10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended: June 30, 2007

Commission File Number: 000-30027

Moldflow Corporation

(Exact name of registrant as specified in its charter)

Delaware	04-3406763
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)

492 Old Connecticut Path, Suite 401 Framingham, MA 01701

(Address of principal executive offices, including zip code)

(508) 358-5848

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of exchange on which registered
Common Stock, par value $.01 per share		The NASDAQ Global Select Market LLC
Preferred Stock Purchase Rights		The NASDAQ Global Select Market LLC

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 o     No þ

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 o     No þ

Indicate by check mark whether the registrant has (i) 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 (ii) has been subject to such filing requirements for the past 90 days.  Yes þ     No o

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 the 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.  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o     Accelerated filer þ     Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o     No þ

The aggregate market value of our voting and non-voting common stock held by non-affiliates is $156,568,232 based on the last reported sale price of our common stock on the NASDAQ Global Select Market LLC on September 7, 2007. On September 7, 2007, there were 11,902,125 shares of our common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Company’s definitive Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A in connection with the 2007 Annual Meeting of Stockholders to be held on November 1, 2007 are incorporated by reference into Part II and Part III of this Form 10-K.

MOLDFLOW CORPORATION

ANNUAL REPORT ON FORM 10-K FOR FISCAL YEAR ENDED JUNE 30, 2007

TABLE OF CONTENTS

		Page
Part I.
Item 1.	Business	2
Item 1A.	Risk Factors	6
Item 1B.	Unresolved Staff Comments	11
Item 2.	Properties	11
Item 3.	Legal Proceedings	12
Item 4.	Submission of Matters to a Vote of Security Holders	12
Part II.
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	12
Item 6.	Selected Financial Data	14
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	29
Item 8.	Financial Statements and Supplementary Data	30
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosures	31
Item 9A.	Controls and Procedures	31
Part III.
Item 10.	Directors, Executive Officers and Corporate Governance	33
Item 11.	Executive Compensation	33
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	33
Item 13.	Certain Relationships and Related Transactions, and Director Independence	33
Item 14.	Principal Accountant Fees and Services	33
Part IV.
Item 15.	Exhibits and Financial Statement Schedules	34
Exhibit Index		34
Signatures		37
Schedule II. Valuation and Qualifying Accounts		38
Index to Consolidated Financial Statements		F-1
Notes to Consolidated Financial Statements		F-6
Report of Independent Registered Public Accounting Firms		F-30
Ex-10.24 Change of Control Agreement - Greg W. Magoon
Ex-10.25 Transition Agreement - Christopher L. Gorgone
Ex-10.26 Employment Agreement - G. Fred Humbert
Ex-21.1 Subsidiaries of the Registrant
Ex-23.1 Consent of Grant Thornton LLP
Ex-23.2 Consent of PricewaterhouseCoopers LLP
Ex-31.1 Section 302 Certification of the Chief Executive Officer
Ex-31.2 Section 302 Certification of the Chief Financial Officer
Ex-32.1 Section 906 Certification of the Chief Executive Officer
Ex-32.2 Section 906 Certification of the Chief Financial Officer

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This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and 21E of the Securities Exchange Act of 1934, as amended. You can identify these statements by forward-looking words such as “may,” “will,” “expect,” “anticipate,” “believe,” “estimate” and “continue” 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 condition, 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 accurately predict or control and that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Investors are cautioned that all forward-looking statements involve risks and uncertainties, and actual results may differ materially from those discussed as a result of various factors, including those factors described in “Risk Factors” beginning on page 6. Readers should not place undue reliance on our forward-looking statements, and we assume no obligation and do not intend to update any forward-looking statements.

References to “Company” and “we,” “us,” “our”, and similar pronouns refer to Moldflow Corporation and its consolidated subsidiaries.

PART I

Item 1.   Business

Overview

Moldflow Corporation is a Delaware corporation, incorporated in 1997. Our business is focused on providing computer aided engineering (“CAE”) software solutions that enable plastics designers and manufacturers to predict and solve manufacturing related challenges prior to production. Our solutions and services help companies manufacture less expensive and more reliable products by increasing the effectiveness of their product and mold designs as well as improving efficiencies across their manufacturing processes.

We develop, market and support a broad range of CAE software applications. Our products are used by global companies involved in the development and production of plastic parts to speed their products to market, decrease manufacturing costs, improve production through greater reliability and quality, and reduce costly design and manufacturing errors. We believe we have the widest and most advanced range of software solutions and proprietary technologies to address the challenges that arise in each phase of the process of designing and manufacturing injection molded plastic parts. Our products are complemented by our experienced service and technical support organizations, as well as resellers and other strategic partners who provide consulting and ancillary product offerings to customers worldwide.

