amount described above or may decide to suspend or discontinue the
payment of cash dividends altogether.

Stock Repurchase Plan

Issuer Repurchases of Equity Securities



|                    |  |                                 |  |                             |      |                                                                                  |       |                                                                            |        
|------------------- |  | ------------------------------- |  | --------------------------- | ---- | -------------------------------------------------------------------------------- | ----- | -------------------------------------------------------------------------- | -------
|Period              |  | Total Number ofShares Purchased |  | Average Price Paidper Share |      | Total Number ofShares Purchased asPart of PubliclyAnnounced Plans orPrograms (1) |       | Maximum Numberof Shares That MayYet Be PurchasedUnder the Plans orPrograms
|January 131, 2009  |  |                                |  |                             |     |                                                                                  |      |                                                                            | 896,481
|February 128, 2009 |  | 7,892                           |  | $                           | 8.85 |                                                                                  | 7,892 |                                                                            | 888,589
|March 131, 2009    |  |                                |  |                             |     |                                                                                  |      |                                                                            | 888,589
|                    |  |                                 |  |                             |      |                                                                                  |       |                                                                            |        
|Total               |  | 7,892                           |  | $                           | 8.85 |                                                                                  | 7,892 |                                                                            | 888,589
|                    |  |                                 |  |                             |      |                                                                                  |       |                                                                            |        



|(1) | On January 31, 2005, we announced a stock repurchase program pursuant to which we are authorized to purchase up to 1,000,000 shares of common stock from time to time on the
open market or in privately negotiated transactions. This program does not have a specified termination date. On February 4, 2008, we announced that our Board approved an increase of an additional 1,000,000 shares under our stock repurchase
program. Any repurchased shares will be available for use in connection with our stock plans or other corporate purchases. As of March 31, 2009, we had repurchased 1,111,411 shares of common stock under this program.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

|ITEM 6. | SELECTED CONSOLIDATED FINANCIAL DATA
|------- | ------------------------------------

The following
selected consolidated financial data should be read in conjunction with our consolidated financial statements and the related notes and Managements Discussion and Analysis of Financial Condition and Results of Operations included
elsewhere in this Annual Report. The statement of operations data for the years ended March 31, 2009, 2008, and 2007, and the balance sheet data as of March 31, 2009 and 2008, are derived from our audited consolidated financial statements
included in this Annual Report. The balance sheet data as of March 31, 2007, 2006 and 2005 and the statement of operations data for the years ended March 31, 2006 and 2005 are derived from our consolidated financial statements that are not
included in this Annual Report. Historical results are not necessarily indicative of results that may be expected for any future period.



|                                                         |  |                                       |         |      |   |         |      |  |      |         |  |      |         |   |  |   |        
|-------------------------------------------------------- |  | ------------------------------------- | ------- | ---- | - | ------- | ---- |  | ---- | ------- |  | ---- | ------- | - |  | - | -------
|                                                         |  | Year Ended March 31,                 
|                                                         |  | 2009                                  |         | 2008 |   |         | 2007 |  | 2006 |         |  | 2005
|                                                         |  | (in thousands, except per share data)
|Statement of Operations Data:                            |  |                                       |         |      |   |         |      |  |      |         |  |      |         |   |  |   |        
|Revenue:                                                 |  |                                       |         |      |   |         |      |  |      |         |  |      |         |   |  |   |        
|New software licenses                                    |  | $                                     | 51,211  |      | $ | 38,838  |      |  | $    | 43,186  |  | $    | 31,976  |   |  | $ | 29,507 
|Software license updates, technical support and services |  |                                       | 43,067  |      |   | 34,787  |      |  |      | 28,062  |  |      | 24,226  |   |  |   | 19,805 
|Professional services                                    |  |                                       | 28,601  |      |   | 27,721  |      |  |      | 23,882  |  |      | 19,913  |   |  |   | 14,931 
|                                                         |  |                                       |         |      |   |         |      |  |      |         |  |      |         |   |  |   |        
|Total revenue                                            |  |                                       | 122,879 |      |   | 101,346 |      |  |      | 95,130  |  |      | 76,115  |   |  |   | 64,243 
|                                                         |  |                                       |         |      |   |         |      |  |      |         |  |      |         |   |  |   |        
|Cost of revenue:                                         |  |                                       |         |      |   |         |      |  |      |         |  |      |         |   |  |   |        
|New software licenses                                    |  |                                       | 3,536   |      |   | 1,035   |      |  |      | 638     |  |      | 657     |   |  |   | 778    
|Software license updates, technical support and services |  |                                       | 4,665   |      |   | 4,514   |      |  |      | 3,264   |  |      | 2,637   |   |  |   | 2,348  
|Professional services                                    |  |                                       | 20,911  |      |   | 19,154  |      |  |      | 15,904  |  |      | 13,705  |   |  |   | 10,154 
|Amortization of acquired technology                      |  |                                       | 2,172   |      |   | 1,486   |      |  |      | 723     |  |      | 832     |   |  |   | 651    
|                                                         |  |                                       |         |      |   |         |      |  |      |         |  |      |         |   |  |   |        
|Total cost of revenue                                    |  |                                       | 31,284  |      |   | 26,189  |      |  |      | 20,529  |  |      | 17,831  |   |  |   | 13,931 
|                                                         |  |                                       |         |      |   |         |      |  |      |         |  |      |         |   |  |   |        
|Gross profit                                             |  |                                       | 91,595  |      |   | 75,157  |      |  |      | 74,601  |  |      | 58,284  |   |  |   | 50,312 
|                                                         |  |                                       |         |      |   |         |      |  |      |         |  |      |         |   |  |   |        
|Operating expenses:                                      |  |                                       |         |      |   |         |      |  |      |         |  |      |         |   |  |   |        
|Research and development                                 |  |                                       | 30,791  |      |   | 27,471  |      |  |      | 21,688  |  |      | 18,643  |   |  |   | 15,455 
|Sales and marketing                                      |  |                                       | 42,533  |      |   | 39,357  |      |  |      | 34,133  |  |      | 26,300  |   |  |   | 22,803 
|General and administrative                               |  |                                       | 11,857  |      |   | 11,747  |      |  |      | 10,994  |  |      | 13,375  |   |  |   | 9,742  
|                                                         |  |                                       |         |      |   |         |      |  |      |         |  |      |         |   |  |   |        
|Total operating expenses                                 |  |                                       | 85,181  |      |   | 78,575  |      |  |      | 66,815  |  |      | 58,318  |   |  |   | 48,000 
|                                                         |  |                                       |         |      |   |         |      |  |      |         |  |      |         |   |  |   |        
|Income (loss) from operations                            |  |                                       | 6,414   |      |   | (3,418  | )    |  |      | 7,786   |  |      | (34     | ) |  |   | 2,312  
|Interest and other income, net                           |  |                                       | 1,246   |      |   | 3,579   |      |  |      | 3,834   |  |      | 2,680   |   |  |   | 1,384  
|                                                         |  |                                       |         |      |   |         |      |  |      |         |  |      |         |   |  |   |        
|Income before provision (benefit) for income taxes       |  |                                       | 7,660   |      |   | 161     |      |  |      | 11,620  |  |      | 2,646   |   |  |   | 3,696  
|Provision (benefit) for income taxes                     |  |                                       | 2,928   |      |   | (372    | )    |  |      | 3,655   |  |      | 509     |   |  |   | 1,644  
|                                                         |  |                                       |         |      |   |         |      |  |      |         |  |      |         |   |  |   |        
|Net income                                               |  | $                                     | 4,732   |      | $ | 533     |      |  | $    | 7,965   |  | $    | 2,137   |   |  | $ | 2,052  
|                                                         |  |                                       |         |      |   |         |      |  |      |         |  |      |         |   |  |   |        
|Basic net income per common share                        |  | $                                     | 0.23    |      | $ | 0.03    |      |  | $    | 0.39    |  | $    | 0.10    |   |  | $ | 0.10   
|                                                         |  |                                       |         |      |   |         |      |  |      |         |  |      |         |   |  |   |        
|Diluted net income per common share                      |  | $                                     | 0.23    |      | $ | 0.03    |      |  | $    | 0.38    |  | $    | 0.10    |   |  | $ | 0.10   
|                                                         |  |                                       |         |      |   |         |      |  |      |         |  |      |         |   |  |   |        
|Basic weighted average shares outstanding                |  |                                       | 20,296  |      |   | 20,342  |      |  |      | 20,358  |  |      | 20,374  |   |  |   | 20,158 
|Diluted weighted average shares outstanding              |  |                                       | 20,581  |      |   | 20,621  |      |  |      | 21,206  |  |      | 20,604  |   |  |   | 20,624 
|                                                         |  |                                       |         |      |  
|Balance Sheet Data (end of period):                      |  |                                       |         |      |   |         |      |  |      |         |  |      |         |   |  |   |        
|Cash, cash equivalents and marketable securities         |  | $                                     | 91,989  |      | $ | 85,829  |      |  | $    | 91,381  |  | $    | 85,861  |   |  | $ | 82,185 
|Total assets                                             |  |                                       | 166,064 |      |   | 153,538 |      |  |      | 147,658 |  |      | 127,347 |   |  |   | 125,185
|Long-term debt                                           |  |                                       |        |      |   |        |      |  |      |        |  |      | 103     |   |  |   | 150    
|Total stockholders equity                               |  |                                       | 116,505 |      |   | 110,645 |      |  |      | 112,871 |  |      | 99,398  |   |  |   | 99,965 



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|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

You should read the following discussion and analysis in conjunction with our consolidated financial statements and the related notes included elsewhere
in this Annual Report on Form 10-K. This discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including, but not limited to, those set forth under Item 1A. Risk Factors and elsewhere in this Annual Report on Form 10-K.

Overview

OPNET Technologies, Inc. is
a provider of software products and related services for managing networks and applications. Our software products and related services address: application performance management, network operations, capacity management, and network research and
development. Our customers include corporate enterprises, government and defense agencies, network service providers, and network equipment manufacturers. Our software products and related services are designed to help our customers make better use
of resources, reduce operational problems and improve competitiveness.

We operate in one reportable industry segment, the development and
sale of computer software programs and related services. Our operations are principally in the United States, and we have subsidiaries in Australia, Belgium, France, Germany, the United Kingdom and Singapore. We primarily depend upon our direct
sales force to generate revenue in the United States. Sales outside the United States are made through our international sales team as well as third-party distributors and value-added resellers, who generally are responsible for providing technical
support and service to customers within their territory.

Our revenue is derived from three primary sources: (1) new software
licenses, (2) software license updates, technical support and services, and (3) professional services, which include consulting and training services for customers without current maintenance agreements. New software license revenue
represents all fees earned from granting customers licenses to use our software and fees associated with hardware necessary to run our software, and excludes revenue derived from software license updates, which are included in software license
updates, technical support, and services revenue. Our software master license agreement provides our customers with the right to use our software either perpetually, which we refer to as perpetual licenses, or during a defined term, generally for
one to four years, which we refer to as term licenses. For the year ended March 31, 2009, perpetual licenses represented approximately 93% of software license revenue. For the years ended March 31, 2008 and 2007, perpetual licenses
represented approximately 97% of software license revenue. Substantially all of our software license arrangements include both perpetual and/or term licenses and software license updates, technical support, and services. Software license updates,
technical support, and services revenue represent fees associated with the sale of unspecified license updates, technical support and when-and-if available training under our maintenance agreements. We offer professional services, under both
time-and-material and fixed-price agreements, primarily to facilitate the adoption of our software products.

We consider our consulting
services to be an integral part of our business model as they are centered on our software product offerings. Because our consulting services facilitate the adoption of our software product offerings, we believe that they ultimately generate
additional sales of software licenses.

The key strategies of our business plan include increasing sales to existing customers, increasing
deal size by selling modules and introducing new software products, improving our sales and marketing execution, establishing alliances to extend our market reach, increasing our international presence and increasing profitability.We have
focused our sales, marketing, and other efforts on corporate enterprise and United States government opportunities, and to a much lesser extent, service provider and network equipment manufacturer opportunities. Our focus and strategies are designed
to increase revenue and profitability. Because of the uncertainty surrounding the amount and timing of revenue growth, we expect to need to closely control the increases in our total expenses as we implement these strategies.



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In March 2008, we launched an initiative to extend our market reach by establishing sales alliances with
third parties called the Synergy program. The Synergy program is designed to increase the penetration of our software products into mid-sized organizations. The Synergy programs focus is on selling our application performance management
software products, including ACE Live that provides end-user experience monitoring and real-time application performance analytics, as we believe these software products are particularly well-suited for channel distribution.

Summary of Our Fiscal 2009 Financial Performance

During fiscal 2009, our total revenue and profitability increased as compared to fiscal 2008. The increases resulted primarily from sales of our application performance management products, driven by our family of ACE
Live products. During fiscal 2009, our operating expenses increased by 8.4% as compared to fiscal 2008. The increase in operating expenses was largely the result of increased personnel costs necessary to pursue our growth strategies.

Our cash, cash equivalents and marketable securities balance as of March 31, 2009 increased by $6.2 million as compared to March 31, 2008
largely due to cash flow generated from operations. Our deferred revenue as of March 31, 2009 increased $2.6 million as compared to March 31, 2008, primarily due to an increase in sales of software license updates, technical support and
services arrangements.

The following table summarizes information on some of our key financial and operating metrics.



|                                                                                                     |  |                                               |         |   |            |   |         |              |  |   |                  |   |  |       |   
|---------------------------------------------------------------------------------------------------- |  | --------------------------------------------- | ------- | - | ---------- | - | ------- | ------------ |  | - | ---------------- | - |  | ----- | --
|                                                                                                     |  | Fiscal2009                                    |         |   | Fiscal2008 |   |         | AmountChange |  |   | PercentageChange |  
|                                                                                                     |  | (dollars in thousands, except per share data) |        
|Operations Data:                                                                                     |  |                                               |         |   |            |   |         |              |  |   |                  |   |  |       |   
|Total revenue                                                                                        |  | $                                             | 122,879 |   |            | $ | 101,346 |              |  | $ | 21,533           |   |  | 21.2  | % 
|Total cost of sales                                                                                  |  | $                                             | 31,284  |   |            | $ | 26,189  |              |  | $ | 5,095            |   |  | 19.5  | % 
|Gross profit                                                                                         |  | $                                             | 91,595  |   |            | $ | 75,157  |              |  | $ | 16,438           |   |  | 21.9  | % 
|Gross profit as a percentage of total revenue (gross margin)                                         |  |                                               | 74.5    | % |            |   | 74.2    | %            |  |   |                  |   |  |       |   
|Total operating expenses                                                                             |  | $                                             | 85,181  |   |            | $ | 78,575  |              |  | $ | 6,606            |   |  | 8.4   | % 
|Income (loss) from operations                                                                        |  | $                                             | 6,414   |   |            | $ | (3,418  | )            |  | $ | 9,832            |   |  | 287.7 | % 
|Income (loss) from operations as a percentage of total revenue (operating margin)                    |  |                                               | 5.2     | % |            |   | (3.4    | )%           |  |   |                  |   |  |       |   
|Net income                                                                                           |  | $                                             | 4,732   |   |            | $ | 533     |              |  | $ | 4,199            |   |  | 787.8 | % 
|Diluted net income per common share                                                                  |  | $                                             | 0.23    |   |            | $ | 0.03    |              |  | $ | 0.20             |   |  | 666.7 | % 
|Total employees (period end)                                                                         |  |                                               | 593     |   |            |   | 560     |              |  |   | 33               |   |  | 5.9   | % 
|Total average employees                                                                              |  |                                               | 585     |   |            |   | 560     |              |  |   | 25               |   |  | 4.5   | % 
|Total consultants (period end)                                                                       |  |                                               | 118     |   |            |   | 126     |              |  |   | (8               | ) |  | (6.3  | )%
|Total period end quota-carrying sales persons (excluding directors and inside sales representatives) |  |                                               | 70      |   |            |   | 70      |              |  |   |                 |   |  | 0.0   | % 
|                                                                                                     |  |                                               |         |  
|Financial Condition and Liquidity Data:                                                              |  |                                               |         |   |            |   |         |              |  |   |                  |   |  |       |   
|Cash, cash equivalents, and marketable securities (period end)                                       |  | $                                             | 91,989  |   |            | $ | 85,829  |              |  | $ | 6,160            |   |  | 7.2   | % 
|Cash flows from operating activities                                                                 |  | $                                             | 12,104  |   |            | $ | 12,900  |              |  | $ | (796             | ) |  | (6.2  | )%
|Total deferred revenue (period end)                                                                  |  | $                                             | 33,133  |   |            | $ | 30,494  |              |  | $ | 2,639            |   |  | 8.7   | % 

We achieved growth in all three revenue categories during fiscal 2009, as compared to fiscal 2008,
driven by growth in revenue from new software licenses of $12.4 million and growth in revenue from software license updates, technical support and services of $8.3 million. The growth in revenue from new software licenses was largely due to an
increase in sales to corporate enterprise customers and, to a lesser extent, service providers. The



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growth in revenue from software license updates, technical support and services was primarily a result of growth in sales to corporate enterprises and, to a
lesser extent, sales to United States government customers. The growth in revenue from professional services was primarily due to an increase in demand for our consulting services by service providers and, to a lesser extent, corporate enterprise
customers. While total revenue generated from sales to United States government customers increased in absolute dollars by $2.1 million during fiscal 2009 to $43.3 million, the percentage of revenue from United States government customers decreased
to 35% in fiscal 2009 from 41% in fiscal 2008. The decrease in the percentage of revenue from United States government customers was the result of an increase in the percentage of revenue generated from corporate enterprise customers.

Our international revenue increased 26.7% to $26.0 million, or 21.1% of total revenue, for fiscal 2009. We expect revenue from sales outside the United
States to continue to account for a significant portion of our total revenue in the future. International revenue in fiscal 2009 benefited from a more experienced direct sales force and our increased focus on sales to corporate enterprises. Sales to
corporate enterprises accounted for the largest portion of our international revenue during fiscal 2009. We believe that continued growth and profitability will require further expansion of our sales, marketing and customer service functions in
international markets.

During fiscal 2009, gross profit increased 21.9% to $91.6 million. Our gross margin increased slightly to 74.5% for
fiscal 2009 from 74.2% in fiscal 2008. The increase in our gross margin was primarily due to an increase in new software license revenue of $12.4 million in fiscal 2009 and, to a lesser extent, an increase in software license updates, technical
support and services revenue of $8.3 million.

During fiscal 2009, operating income increased to $6.4 million from a loss of $3.4 million
during fiscal 2008. The increase in operating margin was largely the result of an increase in revenue from new software licenses and software license updates, technical support and services revenue, partially offset by an increase in operating
expenses.

Trends That May Affect Our Business and Future Results

While we anticipate a challenging economic environment in the near term, we believe the competitive advantages offered by our products and our efforts to
control operating expenses have positioned us well to grow market share and drive profitability when economic conditions improve. The demand for our software products and related services by corporate enterprise and United States government
customers has been much stronger than the demand from service providers and network equipment manufacturers, which is consistent with our expectations. We believe that lower business activity with service providers and network equipment
manufacturers is primarily due to the weakened economy in which these businesses operate, which we expect to continue, at least in the near term. Consequently, our revenue growth and profitability depend, in significant part, upon our ability to
sell in a weakened economic environment and the economic health of corporate enterprises and United States government agencies.

We
anticipate the following trends and patterns over the next several quarters:

Total Revenue.We believe the current economic
environment could make it more difficult to generate revenue domestically and internationally. We expect future growth opportunities in revenue to come primarily from sales to corporate enterprise customers and the United States government, as we
believe our products offer competitive advantages in these markets. We expect revenue from sales to service providers and network equipment manufacturers to fluctuate from quarter to quarter with the potential for periods of declining license
revenue. Our ability to increase professional services revenue will depend upon our ability to maintain several large consulting contracts with the United States government and to attract and retain additional qualified consultants, including those
with security clearances. We also believe the increase in the proportion of sales of our application performance management solutions as compared to our other solutions may decrease demand for our consulting implementation services, as our
application performance management solutions generally require less time to implement. As a result of these factors, we believe that we may experience decreases in quarterly revenue.



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International Revenue.Our international sales are affected by the mix of direct and indirect
sales channels and our ability to increase sales to corporate enterprises. We believe that these factors, in addition to the current economic environment, will affect the timing of sales orders as well as our ability to forecast future revenue. As a
result, our international quarterly revenue in absolute dollars and as a percentage of total revenue may decrease.

Gross Profit
Margin.Our overall gross profit margin will continue to be affected by the proportion of total revenue generated from new software licenses, as revenue from new software licenses and revenue from software license updates, technical support and
services have substantially higher gross margins than the gross margin on revenue from professional services. We anticipate a continued increase in the cost of new software license revenue related to the cost of hardware necessary to deliver our ACE
Live software products. Our overall gross profit margin will also be affected by the profitability of individual consulting engagements. Amortization of technology associated with the acquisition of technology we may make in future periods could
also affect our gross profit margin.

Research and Development Expenses.We believe that continued investment in research and
development will be required to maintain our competitive position and broaden our software product lines, as well as enhance the features and functionality of our current software products. We made significant personnel investments in research and
development during fiscal 2009; however, given current economic conditions, we plan to invest more modestly in additional personnel during the next several quarters. We expect that the absolute dollar amount of these expenses will continue to grow
but generally decrease as a percentage of total revenue in future periods. Our ability to decrease these expenses, as a percentage of revenue, will depend upon increases in our revenue, among other factors.

Sales and Marketing Expenses.We depend upon our direct sales model to generate revenue and believe that increasing the size of our quota-carrying
sales team is essential for long-term growth. We made significant personnel investments in sales and marketing during fiscal 2009. Given the current economic environment, we plan to invest modestly in additional quota-carrying sales personnel during
the coming quarters. Additionally, we have taken specific steps to significantly reduce the dollar amount of marketing expenditures we intend to make during fiscal 2010 as compared to fiscal 2009. Consequently, we expect the absolute dollar amount
of sales and marketing expenses to remain relatively flat over the next several quarters but generally decrease as a percentage of total revenue in future periods. Our ability to lower these expenses as a percentage of revenue will depend upon
increases in our revenue, among other factors.

General and Administrative Expenses.We expect the dollar amount of general and
administrative expenses to remain relatively flat over the next several quarters but generally decrease as a percentage of total revenue in future periods. Our ability to lower these expenses as a percentage of revenue will depend upon increases in
our revenue, among other factors.

Operating Margin.Since a significant portion of our software license arrangements close in the
latter part of each quarter, we may not be able to adjust our cost structure in the short-term to respond to lower than expected revenue, which would adversely impact our operating margin and earnings. Our operating margin increased to positive 5.2%
during fiscal 2009 from negative 3.4% during fiscal 2008. We remain committed to increasing profitability and generating long-term growth. As a result of the challenging economic environment, we have taken a number of steps to control our operating
expenses and maximize our operating margin. We do not believe that additional changes to our cost structure are necessary at this time, but we intend to closely monitor and control expenses in order to maximize our profitability.

Critical Accounting Policies and Use of Estimates

The accompanying discussion and analysis of our financial condition and results of operations are based upon our audited consolidated financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States of America, or GAAP. The preparation of these financial



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statements requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related
disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from the estimates made by management with respect to these and other items that require managements estimates.

We have identified the accounting policies that are critical to understanding our historical and future performance, as these policies
affect the reported amounts of revenue and the more significant areas involving managements judgments and estimates. These critical accounting policies relate to revenue recognition and deferred revenue, stock based compensation, allowance for
doubtful accounts, valuation of long-lived assets, including intangible assets and impairment review of goodwill, software development costs, and income taxes. These policies, and our procedures related to these policies, are described in detail
below. In addition, please refer to Note 1 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further discussion of our accounting policies.

Revenue Recognition.We derive revenue from three primary sources: (1) new software licenses, (2) software license updates, technical
support and services, which include software license update, certain training provided and offered on a when-and-if available basis to customers, and technical support, and (3) professional services, which include consulting and custom training
services for customers without a current maintenance agreement. We recognize revenue based on the provisions of the American Institute of Certified Public Accountants Statement of Position, or SOP, No. 97-2, Software Revenue
Recognition, as amended by SOP No. 98-9, Modification of SOP No. 97-2, Software Revenue Recognition, With Respect to Certain Transactions, SOP No. 81-1, Accounting for Performance of Construction-Type and
Certain Production-Type Contracts and the SEC Staff Accounting Bulletin No. 104, Revenue Recognition in Financial Statements.

New Software License Revenue

New software license revenue represents all fees earned from granting
customers licenses to use our software and excludes revenue derived from software license updates, which are included in software license updates, technical support and services revenue. Our new software license revenue consists of perpetual and
term license sales of software products. For the year ended March 31, 2009, perpetual licenses represented approximately 93% of software license revenue. For the years ended March 31, 2008 and 2007, perpetual licenses represented
approximately 97% of software license revenue. New software license revenue is recognized when the following four criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery of the software has occurred,
(iii) the software license fee is fixed or determinable, and (iv) collectibility is probable. We define each of these four criteria as follows:



| |  |  | Persuasive evidence of an arrangement exists. For license arrangements with end-users, it is our customary practice to have a written
software license agreement, which is signed by both the end user and us, and a purchase order or equivalent. A written contract can be executed based on the customer-specific format or on the standard shrink wrap software master license
agreement. For those end users who have previously negotiated a software license agreement with us, the initial software license agreement is used as evidence of a written contract. Sales to distributors, resellers, and value-added resellers, which
we collectively refer to as resellers, are primarily made outside of North America and are evidenced by a master reseller agreement governing the relationship, which is signed by both the reseller and us, together with a purchase order on a
transaction-by-transaction basis. To further evidence an arrangement, our master reseller agreement requires that the reseller provide us copies of the end users executed software master license agreements.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Delivery has occurred. Physical delivery of our software products to end users or resellers, which are collectively referred to as
customers, is generally considered to have occurred upon the transfer of media containing our software products to a common carrier (usually FOB shipping point based on
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | standard agreement terms). Software products may also be delivered electronically to end users. Electronic delivery is deemed to occur after end users have
been provided with access codes that allow them to take immediate possession of the software. If a software arrangement includes undelivered software products or services that are essential to the functionality of delivered software products,
delivery is not considered to have occurred until these software products or services are delivered.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The fee is fixed or determinable. It is our policy to not provide customers the right to any adjustments or refund of any portion of their
license fees paid, acceptance provisions, cancellation privileges, or rights of return. Our normal payment terms for our software products and services currently range from net 30 days to net 90 days and primarily vary based on the country in which
an agreement is executed. Payments that extend beyond our normal payment terms from the contract date but that are due within six months are generally deemed to be fixed or determinable based on our successful collection history on such
arrangements, and thereby satisfy the required criteria for revenue recognition.Arrangements with payment terms extending beyond six months are considered not to be fixed or determinable, and revenue from such arrangements is recognized as
payments become due and payable.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Collectibility is probable. Collectibility is assessed on a customer-by-customer basis. We typically sell to customers for whom there is a history of
successful collection. New customers are subject to a credit review process that evaluates the customers ability to pay.If we determine from the outset of an arrangement that collectibility is not probable, revenue is recognized as
cash is collected.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In instances when any of the four criteria are not met, we defer recognition of software license
revenue until the criteria are met. When the sale of the software product requires us to make significant enhancements, customization or modifications to the software that are essential to its functionality, software license revenue and consulting
fees are recognized using contract accounting under SOP No. 81-1. We estimate the percentage-of-completion, under SOP No. 81-1, based on our estimate of total hours to complete the project as a percentage of total hours incurred and the
estimated hours to complete.

The process of estimation inherent in the application of the percentage-of-completion method of accounting
for revenue is subject to judgments and uncertainties and may affect the amounts of software license revenue and professional services revenue under certain contracts and related expenses reported in our consolidated financial statements. A number
of internal and external factors can affect our estimates to complete client engagements, including skill level and experience of project managers, staff assigned to engagements and continuity and attrition level of professional services staff.
Changes in the estimated stage of completion of a particular project could create variability in our revenue and results of operations if it is required to increase or decrease previously recognized revenue related to a particular project or if it
expects to incur a loss on the project.

Software License Updates, Technical Support and Services Revenue

Software license updates, technical support and services revenue represents fees associated with the sale of license updates, training, and technical
support, all provided on a when-and-if-available basis (except technical support) under our maintenance agreement. Payments for software license updates, technical support and services on initial order or on renewal are generally made in advance and
are nonrefundable. License updates consist of the right to unspecified software updates on a when-and-if-available basis and are typically entered into in connection with the initial software license purchase. License updates, technical support and
services may be renewed upon expiration of the term. Customers can purchase license updates separately from technical support and services. Revenue from license updates, technical support and services is deferred and recognized as revenue on a
straight-line basis over the term of the maintenance agreement.

Revenue under multiple-element arrangements, which typically include new
software licenses, consulting services, training and maintenance agreements sold together, are allocated to each element in the arrangement primarily using the residual method based upon the fair value of the undelivered elements, which is specific
to our vendor-specific objective evidence of fair value, or VSOE. This means that we defer revenue from the arrangement fee equivalent to the fair value of the undelivered elements. Discounts, if any, are applied to the



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delivered elements, usually software licenses, under the residual method. For periodic unspecified product updates and technical support agreements, VSOE is
based upon either the renewal rate specified in each contract or the price charged when sold separately. For consulting services and training for customers without a current maintenance agreement, VSOE is based upon the rates charged for these
services when sold separately.

If we are unable to establish VSOE for an undelivered post contract support, or PCS, element, for example,
in a two-year term license where the license term and PCS are coterminous and no PCS renewal period exists, all revenue is recognized ratably over the contract period. For income statement classification purposes, our allocation methodology is based
on VSOE of fair value for our professional services which is determined by the price charged when sold separately, and the contractually stated renewal rates for our PCS, generally 18% to 21% of the license fee paid on perpetual licenses. We use the
residual method to allocate any remaining arrangement fee to new software license revenue.

Professional Services Revenue

Professional services revenue consists of fees from consulting services and training for customers without a current maintenance agreement
and is recognized as the services are performed. When we enter into consulting service arrangements that include significant modifications to the software that are essential to the customers use and the arrangement is bundled with software,
revenue under the entire arrangement is recognized under the percentage-of-completion method. For income statement classification purposes, we have developed a revenue allocation methodology for these arrangements that is consistent with the
residual method used, and described under SOP No. 97-2, when services are not essential to the functionality of the software. In these circumstances, revenue is allocated to the various elements of the arrangement based on our VSOE of fair
value and the residual amount is allocated to new software license revenue.

We sell new software licenses, license updates, technical
support and services agreements to distributors at predetermined prices. Sales to distributors are not contingent upon resale of the software to the end user. In most cases, we provide license updates, technical support and services agreements
directly to distributors and the distributors provide support to the end customer. Revenue from sales to distributors is recorded at the amounts charged to the distributor and in the same manner as new software license, license updates, technical
support and services sales sold through our direct sales force. Amounts received in advance of revenue recognition are classified as deferred revenue.

Sales taxes and other taxes collected from customers and remitted to governmental authorities are presented on a net basis and, as such, are excluded from revenues.

Income Taxes. The total amount of gross unrecognized tax benefits as of April 1, 2008 was $838,000. Of this total, $808,000 represents the
amount of unrecognized tax benefits (net of federal benefit on state issues) that, if recognized, would favorably affect the effective income tax rate in any future periods. At March 31, 2009, the gross unrecognized benefit was $804,000,
$775,000 of which would favorably affect the effective income tax rate in future periods. A reconciliation of the beginning and ending amount of unrecognized tax benefits for fiscal 2009 and 2008 follows:



|                                               |  |                |      |  
|---------------------------------------------- |  | -------------- | ---- | -
|                                               |  | (in thousands) |     
|Unrecognized tax benefits at April 1, 2008     |  | $              | 838  |  
|Gross increases  current period tax positions |  |                | 139  |  
|Lapse of statute of limitations                |  |                | (159 | )
|Foreign currency translation adjustment        |  |                | (14  | )
|                                               |  |                |      |  
|Unrecognized tax benefits at March 31, 2009    |  | $              | 804  |  
|                                               |  |                |      |  



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|                                                |  |                |     |  
|----------------------------------------------- |  | -------------- | --- | -
|                                                |  | (in thousands) |    
|Unrecognized tax benefits at April 1, 2007      |  | $              | 810 |  
|Gross decreases  tax positions in prior period |  |                | (80 | )
|Gross increases  current period tax positions  |  |                | 79  |  
|Foreign currency translation adjustment         |  |                | 29  |  
|                                                |  |                |     |  
|Unrecognized tax benefits at March 31, 2008     |  | $              | 838 |  
|                                                |  |                |     |  

The following table summarizes the tax years that are either currently under audit or remain open
under the statute of limitations and are subject to examination by the tax authorities in the most significant jurisdictions that we operate:



|               |  |            
|-------------- |  | -----------
|Australia      |  | FY05  FY08
|Belgium        |  | FY05  FY08
|France         |  | FY06  FY08
|Germany        |  | FY04  FY08
|United Kingdom |  | FY08       
|United States  |  | FY06  FY08
|Maryland       |  | FY04  FY08
|New York       |  | FY07  FY08

Our continuing practice is to recognize interest, if any, related to income tax matters in
interest expense in our consolidated statements of operations and penalties as part of general and administrative expense in our consolidated statements of operations. During fiscal 2008, we recognized $6,000 in potential interest expense associated
with uncertain tax positions. During fiscal 2009, we recognized $4,000 in potential interest expense associated with uncertain tax positions and reversed $17,000 associated with potential claims now barred by the statute of limitations. The
total accrued interest and accrued penalties related to uncertain tax positions at March 31, 2009 was $13,000 and $2,000, respectively.

We believe it is reasonably possible that significant changes in the liability for uncertain tax positions will occur in the next twelve months as a result of final decisions related to the voluntary payments of
our state and local income taxes and lapse of statute of limitations. In the aggregate, we believe the liability for uncertain tax positions could decrease by $276,000 in the next twelve months.

The income tax provision includes income taxes currently payable plus the net change during the year in deferred tax assets or liabilities. Deferred tax
assets and liabilities reflect the differences between the carrying value under GAAP and the tax basis of assets and liabilities using enacted statutory tax rates in effect for the period in which the differences are expected to reverse. Judgments
and estimates are required in the calculation of the deferred tax assets, valuation allowance, accrual of contingencies, research and development tax credits, and foreign tax credits.

Stock-Based Compensation. SFAS No. 123R requires an entity to recognize an expense within its income statement for all share-based payment
arrangements, which includes employee stock option plans, restricted stock grants, and Employee Stock Purchase Plan, or ESPP. We have elected to continue straight-line amortization of stock-based compensation expense for the entire award over the
service period since the awards have only service conditions and graded vesting. Our stock options and nonvested stock do not contain performance conditions. There have been no modifications to awards in 2009 or 2008.

Our stock option grants are accounted for as equity awards. The expense is based on the grant-date fair value of the options granted, and is recognized
over the requisite service period.



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To estimate the grant-date fair value of our stock options, we use the Black-Scholes option-pricing
model, consistent with that used for pro forma disclosure under SFAS No. 123. The Black-Scholes model estimates the per share fair value of an option on its date of grant based on the following: the options exercise price; the price of
the underlying stock on the date of grant; the estimated dividend yield; a risk-free interest rate; the estimated option term; and the expected volatility. For the risk-free interest rate, we use a U.S. Treasury bond due in a
number of years equal to the options expected term. To estimate expected volatility, we analyzed the historic volatility of our common stock. There were no stock options granted in fiscal 2009.

Compensation cost for stock option grants is recognized on a straight-line basis over the requisite service period for the entire award from the date of
grant through the period of the last separately vesting portion of the grant. Compensation cost is recognized within the income statement in the same expense line as the cash compensation paid to the respective employees. SFAS No. 123R also
requires us to estimate forfeitures in calculating the expense related to stock-based compensation. We have concluded that our historical forfeiture rate is the best measure to estimate future forfeitures of granted stock options. The impact on
compensation costs due to changes in the expected forfeiture rate will be recognized in the period that they become known. All of our stock options are fully vested. As a result, during fiscal 2009, we adjusted our expected forfeiture rate to
reflect actual stock option forfeitures. The adjustment of our forfeiture rate did not have a significant impact on the financial statements.

Our restricted stock grants are accounted for as equity awards. The expense is based on the price of our common stock, and is recognized on a straight-line basis over the requisite service period. We did not grant any restricted stock prior
to February 2006. The restricted stock agreements do not contain any post-vesting restrictions. We have concluded that our historical forfeiture rate is the best measure to estimate future forfeitures of granted stock options. As of March 31,
2009, nonvested stock-based deferred compensation associated with restricted stock totaled $1.6 million, which we expect to be recognized over a weighted average period of 1.1 years.

Our 2000 Employee Stock Purchase Plan, or ESPP, provides all eligible employees to collectively purchase up to a total of 650,000 shares of our common
stock. An employee may authorize a payroll deduction up to a maximum of 10% of his or her compensation during the plan period. The purchase price for each share purchased is the lesser of 85% of the closing price of the common stock on the first or
last day of the plan period. The plan period for the ESPP ends on the last day of January and July of each year. To estimate the fair value of shares issued under our ESPP, we use the Black-Scholes option-pricing model. The Black-Scholes model
estimates the per share fair value of an ESPP share at the beginning of the plan period based on the following: the price of the underlying stock on the first day of the plan period; the estimated dividend yield; a risk-free interest
rate; the term of the plan period (six months); and the expected volatility. For the risk-free interest rate, we use a U.S. Treasury Bond due in six months. To determine expected volatility, we analyze the historical volatility of our
stock over the 6 months prior to the first day of the plan period. The expense is calculated based on the difference between the fair market value of the shares purchased at the close of each plan period and the discounted price paid by the
employee, and that expense is recognized on a straight-line basis over the plan period. As of March 31, 2009, nonvested stock-based deferred compensation associated with the ESPP totaled $181,000 and is expected to be recognized over a weighted
average period of 4 months.

Cash Equivalents and Marketable Securities. In September 2006, the Financial Accounting Standards
Board, or FASB, issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements, or SFAS No. 157. This standard clarifies the principle that fair value should be based on the assumptions that market
participants would use when pricing an asset or liability. Additionally, it establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. SFAS No. 157 is effective for financial statements issued for
fiscal years beginning after November 15, 2007. We adopted SFAS No. 157 effective April 1, 2008.



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SFAS No. 157 requires disclosures regarding the manner in which fair value is determined for assets
and liabilities and establishes a three-tiered value hierarchy into which these assets and liabilities must be grouped, based upon significant levels of inputs as follows:



| |  |  | Level 1  Quoted prices (unadjusted) in active markets for identical assets or liabilities.
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | Level 2  Observable inputs, other than Level 1 prices, such as quoted prices in active markets for similar assets and liabilities in markets that are not
active, or other inputs that are observable or can be corroborated by observable inputs.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 3  Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This
includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The lowest level of significant input determines the placement of the entire fair value measurement in the hierarchy. We view auction rate securities, or ARS, as Level 3 assets, corporate notes as Level 2 assets, and
money market funds as Level 1 assets.

The following table summarizes the composition of our marketable securities at March 31, 2009
and 2008:



|                            |  |                |        |                     |   |                       |  |                      |             |   |                                |   |        |  |   |       |  |   |      
|--------------------------- |  | -------------- | ------ | ------------------- | - | --------------------- |  | -------------------- | ----------- | - | ------------------------------ | - | ------ |  | - | ----- |  | - | -----
|                            |  | March 31, 2009
|                            |  | (in thousands)
|                            |  | AmortizedCost  |        | GrossUnrealizedGain |   | GrossUnrealizedLoss   |  |                      | MarketValue |   | Classification on BalanceSheet
|                            |  |                |        |                     |   | Short-TermInvestments |  | Long-TermInvestments
|Corporate notes             |  | $              | 999    |                     | $ |                      |  | $                    |            |   |                                | $ | 999    |  | $ | 999   |  | $ |     
|                            |  |                |        |                     |   |                       |  |                      |             |   |                                |   |        |  |   |       |  |   |      
|Total marketable securities |  | $              | 999    |                     | $ |                      |  | $                    |            |   |                                | $ | 999    |  | $ | 999   |  | $ |     
|                            |  |                |        |                     |   |                       |  |                      |             |   |                                |   |        |  |   |       |  |   |      
|                            | 
|                            |  | March 31, 2008
|                            |  | (in thousands)
|                            |  | AmortizedCost  |        | GrossUnrealizedGain |   | GrossUnrealizedLoss   |  |                      | MarketValue |   | Classification on BalanceSheet
|                            |  |                |        |                     |   | Short-TermInvestments |  | Long-TermInvestments
|Auction rate securities     |  | $              | 8,800  |                     | $ |                      |  | $                    | (381        | ) |                                | $ | 8,419  |  | $ | 1,451 |  | $ | 6,968
|Municipal securities        |  |                | 6,000  |                     |   |                      |  |                      |            |   |                                |   | 6,000  |  |   | 6,000 |  |   |     
|                            |  |                |        |                     |   |                       |  |                      |             |   |                                |   |        |  |   |       |  |   |      
|Total marketable securities |  | $              | 14,800 |                     | $ |                      |  | $                    | (381        | ) |                                | $ | 14,419 |  | $ | 7,451 |  | $ | 6,968
|                            |  |                |        |                     |   |                       |  |                      |             |   |                                |   |        |  |   |       |  |   |      

The following table details the fair value measurements within the three levels of fair value
hierarchy of our financial assets, consisting of cash equivalents and marketable securities, at March 31, 2009:



|                   |  |                                  |         |                                               |         |        |         |   |     |  |   |  
|------------------ |  | -------------------------------- | ------- | --------------------------------------------- | ------- | ------ | ------- | - | --- |  | - | -
|                   |  | Total FairValue At March 31,2009 |         | Fair Value Measurement atMarch 31, 2009 Using
|                   |  |                                  | Level 1 |                                               | Level 2 |        | Level 3
|                   |  | (in thousands)                  
|Money market funds |  | $                                | 79,231  |                                               | $       | 79,231 |         | $ |    |  | $ | 
|Corporate note     |  |                                  | 999     |                                               |         |       |         |   | 999 |  |   | 
|                   |  |                                  |         |                                               |         |        |         |   |     |  |   |  
|Total              |  | $                                | 80,230  |                                               | $       | 79,231 |         | $ | 999 |  | $ | 
|                   |  |                                  |         |                                               |         |        |         |   |     |  |   |  



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At March 31, 2009, we grouped money market funds using a Level 1 valuation because market prices in
active markets for identical assets were readily available. The per-share net asset value of our money market funds has remained at a constant amount of $1.00 per share. Also, as of March 31, 2009, there were no withdrawal limits on redemptions
for any of the money market funds that we hold. At March 31, 2009, we grouped corporate notes using a Level 2 valuation because we used quoted prices in active markets for similar assets to determine the fair value. The contractual maturity for
the corporate note is July 2009. We did not group any financial assets using a Level 3 valuation at March 31, 2009.

The following
table summarizes the activity for our ARS measured at fair value using Level 3 inputs:



|                                                                              |  |                |        |  
|----------------------------------------------------------------------------- |  | -------------- | ------ | -
|                                                                              |  | ARS            |       
|                                                                              |  | (in thousands) |       
|Balance as of March 31, 2008                                                  |  | $              | 8,419  |  
|Redemptions (at par)                                                          |  |                | (8,800 | )
|Total gains and losses:                                                       |  |                |        |  
|Included in earnings (realized)                                               |  |                |       |  
|Change in unrealized gains included in accumulated other comprehensive income |  |                | 381    |  
|                                                                              |  |                |        |  
|Balance as of March 31, 2009                                                  |  | $              |       |  
|                                                                              |  |                |        |  

All investments in ARS were considered Level 3 investments as of the date of adoption of SFAS
No. 157.

Allowance for Doubtful Accounts. We maintain an allowance for doubtful accounts receivable for
estimated losses resulting from the inability of our customers to make required payments and for the limited circumstances when the customer disputes the amounts due us. Our methodology for determining this allowance requires significant estimates.
In estimating the allowance, we consider the age of the receivable, the creditworthiness of the customer, the economic conditions of the customers industry and general economic conditions. While we believe that the estimates we use are
reasonable, should any of these factors change, our estimates may also change, which could affect the amount of our future allowance for doubtful accounts as well as future operating income. Specifically, if the financial condition of our customers
were to deteriorate, resulting in an impairment of their ability to make payments to us, additional allowances could be required. As of March 31, 2009 and 2008, accounts receivable totaled $29.6 million and $26.1 million, net of an allowance
for doubtful accounts of $713,000 and $154,000, respectively.

Valuation of Intangible Assets and Goodwill.We account
for our goodwill and intangible assets in accordance with SFAS No. 141, Business Combinations and SFAS No. 142, Goodwill and Other Intangible Assets. Our intangible assets consist of acquired technology related to
our acquisitions of a software product for modeling voice communications in December 2003, Altaworks in October 2004, and purchased technology we purchased from RadView Software, Ltd. in December 2005, SQMworks, Inc. in April 2006 and Network
Physics, Inc. in October 2007. Our intangible assets also consist of customer relationships and acquired workforce assets we purchased from Network Physics, Inc. related to the purchase of specified assets of Network Physics in October 2007. The
acquired and purchased technology are stated at the lower of unamortized cost or net realizable value and are amortized on a straight-line basis over their expected useful lives of three to five years. Our customer relationship and workforce
intangible assets we purchased from Network Physics, Inc. are amortized on an accelerated depreciation basis over their expected useful lives of four and one half years and five years, respectively. We use the projected discounted cash flow method
in valuing our acquired technology and purchased customer relationships using certain assumptions including revenue growth, cost levels, present value discount rate, and working capital requirements. We use the lower of the amount of cash paid or
the present value of projected discounted cash flows to value purchased technology. The workforce asset associated with the purchase of specified assets of Network Physics, Inc. was valued on a replacement cost basis. While we believe the
assumptions used to value our acquired technology related to acquisitions are reasonable, actual results will



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likely differ from those assumptions. Future cash flows are subject to change for a variety of internal and external factors. We will periodically review the
value of acquired technology and purchased intangible assets for reasonableness in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. If changes in our assumptions at the time of future
periodic reviews indicate that the carrying value of our acquired technology and purchased intangible assets exceeds their fair value and we determine that carrying amounts can not be recovered, it would result in impairment losses. As of
March 31, 2009 and 2008, intangible assets totaled $6.2 million and $8.6 million, net of accumulated amortization of $7.7 million and $5.3 million, respectively. No impairment losses have been recorded to date.

Goodwill is recorded when the consideration paid for acquisitions exceeds the fair value of net tangible and intangible assets acquired. Goodwill is not
amortized. We perform an annual review no later than our fourth quarter to identify any facts or circumstances that indicate the carrying value of goodwill is impaired. The review is based on various analyses including cash flow and profitability
projections and the market capitalization of our common stock. Impairment, if any, is based on the excess of the carrying amount of goodwill over its fair value. We performed our annual impairment test of goodwill as of March 31, 2009 and 2008
and concluded that there was no goodwill impairment. As of March 31, 2009 and 2008, goodwill was $14.6 million. No impairment losses have been recorded to date.

Accounting for Software Development Costs.Costs incurred in the research and development of new software products are expensed as incurred until technological feasibility is established. Development costs are
capitalized beginning when a products technological feasibility has been established and ending when the product is available for general release to our customers. Technological feasibility is reached when the product reaches the working model
stage. To date, products and enhancements have generally reached technological feasibility and have been released for sale at substantially the same time and all research and development costs have been expensed. Consequently, no research and
development costs were capitalized in fiscal 2009, 2008 or 2007.



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Results of Operations

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



|                                                          |  |            |   |  |            |   |  |            |  
|--------------------------------------------------------- |  | ---------- | - |  | ---------- | - |  | ---------- | -
|                                                          |  | Fiscal2009 |   |  | Fiscal2008 |   |  | Fiscal2007 |  
|Revenue:                                                  |  |            |   |  |            |   |  |            |  
|New software licenses                                     |  | 41.7       | % |  | 38.3       | % |  | 45.4       | %
|Software license updates, technical support and services  |  | 35.0       |   |  | 34.3       |   |  | 29.5       |  
|Professional services                                     |  | 23.3       |   |  | 27.4       |   |  | 25.1       |  
|                                                          |  |            |   |  |            |   |  |            |  
|Total revenue                                             |  | 100.0      |   |  | 100.0      |   |  | 100.0      |  
|                                                          |  |            |   |  |            |   |  |            |  
|Cost of revenue:                                          |  |            |   |  |            |   |  |            |  
|New software licenses                                     |  | 2.9        |   |  | 1.0        |   |  | 0.7        |  
|Software license updates, technical support, and services |  | 3.8        |   |  | 4.4        |   |  | 3.4        |  
|Professional services                                     |  | 17.0       |   |  | 18.9       |   |  | 16.7       |  
|Amortization of acquired technology                       |  | 1.8        |   |  | 1.5        |   |  | 0.8        |  
|                                                          |  |            |   |  |            |   |  |            |  
|Total cost of revenue                                     |  | 25.5       |   |  | 25.8       |   |  | 21.6       |  
|                                                          |  |            |   |  |            |   |  |            |  
|Gross profit                                              |  | 74.5       |   |  | 74.2       |   |  | 78.4       |  
|                                                          |  |            |   |  |            |   |  |            |  
|Operating expenses:                                       |  |            |   |  |            |   |  |            |  
|Research and development                                  |  | 25.1       |   |  | 27.1       |   |  | 22.8       |  
|Sales and marketing                                       |  | 34.6       |   |  | 38.9       |   |  | 35.8       |  
|General and administrative                                |  | 9.6        |   |  | 11.6       |   |  | 11.6       |  
|                                                          |  |            |   |  |            |   |  |            |  
|Total operating expenses                                  |  | 69.3       |   |  | 77.6       |   |  | 70.2       |  
|                                                          |  |            |   |  |            |   |  |            |  
|Income (loss) from operations                             |  | 5.2        |   |  | (3.4       | ) |  | 8.2        |  
|Interest and other income, net                            |  | 1.0        |   |  | 3.5        |   |  | 4.0        |  
|                                                          |  |            |   |  |            |   |  |            |  
|Income before provision (benefit) for income taxes        |  | 6.2        |   |  | 0.1        |   |  | 12.2       |  
|Provision (benefit) for income taxes                      |  | 2.3        |   |  | (0.4       | ) |  | 3.8        |  
|                                                          |  |            |   |  |            |   |  |            |  
|Net income                                                |  | 3.9        | % |  | 0.5        | % |  | 8.4        | %
|                                                          |  |            |   |  |            |   |  |            |  

Revenue

New Software License Revenue.New software licenses revenue was $51.2 million, $38.8 million, and $43.2 million, in fiscal 2009, 2008, and 2007, respectively, representing an increase of 31.9% in fiscal 2009
from fiscal 2008 and a decrease of 10.1% in fiscal 2008 from fiscal 2007. For fiscal 2009, the increase in license revenue was primarily due to an increase in sales to corporate enterprise customers and service providers. The increase was primarily
due to an increase in revenue from our Applications Performance Management products. For fiscal 2008, the decrease in license revenue was primarily due to a decrease in sales to United States and international government customers, partially offset
by an increase in sales to corporate enterprise customers.