On June 30, 2007, we completed the sale of substantially all of the assets of our Manufacturing Solutions (“MS”) division, including our Altanium, Shotscope and Celltrack product lines. The Moldflow Plastics Xpert (“MPX”) software product, which had been previously part of the MS division, was retained by Moldflow as this software-focused product line was more closely aligned with our Design Analysis Solutions (“DAS”) business. In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” we are reporting the MS division as a discontinued operation in the consolidated financial statements for all periods presented. See Note 3 to our consolidated financial statements, Discontinued Operations, for further discussion of the MS division divestiture. Unless indicated otherwise, both current and historical amounts provided throughout this Form 10-K relate solely to our continuing operations.

Available Information

Financial and other information about us is available on our website is located at www.moldflow.com. We make available, free of charge, and as soon as reasonably practicable, in the section captioned “Investors — SEC Filings,” our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports after we electronically file such material with or furnish it to the Securities and Exchange Commission (“SEC”). Our reports filed with the SEC are also available at the SEC’s website at www.sec.gov, which

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also contains reports, proxy statements and other information regarding issuers that file electronically with the SEC. Information on our website is not a part of, or incorporated by reference into, this Annual Report on Form 10-K.

Our Products

Participants in all aspects of the creation process of plastic parts, including part designers, mold designers, manufacturing engineers and injection molding machine operators, use our products. Our products provide functionality across a broad spectrum of the discrete product development and manufacture processes. Our products help part and mold designers and plastics engineers eliminate much of the guesswork involved in the design of parts and molds and help them design products that will be manufactured at lower cost and correctly the first time.

We believe our products are the world’s most widely used CAE products in the plastics injection molding industry because they address the broadest range of manufacturing issues and design geometry types. Our solutions consist of a scalable set of products with capabilities that include entry-level part and mold design validation as well as in-depth design and process optimization, allowing users to achieve optimal time to market and part quality at the lowest possible cost.

Moldflow Plastics Advisers^®

Our Moldflow Plastics Advisers (“MPA^®”) series provides part and mold designers with applications that permit them to quickly check the ultimate manufacturability of their designs at an early stage in the design process. MPA allows companies to consider manufacturing constraints at the same time as form, fit and function. MPA products are designed to be easy to learn and use and do not require extensive training or plastics expertise. MPA users can work directly from 3D solid computer-aided design (“CAD”) models, saving significant preparation time. Intuitive result displays and detailed design advice help users to quickly optimize part and mold designs. The MPA series consists of two primary products, Part Adviser^tm and Mold Adviser^tm. Part Adviser is a user-friendly application, which enables product designers without expertise in designing plastic parts to address key manufacturing concerns in the preliminary design stage. Mold Adviser extends the capabilities of Part Adviser to allow users to create and simulate plastic flow through single cavity, multi-cavity and family molds. Optional Mold Adviser add-on modules allow users to simulate more phases of the injection molding process and evaluate molded part performance and cooling circuit design. Both of these products eliminate the need to design plastic parts and molds through trial and error efforts, enabling the designer to create product and mold designs more quickly and efficiently.

Moldflow Plastics Insight^®

The Moldflow Plastics Insight (“MPI^®”) series of products contains our broadest set of predictive capabilities for injection molding and is typically used by highly specialized design engineers. The MPI products are modular and are designed to address the most important physical aspects of injection molding such as plastics flow, cooling time and warpage; as well as specialized injection molding processes such as reactive molding, gas injection molding and microchip encapsulation. Many of our customers invest in multiple modules to solve the full range of problems they may encounter when taking a plastic part from design to manufacture. All applications in the MPI series use an integrated environment, which permits users to easily import all of the most commonly used types of computer-generated models, select and compare material grades, prepare models for analysis, sequence a series of analysis jobs, undertake advanced analysis post-processing and enhance collaboration with team members. In these applications, we believe that we offer the broadest integration with existing CAD products in the plastics CAE industry.

Moldflow Plastics Xpert

Our Moldflow Plastics Xpert (“MPX^®”) product is integrated with injection molding machines to optimize their operation and to monitor and control the manufacturing process. MPX addresses common manufacturing issues such as machine set-up, process optimization and production part quality monitoring and control. Results

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generated by our MPA and MPI products can be input directly into our MPX product to reduce machine set-up time and enhance the efficiency of the injection molding machine.