Software License Updates, Technical Support and Services Revenue.Software license updates, technical support and services revenue was $43.1 million, $34.8 million, and $28.1 million, in fiscal 2009, 2008, and 2007, respectively, representing increases of 23.8% in fiscal 2009 from fiscal 2008 and 24.0% in
fiscal 2008 from fiscal 2007. Software license updates, technical support and services revenue growth rates are affected by the overall new software license revenue growth rates, as well as the renewal rate of annual maintenance contracts by
existing customers. The increase in software license updates, technical support and services revenue in fiscal 2009 and fiscal 2008 primarily reflected increases in the overall customer installed base as compared to the prior fiscal year.



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Professional Services Revenue.The components of professional services revenue for fiscal 2009,
2008, and 2007 were as follows:



|                           |  |                |        |            |   |            |  |   |       
|-------------------------- |  | -------------- | ------ | ---------- | - | ---------- |  | - | ------
|                           |  | Fiscal2009     |        | Fiscal2008 |   | Fiscal2007
|                           |  | (in thousands)
|Consulting services        |  | $              | 27,949 |            | $ | 27,099     |  | $ | 22,399
|Training and other revenue |  |                | 652    |            |   | 622        |  |   | 1,483 
|                           |  |                |        |            |   |            |  |   |       
|Professional services      |  | $              | 28,601 |            | $ | 27,721     |  | $ | 23,882
|                           |  |                |        |            |   |            |  |   |       

Professional services revenue was $28.6 million, $27.7 million, and $23.9 million in fiscal 2009,
2008, and 2007, respectively, representing increases of 3.2% in fiscal 2009 from fiscal 2008, and 16.1% in fiscal 2008 from fiscal 2007. Consulting services revenue accounted for 97.7%, 97.8%, and 93.8%, of professional services revenue for fiscal
2009, 2008, and 2007, respectively. For fiscal 2009, the increase in professional services revenue was primarily due to an increase in demand for our consulting services by service providers and, to a lesser extent, corporate enterprise customers.
For fiscal 2008, the increase in professional services revenue was largely due to growing demand for our consulting services by United States government customers and, to a lesser extent, corporate enterprise customers. Revenue from consulting
services provided to United States government customers for fiscal 2009, 2008, and 2007 was $18.4 million, $18.6 million, and $15.8 million, respectively, representing a decrease of 1.4% in fiscal 2009 from fiscal 2008, and an increase of 17.7% in
fiscal 2008 from fiscal 2007. Training and other revenue was $652,000, $622,000, and $1.5 million in fiscal 2009, 2008 and 2007, respectively. The increase in training and other revenue in fiscal 2009 as compared to fiscal 2008 was due to increased
sales of our training services to service providers, which was offset by a decrease in sales to corporate enterprise customers. The decrease in training revenue in fiscal 2008 as compared to fiscal 2007 was the result of offering training at no cost
to maintained customers on a when-and-if available basis beginning January 1, 2007.

International Revenue. Our international
revenue increased 26.7% to $26.0 million, or 21.1% of total revenue, in fiscal 2009 from $20.5 million, or 20.2% of total revenue, for fiscal 2008. Our international revenue increased 2.2% during fiscal 2008 from $20.1 million, or 21.1% of total
revenue, for fiscal 2007. The increase in international revenue in fiscal 2009 was primarily the result of an increase in sales to international government customers and service providers, which was partially offset by a decrease in sales to
international corporate enterprise customers. The increase in international revenue in fiscal 2008 was primarily the result of an increase in sales to international corporate enterprise customers. Our international revenue is primarily generated in
Europe and Japan. Our goal is to increase sales to international corporate enterprise customers. International revenue from corporate enterprises comprised the largest portion of international revenue for fiscal 2009. During fiscal 2009, 2008, and
2007, we expanded our operations outside the United States through the hiring of additional direct sales persons in our foreign subsidiaries.

Cost of Revenue

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



|                                                                  |  |            |   |  |            |   |  |            |  
|----------------------------------------------------------------- |  | ---------- | - |  | ---------- | - |  | ---------- | -
|                                                                  |  | Fiscal2009 |   |  | Fiscal2008 |   |  | Fiscal2007 |  
|Cost of new software licenses                                     |  | 6.9        | % |  | 2.7        | % |  | 1.5        | %
|Cost of software license updates, technical support, and services |  | 10.8       |   |  | 13.0       |   |  | 11.6       |  
|Cost of professional services                                     |  | 73.1       |   |  | 69.1       |   |  | 66.6       |  

Cost of new software license revenue consists primarily of the cost of hardware platforms
associated with the delivery of some software products, royalties and, to a lesser extent, media, manuals, and distribution costs.



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Cost of license updates, technical support and services revenue consists of personnel-related costs necessary to provide technical support and training to
customers with active maintenance contracts on a when-and-if-available basis, royalties, media, and distribution costs. Cost of professional services revenue consists primarily of personnel-related costs necessary to provide consulting and training
to customers without active maintenance contracts. Gross margins on new software license revenue and software license updates, technical support and services revenue are substantially higher than gross margin on professional services revenue, due to
the low cost of delivering new software licenses and providing technical support and maintenance compared with the relatively high personnel costs associated with providing consulting services and customer training.

Cost of New Software License Revenue.Cost of software license revenue was $3.5 million, $1.0 million, and $638,000 in fiscal 2009, 2008, and
2007, respectively. Gross margin on software license revenue was 93.1%, 97.3%, and 98.5%, for fiscal 2009, 2008, and 2007, respectively. The increase in costs and the decrease in gross margin for fiscal 2009 as compared to fiscal 2008 was primarily
the result of a $2.1 million increase in the cost of hardware platforms associated with delivery of our ACE Live software products. The increase in costs and the decrease in gross margin for fiscal 2008 as compared to fiscal 2007 was primarily the
result of $383,000 in hardware costs associated with our ACE Live software products. Our ACE Live software products were released during the three months ended December 31, 2007. Accordingly, the cost of hardware associated with our ACE Live
software products had not previously been recorded as a cost of new software license revenue.

Cost of Software License Updates,
Technical Support and Services Revenue.Cost of software license updates, technical support and services revenue was $4.7 million, $4.5 million, and $3.3 million in fiscal 2009, 2008, and 2007, respectively. Gross margin on software license
updates, technical support and services revenue was 89.2%, 87.0%, and 88.4%, for fiscal 2009, 2008, and 2007, respectively. The cost of software license updates, technical support and services revenue is primarily affected by the cost of labor
associated with providing technical support and related services to customers with technical support contracts and, to a lesser extent, royalty payments required for some of our license update sales. The increase in costs was primarily the result of
an $82,000 increase in personnel costs necessary to provide technical support and a $42,000 increase in royalty payments required for some of our license update sales, partially offset by a $97,000 decrease in costs necessary to provide training to
customers with maintenance contracts. The increase in gross margin for fiscal year 2009 as compared to 2008 was primarily the result of a 23.8% increase in software license updates, technical support and services revenue. The increase in costs and
the decrease in gross margin for fiscal year 2008 as compared to 2007 was largely related to a $693,000 increase in costs necessary to provide training to customers with maintenance contracts and a $331,000 increase in personnel costs necessary to
provide technical support. Stock-based compensation expense included in cost of software license updates, technical support and services was $20,000, $21,000, and $16,000 for fiscal 2009, 2008, and 2007, respectively.

Cost of Professional Services Revenue.Cost of professional services revenue was $20.9 million, $19.2 million, and $15.9 million in fiscal 2009,
2008, and 2007, respectively. Gross margin on professional services revenue decreased to 26.9% for fiscal 2009 from 30.9% in fiscal 2008. Gross margin on professional services revenue decreased to 30.9% for fiscal 2008 from 33.4% for fiscal 2007.
The increase in cost of professional services in fiscal 2009 from fiscal 2008 was largely due to a $1.8 million increase in direct labor expense attributable to the use of more external contractors. The increase in cost of professional services in
fiscal 2008 from fiscal 2007 was primarily due to an increase in our consulting staff necessary to meet demand for our services. We had 118, 126, and 111 consulting employees at the end of fiscal 2009, 2008, and 2007, respectively. The decrease in
gross margin on professional services in fiscal 2009 from fiscal 2008 was primarily due to the increase in direct labor costs. The decrease in gross margin on professional services in fiscal 2008 from fiscal 2007 was primarily due to lower effective
billing rates for consulting projects during fiscal 2008 as compared to fiscal 2007. We expect the cost of professional services revenue as a percentage of professional services revenue to vary based primarily on the profitability of individual
consulting engagements and, to a lesser extent, costs necessary to recruit and train new consulting staff. Stock-based compensation expense included in cost of professional services was $113,000, $148,000, and $175,000 for fiscal 2009, 2008, and
2007, respectively.



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Operating Expenses

Research and Development.Research and development expenses were $30.8 million, $27.5 million, and $21.7 million in fiscal 2009, 2008, and 2007, respectively, representing increases of 12.1% in fiscal 2009 from
fiscal 2008 and 26.7% in fiscal 2008 from fiscal 2007. The increase in fiscal 2009 from fiscal 2008 was primarily due to a $3.1 million increase in personnel costs as a result of increased staffing levels. The increase in fiscal 2008 from fiscal
2007 was primarily due to higher personnel costs as a result of increased staffing levels required for developing new products as well as sustaining and upgrading existing products. We do not capitalize research and development costs since we
release our products to the public at the same time that technological feasibility is reached. We had 196, 185, and 161 research and development employees at the end of fiscal 2009, 2008, and 2007, respectively. Stock-based compensation expense
included in research and development was $591,000, $568,000, and $533,000 for fiscal 2009, 2008, and 2007, respectively.

Sales and
Marketing. Sales and marketing expenses were $42.5 million, $39.4 million, and $34.1 million in fiscal 2009, 2008, and 2007, respectively. The 8.1% increase in fiscal 2009 from fiscal 2008 was due to a $3.5 million increase in personnel costs
and commission expense as a result of increased staffing levels and increased sales, which was partially offset by a $265,000 reduction in travel expenses and a $217,000 reduction in marketing costs. The 15.3% increase in fiscal 2008 from fiscal
2007 was due to an increase in personnel costs and commission expense of $3.4 million, travel costs of $537,000, facility costs of $506,000 and conference costs of $428,000. Our sales and marketing personnel increased 14.3% to 192 in fiscal 2009
from 168 in fiscal 2008. The increases in fiscal 2009 from fiscal 2008 and in fiscal 2008 from fiscal 2007 were the result of efforts to pursue our growth strategies. Stock-based compensation expense included in sales and marketing was $376,000,
$374,000, and $329,000 for fiscal 2009, 2008, and 2007, respectively.

General and Administrative. General and administrative
expenses were $11.9 million, $11.7 million, and $11.0 million, in fiscal 2009, 2008, and 2007, respectively. The slight increase in fiscal 2009 from fiscal 2008 was largely due to an increase in bad debt expense, rent expense, property tax expense
and compensation expense partially offset by a decrease in facility expense and professional services costs. The 6.8% increase in fiscal 2008 from fiscal 2007 was primarily due to an increase in professional services costs. The increase in
professional services costs during fiscal 2008 was largely due to $720,000 in fees related to the acquisition of specified assets of Network Physics. Stock-based compensation expense included in general and administrative was $433,000, $428,000, and
$409,000 for fiscal 2009, 2008, and 2007, respectively.

Interest and Other Income, net.Interest and other income, net was $1.2
million, $3.6 million, and $3.8 million in fiscal 2009, 2008, and 2007, respectively. The decrease in fiscal 2009 from fiscal 2008 was primarily the result of a change in our portfolio holdings to predominately United States government-backed money
market funds from a mix of United States government-backed money market funds and investment grade marketable securities and, to a lesser extent, a decrease in the interest rates earned on our investment holdings. The decrease in fiscal 2008 from
fiscal 2007 was primarily due to a decrease in the aggregate balance of cash and cash equivalents and marketable securities.

Provision
for Income Taxes.Our effective tax rates were positive 38.2%, negative 231%, and positive 32% for fiscal 2009, 2008 and 2007, respectively. For fiscal 2009, the effective tax rate differed from the statutory tax rate principally due to state
income taxes, differential in the United States and foreign tax rates, research and development credits and the domestic production activities deduction. The increase in our effective tax rate in fiscal 2009 from fiscal 2008 was primarily due to an
increase in our book income which diluted the impact of permanent differences as compared to the same periods in the prior fiscal year. The decrease in our effective tax rate in fiscal 2008 from fiscal 2007 was primarily the result of a decrease in
book income and an increase in permanent book to tax differences such as tax exempt interest income. The effective tax rate differs from the statutory tax rate and varies from period to period due principally to the amount of income before taxes
from various tax jurisdictions, tax-exempt interest income, foreign tax expense, and the amount of tax credits available to us in each period from incremental research expenditures. Future provisions for taxes will depend, among other things, on the
mix and amount of worldwide income, the tax rates in effect for various tax jurisdictions and the amount of research and development tax credits, foreign tax credits and other items for which we are eligible.



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Liquidity and Capital Resources

As of March 31, 2009 and 2008, we had cash, cash equivalents, short-term and long-term marketable securities totaling $92.0 million and $85.8
million, respectively. Due to our available cash balances and our anticipated cash requirements, we do not believe that the current credit crisis will have a material impact on our operational cash requirements.

Cash provided by operating activities was $12.1 million, $12.9 million, and $6.2 million for fiscal 2009, 2008, and 2007, respectively. Cash provided by
operating activities is primarily derived from net income, as adjusted for non-cash items such as depreciation and amortization expense, tax benefits from the exercise of employee stock options, and changes in operating assets and liabilities. The
decrease in cash provided by operating activities in fiscal 2009 from fiscal 2008 was primarily attributable to an increase in accounts receivable and a decrease in the growth of deferred revenue during fiscal 2009, as compared to fiscal 2008, which
was partially offset by an increase in cash resulting from an increase in net income and accrued liabilities. The increase in cash provided by operating activities in fiscal 2008 from fiscal 2007 was primarily attributable to an increase in cash
resulting from an increase in depreciation and amortization expense, deferred revenue and accounts payable and accrued expenses, which was partially offset by an decrease in cash resulting from a decrease in net income and an increase in prepaid
expenses.

Net cash provided by investing activities was $8.3 million and $27.3 million in fiscal 2009 and 2008, respectively. Net cash
used in investing activities was $41.4 million in fiscal 2007. Investing activities include the purchase, sale or maturity of marketable securities, acquisition of property and equipment, and net expenditures for business combinations and technology
acquisitions. For fiscal 2009, we used funds of $999,000 to purchase short-term marketable securities, and funds of $5.5 million to purchase property and equipment. We received proceeds of $14.8 million from the sale or maturity of short-term and
long-term marketable securities for fiscal 2009. For fiscal 2008, we used funds of $10.0 million to purchase specified assets from Network Physics, funds of $114.8 million to purchase short-term and long-term marketable securities, and funds of $4.6
million to purchase property and equipment. We received proceeds of $156.6 million from the sale or maturity of short-term marketable securities for fiscal 2008. For fiscal 2007, funds were used to purchase short-term marketable securities of $109.6
million, purchase property and equipment of $3.5 million and purchase intangible assets of $366,000. Proceeds from the sale or maturity of short-term marketable securities were $72.2 million for fiscal 2007.

Cash provided by financing activities was $861,000 in fiscal 2009. Cash used in financing activities was $3.6 million for fiscal 2008. Cash provided by
financing activities was $2.5 million for fiscal 2007. We used cash of $955,000 to acquire 75,724 shares of treasury stock during fiscal 2009. We used cash of $5.0 million to acquire 521,849 shares of treasury stock during fiscal 2008. We used cash
of $1.5 million to acquire 104,000 shares of treasury stock during fiscal 2007. During fiscal 2009 and 2008, 15,724 and 6,474 shares, respectively, were withheld from employees to satisfy the minimum statutory tax withholding obligations with
respect to the income recognized by these employees upon the vesting of their restricted stock shares during the period. Cash provided by financing activities generally reflects the proceeds received from the exercise of stock options and the sale
of common stock under our employee stock purchase plan. During fiscal 2009, 2008, and 2007, we received proceeds of approximately $644,000, 365,000, and $3.0 million, respectively, and issued 92,648, 59,975, and 381,153 shares of common stock,
pursuant to employee and director exercises of stock options. During fiscal 2009, 2008, and 2007, we received proceeds of approximately $1.1 million, $989,000 and $753,000, respectively, and issued 150,712, 120,295, and 84,072 shares of common
stock, respectively, pursuant to the issuance of common stock under our employee stock purchase plan. Excess tax benefits from the exercise of stock options are presented as a cash flow from financing activities. For fiscal 2009, 2008, and 2007,
excess tax benefits from the exercise of stock options were $49,000, $29,000, and $383,000, respectively.

We have commitments under
contractual arrangements to make future payments for goods and services. These contractual arrangements secure the rights to various assets and services to be used in the future in the



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normal course of business. For example, we are contractually committed to make minimum lease payments for the use of property under operating lease
agreements. In accordance with current accounting rules, the future rights and related obligations pertaining to such contractual arrangements are not reported as assets or liabilities on our consolidated balance sheets. Our FIN No. 48
liability for unrecognized tax benefits is reported on our consolidated balance sheets. We expect to fund these contractual arrangements with our cash, cash equivalents and marketable securities as well as cash generated from operations in the
normal course of business.

The following table summarizes our contractual operating lease arrangements and our FIN No. 48 liability
at March 31, 2009, and the timing and effect that such commitments are expected to have on our liquidity and cash flow in future periods.



|                                                               |  |                        |        |             |   |                         |  |                          |       |                  |   |       |  |   |      
|-------------------------------------------------------------- |  | ---------------------- | ------ | ----------- | - | ----------------------- |  | ------------------------ | ----- | ---------------- | - | ----- |  | - | -----
|                                                               |  | Payments Due by Period
|Contractual Obligations and FIN No. 48 Liability(in thousands) |  | Total                  |        | Fiscal 2010 |   | Fiscal 2011Fiscal 2012 |  | Fiscal 2013 Fiscal 2014 |       | After Fiscal2014
|Facilities Operating Lease Obligations                         |  | $                      | 25,064 |             | $ | 5,227                   |  | $                        | 6,966 |                  | $ | 3,648 |  | $ | 9,223
|Other Operating Lease Obligations                              |  |                        | 154    |             |   | 102                     |  |                          | 52    |                  |   |      |  |   |     
|FIN No. 48 Liability                                           |  |                        | 804    |             |   | 276                     |  |                          | 388   |                  |   | 140   |  |   |     
|                                                               |  |                        |        |             |   |                         |  |                          |       |                  |   |       |  |   |      
|Total                                                          |  | $                      | 26,022 |             | $ | 5,605                   |  | $                        | 7,406 |                  | $ | 3,788 |  | $ | 9,223
|                                                               |  |                        |        |             |   |                         |  |                          |       |                  |   |       |  |   |      

See Notes 9 and 10 to our consolidated financial statements for additional information related to
our operating leases. As of March 31, 2009, we had no capital lease obligations.

Effective June 10, 2002, we entered into a
credit facility with a commercial bank. The credit facility permitted the use of funds for general corporate purposes and the issuance of letters of credit up to a maximum of $10.0 million in the aggregate. As of March 31, 2009, the lender
under our credit facility had issued letters of credit in favor of the beneficiaries under a number of our operating leases in the aggregate amount of $1.4 million. Upon a default, as defined in the respective office lease agreement, the applicable
landlord has the right to draw upon its letter of credit in whole or in part. Interest under this facility, including interest on any amounts drawn under the letters of credit, is payable monthly at an annual rate of 1.25%. The credit facility is
collateralized by our accounts receivable. Effective March 31, 2009, in light of our strong cash position, we elected to eliminate any borrowing capacity under the credit facility in excess of our existing outstanding letters of credit.

We expect working capital needs to increase in the foreseeable future in order for us to execute our business plan and growth strategies.
We anticipate that operating activities, as well as planned capital expenditures, will constitute a material use of our cash resources. In addition, we may utilize cash resources to fund acquisitions or investments in complementary businesses,
technologies or products as well as repurchase our common stock in accordance with our stock repurchase program authorized by our Board in February 2008, and the payment of dividends.

We believe that our current cash and cash equivalents, marketable securities, and cash generated from operations will be sufficient to meet our
anticipated cash requirements for working capital, capital expenditures, and dividends at least through fiscal 2010.

Off-Balance Sheet
Arrangements

We do not have any off-balance sheet arrangements with unconsolidated entities or related parties and, accordingly, there
are no off-balance sheet risks to our liquidity and capital resources from unconsolidated entities.



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Recently Issued Accounting Pronouncements

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, or SFAS
No. 159. SFAS No. 159 permits entities to choose to measure, on an item-by-item basis, specified financial instruments and certain other items at fair value. Unrealized gains and losses on items for which the fair value option has been
elected are required to be reported in earnings at each reporting date. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007, the provisions of which are required to be applied prospectively. SFAS No. 159
became effective for the Company as of April 1, 2008. We did not adopt the fair value measurement election provisions of the statement.

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations, or SFAS No. 141R. SFAS No. 141R, which replaces SFAS No. 141, requires that the acquisition method of accounting (which SFAS
No. 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. SFAS No. 141R also establishes principles and requirements for how the acquirer
recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; recognizes and measures the goodwill acquired in the business combination or a gain from
a bargain purchase; and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141R also requires that acquisition-related costs be
recognized separately from the business combination. SFAS No. 141R will apply prospectively to business combinations for which the acquisition date is after fiscal years beginning on or after December 15, 2008.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Principles, or SFAS No. 162, which outlines the
order of authority for the sources of accounting principles. SFAS No. 162 was effective November 15, 2008. The adoption of SFAS No. 162 did not have a material impact on our results of operations or financial condition.

In June 2008, the FASB issued FASB Staff Position No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions are
Participating Securities, or FSP No. EITF 03-6-1. FSP No. EITF 03-6-1 states that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities
and shall be included in the computation of earnings per share, or EPS, pursuant to the two-class method. FSP EITF 03-6-1 is effective for fiscal years beginnings after December 15, 2008. We will apply the provisions of FSP EITF 03-6-1 in
fiscal 2010. We have not yet determined the impact that the implementation of FST EITF 03-6-1 will have on its results of operations or financial condition.

In November 2008, the FASB issued EITF Issue No. 08-7, Accounting for Defensive Intangible Assets, or EITF No. 08-7. EITF No. 08-7 discusses that when an entity acquired in a business
combination or an asset acquisition an intangible asset that it did not intend to actively use, otherwise known as a defensive asset, the entity historically allocated little or no value to the defensive asset. However, with the issuance of SFAS
No. 141(R) and SFAS No. 157 the entity must recognize a value for the defensive asset that reflects the assets highest and best use based on market assumptions. Upon the effective date of both SFAS No. 141(R) and SFAS
No. 157, acquirers will generally assign a greater value to a defensive asset than would typically have been assigned under SFAS No. 141. EITF No. 08-7 will be effective for the first annual reporting period beginning on or after
December 15, 2008. EITF No. 08-7 will apply prospectively to business combinations for which the acquisition date is after fiscal years beginning on or after December 15, 2008.

In April 2009, the FASB issued FSP SFAS No. 141 (R), Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That
Arise from Contingencies, or FSP SFAS No. 141 (R). FSP SFAS No. 141 (R) amends and clarifies SFAS No. 141, Business Combinations, in regards to the initial recognition and measurement, subsequent measurement and
accounting, and disclosures of assets and liabilities arising from contingencies in a business combination. FSP SFAS No. 141 (R) applies to all assets acquired and liabilities



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assumed in a business combination that arise from contingencies that would be within the scope of SFAS No. 5, Accounting for Contingencies,
if not acquired or assumed in a business combination, except for assets or liabilities arising from contingencies that are subject to specific guidance in SFAS No. 141 (R). FSP SFAS No. 141 (R) will be effective for the first annual
reporting period beginning on or after December 15, 2008. FSP SFAS No. 141(R) will apply prospectively to business combinations for which the acquisition date is after fiscal years beginning on or after December 15, 2008.



|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|-------- | ----------------------------------------------------------

(dollars in thousands)

We consider all highly liquid investments purchased with a maturity of three months or less to be
cash equivalents, and those with maturities greater than three months are considered to be marketable securities. Cash equivalents and marketable securities consist primarily of United States government-backed money market funds with short-term
maturities. The per-share net asset value of our money market funds has remained at a constant amount of $1.00 per share. Also, as of March 31, 2009, there were no withdrawal limits on redemptions for any of the money market funds that we held.
Accordingly, we have no quantitative information concerning the market risks and believe that the risk is minimal. We currently do not hedge interest rate exposure, but do not believe that an increase in interest rates would have a material effect
on the value of our cash equivalents, marketable securities or notes payable.