Major Customers

No single customer accounted for more than 10% of our revenue during fiscal 2007, 2006 or 2005.

Sales and Marketing

As of June 30, 2007, our direct sales organization consisted of a total of 50 sales representatives. Our sales representatives operated out of offices located in China, France, Germany, Italy, Japan, Korea, the Netherlands, Spain, Sweden, Taiwan, India, the United Kingdom, Singapore and the United States. See Note 20 to our consolidated financial statements, Geographic Information. In fiscal 2007, 2006 and 2005, approximately 81%, 82% and 81%, respectively, of our revenue from customers was attributed to countries outside of the United States. Sales of our products may be subject to seasonal variations, particularly in our first fiscal quarter and, to a lesser extent, our third fiscal quarter, in many of the markets in which we sell our products.

To augment our direct sales force we also sell our products through marketing and distribution arrangements with third-party value-added resellers and software vendors. We have agreements with several design software vendors, including Parametric Technology Corporation, Unigraphics Solutions and SolidWorks, a subsidiary of Dassault Systems, to either include our products as part of an integrated application in their solid modeling design systems or resell certain of our products.

Backlog

We generally ship our products within 30 days of acceptance of a customer order and execution of the appropriate license documentation. The amount of unshipped product orders vary from time to time and the amount of such orders at the end of any particular period is not material to our business.

Customer Support and Other Services

Customer Support and Training

We provide customer training on our products and technical support to our customers, which they may access twenty four hours a day. Our customers may access customer support either through our telephone hotline or our self-service website. In addition, our product development staff is available to solve more complex problems that our customer support personnel are unable to solve quickly. We have an established curriculum of training courses provided by us or by our partners, leading to certification in the use of our products.

Consulting Services

In addition to traditional customer support services, we also provide consulting services to customers who lack employees with the expertise necessary to take advantage of the full capability of our products. We employ design engineers who use our products on behalf of our customers to optimize their part design and production processes. We view providing consulting services as complementary to our core business of selling sophisticated software solutions. Accordingly, we provide consulting services typically in cases where we believe that providing these services will help build relationships with future customers for our products.

Material Testing Services

Our material testing group provides testing services to our customers who are seeking accurate, reliable material data on new or existing grades of polymers, measured under a wide range of practical molding conditions. Our proprietary material database contains information on more than 8,100 plastic materials. We conduct material testing at our facilities located near Melbourne, Australia, and in Ithaca, New York, both of which utilize state-of-the-art equipment, including injection molding machines. The research and testing conducted at these facilities provides essential data for our full line of software applications.

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Competition

The CAE market, into which our products are sold is highly competitive. We compete with many companies engaged in selling software solutions to companies involved in product development and manufacturing. Our products face competition from CAD and CAE companies, materials vendors and independent engineering consultants. In addition, new competitors may become evident as we introduce new products into the marketplace.

The entrance of new competitors would likely intensify competition in all or a portion of the markets in which we compete. Some of our current and possible future competitors have greater financial, technical, marketing and other resources than we do, and some have well-established relationships with our current and potential customers. Competitors may form alliances and rapidly acquire significant market share. Moreover, competition may increase as a result of software industry consolidation.

Research and Development

Our product development strategy focuses on on-going development and innovation of new technologies to increase our customers’ productivity and provide solutions that our customers can integrate into their existing environments. Our product development activities take place in our research centers located in the United States, Australia and the United Kingdom. We have linked the information systems of each of these facilities to provide a continuous development environment, enabling product development to be undertaken twenty-four hours per day.

In addition to our internal product development efforts, we fund or participate in a wide assortment of external research and development projects, often conducted by world-leading experts in their fields. In many cases, through these projects, we gain access to fundamental research with comprehensive experimental results. Often the researchers agree to restrictions on publishing rights in order to pursue topics of mutual interest.

As of June 30, 2007, our product development staff had 50 employees, many of whom hold advanced degrees and have industry experience in engineering, mathematics, computer science or related disciplines. In fiscal 2007, 2006 and 2005, our research and development expenses were $8.0 million, $7.4 million and $7.3 million, respectively, which is net of certain software development costs required to be capitalized under generally accepted accounting principles. Costs of $340,000, $496,000 and $201,000 were capitalized in fiscal 2007, 2006 and 2005, respectively. See Note 6 to our consolidated financial statements, Software Development Costs, for a discussion of our treatment of software development costs. Continued investment in research and development is a key component of our strategy and is required in order for us to remain competitive.