At March 31, 2009, we had $91.0 million in cash and
cash equivalents and $999,000 in short-term marketable securities. As of March 31, 2008, we held auction rate securities, or ARS, totaling $8.8 million at par value, which were classified as available for sale securities and long-term
marketable securities on our consolidated balance sheet. The ARS were primarily collateralized by United States government-backed student loans and were rated AAA or AA. Historically, the carrying value of ARS approximated fair value due to the
frequent resetting of the interest rates. With the liquidity issues experienced in the global credit and capital markets, our ARS experienced failed auctions. While we continued to earn and receive interest on these marketable securities at the
maximum contractual rate, the estimated fair value of these ARS no longer approximated par value. Based on our analysis and our belief that the ARS were of high credit quality, we determined that the fair value of the ARS at March 31, 2008 was
$8.4 million and recorded a temporary impairment charge of $381,000. During the year ended March 31, 2009, the ARS were redeemed at par. As of March 31, 2009, all of our ARS had been redeemed and, as of March 31, 2009 we did not hold
any ARS and had no ARS impairment charges recorded on our balance sheet. Based on our cash, cash equivalents, and marketable securities as of March 31, 2009, a one percentage point increase or decrease in the interest rates would increase or
decrease our annual interest income and cash flows by approximately $920,000.

A majority of our revenue transactions outside the United
States are denominated in local currencies and the majority of operating expenses associated with our foreign subsidiaries are denominated in local currencies; therefore, our results of operations are subject to fluctuations due to changes in
foreign currency exchange rates, particularly changes in the British pound and the European Union euro. We currently do not hedge foreign exchange rate risk. Due to the limited nature of our foreign operations, we do not believe that a 5% change in
exchange rates would have a material effect on our business, financial condition, or results of operations.



|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|------- | -------------------------------------------

Our
financial statements together with the related notes and the report of Deloitte & Touche LLP, our independent registered public accounting firm, are set forth in the Index to Financial Statements at Item 15 of this Form 10-K.



|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
|------- | -------------------------------------------------------------------------------------

None.



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|ITEM 9A. | CONTROLS AND PROCEDURES
|-------- | -----------------------

Our management, with the
participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the disclosure controls and procedures as of March 31, 2009. The disclosure controls and procedures, as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SECs rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the companys management, including its principal executive and principal financial officers, as
appropriate to allow timely decisions regarding required disclosure. Management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management
necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of March 31, 2009, our Chief Executive Officer and Chief
Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Managements report on our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) and the independent registered public accounting firms related audit report on internal
control over financial reporting are included in this Item 9A of this Form 10-K.

No change in our internal control over financial
reporting occurred during the fiscal quarter ended March 31, 2009 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



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MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management of OPNET Technologies, Inc. and its subsidiaries (the Company) is responsible for establishing and maintaining adequate internal
control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the companys
principal executive and principal financial officers and effected by the Companys Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorization of management and directors of the Company; and

(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our
assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial
reporting as of March 31, 2009. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on our
assessment and those criteria, management concluded that the Companys internal control over financial reporting was effective as of March 31, 2009.

OPNET Technologies, Inc.

June 5, 2009



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING ON
THE CONSOLIDATED FINANCIAL STATEMENTS

To the Audit Committee and Stockholders of OPNET Technologies, Inc.

Bethesda, Maryland

We have audited the internal control
over financial reporting of OPNET Technologies, Inc. and its subsidiaries (the Company) as of March 31, 2009, based on the criteria established in Internal ControlIntegrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission. The Companys management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial
reporting included in the accompanying Managements Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Companys internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.

A companys internal control over financial reporting is a
process designed by, or under the supervision of, the companys principal executive and principal financial officers, or persons performing similar functions, and effected by the companys board of directors, management, and other
personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal
control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets
that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial
reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness
of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31,
2009, based on the criteria established in Internal ControlIntegrated Framework issuedby the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial
statements as of and for the year ended March 31, 2009, of the Company and our report dated June 5, 2009, expressed an unqualified opinion on those consolidated financial statements and included an explanatory paragraph regarding the
adoption of Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes.

/s/ DELOITTE &
TOUCHE LLP

McLean, Virginia

June 5, 2009



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|ITEM 9B. | OTHER INFORMATION
|-------- | -----------------

Not applicable.



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PART III

Certain information required by Part III is omitted from this Annual Report as we intend to file our definitive Proxy Statement for the 2009 Annual
Meeting of Stockholders (the Proxy Statement) pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended, not later than 120 days after the end of the fiscal year covered by this Annual Report, and certain information
included in the Proxy Statement is incorporated herein by reference.



|ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|-------- | ------------------------------------------------------

The information in the section entitled Executive Officers and Directors of the Registrant in Part I hereof is incorporated herein by reference. The information in the sections entitled Election of Directors,
Section 16(a) Beneficial Ownership Reporting Compliance and Code of Business Conduct and Ethics in the Proxy Statement is incorporated herein by reference.



|ITEM 11. | EXECUTIVE COMPENSATION
|-------- | ----------------------

The information in the
sections entitled Summary Compensation Table, Compensation of Directors, Compensation Committee Interlocks and Insider Participation and Compensation Discussion and Analysis in the Proxy Statement is
incorporated herein by reference.



|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|-------- | ----------------------------------------------------------------------------------------------

The information in the section entitled Equity Compensation Plan Information in Part I hereof is incorporated by reference. The information in
the section entitled Security Ownership of Certain Beneficial Owners and Management in the Proxy Statement is incorporated herein by reference.



|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|-------- | -------------------------------------------------------------------------

The information in the section entitled Certain Transactions in the Proxy Statement is incorporated herein by reference.



|ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES
|-------- | --------------------------------------

The
information in the section entitled Independent Registered Public Accounting Firm Fees and Other Matters in the Proxy Statement is incorporated herein by reference.



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PART IV



|ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|-------- | ------------------------------------------



| | (a) | The following documents are filed as part of this Form 10-K:
| | --- | ------------------------------------------------------------



| | 1. | Financial Statements. The following financial statements of OPNET Technologies, Inc. are filed as part of this Form 10-K on the pages indicated:
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                                                                              |  |     
|------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                              |  | Page
|Report of Independent Registered Public Accounting Firm                                                       |  | 51  
|Consolidated Balance Sheets as of March 31, 2009 and 2008                                                     |  | 52  
|Consolidated Statements of Operations for the years ended March 31, 2009, 2008, and 2007                      |  | 53  
|Consolidated Statements of Changes in Stockholders Equity for the years ended March 31, 2009, 2008, and
2007 |  | 54  
|Consolidated Statements of Cash Flows for the years ended March 31, 2009, 2008, and 2007                      |  | 55  
|Notes to Consolidated Financial Statements                                                                    |  | 56  



| | (b) | Exhibits. The exhibits listed in the exhibits index immediately preceding such exhibits are filed as part of this Annual Report on Form 10-K.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | Financial Statement Schedules. Financial statement schedules are omitted as the required information is inapplicable or the information is presented in the financial statements or
related notes in this Annual Report on Form 10-K.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized on the 5th day of June, 2009.



OPNET TECHNOLOGIES, INC.By:

/s/    MARC A.
COHENMarc A. Cohen Chairman of the Board and Chief Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the capacities and on the 5th day of June, 2009.



|                                             |  |                                                                                             
|-------------------------------------------- |  | --------------------------------------------------------------------------------------------
|Signature                                    |  | Title                                                                                       
|                                             | 
|/s/    MARC A.
COHEN Marc A. Cohen           |  | Chairman of the Board of Directors and Chief Executive Officer (Principal Executive Officer)
|                                             | 
|Alain J. Cohen                               |  | President, Chief Technology Officer and Director                                            
|                                             | 
|/s/    MEL F.
WESLEY Mel F. Wesley           |  | Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)     
|                                             | 
|/s/    STEVEN G. FINN Steven G. Finn, PhD    |  | Director                                                                                    
|                                             | 
|/s/    RONALD W. KAISER Ronald W. Kaiser     |  | Director                                                                                    
|                                             | 
|/s/    WILLIAM F.
STASIOR William F. Stasior |  | Director                                                                                    



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Audit Committee and Stockholders of OPNET Technologies, Inc.

Bethesda, Maryland

We have audited the accompanying consolidated balance sheets of OPNET Technologies, Inc. and its subsidiaries
(the Company) as of March 31, 2009 and 2008, and the related consolidated statements of operations, changes in stockholders equity, and cash flows for each of the three years in the period ended March 31, 2009. These
financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for
our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of
OPNET Technologies, Inc. and its subsidiaries as of March 31, 2009 and 2008, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2009, in conformity with accounting principles
generally accepted in the United States of America.

As discussed in Note 1 to the consolidated financial statements, the Company changed
its method of accounting for uncertain tax positions effective April 1, 2007 to conform to Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty In Income Taxes.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Companys internal
control over financial reporting as of March 31, 2009, based on the criteria established in Internal ControlIntegrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated
June 5, 2009 expressed an unqualified opinion on the effectiveness of the Companys internal control over financial reporting.

/s/
DELOITTE & TOUCHE LLP

McLean, Virginia

June 5,
2009



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OPNET TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS

(in
thousands, except per share data)



|                                                                                                                                                                                                                                      |  |           |         |   |      |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------- | ------- | - | ---- | - | ------- | -
|                                                                                                                                                                                                                                      |  | March 31, |        
|                                                                                                                                                                                                                                      |  | 2009      |         |   | 2008 |  
|ASSETS                                                                                                                                                                                                                                |  |           |         |   |      |   |         |  
|Current assets:                                                                                                                                                                                                                       |  |           |         |   |      |   |         |  
|Cash and cash equivalents                                                                                                                                                                                                             |  | $         | 90,990  |   |      | $ | 71,410  |  
|Marketable securities                                                                                                                                                                                                                 |  |           | 999     |   |      |   | 7,451   |  
|Accounts receivable, net of $713,000 and $154,000 in allowance for doubtful accounts at March 31, 2009 and 2008,
respectively                                                                                                         |  |           | 24,086  |   |      |   | 20,780  |  
|Unbilled accounts receivable                                                                                                                                                                                                          |  |           | 5,476   |   |      |   | 5,366   |  
|Inventory                                                                                                                                                                                                                             |  |           | 722     |   |      |   | 319     |  
|Prepaid expenses and other current assets                                                                                                                                                                                             |  |           | 4,043   |   |      |   | 3,627   |  
|                                                                                                                                                                                                                                      |  |           |         |   |      |   |         |  
|Total current assets                                                                                                                                                                                                                  |  |           | 126,316 |   |      |   | 108,953 |  
|                                                                                                                                                                                                                                      |  |           |         |   |      |   |         |  
|Marketable securities                                                                                                                                                                                                                 |  |           |        |   |      |   | 6,968   |  
|Property and equipment, net                                                                                                                                                                                                           |  |           | 13,984  |   |      |   | 10,884  |  
|Intangible assets, net                                                                                                                                                                                                                |  |           | 6,193   |   |      |   | 8,633   |  
|Goodwill                                                                                                                                                                                                                              |  |           | 14,639  |   |      |   | 14,639  |  
|Deferred income taxes and other assets                                                                                                                                                                                                |  |           | 4,932   |   |      |   | 3,461   |  
|                                                                                                                                                                                                                                      |  |           |         |   |      |   |         |  
|Total assets                                                                                                                                                                                                                          |  | $         | 166,064 |   |      | $ | 153,538 |  
|                                                                                                                                                                                                                                      |  |           |         |   |      |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                                                  |  |           |         |   |      |   |         |  
|Current liabilities:                                                                                                                                                                                                                  |  |           |         |   |      |   |         |  
|Accounts payable                                                                                                                                                                                                                      |  | $         | 485     |   |      | $ | 489     |  
|Accrued liabilities                                                                                                                                                                                                                   |  |           | 11,561  |   |      |   | 8,555   |  
|Deferred and accrued income taxes                                                                                                                                                                                                     |  |           | 849     |   |      |   | 658     |  
|Deferred rent                                                                                                                                                                                                                         |  |           | 364     |   |      |   | 326     |  
|Deferred revenue                                                                                                                                                                                                                      |  |           | 30,223  |   |      |   | 28,722  |  
|                                                                                                                                                                                                                                      |  |           |         |   |      |   |         |  
|Total current liabilities                                                                                                                                                                                                             |  |           | 43,482  |   |      |   | 38,750  |  
|Accrued liabilities                                                                                                                                                                                                                   |  |           | 69      |   |      |   | 59      |  
|Deferred rent                                                                                                                                                                                                                         |  |           | 2,571   |   |      |   | 1,762   |  
|Deferred revenue                                                                                                                                                                                                                      |  |           | 2,910   |   |      |   | 1,772   |  
|Other income tax                                                                                                                                                                                                                      |  |           | 527     |   |      |   | 550     |  
|                                                                                                                                                                                                                                      |  |           |         |   |      |   |         |  
|Total liabilities                                                                                                                                                                                                                     |  |           | 49,559  |   |      |   | 42,893  |  
|                                                                                                                                                                                                                                      |  |           |         |   |      |   |         |  
|                                                                                                                                                                                                                                      |  |          
|Commitments and contingencies (Note 9)                                                                                                                                                                                                |  |           |         |   |      |   |         |  
|                                                                                                                                                                                                                                      |  |          
|Stockholders equity:                                                                                                                                                                                                                 |  |           |         |   |      |   |         |  
|Common stockpar value $0.001; 100,000,000 shares authorized; 27,903,470 and 27,576,355 shares issued at March 31, 2009 and 2008,
respectively; 20,658,514 and 20,407,123 shares outstanding at March 31, 2009 and 2008, respectively |  |           | 28      |   |      |   | 28      |  
|Additional paid-in capital                                                                                                                                                                                                            |  |           | 93,292  |   |      |   | 89,878  |  
|Retained earnings                                                                                                                                                                                                                     |  |           | 39,570  |   |      |   | 34,838  |  
|Accumulated other comprehensive (loss) income                                                                                                                                                                                         |  |           | (1,171  | ) |      |   | 160     |  
|Treasury stock7,244,956 and 7,169,232 shares at March 31, 2009 and 2008, respectively, at cost                                                                                                                                       |  |           | (15,214 | ) |      |   | (14,259 | )
|                                                                                                                                                                                                                                      |  |           |         |   |      |   |         |  
|Total stockholders equity                                                                                                                                                                                                            |  |           | 116,505 |   |      |   | 110,645 |  
|                                                                                                                                                                                                                                      |  |           |         |   |      |   |         |  
|Total liabilities and stockholders equity                                                                                                                                                                                            |  | $         | 166,064 |   |      | $ | 153,538 |  
|                                                                                                                                                                                                                                      |  |           |         |   |      |   |         |  

See accompanying notes to consolidated financial statements.



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OPNET TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)



|                                                         |  |                      |         |      |   |         |      |  |   |       
|-------------------------------------------------------- |  | -------------------- | ------- | ---- | - | ------- | ---- |  | - | ------
|                                                         |  | Year Ended March 31,
|                                                         |  | 2009                 |         | 2008 |   |         | 2007
|Revenues:                                                |  |                      |         |      |   |         |      |  |   |       
|New software licenses                                    |  | $                    | 51,211  |      | $ | 38,838  |      |  | $ | 43,186
|Software license updates, technical support and services |  |                      | 43,067  |      |   | 34,787  |      |  |   | 28,062
|Professional services                                    |  |                      | 28,601  |      |   | 27,721  |      |  |   | 23,882
|                                                         |  |                      |         |      |   |         |      |  |   |       
|Total revenues                                           |  |                      | 122,879 |      |   | 101,346 |      |  |   | 95,130
|                                                         |  |                      |         |      |   |         |      |  |   |       
|Cost of revenues:                                        |  |                      |         |      |   |         |      |  |   |       
|New software licenses                                    |  |                      | 3,536   |      |   | 1,035   |      |  |   | 638   
|Software license updates, technical support and services |  |                      | 4,665   |      |   | 4,514   |      |  |   | 3,264 
|Professional services                                    |  |                      | 20,911  |      |   | 19,154  |      |  |   | 15,904
|Amortization of acquired technology                      |  |                      | 2,172   |      |   | 1,486   |      |  |   | 723   
|                                                         |  |                      |         |      |   |         |      |  |   |       
|Total cost of revenues                                   |  |                      | 31,284  |      |   | 26,189  |      |  |   | 20,529
|                                                         |  |                      |         |      |   |         |      |  |   |       
|Gross profit                                             |  |                      | 91,595  |      |   | 75,157  |      |  |   | 74,601
|                                                         |  |                      |         |      |   |         |      |  |   |       
|Operating expenses:                                      |  |                      |         |      |   |         |      |  |   |       
|Research and development                                 |  |                      | 30,791  |      |   | 27,471  |      |  |   | 21,688
|Sales and marketing                                      |  |                      | 42,533  |      |   | 39,357  |      |  |   | 34,133
|General and administrative                               |  |                      | 11,857  |      |   | 11,747  |      |  |   | 10,994
|                                                         |  |                      |         |      |   |         |      |  |   |       
|Total operating expenses                                 |  |                      | 85,181  |      |   | 78,575  |      |  |   | 66,815
|                                                         |  |                      |         |      |   |         |      |  |   |       
|Income (loss) from operations                            |  |                      | 6,414   |      |   | (3,418  | )    |  |   | 7,786 
|Interest and other income, net                           |  |                      | 1,246   |      |   | 3,579   |      |  |   | 3,834 
|                                                         |  |                      |         |      |   |         |      |  |   |       
|Income before provision (benefit) for income taxes       |  |                      | 7,660   |      |   | 161     |      |  |   | 11,620
|Provision (benefit) for income taxes                     |  |                      | 2,928   |      |   | (372    | )    |  |   | 3,655 
|                                                         |  |                      |         |      |   |         |      |  |   |       
|Net income                                               |  | $                    | 4,732   |      | $ | 533     |      |  | $ | 7,965 
|                                                         |  |                      |         |      |   |         |      |  |   |       
|Basic net income per common share                        |  | $                    | 0.23    |      | $ | 0.03    |      |  | $ | 0.39  
|                                                         |  |                      |         |      |   |         |      |  |   |       
|Diluted net income per common share                      |  | $                    | 0.23    |      | $ | 0.03    |      |  | $ | 0.38  
|                                                         |  |                      |         |      |   |         |      |  |   |       
|Basic weighted average common shares outstanding         |  |                      | 20,296  |      |   | 20,342  |      |  |   | 20,358
|                                                         |  |                      |         |      |   |         |      |  |   |       
|Diluted weighted average common shares outstanding       |  |                      | 20,581  |      |   | 20,621  |      |  |   | 21,206
|                                                         |  |                      |         |      |   |         |      |  |   |       

See accompanying notes to consolidated financial statements.



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OPNET TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY

(in thousands)



|                                                                 |              |              |                   |                          |   |                |   |    |                  |   |        |                                            |       |  |                          |         |   |  |   |        |   |  |   |        |   |  |   |         |  
|---------------------------------------------------------------- | ------------ | ------------ | ----------------- | ------------------------ | - | -------------- | - | -- | ---------------- | - | ------ | ------------------------------------------ | ----- |  | ------------------------ | ------- | - |  | - | ------ | - |  | - | ------ | - |  | - | ------- | -
|                                                                 |              | Common Stock |                   | AdditionalPaid inCapital |   | Treasury Stock |   |    | RetainedEarnings |   |        | AccumulatedOtherComprehensiveIncome (Loss) |       |  | TotalStockholdersEquity |        
|                                                                 | SharesIssued |              | SharesOutstanding |                          |   | Amount         |   |    | Shares           |   | Amount |                                            |       |  |                         
|Balance, April 1, 2006                                           |              | 26,738       |                   | 20,194                   |   |                | $ | 27 |                  | $ | 80,591 |                                            | 6,543 |  | $                        | (7,725  | ) |  | $ | 26,850 |   |  | $ | (345   | ) |  | $ | 99,398  |  
|                                                                 |              |              |                   |                          |   |                |   |    |                 
|Net income                                                       |              |              |                   |                          |   |                |   |    |                  |   |        |                                            |       |  |                          |         |   |  |   | 7,965  |   |  |   |        |   |  |   | 7,965   |  
|Foreign currency translation                                     |              |              |                   |                          |   |                |   |    |                  |   |        |                                            |       |  |                          |         |   |  |   |        |   |  |   | 758    |   |  |   | 758     |  
|Unrealized loss on marketable securities, net of tax             |              |              |                   |                          |   |                |   |    |                  |   |        |                                            |       |  |                          |         |   |  |   |        |   |  |   | (19    | ) |  |   | (19     | )
|                                                                 |              |              |                   |                          |   |                |   |    |                  |   |        |                                            |       |  |                          |         |   |  |   |        |   |  |   |        |   |  |   |         |  
|Total comprehensive income                                       |              |              |                   |                          |   |                |   |    |                  |   |        |                                            |       |  |                          |         |   |  |   |        |   |  |   |        |   |  |   | 8,704   |  
|                                                                 |              |              |                   |                          |   |                |   |    |                 
|Issuance of common stock:                                        |              |              |                   |                          |   |                |   |    |                  |   |        |                                            |       |  |                          |         |   |  |   |        |   |  |   |        |   |  |   |         |  
|Exercise of options                                              |              | 381          |                   | 381                      |   |                |   |    |                  |   | 2,987  |                                            |       |  |                          |         |   |  |   |        |   |  |   |        |   |  |   | 2,987   |  
|Employee stock purchase plan                                     |              | 85           |                   | 85                       |   |                |   |    |                  |   | 753    |                                            |       |  |                          |         |   |  |   |        |   |  |   |        |   |  |   | 753     |  
|Tax benefit from exercise of stock options                       |              |              |                   |                          |   |                |   |    |                  |   | 1,088  |                                            |       |  |                          |         |   |  |   |        |   |  |   |        |   |  |   | 1,088   |  
|Restricted stock issuance, net of forfeitures                    |              | 85           |                   | 85                       |   |                |   |    |                  |   |       |                                            |       |  |                          |         |   |  |   |        |   |  |   |        |   |  |   |        |  
|Purchase of treasury shares                                      |              |              |                   | (104                     | ) |                |   |    |                  |   |        |                                            | 104   |  |                          | (1,521  | ) |  |   |        |   |  |   |        |   |  |   | (1,521  | )
|Deferred compensation                                            |              |              |                   |                          |   |                |   |    |                  |   |        |                                            |       |  |                          |         |   |  |   |        |   |  |   |        |   |  |   |         |  
|Stock based compensation expense                                 |              |              |                   |                          |   |                |   |    |                  |   | 1,462  |                                            |       |  |                          |         |   |  |   |        |   |  |   |        |   |  |   | 1,462   |  
|                                                                 |              |              |                   |                          |   |                |   |    |                  |   |        |                                            |       |  |                          |         |   |  |   |        |   |  |   |        |   |  |   |         |  
|Balance, March 31, 2007                                          |              | 27,289       |                   | 20,641                   |   |                |   | 27 |                  |   | 86,881 |                                            | 6,647 |  |                          | (9,246  | ) |  |   | 34,815 |   |  |   | 394    |   |  |   | 112,871 |  
|                                                                 |              |              |                   |                          |   |                |   |    |                 
|Net income                                                       |              |              |                   |                          |   |                |   |    |                  |   |        |                                            |       |  |                          |         |   |  |   | 533    |   |  |   |        |   |  |   | 533     |  
|Foreign currency translation                                     |              |              |                   |                          |   |                |   |    |                  |   |        |                                            |       |  |                          |         |   |  |   |        |   |  |   | 147    |   |  |   | 147     |  
|Unrealized loss on marketable securities, net of tax             |              |              |                   |                          |   |                |   |    |                  |   |        |                                            |       |  |                          |         |   |  |   |        |   |  |   | (381   | ) |  |   | (381    | )
|                                                                 |              |              |                   |                          |   |                |   |    |                  |   |        |                                            |       |  |                          |         |   |  |   |        |   |  |   |        |   |  |   |         |  
|Total comprehensive income                                       |              |              |                   |                          |   |                |   |    |                  |   |        |                                            |       |  |                          |         |   |  |   |        |   |  |   |        |   |  |   | 299     |  
|Adoption of FIN No.48cumulative effect                          |              |              |                   |                          |   |                |   |    |                  |   |        |                                            |       |  |                          |         |   |  |   | (510   | ) |  |   |        |   |  |   | (510    | )
|Exercise of options                                              |              | 60           |                   | 60                       |   |                |   |    |                  |   | 365    |                                            |       |  |                          |         |   |  |   |        |   |  |   |        |   |  |   | 365     |  
|Employee stock purchase plan                                     |              | 121          |                   | 121                      |   |                |   | 1  |                  |   | 988    |                                            |       |  |                          |         |   |  |   |        |   |  |   |        |   |  |   | 989     |  
|Tax benefit from exercise of stock options                       |              |              |                   |                          |   |                |   |    |                  |   | 105    |                                            |       |  |                          |         |   |  |   |        |   |  |   |        |   |  |   | 105     |  
|Restricted stock issuance, net of forfeitures                    |              | 107          |                   | 107                      |   |                |   |    |                  |   |        |                                            |       |  |                          |         |   |  |   |        |   |  |   |        |   |  |   |         |  
|Purchase of treasury shares                                      |              |              |                   | (522                     | ) |                |   |    |                  |   |        |                                            | 522   |  |                          | (5,013  | ) |  |   |        |   |  |   |        |   |  |   | (5,013  | )
|Stock based compensation expense                                 |              |              |                   |                          |   |                |   |    |                  |   | 1,539  |                                            |       |  |                          |         |   |  |   |        |   |  |   |        |   |  |   | 1,539   |  
|                                                                 |              |              |                   |                          |   |                |   |    |                  |   |        |                                            |       |  |                          |         |   |  |   |        |   |  |   |        |   |  |   |         |  
|Balance, March 31, 2008                                          |              | 27,576       |                   | 20,407                   |   |                |   | 28 |                  |   | 89,878 |                                            | 7,169 |  |                          | (14,259 | ) |  |   | 34,838 |   |  |   | 160    |   |  |   | 110,645 |  
|                                                                 |              |              |                   |                          |   |                |   |    |                 
|Net income                                                       |              |              |                   |                          |   |                |   |    |                  |   |        |                                            |       |  |                          |         |   |  |   | 4,732  |   |  |   |        |   |  |   | 4,732   |  
|Foreign currency translation                                     |              |              |                   |                          |   |                |   |    |                  |   |        |                                            |       |  |                          |         |   |  |   |        |   |  |   | (1,712 | ) |  |   | (1,712  | )
|Reversal of unrealized loss on marketable securities, net of tax |              |              |                   |                          |   |                |   |    |                  |   |        |                                            |       |  |                          |         |   |  |   |        |   |  |   | 381    |   |  |   | 381     |  
|                                                                 |              |              |                   |                          |   |                |   |    |                  |   |        |                                            |       |  |                          |         |   |  |   |        |   |  |   |        |   |  |   |         |  
|Total comprehensive income                                       |              |              |                   |                          |   |                |   |    |                  |   |        |                                            |       |  |                          |         |   |  |   |        |   |  |   |        |   |  |   | 3,401   |  
|Exercise of options                                              |              | 93           |                   | 93                       |   |                |   |    |                  |   | 644    |                                            |       |  |                          |         |   |  |   |        |   |  |   |        |   |  |   | 644     |  
|Employee stock purchase plan                                     |              | 151          |                   | 151                      |   |                |   |    |                  |   | 1,123  |                                            |       |  |                          |         |   |  |   |        |   |  |   |        |   |  |   | 1,123   |  
|Tax benefit from exercise of stock options                       |              |              |                   |                          |   |                |   |    |                  |   | 114    |                                            |       |  |                          |         |   |  |   |        |   |  |   |        |   |  |   | 114     |  
|Restricted stock issuance, net of forfeitures                    |              | 83           |                   | 83                       |   |                |   |    |                  |   |        |                                            |       |  |                          |         |   |  |   |        |   |  |   |        |   |  |   |        |  
|Purchase of treasury shares                                      |              |              |                   | (76                      | ) |                |   |    |                  |   |        |                                            | 76    |  |                          | (955    | ) |  |   |        |   |  |   |        |   |  |   | (955    | )
|Stock based compensation expense                                 |              |              |                   |                          |   |                |   |    |                  |   | 1,533  |                                            |       |  |                          |         |   |  |   |        |   |  |   |        |   |  |   | 1,533   |  
|                                                                 |              |              |                   |                          |   |                |   |    |                  |   |        |                                            |       |  |                          |         |   |  |   |        |   |  |   |        |   |  |   |         |  
|Balance, March 31, 2009                                          |              | 27,903       |                   | 20,658                   |   |                | $ | 28 |                  | $ | 93,292 |                                            | 7,245 |  | $                        | (15,214 | ) |  | $ | 39,570 |   |  | $ | (1,171 | ) |  | $ | 116,505 |  
|                                                                 |              |              |                   |                          |   |                |   |    |                  |   |        |                                            |       |  |                          |         |   |  |   |        |   |  |   |        |   |  |   |         |  