Proprietary Rights

Our software products and trademarks, including our company name, product names and logos, are proprietary. We rely on a combination of patent protection, trade secrets, copyright and trademark laws, license agreements, nondisclosure and other contractual provisions and technical measures to protect the proprietary technology contained in our products. Despite these measures, there can be no assurance that the laws of all relevant jurisdictions will afford adequate protection to our products and other intellectual property.

The software industry is characterized by frequent litigation regarding copyright, patent and other intellectual property rights. While we have not, to date, had any material claims of this type asserted against us, there can be no assurance that someone will not assert such claims against us with respect to existing or future products or other intellectual property or that, if asserted, we would prevail in such claims. In the event a lawsuit of this type is filed, it could result in significant expense to us and divert the efforts of our technical and management personnel, whether or not we ultimately prevail.

Due to the rapid pace of innovation within our industry, factors such as the technological and creative skills of our personnel are as important to establishing and maintaining a technology leadership position within the industry as are the various legal protections surrounding our technology. We require certain employees and consultants to sign a confidentiality and non-competition agreement. Under these agreements, our employees agree not to disclose trade secrets or confidential information and agree not to engage in or be connected with any business that is competitive with our business while employed by us, and in some cases, for specified periods thereafter. Despite these precautions, misappropriation of our technology may occur. In addition, we believe that software piracy is an

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ongoing problem to us, and many other software vendors. We are unable to measure the impact that this has on our business. Further, patent, trademark, copyright and trade secret protection may not be available for our products in every country.

There can be no assurance that third parties will not assert infringement claims against us in the future. Certain of our products also contain technology developed and licensed from third parties. We may likewise be susceptible to infringement claims with respect to these third-party technologies.

Compliance with Environmental Provisions

Our capital expenditures, earnings and competitive position are not materially affected by compliance with federal, state and local environmental provisions which have been enacted or adopted to regulate the distribution of materials into the environment.

Employees

As of June 30, 2007, we had 267 employees associated with our continuing operations, 86 of whom resided in the United States, 51 of whom resided in Australia and 130 of whom resided in other countries. None of our employees are subject to a collective bargaining agreement. We consider our relationship with our employees to be good.

Item 1A.   Risk Factors

You should carefully consider the following risks and uncertainties prior to making an investment in our common stock. The following risks and uncertainties may also cause our actual results to differ materially from those contained in or predicted by our forward-looking statements.

We make estimates in determining our worldwide income tax provision.

We make significant estimates in determining our worldwide income tax provision. These estimates are subject to many transactions, calculations and proceedings where the ultimate tax outcome is uncertain. Although we believe that our estimates are reasonable, the final outcome of tax matters and proceedings could be different than the estimates reflected in the income tax provision and accruals. Such differences could have a material impact on income tax expense and net income in the period in which such determination is made.

In the first quarter of fiscal 2005, one of our Australian subsidiaries became subject to an audit by the Australian Tax Office (“ATO”). The amount of liabilities assessed through June 30, 2007 by the ATO, including tax penalties and interest, is approximately $6.6 million (A$7.8 million). These liabilities represent the Company’s maximum potential exposure and do not include the benefits of the related tax effects of any such payments or tax benefits that may be available in other tax years, both of which may serve to mitigate our total expense that would be recorded in our results of operations. Payments of $3.3 million (A$3.9 million) have been made to date with respect to these assessed amounts. These payments have been recorded as current assets in our balance sheet as we believe that these matters will be resolved in a period of not more than twelve months. We believe that the positions on our tax returns have merit and will ultimately be sustained. Accordingly, we have not recorded any liabilities related to these matters. See Provision for Income Taxes in Management’s Discussion and Analysis for additional information. We may continue to make cash payments with respect to these matters during fiscal 2008.

In the event that such audit is resolved in a manner unfavorable to Moldflow or in the event that we are required to record a liability related to these matters in our consolidated balance sheet or make further cash payments, there would likely be a material adverse impact on our results of operations. In addition, our effective tax rate for fiscal 2008 may be materially and adversely impacted in the event that we are required to record a liability with respect to these matters, which would have a material adverse impact on our results of operations.

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Any future mergers, acquisitions and strategic relationships may result in lost revenue caused by business disruptions and missed opportunities caused by the distraction of our management.