See accompanying notes to consolidated financial statements.



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OPNET TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)



|                                                                                  |  |                      |        |   |      |   |          |      |  |   |          |  
|--------------------------------------------------------------------------------- |  | -------------------- | ------ | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                                                                  |  | Year Ended March 31, |       
|                                                                                  |  | 2009                 |        |   | 2008 |   |          | 2007 | 
|Cash flows from operating activities:                                             |  |                      |        |   |      |   |          |      |  |   |          |  
|Net income                                                                        |  | $                    | 4,732  |   |      | $ | 533      |      |  | $ | 7,965    |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                      |        |   |      |   |          |      |  |   |          |  
|Depreciation and amortization                                                     |  |                      | 5,528  |   |      |   | 4,018    |      |  |   | 2,348    |  
|Loss on disposition of fixed assets                                               |  |                      | 74     |   |      |   | 11       |      |  |   | 12       |  
|Provision for losses on accounts receivable                                       |  |                      | 646    |   |      |   | 96       |      |  |   | 25       |  
|Deferred income taxes                                                             |  |                      | (431   | ) |      |   | (882     | )    |  |   | 50       |  
|Non-cash stock-based compensation expense                                         |  |                      | 1,533  |   |      |   | 1,539    |      |  |   | 1,462    |  
|Changes in assets and liabilities:                                                |  |                      |        |   |      |   |          |      |  |   |          |  
|Accounts receivable                                                               |  |                      | (3,926 | ) |      |   | (942     | )    |  |   | (9,944   | )
|Inventory                                                                         |  |                      | 569    |   |      |   | (116     | )    |  |   |         |  
|Prepaid expenses and other current assets                                         |  |                      | (70    | ) |      |   | 1,315    |      |  |   | (2,151   | )
|Other assets                                                                      |  |                      | (434   | ) |      |   | (49      | )    |  |   | 38       |  
|Accounts payable                                                                  |  |                      | (10    | ) |      |   | 213      |      |  |   | (743     | )
|Accrued liabilities                                                               |  |                      | 1,682  |   |      |   | 466      |      |  |   | (762     | )
|Accrued income taxes                                                              |  |                      | (130   | ) |      |   | (382     | )    |  |   | 512      |  
|Deferred revenue                                                                  |  |                      | 2,638  |   |      |   | 7,187    |      |  |   | 6,728    |  
|Deferred rent                                                                     |  |                      | (248   | ) |      |   | (78      | )    |  |   | 1,044    |  
|Excess tax benefit from exercise of stock options                                 |  |                      | (49    | ) |      |   | (29      | )    |  |   | (383     | )
|                                                                                  |  |                      |        |   |      |   |          |      |  |   |          |  
|Net cash provided by operating activities                                         |  |                      | 12,104 |   |      |   | 12,900   |      |  |   | 6,201    |  
|                                                                                  |  |                      |        |   |      |   |          |      |  |   |          |  
|Cash flows from investing activities:                                             |  |                      |        |   |      |   |          |      |  |   |          |  
|Acquisition of specified assets from Network Physics                              |  |                      |       |   |      |   | (10,005  | )    |  |   |         |  
|Acquired technology                                                               |  |                      |       |   |      |   |         |      |  |   | (366     | )
|Purchase of property and equipment                                                |  |                      | (5,466 | ) |      |   | (4,557   | )    |  |   | (3,529   | )
|Purchase of investments                                                           |  |                      | (999   | ) |      |   | (114,799 | )    |  |   | (109,637 | )
|Proceeds from sale/maturity of investments                                        |  |                      | 14,800 |   |      |   | 156,615  |      |  |   | 72,155   |  
|                                                                                  |  |                      |        |   |      |   |          |      |  |   |          |  
|Net cash provided by (used in) investing activities                               |  |                      | 8,335  |   |      |   | 27,254   |      |  |   | (41,377  | )
|                                                                                  |  |                      |        |   |      |   |          |      |  |   |          |  
|Cash flows from financing activities:                                             |  |                      |        |   |      |   |          |      |  |   |          |  
|Acquisition of treasury stock                                                     |  |                      | (955   | ) |      |   | (5,013   | )    |  |   | (1,521   | )
|Payment of note payable                                                           |  |                      |       |   |      |   |         |      |  |   | (150     | )
|Excess tax benefit from exercise of stock options                                 |  |                      | 49     |   |      |   | 29       |      |  |   | 383      |  
|Proceeds from exercise of stock options                                           |  |                      | 644    |   |      |   | 365      |      |  |   | 2,987    |  
|Issuance of common stock under employee stock purchase plan                       |  |                      | 1,123  |   |      |   | 989      |      |  |   | 753      |  
|                                                                                  |  |                      |        |   |      |   |          |      |  |   |          |  
|Net cash provided by (used in) financing activities                               |  |                      | 861    |   |      |   | (3,630   | )    |  |   | 2,452    |  
|                                                                                  |  |                      |        |   |      |   |          |      |  |   |          |  
|Effect of exchange rate changes on cash and cash equivalents                      |  |                      | (1,720 | ) |      |   | 120      |      |  |   | 780      |  
|                                                                                  |  |                      |        |   |      |   |          |      |  |   |          |  
|Net increase (decrease) in cash and cash equivalents                              |  |                      | 19,580 |   |      |   | 36,644   |      |  |   | (31,944  | )
|Cash and cash equivalents, beginning of year                                      |  |                      | 71,410 |   |      |   | 34,766   |      |  |   | 66,710   |  
|                                                                                  |  |                      |        |   |      |   |          |      |  |   |          |  
|Cash and cash equivalents, end of year                                            |  | $                    | 90,990 |   |      | $ | 71,410   |      |  | $ | 34,766   |  
|                                                                                  |  |                      |        |   |      |   |          |      |  |   |          |  

See accompanying notes to consolidated financial statements



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OPNET TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2009, 2008, and 2007

1. Organization and Significant Accounting Policies

Organization.OPNET Technologies, Inc., (hereafter, the Company or OPNET), is a provider of software products and related services for
managing networks and applications. The Companys software products address application performance management, network operations, capacity management and network research and development. The Company sells products to corporate enterprises,
government and defense agencies, network service providers, and network equipment manufacturers. The Company markets software products and related services in North America primarily through a direct sales force and, to a lesser extent, several
resellers and original equipment manufacturers. Internationally, the Company conducts research and development through a wholly-controlled subsidiary in Ghent, Belgium and markets software products and related services through wholly-owned
subsidiaries in Paris, France; Mainz, Germany; Slough, United Kingdom; and Singapore; sales office in Beijing, China; third-party distributors; and value-added resellers. The Company is headquartered in Bethesda, Maryland and has domestic offices in
Cary, North Carolina; Dallas, Texas; Santa Clara, California; and Nashua, New Hampshire.

Principles of Consolidation.The
consolidated financial statements include the results of OPNET Technologies, Inc., its wholly-owned subsidiaries: OPNET Technologies SAS; OPNET Technologies Limited; OPNET Technologies, Pty. Ltd.; OPNET Analysis, Inc.; OPNET Technologies, GmbH; and
OPNET Technologies Asia, Pte. Ltd., and its wholly-controlled subsidiary OPNET Technologies, BVBA. All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates. The preparation of financial statements in conformity with generally accepted accounting principles in the United States
of America, or GAAP, requires management to make estimates, judgments and assumptions. These estimates, judgments, and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the
date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results may differ from these estimates. Significant items subject to such estimates, judgments, and assumptions
include revenue recognition, the carrying amount and useful lives of long-lived assets, valuation allowances for accounts receivable and deferred tax assets, research and development tax credits, determination of uncertain tax position benefits
under FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes  An Interpretation of FASB Statement No. 109, or FIN No. 48, software development costs, valuation of acquired intangible assets, valuation
of stock based compensation, and loss contingencies, such as litigation, claims and assessments.

Cash and Cash Equivalents.
Cash and cash equivalents consist of deposits in banks and all highly liquid investments with maturities of three months or less when purchased.

Marketable Securities.The Company has determined that all of its investments in marketable securities are marketable securities to be classified as available-for-sale. Available-for-sale securities are carried at fair
value, with the unrealized gains and losses reported in stockholders equity in the accompanying consolidated balance sheets under the caption Accumulated other comprehensive income. The amortized cost of debt securities is
adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in the Interest income line item on the accompanying consolidated statements of operations. Realized gains and losses
on available-for-sale securities are included in the Interest and other income, net line item on the consolidated statements of operations. The cost of securities sold is based on the specific identification method. Interest
and dividends on securities classified as available-for-sale are included in the Interest and other income, net line item on the consolidated statements of operations.

As of March 31, 2009, the Company did not hold any auction rate securities, or ARS. As of March 31, 2008, the Company held ARS totaling $8.8
million at par value, which were classified as available for sale securities



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March 31, 2009,
2008, and 2007



and long-term marketable securities on its consolidated balance sheet. The ARS were primarily collateralized by United States government-backed student loans
and were rated AAA or AA. Historically, the carrying value of ARS approximated fair value due to the frequent resetting of the interest rates. With the liquidity issues experienced in the global credit and capital markets, the Companys ARS
experienced failed auctions. While the Company continued to earn and receive interest on these marketable securities at the maximum contractual rate, the estimated fair value of these ARS no longer approximated par value. Based on the Companys
analysis and its belief that the ARS were of high credit quality, it determined that the fair value of the ARS at March 31, 2008 was $8.4 million and recorded a temporary impairment charge of $381,000 in the year ended March 31, 2008.
During the year ended March 31, 2009, the ARS were redeemed at par. As of March 31, 2009, all of the Companys ARS had been redeemed and, as of March 31, 2009 the Company did not hold any ARS and had no ARS impairment charges
recorded on its balance sheet.

Supplemental Cash Flow Information.



|                                                             |  |                      |       |      |   |       |      |  |   |       |  
|------------------------------------------------------------ |  | -------------------- | ----- | ---- | - | ----- | ---- |  | - | ----- | -
|                                                             |  | Year ended March 31, |      
|                                                             |  | 2009                 |       | 2008 |   |       | 2007 | 
|                                                             |  | (in thousands)       |      
|Cash paid during the fiscal year for:                        |  |                      |       |      |   |       |      |  |   |       |  
|Income taxes                                                 |  | $                    | 3,239 |      | $ | 768   |      |  | $ | 3,415 |  
|Interest paid                                                |  |                      | 25    |      |   | 30    |      |  |   | 42    |  
|Non-cash financing and investing activities:                 |  |                      |       |      |   |       |      |  |   |       |  
|Unrealized gain (loss) on marketable securities              |  |                      | 381   |      |   | (381  | )    |  |   | (19   | )
|Restricted stock issued                                      |  |                      | 860   |      |   | 1,022 |      |  |   | 1,152 |  
|Accrued liability for the purchase of property and equipment |  |                      | 72    |      |   | 218   |      |  |   | 852   |  
|Tenant improvement allowance received from landlord          |  |                      | 1,095 |      |   | 880   |      |  |   |      |  

Advertising Expense.Advertising costs are expensed when incurred. Advertising
expense for fiscal 2009, 2008, and 2007 was $389,000, $525,000, and $703,000, respectively.

Concentration of Credit Risk.
Financial instruments that potentially subject the Company to a concentration of credit risk consist principally of cash, cash equivalents, marketable securities and accounts receivable. The Company generally does not require collateral on accounts
receivable, as the majority of its customers are large, well-established companies or government entities.

The Company maintains its cash
balances at several financial institutions. The Federal Deposit Insurance Corporation insures the bank accounts up to $250,000. Although balances exceed that amount, the Company has not experienced any losses in such accounts and believes it is not
exposed to any significant credit risk related to cash.

Fair Value of Financial Instruments.The fair value of the
Companys cash and cash equivalents, marketable securities, accounts receivable, accounts payable, and accrued expenses approximates their respective carrying amounts.

In September 2006, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards No. 157, Fair Value
Measurements, or SFAS No. 157. This standard clarifies the principle that fair value should be based on the assumptions that market participants would use when pricing an



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March 31, 2009,
2008, and 2007



asset or liability. Additionally, it establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. SFAS No. 157
is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company adopted SFAS No. 157 effective April 1, 2008.

SFAS No. 157 requires disclosures regarding the manner in which fair value is determined for assets and liabilities and establishes a three-tiered fair value hierarchy into which these assets and liabilities must
be grouped, based upon significant levels of inputs as follows:



| |  |  | Level 1  Quoted prices (unadjusted) in active markets for identical assets or liabilities.
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | Level 2  Observable inputs, other than Level 1 prices, such as quoted prices in active markets for similar assets and liabilities in markets that are not
active, or other inputs that are observable or can be corroborated by observable inputs.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 3  Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This
includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The lowest level of significant input determines the placement of the entire fair value measurement in the hierarchy.

Software Development Costs. Development costs incurred in the research and development of new software products and enhancements to existing software products are expensed as incurred until technological
feasibility has been established. The Company considers technological feasibility to be established when all planning, designing, coding, and testing has been completed according to design specifications. After technological feasibility has been
established, any additional costs are capitalized in accordance with Statement of Financial Accounting Standards, or SFAS, No. 86, Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed. Through
March 31, 2009, software development has been substantially completed concurrently with the establishment of technological feasibility and, accordingly, no costs have been capitalized to date.

Property and Equipment. Property and equipment are stated at cost. Depreciation on property and equipment is computed using the
straight-line method over the estimated useful lives of the assets, of five to seven years. Leasehold improvements are depreciated over the shorter of the estimated useful life of the assets, the non-cancelable term of the related lease, or the
non-cancelable lease term plus all periods for which executive management believes that the failure to renew the lease imposes a penalty in an amount such that the renewal appears, at the inception of the lease, to be reasonably assured. Repairs and
maintenance are expensed as incurred.

Intangible Assets.The Company accounts for its goodwill and intangible assets in
accordance with SFAS No. 141, Business Combinations and SFAS No. 142, Goodwill and Other Intangible Assets. Its intangible assets consist of acquired technology related to its acquisitions of a software product for
modeling voice communications in December 2003, Altaworks in October 2004, and purchased technology the Company purchased from RadView Software, Ltd. in December 2005, SQMworks, Inc. in April 2006, and the acquisition of specified assets of Network
Physics, Inc. in October 2007. The Companys intangible assets also consist of customer relationships and acquired workforce assets it purchased from Network Physics, Inc. related to the purchase of specified assets of Network Physics in
October 2007. The acquired and purchased technology are stated at the lower of unamortized cost or net realizable value and are amortized on a straight-line basis over their



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March 31, 2009,
2008, and 2007



expected useful lives of three to five years. The Companys customer relationship and workforce intangible assets it purchased from Network Physics,
Inc. are amortized on an accelerated basis over their expected useful lives of four and one-half years and five years, respectively. The Company uses the projected discounted cash flow method in valuing its acquired technology and purchased customer
relationships using certain assumptions including revenue growth, cost levels, present value discount rate, and working capital requirements. The Company uses the lower of the amount of cash paid or the present value of projected discounted cash
flows to value purchased technology. The workforce asset associated with the purchase of specified assets of Network Physics, Inc. was valued on a replacement cost basis. While the Company believes the assumptions used to value its acquired
technology related to acquisitions are reasonable, actual results will likely differ from those assumptions. Future cash flows are subject to change for a variety of internal and external factors. The Company periodically reviews the value of
acquired technology and purchased intangible assets for reasonableness in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. If changes in the Companys assumptions at the time of
future periodic reviews indicate that the carrying value of its acquired technology and purchased intangible assets exceeds their fair value and it determines that carrying amounts can not be recovered, it would result in impairment losses. As of
March 31, 2009 and 2008, intangible assets totaled $6.2 million and $8.6 million, net of accumulated amortization of $7.7 million and $5.3 million, respectively. There has been no impairment as of March 31, 2009 or 2008.

Goodwill.In accordance with SFAS No. 142, goodwill is not amortized but is tested for impairment annually during
the Companys fourth quarter and whenever events and circumstances occur indicating that the asset might be impaired. The Company performed its annual impairment test of goodwill as of March 31, 2009 and 2008 and concluded that there was
no goodwill impairment.

Valuation of Long-Lived Assets.In accordance with SFAS No. 144, the Company reviews its
long-lived assets, including property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be fully recoverable. If the total of the expected undiscounted future net cash
flows is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and carrying amount of the asset. There has been no impairment as of March 31, 2009 or 2008.

Revenue Recognition. The Company derives revenue from three primary sources: (1) new software licenses, (2) software license
updates, technical support and services, which include software license update, certain training provided and offered on a when-and-if available basis to customers, and technical support, and (3) professional services, which include consulting
and custom training services for customers without a current maintenance agreement. The Company recognizes revenue based on the provisions of the American Institute of Certified Public Accountants Statement of Position, or SOP No. 97-2,
Software Revenue Recognition, as amended by SOP No. 98-9, Modification of SOP No. 97-2, Software Revenue Recognition, With Respect to Certain Transactions, SOP No. 81-1, Accounting for Performance of
Construction-Type and Certain Production-Type Contracts and the SEC Staff Accounting Bulletin No. 104, Revenue Recognition in Financial Statements.

New Software License Revenue

New software license revenue represents all fees earned from granting
customers licenses to use the Companys software and excludes revenue derived from software license updates, which are included in software license updates, technical support and services revenue. The Companys new software license revenue
consists of perpetual and term license sales of software products. For the year ended March 31, 2009, perpetual licenses represented approximately 93% of software license revenue. For the years ended March 31, 2008 and 2007,



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March 31, 2009,
2008, and 2007



perpetual licenses represented approximately 97% of software license revenue. New software license revenue is recognized when the following four criteria are
met: (i) persuasive evidence of an arrangement exists, (ii) delivery of the software has occurred, (iii) the software license fee is fixed or determinable, and (iv) collectibility is probable. The Company defines each of these
four criteria as follows:



| |  |  | Persuasive evidence of an arrangement exists. For license arrangements with end-users, it is the Companys customary practice to have
a written software license agreement, which is signed by both the end user and the Company, and a purchase order or equivalent. A written contract can be executed based on the customer-specific format or on the standard shrink wrap
software master license agreement. For those end users who have previously negotiated a software license agreement with the Company, the initial software license agreement is used as evidence of a written contract. Sales to distributors, resellers,
and value-added resellers, which the Company collectively referred to as resellers, are primarily made outside of North America and are evidenced by a master reseller agreement governing the relationship, which is signed by both the reseller and the
Company, together with a purchase order on a transaction-by-transaction basis. To further evidence an arrangement, our master reseller agreement requires that the reseller provide us copies of the end users executed software master license
agreements.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Delivery has occurred. Physical delivery of the Companys software products to end users or resellers, which are collectively
referred to as customers, is generally considered to have occurred upon the transfer of media containing the Companys software products to a common carrier (usually FOB shipping point based on standard agreement terms). Software products may
also be delivered electronically to end users. Electronic delivery is deemed to occur after end users have been provided with access codes that allow them to take immediate possession of the software. If a software arrangement includes undelivered
software products or services that are essential to the functionality of delivered software products, delivery is not considered to have occurred until these software products or services are delivered.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The fee is fixed or determinable. It is the Companys policy to not provide customers the right to any adjustments or
refund of any portion of their license fees paid, acceptance provisions, cancellation privileges, or rights of return. The Companys normal payment terms for its software products and services currently range from net 30 days to net 90 days and
primarily vary based on the country in which an agreement is executed. Payments that extend beyond the Companys normal payment terms from the contract date but that are due within six months are generally deemed to be fixed or determinable
based on its successful collection history on such arrangements, and thereby satisfy the required criteria for revenue recognition.Arrangements with payment terms extending beyond six months are considered not to be fixed or determinable,
and revenue from such arrangements is recognized as payments become due and payable.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Collectibility is probable. Collectibility is assessed on a customer-by-customer basis. The Company typically sells to customers for whom there is a
history of successful collection. New customers are subject to a credit review process that evaluates the customers ability to pay.If the Company determines from the outset of an arrangement that collectibility is not probable, revenue
is recognized as cash is collected.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In instances when any of the four criteria are not met, the Company defers
recognition of software license revenue until the criteria are met. When the sale of the software product requires the Company to make significant enhancements, customization or modifications to the software that are essential to its functionality,
software license revenue and consulting fees are recognized using contract accounting under SOP No. 81-1. The



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March 31, 2009,
2008, and 2007



Company estimates the percentage-of-completion, under SOP No. 81-1, based on its estimate of total hours to complete the project as a percentage of
total hours incurred and the estimated hours to complete.

The process of estimation inherent in the application of the
percentage-of-completion method of accounting for revenue is subject to judgments and uncertainties and may affect the amounts of software license revenue and professional services revenue under certain contracts and related expenses reported in the
Companys consolidated financial statements. A number of internal and external factors can affect the Companys estimates to complete client engagements, including skill level and experience of project managers, staff assigned to
engagements, and continuity and attrition level of professional services staff. Changes in the estimated stage of completion of a particular project could create variability in the Companys revenue and results of operations if it is required
to increase or decrease previously recognized revenue related to a particular project or if it expects to incur a loss on the project.