We may engage in acquisitions and strategic relationships in the future. If we merge with or acquire another company, we may only receive the anticipated benefits if we successfully integrate the acquired business into our existing business in a timely and non-disruptive manner. This will require us to devote a significant amount of time, management and financial resources. Even with this investment of management and financial resources, the acquisition of another business or strategic relationship may not produce the revenues, earnings or business synergies that we anticipated. If we fail to integrate the acquired business effectively or if key employees of that business leave, the anticipated benefits of the acquisition would be jeopardized. The time, capital, management and other resources spent on an acquisition that fails to meet our expectations could cause our business and financial condition to be materially and adversely affected. In addition, acquisitions can involve charges and amortization of significant amounts of acquired identifiable intangible assets that could adversely affect our results of operations.

A general economic slowdown, particularly in our end markets, may adversely impact our results.

The demand for our products is largely driven by the demand for the products in our primary end markets. Many of these end markets, particularly the automotive, telecommunications and electronics industries, experienced severe economic declines which significantly and adversely affected our business in past years. While general economic trends have improved in some geographic markets, a general economic slowdown could materially and adversely affect us by decreasing our revenue as compared to prior years, or by lowering our revenue growth.

Our quarterly operating results are subject to significant fluctuations and, as a result, period-to-period comparisons of our results of operations are not necessarily meaningful and should not be relied upon as indicators of future performance.

We have experienced significant historical fluctuations in our results of operations on a quarterly basis. We expect to continue to experience significant fluctuations in our future quarterly results of operations due to a variety of factors, many of which are outside of our control, including:

•  seasonal slowdowns, in particular, in our first and, to a lesser extent, our third fiscal quarter, in many of the markets in which we sell our products,

•  the timing and magnitude of capital expenditures, including costs relating to the expansion of our operations and infrastructure, and planned program spending required for major marketing initiatives or tradeshows,

•  introductions of new services or enhancements by us and our competitors and corresponding changes in pricing policies,

•  our increased use of third parties such as distributors, OEM partners and resellers which may lessen the control we have over revenue and earnings during any particular period,

•  the timing and magnitude of our tax expense, resulting from the globally distributed nature of our selling and research and development operations, and certain on-going tax audits or investigations by various local tax authorities that may lead to the loss of certain planned-for tax benefits, or increased taxable income in certain jurisdictions that may not be offset by losses in other tax jurisdictions,

•  fluctuations in our tax rate from quarter to quarter due to the impact of discrete events, including the settlement of claims, the management of audits and other inquiries, the acquisition of other companies or other events,

•  the impact of expensing share-based compensation,

•  currency and exchange rate fluctuations,

•  timing and integration of acquisitions,

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•  continuing costs of compliance with the Sarbanes-Oxley Act of 2002, and

•  restructuring charges taken during any fiscal year.

In addition, like many software companies, we usually record a larger percentage of our quarterly revenue in the third month of the fiscal quarter. Accordingly, our quarterly results are often difficult to predict prior to the conclusion of the quarter.

If we experience delays in introducing new products or if our existing or new products do not achieve market acceptance, we may lose revenue.

Our industry is characterized by:

•  rapid technological advances,

•  evolving industry standards,

•  changes in end-user requirements,

•  intense competition,

•  technically complex products,

•  frequent new product introductions, and

•  evolving offerings by product manufacturers.

We believe our future success will depend, in part, on our ability to anticipate or adapt to these factors and to offer, on a timely basis, products that meet customer demands. For example, the introduction of new products and services embodying new technologies and the emergence of new industry standards can render our existing products obsolete. The development of new or enhanced products is a complex and uncertain process, requiring the anticipation of technological and market trends. We may experience design, manufacturing, marketing and other difficulties that could delay or prevent our release of new products and enhancements, and result in unexpected expenses.

Our growth and profitability will depend upon our ability to expand the use and market penetration of our existing product lines as well as new products we introduce. Market acceptance of our products will depend, in part, on our ability to demonstrate the cost- effectiveness, ease of use and technological advantages of our products over competing products.

If we determine that any of our goodwill is impaired, we would be required to take a charge to earnings, which could have a material adverse effect on our results of operations.

If we determine that any of our goodwill is impaired, we would be required to reduce the value of that asset or to write it off completely by taking a related charge to earnings. If we are required to write down or write off all or a portion of our goodwill, or if financial analysts or investors believe we may need to take such action in the future, our stock price and results of operations could be materially and adversely affected. As of June 30, 2007, the carrying value of the goodwill of the Company was $6.5 million.

Our net income and earnings per share have been and will continue to be significantly reduced as a result of the requirement that we record compensation expense for shares issued under our stock plans.