Software License Update, Technical Support, and Services Revenue

Software license updates, technical support and
services revenue represents fees associated with the sale of license updates, training, and technical support, all provided on a when-and-if-available basis (except for technical support) under the Companys maintenance agreement. Payments for
software license updates, technical support and services on initial order or on renewal are generally made in advance and are nonrefundable. License updates consist of the right to unspecified software updates on a when-and-if-available basis and
are typically entered into in connection with the initial software license purchase. License updates, technical support and services may be renewed upon expiration of the term. Customers can purchase license updates separately from technical support
and services. Revenue from license updates, technical support and services is deferred and recognized as revenue on a straight-line basis over the term of the maintenance agreement.

Revenue under multiple-element arrangements, which typically include new software licenses, consulting services, training and maintenance agreements sold
together, are allocated to each element in the arrangement primarily using the residual method based upon the fair value of the undelivered elements, which is specific to the Company vendor-specific objective evidence of fair value, or VSOE. This
means that the Company defers revenue from the arrangement fee equivalent to the fair value of the undelivered elements. Discounts, if any, are applied to the delivered elements, usually software licenses, under the residual method. For periodic
unspecified product updates and technical support agreements, VSOE is based upon either the renewal rate specified in each contract or the price charged when sold separately. For consulting services and training for customers without a current
maintenance agreement, VSOE is based upon the rates charged for these services when sold separately.

If the Company is unable to establish
VSOE for an undelivered post contract customer support, or PCS, element, for example, in a two-year term license where the license term and PCS are coterminous and no PCS renewal period exists, all revenue is recognized ratably over the contract
period. For income statement classification purposes, the Companys allocation methodology is based on VSOE of fair value for its professional services which is determined by the price charged when sold separately, and the contractually stated
renewal rates for its PCS, generally 18% to 21% of the license fee paid, on perpetual licenses. The Company uses the residual method to allocate any remaining arrangement fee to new software license revenue.

Professional Services Revenue

Professional services revenue consists of fees from consulting services and training for customers without a current maintenance agreement and is recognized as the services are performed. When the Company enters into



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March 31, 2009,
2008, and 2007



consulting service arrangements that include significant modifications to the software that are essential to the customers use and the arrangement is
bundled with software, revenue under the entire arrangement is recognized under the percentage-of-completion method. For income statement classification purposes, the Company has developed a revenue allocation methodology for these arrangements that
is consistent with the residual method used, and described under SOP No. 97-2, when services are not essential to the functionality of the software. In these circumstances, revenue is allocated to the various elements of the arrangement based
on the Companys VSOE of fair value and the residual amount is allocated to new software license revenue.

The Company sells new
software licenses, license updates, technical support and services agreements to distributors at predetermined prices. Sales to distributors are not contingent upon resale of the software to the end user. In most cases, the Company provides license
updates, technical support and services agreements directly to distributors and the distributors provide support to the end customer. Revenue from sales to distributors is recorded at the amounts charged to the distributor and in the same manner as
new software license, license updates, technical support and services sales sold through the Companys direct sales force. Amounts received in advance of revenue recognition are classified as deferred revenue.

Sales taxes and other taxes collected from customers and remitted to governmental authorities are presented on a net basis, and as such, are excluded
from revenues.

Allowance for Doubtful Accounts. The Company maintains an allowance for doubtful accounts receivable for
estimated losses resulting from the inability of its customers to make required payments and for the limited circumstances when the customer disputes the amounts due the Company. The Companys methodology for determining this allowance requires
significant estimates. In estimating the allowance, the Company considers the age of the receivable, the creditworthiness of the customer, the economic conditions of the customers industry and general economic conditions.

Income Taxes.Income taxes are accounted for in accordance with SFAS No. 109, Accounting for
Income Taxes, or SFAS No. 109 and FIN No. 48. The income tax provision includes income taxes currently payable plus the net change during the year in deferred tax assets or liabilities. Under SFAS No. 109, deferred tax assets
and liabilities reflect the differences between the carrying value under GAAP and the tax basis of assets and liabilities using enacted statutory tax rates in effect for the period in which the differences are expected to reverse. Judgments and
estimates are required in the calculation of the deferred tax assets, valuation allowance, research and development tax credits, and foreign tax credits.

FIN No. 48 prescribes a recognition threshold of more-likely-than-not, and a measurement attribute for all tax positions taken or expected to be taken on a tax return, in order for these positions to be
recognized in the financial statements. The Company continually reviews tax laws, regulations and guidance in order to properly record any uncertain tax positions.

Foreign Currency Transactions.Revenue and expenses denominated in foreign currencies are translated at the average exchange rates during the period. Gains or losses on foreign exchange
transactions are reported in the consolidated statements of operations.

Foreign Currency Translation.The results of
operations for the Companys international subsidiaries are translated from the designated functional currencies into United States dollars using average exchange rates during each period. Assets and liabilities are translated using exchange
rates at the end of each period. Translation gains and losses are reported as a component of accumulated other comprehensive income in stockholders equity.



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March 31, 2009,
2008, and 2007



Comprehensive Income. Certain revenues, expenses, gains and losses are recognized in
comprehensive income but excluded from net income. Comprehensive income includes net income, foreign currency translation adjustments, and unrealized gains and losses on marketable securities.

Earnings per Share. Basic earnings per share is computed by dividing net income available to common stockholders by the weighted average
number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted into common shares for all periods
presented.

Stock-Based Compensation. The Company accounts for stock-based compensation given to employees in accordance with
Financial Accounting Standards No. 123R, Share-Based Payment, or SFAS No. 123R. SFAS No. 123R requires all share-based payments and nonvested shares (restricted stock) issued to employees, including grants of employee
stock options, to be valued at fair value on the date of grant, and to be expensed over the applicable vesting period.

Recently Issued Accounting Pronouncements

In February 2007, the FASB issued SFAS No. 159, The Fair Value
Option for Financial Assets and Financial Liabilities, or SFAS No. 159. SFAS No. 159 permits entities to choose to measure, on an item-by-item basis, specified financial instruments and certain other items at fair value. Unrealized
gains and losses on items for which the fair value option has been elected are required to be reported in earnings at each reporting date. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007, the provisions of
which are required to be applied prospectively. SFAS No. 159 became effective for the Company as of April 1, 2008. The Company did not adopt the fair value measurement election provisions of the statement.

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations, or SFAS No. 141R. SFAS No. 141R, which replaces SFAS
No. 141, requires that the acquisition method of accounting (which SFAS No. 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. SFAS
No. 141R also establishes principles and requirements for how the acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree;
recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the
business combination. SFAS No. 141R also requires that acquisition-related costs be recognized separately from the business combination. SFAS No. 141R will apply prospectively to business combinations for which the acquisition date is
after fiscal years beginning on or after December 15, 2008.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of
Generally Accepted Principles, or SFAS No. 162, which outlines the order of authority for the sources of accounting principles. SFAS No. 162 was effective November 15, 2008. The adoption of SFAS No. 162 did not have a
material impact on the Companys results of operations or financial condition.

In June 2008, the FASB issued FASB Staff Position No.
EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities, or FSP No. EITF 03-6-1. FSP No. EITF 03-6-1 states that unvested share-based payment awards that contain
nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share, or EPS, pursuant to the two-class method. FSP EITF 03-6-1 is effective
for



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

March 31, 2009,
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fiscal years beginnings after December 15, 2008. The Company will apply the provisions of FSP EITF 03-6-1 in fiscal 2010. The Company has not yet
determined the impact that the implementation of FST EITF 03-6-1 will have on its results of operations or financial condition.

In
November 2008, the FASB issued EITF Issue No. 08-7, Accounting for Defensive Intangible Assets, or EITF No. 08-7. EITF No. 08-7 discusses that when an entity acquired in a business combination or an asset acquisition an
intangible asset that it did not intend to actively use, otherwise known as a defensive asset, the entity historically allocated little or no value to the defensive asset. However, with the issuance of SFAS No. 141(R) and SFAS No. 157 the
entity must recognize a value for the defensive asset that reflects the assets highest and best use based on market assumptions. Upon the effective date of both SFAS No. 141(R) and SFAS No. 157, acquirers will generally assign a
greater value to a defensive asset than would typically have been assigned under SFAS No. 141. EITF No. 08-7 will be effective for the first annual reporting period beginning on or after December 15, 2008. SFAS No. 141R will
apply prospectively to business combinations for which the acquisition date is after fiscal years beginning on or after December 15, 2008. EITF No. 08-7 will apply prospectively to business combinations for which the acquisition date is
after fiscal years beginning on or after December 15, 2008.

In April 2009, the FASB issued FSP SFAS No. 141 (R),
Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies, or FSP SFAS No. 141 (R). FSP SFAS No. 141 (R) amends and clarifies SFAS No. 141, Business
Combinations, in regards to the initial recognition and measurement, subsequent measurement and accounting, and disclosures of assets and liabilities arising from contingencies in a business combination. FSP SFAS No. 141 (R) applies
to all assets acquired and liabilities assumed in a business combination that arise from contingencies that would be within the scope of SFAS No. 5, Accounting for Contingencies, if not acquired or assumed in a business combination,
except for assets or liabilities arising from contingencies that are subject to specific guidance in SFAS No. 141 (R). FSP SFAS No. 141 (R) will be effective for the first annual reporting period beginning on or after
December 15, 2008. FSP SFAS No. 141 (R) will apply prospectively to business combinations for which the acquisition date is after fiscal years beginning on or after December 15, 2008.

2. Stock-Based Compensation

The Companys
Amended and Restated 2000 Stock Incentive Plan, or the 2000 Plan, provides for the granting of incentive and non-qualified stock options and restricted stock to purchase up to 5,539,742 shares of the Companys common stock. The number of shares
available for issuance will automatically increase on the first trading day of each calendar year by an amount equal to the lesser of 3% of the shares of common stock outstanding on the last trading day of the preceding calendar year, or an amount
determined by the Board of Directors, or the Board, not to exceed an annual increase of 1,000,000 shares. The Board of Directors voted not to increase the number of shares for issuance on the first trading day of calendar year 2009, 2008, or 2007.
Options are granted for terms up to ten years and generally vest over periods ranging from one to six years from the date of the grant. Restricted stock granted to employees under this plan generally vests over one to four years from the date of the
grant. Restricted stock granted to non-employees under this plan generally vests over six months from the date of the grant. New option grants and restricted stock grants are granted from new shares of the Companys common stock.

The Companys Amended and Restated 1993 Incentive Stock Option Plan, or the 1993 Plan, provides for the granting of incentive stock options to
purchase up to 3,000,000 shares of common stock of the Company. Options are granted for terms of up to ten years, and generally vest over periods ranging from one to six years



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OPNET TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

March 31, 2009,
2008, and 2007



from the date of the grant. The Board approved a resolution to make no further grants for options or stock awards under the 1993 Plan upon approval of the
2000 Plan.

SFAS No.123R requires an entity to recognize an expense within its income statement for all share-based payment arrangements,
which includes employee stock option plans, restricted stock grants, and employee stock purchase plans. The Company has elected to continue straight-line amortization of stock-based compensation expense for the entire award over the service period
since the awards have only service conditions and graded vesting.

Excess tax benefits from the exercise of stock options are presented as
a cash flow from financing activity. For fiscal 2009, 2008, and 2007, excess tax benefits from the exercise of stock options were $49,000, $29,000, and $383,000, respectively.

A summary of the total stock-based compensation expense for fiscal 2009, 2008 and 2007 is as follows:



|                               |  |                |       |      |   |       |  |   |      
|------------------------------ |  | -------------- | ----- | ---- | - | ----- |  | - | -----
|                               |  | 2009           |       | 2008 |   | 2007 
|                               |  | (in thousands)
|Stock options                  |  | $              | 172   |      | $ | 482   |  | $ | 979  
|Restricted stock               |  |                | 917   |      |   | 611   |  |   | 253  
|ESPP shares                    |  |                | 444   |      |   | 446   |  |   | 230  
|                               |  |                |       |      |   |       |  |   |      
|Total stock-based compensation |  | $              | 1,533 |      | $ | 1,539 |  | $ | 1,462
|                               |  |                |       |      |   |       |  |   |      

A summary of the total nonvested stock-based deferred compensation at March 31, 2009 and 2008
is as follows:



|                                         |  |                |       |      |   |      
|---------------------------------------- |  | -------------- | ----- | ---- | - | -----
|                                         |  | 2009           |       | 2008
|                                         |  | (in thousands)
|Restricted stock                         |  | $              | 1,633 |      | $ | 1,699
|Stock options                            |  |                |      |      |   | 162  
|ESPP shares                              |  |                | 181   |      |   | 139  
|                                         |  |                |       |      |   |      
|Total nonvested stock-based compensation |  | $              | 1,814 |      | $ | 2,000
|                                         |  |                |       |      |   |      

The deferred compensation associated with the nonvested restricted stock and ESPP shares at
March 31, 2009 are expected to be recognized over a weighted average period of 1.1 years and 4 months, respectively.

Stock Options

The Companys stock option grants are accounted for as equity awards. The expense is based on the grant-date fair value of the
options granted, and is recognized over the requisite service period.



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OPNET TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

March 31, 2009,
2008, and 2007



A summary of the option transactions for fiscal 2009, 2008, and 2007 is as follows:



|                                   |  |           |   |  |                               |       |                                              |      |                                       |   |                                     |  |   |     
|---------------------------------- |  | --------- | - |  | ----------------------------- | ----- | -------------------------------------------- | ---- | ------------------------------------- | - | ----------------------------------- |  | - | ----
|                                   |  | 2009     
|                                   |  | Options   |   |  | WeightedAverageExercise Price |       | WeightedAverageRemainingContract Life(Years) |      | AggregateIntrinsicValue(in thousands) |   | WeightedAverageGrant DateFair Value
|Outstanding at beginning of period |  | 2,720,121 |   |  | $                             | 10.79 |                                              |     |                                       | $ | 1,473                               |  | $ | 7.56
|Granted                            |  |          |   |  |                               |      |                                              |     |                                       |   |                                    |  |   |    
|Exercised                          |  | (92,648   | ) |  |                               | 6.95  |                                              |     |                                       |   | 459                                 |  |   | 4.88
|Forfeited or expired               |  | (70,750   | ) |  |                               | 12.45 |                                              |     |                                       |   | 3                                   |  |   | 8.90
|                                   |  |           |   |  |                               |       |                                              |      |                                       |   |                                     |  |   |     
|Outstanding at end of period       |  | 2,556,723 |   |  |                               | 10.89 |                                              | 2.94 |                                       |   | 1,283                               |  |   | 7.62
|                                   |  |           |   |  |                               |       |                                              |      |                                       |   |                                     |  |   |     
|Exercisable at end of period       |  | 2,556,723 |   |  |                               | 10.89 |                                              | 2.94 |                                       |   | 1,283                               |  |   | 7.62
|                                   |  |           |   |  |                               |       |                                              |      |                                       |   |                                     |  |   |     
|Nonvested at end of period         |  |          |   |  |                               |      |                                              |     |                                       |   |                                    |  |   |    
|                                   |  |           |   |  |                               |       |                                              |      |                                       |   |                                     |  |   |     



|                                   |  |           |   |  |                               |       |                                              |      |                                       |   |                                     |  |   |     
|---------------------------------- |  | --------- | - |  | ----------------------------- | ----- | -------------------------------------------- | ---- | ------------------------------------- | - | ----------------------------------- |  | - | ----
|                                   |  | 2008     
|                                   |  | Options   |   |  | WeightedAverageExercise Price |       | WeightedAverageRemainingContract Life(Years) |      | AggregateIntrinsicValue(in thousands) |   | WeightedAverageGrant DateFair Value
|Outstanding at beginning of period |  | 2,841,065 |   |  | $                             | 10.73 |                                              |     |                                       | $ | 1,405                               |  | $ | 7.51
|Granted                            |  |          |   |  |                               |      |                                              |     |                                       |   |                                    |  |   |    
|Exercised                          |  | (59,975   | ) |  |                               | 6.08  |                                              |     |                                       |   | 256                                 |  |   | 4.23
|Forfeited or expired               |  | (60,969   | ) |  |                               | 12.37 |                                              |     |                                       |   |                                    |  |   | 8.65
|                                   |  |           |   |  |                               |       |                                              |      |                                       |   |                                     |  |   |     
|Outstanding at end of period       |  | 2,720,121 |   |  |                               | 10.79 |                                              | 3.92 |                                       |   | 1,256                               |  |   | 7.56
|                                   |  |           |   |  |                               |       |                                              |      |                                       |   |                                     |  |   |     
|Exercisable at end of period       |  | 2,643,020 |   |  |                               | 10.85 |                                              | 3.85 |                                       |   | 1,256                               |  |   | 7.61
|                                   |  |           |   |  |                               |       |                                              |      |                                       |   |                                     |  |   |     
|Nonvested at end of period         |  | 77,101    |   |  |                               | 9.01  |                                              | 6.35 |                                       |   |                                    |  |   | 6.01
|                                   |  |           |   |  |                               |       |                                              |      |                                       |   |                                     |  |   |     



|                                   |  |           |   |  |                              |       |                                              |      |                                        |   |                                     |  |   |     
|---------------------------------- |  | --------- | - |  | ---------------------------- | ----- | -------------------------------------------- | ---- | -------------------------------------- | - | ----------------------------------- |  | - | ----
|                                   |  | 2007     
|                                   |  | Options   |   |  | WeightedAverageExercisePrice |       | WeightedAverageRemainingContract Life(Years) |      | AggregateIntrinsic Value(in thousands) |   | WeightedAverageGrant DateFair Value
|Outstanding at beginning of period |  | 3,233,537 |   |  | $                            | 10.37 |                                              |     |                                        | $ | 11,362                              |  | $ | 7.31
|Granted                            |  | 30,000    |   |  |                              | 13.25 |                                              |     |                                        |   | 8                                   |  |   | 3.90
|Exercised                          |  | (381,153  | ) |  |                              | 7.84  |                                              |     |                                        |   | 2,406                               |  |   | 5.53
|Forfeited or expired               |  | (41,319   | ) |  |                              | 10.78 |                                              |     |                                        |   | 113                                 |  |   | 7.30
|                                   |  |           |   |  |                              |       |                                              |      |                                        |   |                                     |  |   |     
|Outstanding at end of period       |  | 2,841,065 |   |  |                              | 10.73 |                                              | 4.91 |                                        |   | 9,092                               |  |   | 7.51
|                                   |  |           |   |  |                              |       |                                              |      |                                        |   |                                     |  |   |     
|Exercisable at end of period       |  | 2,649,614 |   |  |                              | 10.80 |                                              | 4.71 |                                        |   | 8,356                               |  |   | 7.65
|                                   |  |           |   |  |                              |       |                                              |      |                                        |   |                                     |  |   |     
|Nonvested at end of period         |  | 191,451   |   |  |                              | 9.67  |                                              | 7.68 |                                        |   | 735                                 |  |   | 5.68
|                                   |  |           |   |  |                              |       |                                              |      |                                        |   |                                     |  |   |     

During fiscal 2009, 76,451 stock options vested with a weighted average grant date fair value of
$9.16.



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OPNET TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

March 31, 2009,
2008, and 2007



To estimate the grant-date fair value of its stock options, the Company uses the Black-Scholes
option-pricing model. The Black-Scholes model estimates the per share fair value of an option on its date of grant based on the following: the options exercise price; the price of the underlying stock on the date of grant; the estimated
dividend yield; a risk-free interest rate; the estimated option term; and the expected volatility. For the risk-free interest rate, the Company uses a U.S. Treasury Bond due in a number of years equal to the options
expected term. To determine expected volatility, the Company analyzes the historical volatility of its stock over the expected term of the option.

The Company did not grant any stock options during fiscal 2009 or fiscal 2008. The weighted average assumptions used to determine the grant-date fair value for stock options for fiscal 2007 are as follows:



|                        |  |         |  
|----------------------- |  | ------- | -
|                        |  | 2007    |  
|Risk-free interest rate |  | 5.02    | %
|Expected dividend yield |  | 0.00    | %
|Expected life           |  | 2 years |  
|Volatility factor       |  | 43      | %

Compensation cost for option grants is recognized on a straight-line basis over the requisite
service period for the entire award (from the date of grant through the period of the last separately vesting portion of the grant). Compensation cost is recognized within the income statement in the same expense line as the cash compensation paid
to the respective employees. SFAS No. 123R also requires the Company to estimate forfeitures in calculating the expense related to stock-based compensation. The impact on compensation cost due to changes in the expected forfeiture rate will be
recognized in the period that they become known. All of the Companys stock options are fully vested. As a result, during the year ended March 31, 2009, the Company adjusted its expected forfeiture rate to reflect actual stock option
forfeitures. The adjustment of the Companys forfeiture rate did not have a significant impact on the financial statements.

During
fiscal 2009, 2008, and 2007, the Company received proceeds of approximately $644,000, $365,000, and $3.0 million, respectively, and issued 92,648, 59,972, and 381,153 shares of common stock, respectively, pursuant to employee exercises of stock
options.

Restricted Stock

The Companys restricted stock grants are accounted for as equity awards. The expense is based on the price of the Companys common stock on the date the restricted stock award is granted, and is recognized on a straight-line
basis over the requisite service period. The Company did not grant any restricted stock prior to February 2006. The Companys restricted stock agreements do not contain any post-vesting restrictions.

A summary of the restricted stock grants is as follows:



|                                 |  |                        |   |  |                                 |      
|-------------------------------- |  | ---------------------- | - |  | ------------------------------- | -----
|                                 |  | 2009                  
|                                 |  | RestrictedStock Grants |   |  | WeightedAverage GrantFair Value
|Nonvested at beginning of period |  | 213,177                |   |  | $                               | 11.07
|Granted                          |  | 87,070                 |   |  |                                 | 10.27
|Vested                           |  | (61,370                | ) |  |                                 | 11.55
|Forfeited                        |  | (3,315                 | ) |  |                                 | 10.85
|                                 |  |                        |   |  |                                 |      
|Nonvested at end of period       |  | 235,562                |   |  |                                 | 10.66
|                                 |  |                        |   |  |                                 |      



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OPNET TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

March 31, 2009,
2008, and 2007



|                                 |  |                        |   |  |                                 |      
|-------------------------------- |  | ---------------------- | - |  | ------------------------------- | -----
|                                 |  | 2008                  
|                                 |  | RestrictedStock Grants |   |  | WeightedAverage GrantFair Value
|Nonvested at beginning of period |  | 127,213                |   |  | $                               | 12.14
|Granted                          |  | 108,190                |   |  |                                 | 9.86 
|Vested                           |  | (21,586                | ) |  |                                 | 11.16
|Forfeited                        |  | (640                   | ) |  |                                 | 14.41
|                                 |  |                        |   |  |                                 |      
|Nonvested at end of period       |  | 213,177                |   |  |                                 | 11.07
|                                 |  |                        |   |  |                                 |      



|                                 |  |                        |   |  |                                 |      
|-------------------------------- |  | ---------------------- | - |  | ------------------------------- | -----
|                                 |  | 2007                  
|                                 |  | RestrictedStock Grants |   |  | WeightedAverage GrantFair Value
|Nonvested at beginning of period |  | 43,451                 |   |  | $                               | 9.39 
|Granted                          |  | 88,958                 |   |  |                                 | 13.48
|Vested                           |  | (1,200                 | ) |  |                                 | 13.44
|Forfeited                        |  | (3,996                 | ) |  |                                 | 11.67
|                                 |  |                        |   |  |                                 |      
|Nonvested at end of period       |  | 127,213                |   |  |                                 | 12.14
|                                 |  |                        |   |  |                                 |      

Employee Stock Purchase Plan

The Companys 2000 Employee Stock Purchase Plan, or ESPP, provides all eligible employees to collectively purchase up to a total of 650,000 shares of
its common stock. An employee may authorize a payroll deduction up to a maximum of 10% of his or her compensation during the plan period. The purchase price for each share purchased is the lesser of 85% of the closing price of the common stock on
the first or last day of the plan period. The plan period for the ESPP ends on the last day of January and July of each year.

To estimate
the fair value of shares issued under its ESPP, the Company uses the Black-Scholes option-pricing model. The Black-Scholes model estimates the per share fair value of an ESPP share at the beginning of the plan period based on the following: the
price of the underlying stock on the first day of the plan period; the estimated dividend yield; a risk-free interest rate; the term of the plan period (six months); and the expected volatility. For the risk-free interest
rate, the Company uses a U.S. Treasury Bond due in six months. To determine expected volatility, the Company analyzes the historical volatility of its stock over the 6 months prior to the first day of the plan period. The expense is calculated based
on the difference between the fair market value of the shares purchased at the close of each plan period and the discounted price paid by the employee, and that expense is recognized on a straight-line basis over the plan period.

A total of 150,712, 120,295, and 84,072 shares of the Companys common stock were issued under the ESPP in fiscal 2009, 2008, and 2007,
respectively. The issuance of the common stock resulted in proceeds to the Company of $1.1 million, $989,000, and $753,000, respectively.