We use stock options and restricted stock as a key component of our employee compensation packages. We believe that stock options and restricted stock provide an incentive to our employees to maximize long-term shareholder value and can encourage valued employees to remain with the Company. Our adoption of Statement of Financial Accounting Standards (“SFAS”) No. 123(R), “Shared-Based Payment,” requires us to account for share-based compensation granted under our stock plans using a fair value-based model, such as Black-Scholes option-pricing model, on the grant date and to record the value of those grants as share-based compensation expense. As a result, our net income and earnings per share have been and will continue to be significantly reduced. Our results may reflect a loss in future periods. We currently calculate share-based compensation expense using the Black-

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Scholes option-pricing model, which requires the input of highly subjective assumptions and does not necessarily provide a reliable measure of the fair value of our stock options. Assumptions used under the Black-Scholes option-pricing model that are highly subjective include the expected stock price volatility and expected life of an option.

If we become subject to intellectual property infringement claims, we could incur significant expenses and we could be prevented from offering specific products or services.

Our products include proprietary intellectual property. We may become subject to claims that we infringe on the proprietary rights of others. In the United States and elsewhere, a significant number of software and business method patents have been issued over the past decade and the holders of these patents have been actively seeking out potential infringers. If any element of our products or services violates third-party proprietary rights, we might not be able to obtain licenses on commercially reasonable terms to continue offering our products or services without substantial re-engineering and any effort to undertake such re-engineering might not be successful. In addition, even if the claim is invalid, any claim of infringement could cause us to incur substantial costs defending against the claim and could distract our management from our business. Any judgment against us could require us to pay substantial damages and could also include an injunction or other court order that could prevent us from offering our products and services.

We may lose sales if we are unable to protect important intellectual property.

Our ability to compete effectively against other companies in our industry will depend, in part, on our ability to protect our proprietary rights in our technology. We may be unable to maintain the proprietary nature of our technology. While we have attempted to safeguard and maintain our proprietary rights, we do not know whether we have been or will be completely successful in doing so.

We face the following risks in protecting our intellectual property:

•  we cannot be certain that our pending United States and foreign patent applications will result in issued patents or that the claims allowed are or will be sufficiently broad to protect our technology,

•  third parties may design around our patented technologies or seek to challenge or invalidate our patented technologies,

•  patents of others may have an adverse effect on our ability to do business,

•  the contractual provisions that we rely on, in part, to protect our trade secrets and proprietary knowledge may be breached, and we may not have adequate remedies for any breach and our trade secrets and proprietary information may be disclosed to the public,

•  our trade secrets may become known without breach of such agreements or may be independently developed by competitors,

•  foreign countries, including some of those in which we conduct business, may reduce or limit the protection of our intellectual property rights and software piracy, particularly in certain countries in Asia, may cause us to lose revenue in those countries or customers with worldwide operations, and

•  the cost of enforcing our intellectual property rights, including actions currently on going, may reduce our future profitability.

Our financial condition or results of operations may be adversely affected by international business risks.

The majority of our employees, including sales, support and research and development personnel, are located outside of the United States. Similarly, the majority of our revenue is derived from customers outside the United States and certain intellectual property is owned by subsidiary companies located outside the United States.

Conducting business outside of the United States is subject to numerous risks, including:

•  decreased liquidity resulting from longer accounts receivable collection cycles typical of certain foreign countries,

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•  decreased revenue on foreign sales resulting from possible foreign currency exchange and conversion issues,

•  lower productivity resulting from difficulties managing our sales, support, and research and development operations across many countries,

•  decreased earnings based on changes in tax regulations in foreign jurisdictions or the timing of required tax payments in foreign jurisdictions that may not yet be offset by tax benefits arising from losses in other jurisdictions,

•  lost revenue resulting from difficulties associated with enforcing agreements and collecting receivables through foreign legal systems,

•  interruptions of our operations due to political and social conditions of the countries in which we do business,

•  lost revenue resulting from the imposition by foreign governments of trade protection measures, and

•  higher cost of sales resulting from import or export licensing requirements.

We have more limited financial and other resources than many of our competitors and potential competitors and may be unable to compete successfully against them.

We operate in a highly competitive environment and may not be able to successfully compete. Companies in our industry and entities in similar industries could decide to focus on the development of solutions that optimize discrete product development. Many of these entities have substantially greater financial, research and development, manufacturing and marketing resources than we do. Increased competition may result in price reductions, reduced profitability and loss of market share.

Disruption of operations at our development facilities could interfere with our product development and production cycles.

A significant portion of our computer equipment, source code and personnel, including critical resources dedicated to research and development, are presently located at operating facilities in Australia, the United States and Europe. The occurrence of a natural disaster or other unanticipated catastrophe at any of these facilities could cause interruptions in our operations and services. Extensive or multiple interruptions in our operations at our development facilities could severely disrupt our operations.

Our stock price is highly volatile and our stock price could experience substantial declines and our management’s attention may be diverted from more productive tasks.

The stock market has experienced extreme price and volume fluctuations. In addition, the per share price of our common stock has experienced significant volatility since we have been a public company. Many factors that may cause the market price for our common stock to decline, include the following:

•  revenues and operating results failing to meet the expectations of securities analysts or investors,

•  downward revisions in securities analysts’ estimates or changes in general market conditions,

•  changes in our senior management personnel,

•  sale of shares of our common stock by insiders or affiliated persons,

•  technological innovations by competitors or in competing technologies,

•  a decrease in the demand for our common stock,

•  investor perception of our industry or our prospects, and

•  general technology or economic trends.

In the past, companies that have experienced volatility in the market price of their stock have been the subjects of securities class action litigation. We may be involved in securities class action litigation in the future. Such

10

litigation often results in substantial costs and a diversion of management’s attention and resources and could harm our business, financial condition and results of operations.

Purchase price adjustments related to the disposition of our Manufacturing Solutions division may have a material, adverse impact on our continuing results of operations and on our Net Income (Loss).

The net result of the Manufacturing Solutions division’s operations has been included in our net income (loss) for each period during which it was held as discontinued operations. During fiscal 2007, this resulted in a net loss for the fiscal period, as net income from our continuing operations was fully offset by a net loss from discontinued operations. A portion of the purchase price for the assets of the Manufacturing Solutions division was placed in escrow for a period of one year, from the closing of the transaction. In the event that the Company were not to recover the escrowed portion of the purchase price it could result in a material adverse impact on our financial statements and results of operations. There is no assurance that we will be successful in retaining the funds being held in escrow.

Our use of third-party and open source software could impose limitations on our ability to commercialize our products.

We incorporate both third party and “open source” software and code into many of our products. Although we actively monitor our use of open source in our development efforts, the terms of many open source licenses have not been interpreted by U.S. courts. Therefore, it is possible that such licenses could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to sell and market our products based on our use of open source. While we believe we have complied with our obligations under the various applicable licenses for open source software to avoid subjecting our proprietary products to conditions we do not intend, in the event the copyright holder of any open source software were to successfully establish in court that we had not complied with the terms of a license for a particular work, we could be required to release the source code of that work to the public, stop distribution of that work and/or recall our products that include that work. Therefore, we could be required to seek licenses from third parties in order to continue offering our products; to make generally available, in source code form, proprietary code that links to certain open source modules; to re-engineer our products; or to recall and/or discontinue the sale of our products in the event re-engineering cannot be accomplished on a timely basis, any of which could harm our business, operating results and financial condition.

Item 1B.   Unresolved Staff Comments

None.

Item 2.   Properties

We primarily operate in leased facilities. We lease 18,000 square feet of office space located in Framingham, Massachusetts pursuant to a lease that expires in March 2012. This facility serves as our corporate headquarters. Personnel located at this facility include members of our senior management team, technical support personnel, product marketing personnel, sales personnel, and finance and administration personnel.

We own an 18,100 square foot office building near Melbourne, Australia. Personnel located at our Melbourne facility include members of our software development and research team, some of our materials testing personnel, sales personnel, as well as finance and administrative staff.

In addition, we lease 18,000 square feet of office space located in Ithaca, New York pursuant to a lease that expires in March 2012. This facility primarily serves as our North American product development and testing lab.

We also lease office space in other locations in which we do business. The aggregate lease expenses of our continuing operations were $2.0 million. For more information about our lease commitments, see Note 19 to our consolidated financial statements, Contingencies, Commitments and Guarantor Arrangements.

11

Item 3.   Legal Proceedings

From time to time, we may be involved in various claims and legal proceedings arising in the ordinary course of business. We are not currently a party to any such claims or proceedings which, if decided adversely to us, would either individually or in the aggregate have a material adverse effect on our business, financial condition or results of operations.

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

None.

PART II

Item 5.   Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock (symbol “MFLO”) began trading on the Nasdaq Stock Market, LLC (“NASDAQ”) on March 28, 2000 and currently trades on the Nasdaq Global Select Market (formerly, the Nasdaq National Market). Prior to this date, there was no established public trading market for the Company’s common stock.

On September 4, 2007, the last reported sale price of our common stock on NASDAQ was $16.32 per share and there were approximately 73 holders of record of our common stock.