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OPNET TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

March 31, 2009,
2008, and 2007



The weighted average assumptions to determine the value for ESPP shares for fiscal 2009, 2008, and
2007 are as follows:



|                        |  |                                 |   |  |                               |   |  |                                 |   |  |                               |   |  |                                 |   |  |                               |  
|----------------------- |  | ------------------------------- | - |  | ----------------------------- | - |  | ------------------------------- | - |  | ----------------------------- | - |  | ------------------------------- | - |  | ----------------------------- | -
|                        |  | Plan PeriodStartingFebruary2009 |   |  | Plan PeriodStartingAugust2008 |   |  | Plan PeriodStartingFebruary2008 |   |  | Plan PeriodStartingAugust2007 |   |  | Plan PeriodStartingFebruary2007 |   |  | Plan PeriodStartingAugust2006 |  
|Risk-free interest rate |  | 0.39                            | % |  | 1.88                          | % |  | 2.15                            | % |  | 4.96                          | % |  | 5.16                            | % |  | 5.18                          | %
|Expected dividend yield |  | 0.00                            | % |  | 0.00                          | % |  | 0.00                            | % |  | 0.00                          | % |  | 0.00                            | % |  | 0.00                          | %
|Expected life           |  | 0.5 years                       |   |  | 0.5 years                     |   |  | 0.5 years                       |   |  | 0.5 years                     |   |  | 0.5 years                       |   |  | 0.5 years                     |  
|Volatility factor       |  | 88                              | % |  | 42                            | % |  | 60                              | % |  | 49                            | % |  | 45                              | % |  | 48                            | %

3. Marketable Securities and Cash Equivalents

The following table summarizes the composition of the Companys marketable securities at March 31, 2009 and 2008:



|                            |  |                |        |                     |   |                       |  |                      |             |   |                                |   |        |  |   |       |  |   |      
|--------------------------- |  | -------------- | ------ | ------------------- | - | --------------------- |  | -------------------- | ----------- | - | ------------------------------ | - | ------ |  | - | ----- |  | - | -----
|                            |  | March 31, 2009
|                            |  | (in thousands)
|                            |  | AmortizedCost  |        | GrossUnrealizedGain |   | GrossUnrealizedLoss   |  |                      | MarketValue |   | Classification on BalanceSheet
|                            |  |                |        |                     |   | Short-TermInvestments |  | Long-TermInvestments
|Corporate note              |  | $              | 999    |                     | $ |                      |  | $                    |            |   |                                | $ | 999    |  | $ | 999   |  | $ |     
|                            |  |                |        |                     |   |                       |  |                      |             |   |                                |   |        |  |   |       |  |   |      
|Total marketable securities |  | $              | 999    |                     | $ |                      |  | $                    |            |   |                                | $ | 999    |  | $ | 999   |  | $ |     
|                            |  |                |        |                     |   |                       |  |                      |             |   |                                |   |        |  |   |       |  |   |      
|                            | 
|                            |  | March 31, 2008
|                            |  | (in thousands)
|Auction rate securities     |  | $              | 8,800  |                     | $ |                      |  | $                    | (381        | ) |                                | $ | 8,419  |  | $ | 1,451 |  | $ | 6,968
|Municipal securities        |  |                | 6,000  |                     |   |                      |  |                      |            |   |                                |   | 6,000  |  |   | 6,000 |  |   |     
|                            |  |                |        |                     |   |                       |  |                      |             |   |                                |   |        |  |   |       |  |   |      
|Total marketable securities |  | $              | 14,800 |                     | $ |                      |  | $                    | (381        | ) |                                | $ | 14,419 |  | $ | 7,451 |  | $ | 6,968
|                            |  |                |        |                     |   |                       |  |                      |             |   |                                |   |        |  |   |       |  |   |      

The following table details the fair value measurements within the three levels of fair value
hierarchy of the Companys financial assets, consisting of cash equivalents and marketable securities, at March 31, 2009:



|                   |  |                                  |        |                                               |   |         |  |   |     |  |   |  
|------------------ |  | -------------------------------- | ------ | --------------------------------------------- | - | ------- |  | - | --- |  | - | -
|                   |  | Total FairValue At March 31,2009 |        | Fair Value Measurement at March 31, 2009Using
|                   |  | Level 1                          |        | Level 2                                       |   | Level 3
|                   |  | (in thousands)                  
|Corporate note     |  | $                                | 999    |                                               | $ |        |  | $ | 999 |  | $ | 
|Money market funds |  |                                  | 79,231 |                                               |   | 79,231  |  |   |    |  |   | 
|                   |  |                                  |        |                                               |   |         |  |   |     |  |   |  
|Total              |  | $                                | 80,230 |                                               | $ | 79,231  |  | $ | 999 |  | $ | 
|                   |  |                                  |        |                                               |   |         |  |   |     |  |   |  

At March 31, 2009, the Company grouped money market funds using a Level 1 valuation because
market prices in active markets for identical assets were readily available. The per-share net asset value of the Companys money market funds has remained at a constant amount of $1.00 per share. Also, as of March 31, 2009, there were no
withdrawal limits on redemptions for any of the money market funds that the Company



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OPNET TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

March 31, 2009,
2008, and 2007



holds. At March 31, 2009, the Company grouped the corporate note using a Level 2 valuation because it used quoted prices in active markets for similar
assets to determine the fair value. The contractual maturity for the corporate note is July 2009. The Company did not group any financial assets using a Level 3 valuation at March 31, 2009.

The following table summarizes the activity for the Companys ARS measured at fair value using Level 3 inputs:



|                                                                               |  |                |        |  
|------------------------------------------------------------------------------ |  | -------------- | ------ | -
|                                                                               |  | ARS            |       
|                                                                               |  | (in thousands) |       
|Balance as of April 1, 2008                                                    |  | $              | 8,419  |  
|Redemptions (at par)                                                           |  |                | (8,800 | )
|Total gains and losses:                                                        |  |                |        |  
|Included in earnings (realized)                                                |  |                |       |  
|Reversal of unrealized loss included in accumulated other comprehensive income |  |                | 381    |  
|                                                                               |  |                |        |  
|Balance as of March 31, 2009                                                   |  | $              |       |  
|                                                                               |  |                |        |  

4. Acquisition of Specified Assets of Network Physics, Inc.

On October 19, 2007, the Company completed the acquisition of specified assets of Network Physics, Inc. (Network Physics). Pursuant to the asset
purchase agreement, the purchase price totaled $10.0 million and was paid in cash from the Companys working capital. The Company accounted for the asset acquisition as the purchase of productive assets and followed the guidance in SFAS
No. 141 to perform the purchase price allocation. The Company expensed $720,000 in transaction-related professional services costs during fiscal 2008 in connection with the asset acquisition. The Company has conducted a review and analysis of
the purchase price. A summary of the assets acquired follows:



|                              |  |                        |        |                     |                          |            |          
|----------------------------- |  | ---------------------- | ------ | ------------------- | ------------------------ | ---------- | ---------
|                              |  | March 31,2008          |        | Amortization Method |                          | UsefulLife
|                              |  | (dollars in thousands) |        |                     |                          |           
|Current assets                |  | $                      | 45     |                     |                          |            |          
|Property, plant and equipment |  |                        | 572    |                     | Straight-line            |            | 1-3 years
|Acquired technology           |  |                        | 7,827  |                     | Straight-line            |            | 5 years  
|Customer relationships        |  |                        | 724    |                     | Double-declining balance |            | 4.5 years
|Acquired workforce            |  |                        | 837    |                     | Double-declining balance |            | 5 years  
|                              |  |                        |        |                     |                          |            |          
|Total consideration           |  | $                      | 10,005 |                     |                          |            |          
|                              |  |                        |        |                     |                          |            |          

The assets acquired were recorded at estimated fair values as determined by the Companys
management based on information currently available and on current assumptions as to future operations. The Company obtained valuation services from an independent company to assist in the Companys determination of the fair value of acquired
intangibles and their remaining useful lives.

The Companys purchase of specified assets of Network Physics constituted the
acquisition of productive assets and not the acquisition of a business under Emerging Issues Task Force, or EITF, 98-3, Determining Whether a Nonmonetary Transaction Involves Receipt of Productive Assets or of a Business.



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OPNET TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

March 31, 2009,
2008, and 2007



5. Intangible Assets and Goodwill

Intangible assets consisted of the following:



|                                  |  |                  |        |   |                  |   |        |  
|--------------------------------- |  | ---------------- | ------ | - | ---------------- | - | ------ | -
|                                  |  | At March 31,2009 |        |   | At March 31,2008 |  
|                                  |  | (in thousands)   |       
|Acquired and purchased technology |  | $                | 12,374 |   |                  | $ | 12,374 |  
|Customer relationships            |  |                  | 724    |   |                  |   | 724    |  
|Acquired workforce asset          |  |                  | 837    |   |                  |   | 837    |  
|                                  |  |                  |        |   |                  |   |        |  
|Total                             |  |                  | 13,935 |   |                  |   | 13,935 |  
|Less: accumulated amortization    |  |                  | (7,742 | ) |                  |   | (5,302 | )
|                                  |  |                  |        |   |                  |   |        |  
|Intangible assets, net            |  | $                | 6,193  |   |                  | $ | 8,633  |  
|                                  |  |                  |        |   |                  |   |        |  

Intangible assets associated with acquired and purchased technology consist of acquired technology
related to the Companys acquisitions of a software product for modeling voice communications in December 2003, Altaworks in October 2004, purchased technology from RadView Software, Ltd. in December 2005, and SQMworks, Inc. in April 2006, and
the purchase of technology from Network Physics in October 2007. Intangible assets associated with customer relationships and acquired workforce asset relate to the purchase of specified assets from Network Physics in October 2007. Acquired and
purchased intangible assets resulted in amortization expense for fiscal 2009, 2008 and 2007 of $2.4 million, $1.7 million, and $723,000, respectively. Amortization expense from acquired and purchased technology and customer relationships is included
in cost of revenue in the consolidated statements of operations. Amortization expense from the acquired workforce asset is included in research and development expenses in the consolidated statements of operations. The Company amortizes acquired and
purchased technology on a straight-line basis over their expected useful lives of three to five years. The customer relationships and workforce assets that the Company purchased from Network Physics are amortized on an accelerated depreciation basis
over their expected useful lives of four and one half years and five years, respectively. The Company currently expects future amortization expense attributable to these intangible assets of $1.8 million in fiscal 2010, $1.8 million in fiscal 2011,
$1.8 million in fiscal 2012, and $833,000 in fiscal 2013.

Goodwill is primarily derived from the Companys acquisitions of Altaworks
in October 2004, WDM NetDesign in January 2002, and NetMaker in March 2001. The Company made no adjustment to goodwill during fiscal 2009 or fiscal 2008.

6. Property and Equipment

Property and equipment consisted of the following at March 31, 2009 and 2008:



|                               |  |                |         |   |      |   |         |  
|------------------------------ |  | -------------- | ------- | - | ---- | - | ------- | -
|                               |  | 2009           |         |   | 2008 |  
|                               |  | (in thousands) |        
|Computer equipment             |  | $              | 9,708   |   |      | $ | 8,371   |  
|Leasehold improvements         |  |                | 9,977   |   |      |   | 6,699   |  
|Construction in progress       |  |                | 30      |   |      |   | 237     |  
|Purchased software             |  |                | 4,159   |   |      |   | 4,094   |  
|Office furniture and equipment |  |                | 1,758   |   |      |   | 1,656   |  
|                               |  |                |         |   |      |   |         |  
|Total                          |  |                | 25,632  |   |      |   | 21,057  |  
|Less: accumulated depreciation |  |                | (11,648 | ) |      |   | (10,173 | )
|                               |  |                |         |   |      |   |         |  
|Property and equipment, net    |  | $              | 13,984  |   |      | $ | 10,884  |  
|                               |  |                |         |   |      |   |         |  



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OPNET TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

March 31, 2009,
2008, and 2007



Depreciation expense for fiscal 2009, 2008, and 2007 was $3.1 million, $2.4 million, and $1.6
million, respectively.

7. Accrued Liabilities

Accrued liabilities consisted of the following at March 31, 2009 and 2008:



|                                    |  |                |        |      |   |      
|----------------------------------- |  | -------------- | ------ | ---- | - | -----
|                                    |  | 2009           |        | 2008
|                                    |  | (in thousands)
|Accrued compensation and bonuses    |  | $              | 6,504  |      | $ | 4,866
|Accrued accounting and tax services |  |                | 692    |      |   | 970  
|Accrued legal services              |  |                |       |      |   | 11   
|Accrued inventory                   |  |                | 997    |      |   | 225  
|Other                               |  |                | 3,368  |      |   | 2,483
|                                    |  |                |        |      |   |      
|Total                               |  | $              | 11,561 |      | $ | 8,555
|                                    |  |                |        |      |   |      

8. Income Taxes

The components of the provision for income taxes for the years ended March 31, 2009, 2008, and 2007, were as follows:



|                                           |  |                |       |   |      |   |      |      |  |   |       |  
|------------------------------------------ |  | -------------- | ----- | - | ---- | - | ---- | ---- |  | - | ----- | -
|                                           |  | 2009           |       |   | 2008 |   |      | 2007 | 
|                                           |  | (in thousands) |      
|Current provision:                         |  |                |       |   |      |   |      |      |  |   |       |  
|Federal                                    |  | $              | 2,164 |   |      | $ | 115  |      |  | $ | 2,471 |  
|State                                      |  |                | 744   |   |      |   | 13   |      |  |   | 785   |  
|Foreign                                    |  |                | 451   |   |      |   | 382  |      |  |   | 349   |  
|                                           |  |                |       |   |      |   |      |      |  |   |       |  
|Total current provision                    |  |                | 3,359 |   |      |   | 510  |      |  |   | 3,605 |  
|                                           |  |                |       |   |      |   |      |      |  |   |       |  
|Deferred (benefit) provision:              |  |                |       |   |      |   |      |      |  |   |       |  
|Federal                                    |  |                | (320  | ) |      |   | (748 | )    |  |   | (28   | )
|State                                      |  |                | (88   | ) |      |   | (131 | )    |  |   | 23    |  
|Foreign                                    |  |                | (23   | ) |      |   | (3   | )    |  |   | 55    |  
|                                           |  |                |       |   |      |   |      |      |  |   |       |  
|Total deferred (benefit) provision         |  |                | (431  | ) |      |   | (882 | )    |  |   | 50    |  
|                                           |  |                |       |   |      |   |      |      |  |   |       |  
|Total provision (benefit) for income taxes |  | $              | 2,928 |   |      | $ | (372 | )    |  | $ | 3,655 |  
|                                           |  |                |       |   |      |   |      |      |  |   |       |  



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OPNET TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

March 31, 2009,
2008, and 2007



At March 31, 2009 and 2008, the components of the Companys deferred tax assets and
deferred tax liabilities were as follows:



|                                                     |  |                |         |   |      |   |         |  
|---------------------------------------------------- |  | -------------- | ------- | - | ---- | - | ------- | -
|                                                     |  | 2009           |         |   | 2008 |  
|                                                     |  | (in thousands) |        
|Deferred tax assets:                                 |  |                |         |   |      |   |         |  
|Accrued expenses                                     |  | $              | 1,544   |   |      | $ | 1,346   |  
|Deferred revenue                                     |  |                | 648     |   |      |   | 315     |  
|In-process research and development                  |  |                | 138     |   |      |   | 158     |  
|Deferred rent                                        |  |                | 1,114   |   |      |   | 777     |  
|Research and development tax credit carryforward     |  |                | 1,188   |   |      |   | 1,483   |  
|Accelerated book amortization of acquired technology |  |                | 1,463   |   |      |   | 960     |  
|Bad debt reserve                                     |  |                | 275     |   |      |   | 59      |  
|Federal net operating loss carryforward              |  |                | 12,941  |   |      |   | 12,995  |  
|Foreign net operating loss carryforward              |  |                | 82      |   |      |   | 73      |  
|Foreign tax credit carryforward                      |  |                |        |   |      |   | 138     |  
|Deferred stock based compensation                    |  |                | 864     |   |      |   | 808     |  
|Accelerated depreciation                             |  |                |        |   |      |   | 128     |  
|Other temporary differences                          |  |                | 17      |   |      |   | 29      |  
|                                                     |  |                |         |   |      |   |         |  
|Gross deferred tax assets                            |  |                | 20,274  |   |      |   | 19,269  |  
|Less: valuation allowance                            |  |                | (13,289 | ) |      |   | (13,289 | )
|                                                     |  |                |         |   |      |   |         |  
|Total deferred tax asset                             |  |                | 6,985   |   |      |   | 5,980   |  
|                                                     |  |                |         |   |      |   |         |  
|Deferred tax liabilities:                            |  |                |         |   |      |   |         |  
|Tax amortization of goodwill                         |  |                | (2,241  | ) |      |   | (1,961  | )
|Accelerated depreciation                             |  |                | (249    | ) |      |   |        |  
|Tax accounting for unbilled accounts receivable      |  |                | (1,065  | ) |      |   | (988    | )
|                                                     |  |                |         |   |      |   |         |  
|Total deferred tax liabilities                       |  |                | (3,555  | ) |      |   | (2,949  | )
|                                                     |  |                |         |   |      |   |         |  
|Net deferred tax asset                               |  | $              | 3,430   |   |      | $ | 3,031   |  
|                                                     |  |                |         |   |      |   |         |  

SFAS No. 109 Accounting for Income Taxes, or SFAS No. 109 requires that the
Company assess the realizability of deferred tax assets at the end of each reporting period. These assessments generally consider several factors including the reversal of existing deferred tax asset temporary differences, projected future taxable
income, tax planning strategies, and historical and future book income adjusted for permanent book to tax differences. As stated below, the Company has established a valuation allowance related to a portion of the deferred tax asset associated with
the Altaworks transaction due to limitations under Section 382 of the Internal Revenue Code. The Company believes that it is more likely than not that the remaining net deferred tax asset of $3.4 million will be realized, based upon its history
of profitability, estimates of future taxable income, and the period over which the tax benefits can be realized.



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OPNET TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

March 31, 2009,
2008, and 2007



The provision for income taxes for fiscal 2009, 2008, and 2007 differs from the amount computed by
applying the statutory United States Federal income tax rate to income before taxes as a result of the following:



|                                               |  |      |   |  |        |    |  |      |  
|---------------------------------------------- |  | ---- | - |  | ------ | -- |  | ---- | -
|                                               |  | 2009 |   |  | 2008   |    |  | 2007 |  
|Statutory United States Federal rate           |  | 34.0 | % |  | 34.0   | %  |  | 34.0 | %
|Increase (decrease) in taxes resulting from:   |  |      |   |  |        |    |  |      |  
|State income taxes  net of Federal benefit    |  | 4.7  |   |  | (7.0   | )  |  | 4.5  |  
|Nondeductible meals and entertainment          |  | 0.6  |   |  | 38.0   |    |  | 0.5  |  
|Nondeductible fines and penalties              |  |     |   |  | 3.6    |    |  | 0.1  |  
|Nondeductible stock compensation               |  | 2.0  |   |  | 93.9   |    |  | 0.1  |  
|Nondeductible expenses  other                 |  | 0.1  |   |  | 4.3    |    |  | 0.1  |  
|Section 199 deduction                          |  | (2.4 | ) |  | (10.2  | )  |  | (0.6 | )
|Tax credits                                    |  | (7.1 | ) |  | (209.3 | )  |  | (6.2 | )
|Provision to return true-ups (permanent items) |  | 3.5  |   |  | 148.9  |    |  | 0.5  |  
|Foreign tax expense                            |  | 2.4  |   |  | (173.6 | )  |  |     |  
|Tax exempt income                              |  |     |   |  | (234.0 | )  |  | (1.9 | )
|Other                                          |  | 1.2  |   |  | 13.0   |    |  | 0.1  |  
|FIN No. 48                                     |  | (0.4 | ) |  | 45.2   |    |  |     |  
|Changes to estimates                           |  |     |   |  | 8.2    |    |  | 0.5  |  
|Foreign tax rate differential                  |  | (0.4 | ) |  | 14.5   |    |  | (0.2 | )
|                                               |  |      |   |  |        |    |  |      |  
|Effective tax rate                             |  | 38.2 | % |  | (230.5 | )% |  | 31.5 | %
|                                               |  |      |   |  |        |    |  |      |  

For fiscal 2009, the effective tax rate differed from the statutory tax rate principally due to
state income taxes, differential in the United States and foreign tax rates, research and development credits and the domestic production activities deduction. The increase in the Companys effective tax rate in fiscal 2009 from fiscal 2008 was
primarily due to the increase in its book income which diluted the impact of permanent differences as compared to the same periods in the prior fiscal year. The decrease in the Companys effective tax rate in fiscal 2008 from fiscal 2007 was
primarily the result of a decrease in book income and an increase in permanent book to tax differences such as tax exempt interest income.

At March 31, 2009, the Company had a United States federal research and development tax credit carryforward of approximately $1.2 million and net operating loss carryforwards of approximately $38.2 million, which will expire in the
years 2019 through 2024. At March 31, 2009, the Companys Singapore subsidiary had a foreign net operating loss carryforward of $454,000. The foreign net operating loss can be carried forward indefinitely under local tax legislation.

As part of the Altaworks Corporation acquisition, the Company received a federal net operating loss carryforward of approximately $38.8
million and a research and development credit carryforward of approximately $1.2 million. The related deferred tax assets amount to $14.4 million. These tax assets are subject to an annual limitation under Section 382 of the Internal Revenue
Code. Because of the limitation imposed, management believes it is more likely than not that a portion of the assets will not be realized and has placed a valuation allowance of $13.3 million against that portion.

At March 31, 2009, the Company had cumulative undistributed earnings of foreign subsidiaries, for which no United States income or foreign
withholding taxes have been recorded, of approximately $2.9 million, which have been reinvested indefinitely. Determination of the amount of unrecognized deferred tax liability with respect to such earnings is not practicable. The additional taxes
on the earnings of foreign subsidiaries, if remitted, would be partially offset by United States tax credits for foreign taxes already paid.



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OPNET TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

March 31, 2009,
2008, and 2007



The total amount of gross unrecognized tax benefits as of April 1, 2008 was $838,000. Of this
total, $808,000 represents the amount of unrecognized tax benefits (net of federal benefit on state issues) that, if recognized, would favorably affect the effective income tax rate in any future periods. At March 31, 2009, the gross
unrecognized benefit was $804,000, $775,000 of which would favorably affect the effective income tax rate in future periods. A reconciliation of the beginning and ending amount of unrecognized tax benefits for fiscal 2009 and 2008 follows:



|                                               |  |                |      |  
|---------------------------------------------- |  | -------------- | ---- | -
|                                               |  | (in thousands) |     
|Unrecognized tax benefits at April 1, 2008     |  | $              | 838  |  
|Gross increases  current period tax positions |  |                | 139  |  
|Lapse of statute of limitations                |  |                | (159 | )
|Foreign currency translation adjustment        |  |                | (14  | )
|                                               |  |                |      |  
|Unrecognized tax benefits at March 31, 2009    |  | $              | 804  |  
|                                               |  |                |      |  



|                                                |  |                |     |  
|----------------------------------------------- |  | -------------- | --- | -
|                                                |  | (in thousands) |    
|Unrecognized tax benefits at April 1, 2007      |  | $              | 810 |  
|Gross decreases  tax positions in prior period |  |                | (80 | )
|Gross increases  current period tax positions  |  |                | 79  |  
|Foreign currency translation adjustment         |  |                | 29  |  
|                                                |  |                |     |  
|Unrecognized tax benefits at March 31, 2008     |  | $              | 838 |  
|                                                |  |                |     |  

The following table summarizes the tax years that are either currently under audit or remain open
under the statute of limitations and are subject to examination by the tax authorities in the most significant jurisdictions that the Company operates:



|               |  |            
|-------------- |  | -----------
|Australia      |  | FY05  FY08
|Belgium        |  | FY05  FY08
|France         |  | FY06  FY08
|Germany        |  | FY04  FY08
|United Kingdom |  | FY08       
|United States  |  | FY06  FY08
|Maryland       |  | FY04  FY08
|New York       |  | FY07  FY08

The Companys continuing practice is to recognize interest, if any, related to income tax
matters in interest expense in its consolidated statements of operations and penalties as part of general and administrative expense in its consolidated statements of operations. During fiscal 2008, the Company recognized $6,000 in potential
interest expense associated with uncertain tax positions. During fiscal 2009, the Company recognized $4,000 in potential interest expense associated with uncertain tax positions and reversed $17,000 associated with potential claims now barred by the
statute of limitations. The total accrued interest and accrued penalties related to uncertain tax positions at March 31, 2009 was $13,000 and $2,000, respectively.

The Company believes it is reasonably possible that significant changes in the liability for uncertain tax positions will occur in the next twelve months
as a result of final decisions related to the voluntary payments of its state and local income taxes and lapse of statute of limitations. In the aggregate, the Company believes the liability for uncertain tax positions could
decrease by $276,000 in the next twelve months.



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OPNET TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

March 31, 2009,
2008, and 2007



The income tax provision includes income taxes currently payable plus the net change during the year
in deferred tax assets or liabilities. Deferred tax assets and liabilities reflect the differences between the carrying value under GAAP and the tax basis of assets and liabilities using enacted statutory tax rates in effect for the period in which
the differences are expected to reverse. Judgments and estimates are required in the calculation of the deferred tax assets, valuation allowance, accrual of contingencies, research and development tax credits, and foreign tax credits.

9. Commitments and Contingencies

The Companys
corporate office and principal facilities are located in Bethesda, Maryland and consist of approximately 82,000 square feet of office space held under two leases. The lease for 60,000 square feet expires on January 31, 2011, exclusive of
renewal options. The lease provides for two five-year renewal options. The rent is subject to escalation based upon a consumer price index adjustment of up to 3% each year. The lease also requires the Company to maintain a security deposit of
approximately $1.2 million in the form of a bank letter of credit, as discussed in Note 10, which is subject to annual reductions based upon meeting certain minimum financial requirements. The lease for 22,000 square feet expires on January 31,
2016, exclusive of renewal options. The lease provides for one five-year renewal option. The rent is subject to escalation based upon a consumer price index adjustment of up to 3% each year. The lease also requires the Company to maintain a security
deposit of approximately $69,000 in the form of a bank letter of credit, as discussed in Note 10, which is subject to annual reductions based upon meeting certain minimum financial requirements.

In addition, the Company leases additional office space under non-cancelable operating leases. The leases for office space contain escalation clauses
that provide for increased rentals based primarily on increases in real estate taxes, operating expenses, or the consumer price index. Total rent expense under all leases for fiscal 2009, 2008, and 2007 was $5.0 million, $4.5 million, and $3.8
million, respectively. At March 31, 2009, future minimum lease payments required under non-cancelable leases were as follows:



|                             |  |                |       
|---------------------------- |  | -------------- | ------
|                             |  | (in thousands)
|Year ending March 31,        |  |                |       
|2010                         |  | $              | 5,227 
|2011                         |  |                | 4,829 
|2012                         |  |                | 2,136 
|2013                         |  |                | 1,959 
|2014                         |  |                | 1,690 
|Thereafter                   |  |                | 9,223 
|                             |  |                |       
|Total minimum lease payments |  | $              | 25,064
|                             |  |                |       

The Company accounts for guarantees in accordance with FIN No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN No. 45 elaborates on the disclosures required in financial statements concerning obligations under certain guarantees. It
also clarifies the requirements related to the recognition of liabilities by a guarantor at the inception of certain guarantees. The provisions related to recognizing a liability at inception of the guarantee do not apply to product warranties or
indemnification provisions in the Companys software license agreements.

Under the terms of substantially all of the Companys
license agreements, it has agreed to defend and pay any final judgment against its customers arising from claims against such customers that the Companys software



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OPNET TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

March 31, 2009,
2008, and 2007



products infringe the intellectual property rights of a third party. To date: i) the Company has not received any notice that any customer is subject to an
infringement claim arising from the use of its software products, ii) the Company has not received any request to defend any customers from infringement claims arising from the use of its software products, and iii) the Company has not paid any
final judgment on behalf of any customer related to an infringement claim arising from the use of its software products. Because the outcome of infringement disputes are related to the specific facts in each case, and given the lack of previous or
current indemnification claims, the Company cannot estimate the maximum amount of potential future payments, if any, related to its indemnification provisions. However, the Company reasonably believes these indemnification provisions will not have a
material adverse effect on its operating performance or financial condition. As of March 31, 2009, the Company has not recorded any liabilities related to these indemnifications.

The Companys standard license agreement includes a warranty provision for software products. The Company generally warrants for the first ninety
days after delivery that the software shall operate substantially as stated in the then current documentation provided that the software is used in a supported computer system. The Company provides for the estimated cost of product warranties based
on specific warranty claims, provided that it is probable that a liability exists and provided the amount can be reasonably estimated. To date, the Company has not had any material costs associated with these warranties.

The Company is involved in other claims and legal proceedings arising from its normal operations. The Company does not expect these matters, individually
or in the aggregate, to have a material effect on its financial condition, results of operations, or cash flows.

10. Credit Agreements and Notes
Payable

Effective June 10, 2002, the Company entered into a credit facility with a commercial bank. The credit facility permitted
the use of funds for general corporate purposes and the issuance of letters of credit up to a maximum of $10.0 million in the aggregate. As of March 31, 2009, the lender under the credit facility had issued letters of credit in favor of the
beneficiaries under a number of the Companys operating leases in the aggregate amount of $1.4 million. Upon a default, as defined in the respective office lease agreement, the applicable landlord has the right to draw upon its letter of credit
in whole or in part. Interest under this facility, including interest on any amounts drawn under the letters of credit, is payable monthly at an annual rate of 1.25%. The credit facility is collateralized by the Companys accounts receivable.
Effective March 31, 2009, the Company elected to eliminate any borrowing capacity under the credit facility in excess of its existing outstanding letters of credit.

11. Employee Benefit Plan

Effective August 1, 1993, the Company established a 401(k) retirement
plan, or the Plan, covering all eligible employees, as defined. Eligible employees who are at least 21 years old may participate. Under the terms of the Plan, participants may defer a portion of their salaries as employee contributions. The Company
makes matching contributions and may make discretionary and extra contributions. Employee contributions and extra contributions made by the Company are 100% vested immediately. In general, the Companys matching and discretionary contributions
vest ratably over a five-year period. The Companys expense under this Plan for fiscal 2009, 2008, and 2007 was $1.4 millions, $1.3 million, and $1.1 million, respectively.



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OPNET TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

March 31, 2009,
2008, and 2007



12. Earnings per Share

The following is a reconciliation of the amounts used in calculating basic and diluted net income per common share for fiscal 2009, 2008, and 2007:



|                                                       |  |                                            |            |      |   |            |  |   |           
|------------------------------------------------------ |  | ------------------------------------------ | ---------- | ---- | - | ---------- |  | - | ----------
|                                                       |  | 2009                                       |            | 2008 |   | 2007      
|                                                       |  | ($ in thousands, except per share amounts)
|Net Income (Numerator):                                |  |                                            |            |      |   |            |  |   |           
|Basic and diluted net income                           |  | $                                          | 4,732      |      | $ | 533        |  | $ | 7,965     
|                                                       |  |                                            |            |      |   |            |  |   |           
|Shares (Denominator):                                  |  |                                            |            |      |   |            |  |   |           
|Weighted average shares outstanding (basic)            |  |                                            | 20,296,165 |      |   | 20,342,426 |  |   | 20,357,530
|Plus:                                                  |  |                                            |            |      |   |            |  |   |           
|Effect of other dilutive securities  options          |  |                                            | 237,212    |      |   | 253,542    |  |   | 831,709   
|Effect of other dilutive securities  restricted stock |  |                                            | 47,589     |      |   | 24,819     |  |   | 16,310    
|                                                       |  |                                            |            |      |   |            |  |   |           
|Weighted average shares outstanding (diluted)          |  |                                            | 20,580,966 |      |   | 20,620,787 |  |   | 21,205,549
|                                                       |  |                                            |            |      |   |            |  |   |           
|Net income per common share:                           |  |                                            |            |      |   |            |  |   |           
|Basic                                                  |  | $                                          | 0.23       |      | $ | 0.03       |  | $ | 0.39      
|Diluted                                                |  | $                                          | 0.23       |      | $ | 0.03       |  | $ | 0.38      

The weighted average diluted shares outstanding is not affected during any period where the
exercise price of a stock option is greater than the average market price. Options for the purchase of 1,745,390, 1,826,054 and 469,600 common shares were excluded from the weighted average diluted shares outstanding for fiscal 2009, 2008, and 2007,
respectively, because their effect was anti-dilutive.

13. Treasury Stock

On January 31, 2005, the Company announced that the Board had authorized the repurchase of up to 1,000,000 shares of the Companys common stock
from time to time on the open market or in privately negotiated transactions. On February 4, 2008, the Company announced that the Board had authorized the repurchase of an additional 1,000,000 shares of the Companys common stock under the
stock repurchase program. This stock repurchase program does not have a specified termination date. Any repurchased shares will be available for use in connection with the Companys stock plans or other corporate purposes. The Company expended
$955,000, $5.0 million, and $1.5 million to purchase 75,724, 521,849, and 104,000 shares during fiscal 2009, 2008, and 2007, respectively, at an average price of $12.61, $9.61, and $14.62.

Restricted stock shares withheld from employees to satisfy the minimum statutory withholding obligations with respect to the income recognized by these
employees upon the vesting of their restricted stock shares during the year are included in these totals.

As of March 31, 2009, the
Company had repurchased 1,111,411 shares of common stock under the stock repurchase program.



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OPNET TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

March 31, 2009,
2008, and 2007



14. Comprehensive Income

Comprehensive income includes net income, foreign currency translation adjustments, and net unrealized (losses)/gains on marketable securities. The components of comprehensive income for fiscal 2009, 2008, and 2007,
net of tax, are as follows:



|                                                       |  |      |        |   |      |   |      |      |  |   |       |  
|------------------------------------------------------ |  | ---- | ------ | - | ---- | - | ---- | ---- |  | - | ----- | -
|                                                       |  | 2009 |        |   | 2008 |   |      | 2007 | 
|Net income                                             |  | $    | 4,732  |   |      | $ | 533  |      |  | $ | 7,965 |  
|Foreign currency translation adjustments               |  |      | (1,712 | ) |      |   | 147  |      |  |   | 758   |  
|Net unrealized gains (losses) on marketable securities |  |      | 381    |   |      |   | (381 | )    |  |   | (19   | )
|                                                       |  |      |        |   |      |   |      |      |  |   |       |  
|Total comprehensive income                             |  | $    | 3,401  |   |      | $ | 299  |      |  | $ | 8,704 |  
|                                                       |  |      |        |   |      |   |      |      |  |   |       |  

Accumulated other comprehensive (loss) income includes foreign currency translation adjustments
and net unrealized (losses)/gains on marketable securities. The components of accumulated other comprehensive (loss) income at March 31, 2009 and 2008, net of tax, are as follows:



|                                                    |  |      |        |   |      |   |      |  
|--------------------------------------------------- |  | ---- | ------ | - | ---- | - | ---- | -
|                                                    |  | 2009 |        |   | 2008 |  
|Foreign currency translation adjustments            |  |      | (1,171 | ) |      |   | 541  |  
|Net unrealized losses on marketable securities      |  |      |       |   |      |   | (381 | )
|                                                    |  |      |        |   |      |   |      |  
|Total accumulated other comprehensive (loss) income |  | $    | (1,171 | ) |      | $ | 160  |  
|                                                    |  |      |        |   |      |   |      |  

15. Business Segment and Geographic Area Information

The Company operates in one industry segment, the development and sale of computer software programs and related services. The chief operating decision
maker evaluates the performance of the Company using one industry segment. For the years ended March 31, 2009, 2008, and 2007, revenue from transactions with United States government agencies was approximately 35%, 41%, and 43% of total
revenue, respectively. No single customer accounted for 10% or more of revenue for fiscal 2009, 2008 or 2007. In addition, there was no country, with the exception of the United States, where aggregate sales accounted for 10% or more of total
revenue. The Companys assets were primarily held in the United States for fiscal 2009, 2008, and 2007.

Revenue by geographic
destination and as a percentage of total revenue for fiscal 2009, 2008, and 2007 were as follows:



|                               |  |                |         |   |      |   |         |      |  |   |        |  
|------------------------------ |  | -------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------ | -
|                               |  | 2009           |         |   | 2008 |   |         | 2007 | 
|                               |  | (in thousands) |        
|Geographic Area by Destination |  |                |         |   |      |   |         |      |  |   |        |  
|United States                  |  | $              | 96,896  |   |      | $ | 80,840  |      |  | $ | 75,071 |  
|International                  |  |                | 25,983  |   |      |   | 20,506  |      |  |   | 20,059 |  
|                               |  |                |         |   |      |   |         |      |  |   |        |  
|                               |  | $              | 122,879 |   |      | $ | 101,346 |      |  | $ | 95,130 |  
|                               |  |                |         |   |      |   |         |      |  |   |        |  
|Geographic Area by Destination |  |                |         |   |      |   |         |      |  |   |        |  
|United States                  |  |                | 78.9    | % |      |   | 79.8    | %    |  |   | 78.9   | %
|International                  |  |                | 21.1    |   |      |   | 20.2    |      |  |   | 21.1   |  
|                               |  |                |         |   |      |   |         |      |  |   |        |  
|                               |  |                | 100.0   | % |      |   | 100.0   | %    |  |   | 100.0  | %
|                               |  |                |         |   |      |   |         |      |  |   |        |  



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OPNET TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

March 31, 2009,
2008, and 2007



16. Valuation and Qualifying Accounts

The following table sets forth activity in our valuation accounts:



|                                     |  |                              |        |                    |   |               |  |   |                        |   |  |   |       
|------------------------------------ |  | ---------------------------- | ------ | ------------------ | - | ------------- |  | - | ---------------------- | - |  | - | ------
|                                     |  | Balance atBeginningof Period |        | Charges toExpenses |   | Deductions(1) |  |   | Balance atEnd ofPeriod
|                                     |  | (in thousands)              
|Accounts receivable reserve account: |  |                              |        |                    |   |               |  |   |                        |   |  |   |       
|Year ended March 31, 2009            |  | $                            | 154    |                    | $ | 646           |  | $ | (87                    | ) |  | $ | 713   
|Year ended March 31, 2008            |  | $                            | 133    |                    | $ | 96            |  | $ | (75                    | ) |  | $ | 154   
|Year ended March 31, 2007            |  | $                            | 140    |                    | $ | 25            |  | $ | (32                    | ) |  | $ | 133   
|                                     |  |                              |        |                   
|Deferred tax valuation account:      |  |                              |        |                    |   |               |  |   |                        |   |  |   |       
|Year ended March 31, 2009            |  | $                            | 13,289 |                    | $ |              |  | $ |                       |   |  | $ | 13,289
|Year ended March 31, 2008            |  | $                            | 13,289 |                    | $ |              |  | $ |                       |   |  | $ | 13,289
|Year ended March 31, 2007            |  | $                            | 13,289 |                    | $ |              |  | $ |                       |   |  | $ | 13,289



|(1) | Deductions represent write-offs of accounts receivable previously reserved and adjustments to reflect accounts receivable at net realizable value.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------

17. Quarterly Financial Data (Unaudited)



|                                                   |  |                                       |        |               |   |              |  |               |        |  |   |        |  
|-------------------------------------------------- |  | ------------------------------------- | ------ | ------------- | - | ------------ |  | ------------- | ------ |  | - | ------ | -
|Year Ended March 31, 2009                          |  |                                       |        |               |   |              |  |               |        |  |   |        |  
|                                                   |  | FirstQuarter                          |        | SecondQuarter |   | ThirdQuarter |  | FourthQuarter |       
|                                                   |  | (in thousands, except per share data) |       
|Revenue                                            |  | $                                     | 30,094 |               | $ | 32,358       |  | $             | 31,515 |  | $ | 28,912 |  
|Gross profit                                       |  |                                       | 22,238 |               |   | 24,527       |  |               | 23,630 |  |   | 21,200 |  
|Income (loss) from operations                      |  |                                       | 945    |               |   | 3,121        |  |               | 2,832  |  |   | (484   | )
|Net income (loss)                                  |  |                                       | 807    |               |   | 2,034        |  |               | 1,962  |  |   | (71    | )
|Basic net income (loss) per common share           |  | $                                     | 0.04   |               | $ | 0.10         |  | $             | 0.10   |  | $ | (0.00  | )
|Diluted net income (loss) per common share         |  | $                                     | 0.04   |               | $ | 0.10         |  | $             | 0.10   |  | $ | (0.00  | )
|Basic weighted average common shares outstanding   |  |                                       | 20,209 |               |   | 20,278       |  |               | 20,315 |  |   | 20,384 |  
|Diluted weighted average common shares outstanding |  |                                       | 20,444 |               |   | 20,682       |  |               | 20,652 |  |   | 20,384 |  



|                                                   |  |                                       |        |   |               |   |              |  |   |               |   |  |   |        |  
|-------------------------------------------------- |  | ------------------------------------- | ------ | - | ------------- | - | ------------ |  | - | ------------- | - |  | - | ------ | -
|Year Ended March 31, 2008                          |  |                                       |        |   |               |   |              |  |   |               |   |  |   |        |  
|                                                   |  | FirstQuarter                          |        |   | SecondQuarter |   | ThirdQuarter |  |   | FourthQuarter |  
|                                                   |  | (in thousands, except per share data) |       
|Revenue                                            |  | $                                     | 23,332 |   |               | $ | 24,991       |  | $ | 26,017        |   |  | $ | 27,006 |  
|Gross profit                                       |  |                                       | 17,474 |   |               |   | 19,026       |  |   | 19,091        |   |  |   | 19,566 |  
|(Loss) income from operations                      |  |                                       | (59    | ) |               |   | 211          |  |   | (2,346        | ) |  |   | (1,224 | )
|Net income (loss)                                  |  |                                       | 647    |   |               |   | 1,301        |  |   | (1,312        | ) |  |   | (103   | )
|Basic net income (loss) per common share           |  | $                                     | 0.03   |   |               | $ | 0.06         |  | $ | (0.06         | ) |  | $ | (0.00  | )
|Diluted net income (loss) per common share         |  | $                                     | 0.03   |   |               | $ | 0.06         |  | $ | (0.06         | ) |  | $ | (0.00  | )
|Basic weighted average common shares outstanding   |  |                                       | 20,516 |   |               |   | 20,409       |  |   | 20,273        |   |  |   | 20,200 |  
|Diluted weighted average common shares outstanding |  |                                       | 21,180 |   |               |   | 20,926       |  |   | 20,273        |   |  |   | 20,200 |  



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OPNET TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

March 31, 2009,
2008, and 2007



18. Interest and Other Income, Net

The components of interest and other income, net, for fiscal 2009, 2008, and 2007 were as follows:



|                               |  |                |       |   |      |   |       |      |  |   |       |  
|------------------------------ |  | -------------- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | -
|                               |  | 2009           |       |   | 2008 |   |       | 2007 | 
|                               |  | (in thousands) |      
|Interest income                |  | $              | 1,004 |   |      | $ | 3,646 |      |  | $ | 3,825 |  
|Interest expense               |  |                | (25   | ) |      |   | (30   | )    |  |   | (26   | )
|Other income                   |  |                | 267   |   |      |   |      |      |  |   | 38    |  
|Other expense                  |  |                |      |   |      |   | (37   | )    |  |   | (3    | )
|                               |  |                |       |   |      |   |       |      |  |   |       |  
|Interest and other income, net |  | $              | 1,246 |   |      | $ | 3,579 |      |  | $ | 3,834 |  
|                               |  |                |       |   |      |   |       |      |  |   |       |  

19. Subsequent Event

On May 13, 2009, the Board approved a quarterly cash dividend in the amount of $0.09 per share, which will be paid on June 29, 2009 to stockholders of record as of the close of business on June 15,
2009.

The declaration of cash dividends in the future is subject to final determination each quarter by the Board based on a number of
factors, including the Companys financial performance and available cash resources, its cash requirements and alternative uses of cash that the Board may conclude would represent an opportunity to generate a greater return on investment for
the Company. The Board may decide that future dividends will be in amounts that are different than the amount described above or may decide to suspend or discontinue the payment of cash dividends altogether.



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OPNET TECHNOLOGIES, INC.

EXHIBIT INDEX



|               |  |                                                                                                                                                                                                                         |  |                                                                                                                                                                        
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                                                                                             |  | Source                                                                                                                                                                 
|3.1            |  | Third Amended and Restated Certificate of Incorporation                                                                                                                                                                 |  | Incorporated by reference from exhibit 3.2 to the Registrants Registration Statement on Form S-1 (File No. 333-2588).                                                 
|               |  |                                                                                                                                                                                                                        
|3.2            |  | Second Amended and Restated By-Laws of the Registrant, as amended                                                                                                                                                       |  | Incorporated by reference from exhibit 3.2 to the Registrants Annual Report on Form 10-K for the period ended March 31, 2007, as filed with the SEC on June 11, 2007. 
|               |  |                                                                                                                                                                                                                        
|4.1            |  | Specimen common stock certificate                                                                                                                                                                                       |  | Incorporated by reference from exhibit 4.1 to the Registrants Registration Statement on Form S-1 (File No. 333-32588).                                                
|               |  |                                                                                                                                                                                                                        
|4.2            |  | See Exhibits 3.1 and 3.2 for provisions of the Certificate of Incorporation and By-Laws of the Registrant defining the rights of holders of common stock                                                                |  | Incorporated by reference from exhibit 4.2 to the Registrants Registration Statement on Form S-1 (File No. 333-32588).                                                
|               |  |                                                                                                                                                                                                                        
|10.1           |  | 2000 Employee Stock Purchase Plan, as Restated                                                                                                                                                                          |  | Incorporated by reference from to the Schedule 14A as filed with the SEC on June 20, 2008.                                                                             
|               |  |                                                                                                                                                                                                                        
|10.2           |  | Amended and Restated Registration Rights Agreement, dated as of March 30, 2001, by and among the Registrant, Summit Ventures IV, L.P., Summit Investors III, L.P., Alain J. Cohen, Marc A. Cohen
and Make Systems, Inc. |  | Incorporated by reference from exhibit 10.1 to the Registrants Annual Report on Form 10-K for the period ended March 31, 2001 as filed with the SEC on June 29, 2001. 
|               |  |                                                                                                                                                                                                                        
|10.3           |  | Amended and Restated 1993 Incentive Stock Option Plan                                                                                                                                                                   |  | Incorporated by reference from exhibit 10.10 to the Registrants Registration Statement on Form S-1 (File No. 333-32588).                                              
|               |  |                                                                                                                                                                                                                        
|10.4           |  | 2000 Director Stock Option Plan                                                                                                                                                                                         |  | Incorporated by reference from exhibit 10.13 to the Registrants Registration Statement on Form S-1 (File No. 333-32588).                                              
|               |  |                                                                                                                                                                                                                        
|10.5           |  | Non-competition Agreement, dated as of December 31, 1997, between the Registrant and Marc A. Cohen                                                                                                                      |  | Incorporated by reference from exhibit 10.15 to the Registrants Registration Statement on Form S-1 (File No. 333-32588).                                              
|               |  |                                                                                                                                                                                                                        
|10.6           |  | Non-competition Agreement, dated as of December 31, 1997, between the Registrant and Alain J. Cohen                                                                                                                     |  | Incorporated by reference from exhibit 10.16 to the Registrants Registration Statement on Form S-1 (File No. 333-32588).                                              
|               |  |                                                                                                                                                                                                                        
|10.7           |  | Office Lease Agreement, dated May 2000, between the Registrant and Street Retail, Inc.                                                                                                                                  |  | Incorporated by reference from exhibit 10.21 to the Registrants Annual Report on Form 10-K for the period ended March 31, 2001 as filed with the SEC on June 29, 2001.
|               |  |                                                                                                                                                                                                                        
|10.8           |  | Loan Agreement, dated June 10, 2000, between the Registrant and Bank of America, N.A.                                                                                                                                   |  | Incorporated by reference from exhibit 10.22 to the Registrants Annual Report on Form 10-K for the period ended March 31, 2002.                                       



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|               |  |                                                                                                                                                       |  |                                                                                                                                                                                  
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                           |  | Source                                                                                                                                                                           
|10.9           |  | Office Lease Agreement, dated December 2006 between the Registrant and Street Retail, Inc.                                                            |  | Incorporated by reference from exhibit 10.12 to the Registrants Annual Report on Form 10-K for the period ended March 31, 2008 as filed with the SEC on June 9,
2008.           
|               |  |                                                                                                                                                      
|10.10          |  | Amended and Restated 2000 Stock Incentive Plan                                                                                                        |  | Incorporated by reference from exhibit 10.1 to the Registrants Quarterly Report on Form 10-Q for the period ended September 30, 2001 as filed with the SEC on November 14,
2001.
|               |  |                                                                                                                                                      
|10.11          |  | Loan Modification Agreement, dated June 4, 2008, between Registrant and Bank of America, N.A.                                                         |  | Incorporated by reference from exhibit 10.14 to the Registrants Annual Report on Form 10-K for the period ended March 31, 2008 as filed with the SEC on June 9, 2008.           
|               |  |                                                                                                                                                      
|10.12*         |  | Form of Restricted Stock Agreement                                                                                                                    |  | Exhibit 10.12 to this Annual Report on Form 10-K.                                                                                                                                
|               |  |                                                                                                                                                      
|10.13          |  | Form of Stock Option Agreement                                                                                                                        |  | Incorporated by reference from exhibit 10.2 to the Registrants Current Report on Form 8-K for as filed with the SEC on December 23, 2004.                                       
|               |  |                                                                                                                                                      
|*21            |  | Subsidiaries of the Registrant                                                                                                                        |  | Exhibit 21 to this Annual Report on Form 10-K.                                                                                                                                   
|               |  |                                                                                                                                                      
|*23            |  | Consent of Deloitte & Touche LLP                                                                                                                      |  | Exhibit 23 to this Annual Report on Form 10-K.                                                                                                                                   
|               |  |                                                                                                                                                      
|*31.1          |  | Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended                            |  | Exhibit 31.1 to this Annual Report on Form 10-K.                                                                                                                                 
|               |  |                                                                                                                                                      
|*31.2          |  | Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended                            |  | Exhibit 31.2 to this Annual Report on Form 10-K.                                                                                                                                 
|               |  |                                                                                                                                                      
|*32.1          |  | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |  | Exhibit 32.1 to this Annual Report on Form 10-K.                                                                                                                                 
|               |  |                                                                                                                                                      
|*32.2          |  | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |  | Exhibit 32.2 to this Annual Report on Form 10-K.                                                                                                                                 



|* | filed herewith
|- | --------------



83