We have never declared or paid any cash dividends on our common stock. We currently intend to retain our future earnings, if any, to finance the expansion of our business and do not expect to pay any cash dividends in the foreseeable future.

Information regarding our equity compensation plans required by this item is incorporated by reference to the information appearing under the caption “Equity Compensation Plan Information” in our definitive Proxy Statement for the 2007 Annual Meeting of Stockholders.

The following table sets forth the quarterly high and low closing sales prices per share reported on NASDAQ for our last two fiscal years.

	2007				2006
	High		Low		High		Low
First quarter	$	12.33	$	11.31	$	16.48	$	12.90
Second quarter	$	13.95	$	11.90	$	15.51	$	13.51
Third quarter	$	15.03	$	13.37	$	15.70	$	12.70
Fourth quarter	$	23.10	$	14.82	$	15.80	$	11.60

The May 2006 stock repurchase program allowing the Company to repurchase up to 600,000 shares of common stock was completed as of March 31, 2007. As authorized by the plan, the shares were purchased through the open market, in a manner consistent with applicable securities laws and regulations. The Company did not repurchase shares on the open market in the fourth quarter of fiscal 2007.

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Performance Graph

Set forth below is a line graph comparing the percentage change in the cumulative total shareholder return on the Company’s Common Stock, based on the market price of the Company’s Common Stock, with the total return of companies included within the NASDAQ National Market Composite Index and the NASDAQ Computer and Data Processing Index for the period commencing June 30, 2002 and ending June 30, 2007. The calculation of total cumulative return assumes a $100 investment in the Company’s Common Stock, the NASDAQ National Market Composite Index and the NASDAQ Computer and Data Processing Index on June 30, 2002 and the reinvestment of all dividends.

The information contained in the Performance Graph shall not be deemed to be “soliciting material” or “filed” with the SEC or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that we specifically incorporate it by reference into a document filed under the Securities Act or the Exchange Act.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*

Among Moldflow Corporation, The NASDAQ Composite Index
And The NASDAQ Computer & Data Processing Index

	6/02		6/03		6/04		6/05		6/06		6/07
Moldflow Corporation		100.00		113.71		137.56		164.59		148.60		278.93
NASDAQ Composite		100.00		109.91		139.04		141.74		155.82		191.32
NASDAQ Computer & Data Processing		100.00		105.06		126.04		130.56		136.58		170.32

* $100 invested on June 30, 2002 in stock or index-including reinvestment of dividends.
Our fiscal year ends on June 30.

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Item 6.   Selected Financial Data

	Years Ended June 30,
	2007			2006			2005			2004			2003
	(In thousands, except per share amounts)
Consolidated Statement of Operations Data(1)(2):
Revenue:
Product	$	28,403		$	24,433		$	24,163		$	18,780		$	17,259
Services		27,450			24,523			23,388			20,450			19,366
Total revenue		55,853			48,956			47,551			39,230			36,625
Costs and operating expenses:
Cost of product revenue		1,545			1,511			1,340			1,428			2,964
Cost of services revenue		4,536			4,309			3,867			2,582			1,210
Research and development		8,026			7,390			7,307			5,202			5,650
Selling and marketing		20,436			17,697			15,753			15,306			18,638
General and administrative		14,042			11,893			11,060			6,795			7,242
Restructuring charges		—			1,247			—			—			405
Amortization of acquired intangible assets		—			—			83			224			605
Total costs and operating expenses		48,585			44,047			39,410			31,537			36,714
Income (loss) from continuing operations		7,268			4,909			8,141			7,693			(89	)
Interest income, net		3,250			2,571			1,663			1,212			1,089
Other income (loss), net		218			162			70			(15	)		(198	)
Income from continuing operations before income taxes		10,736			7,642			9,874			8,890			802
Provision for income taxes		2,187			2,381			1,604			2,220			920
Net income from continuing operations		8,549			5,261			8,270			6,670			(118	)
Net loss from discontinued operations, net of income taxes		(11,469	)		(4,260	)		(1,513	)		(4,042	)		—
Net loss on disposal of discontinued operations, net of income taxes		(869	)		—			—			—			—
Net income (loss)	$	(3,789	)	$	1,001		$	6,757		$	2,628		$	(118	)
Income (loss) from continuing operations per common share — basic	$	0.76		$	0.47		$	0.77		$	0.65		$	(0.01	)
Income (loss) from continuing operations per common share — diluted	$	0.73		$	0.44		$	0.71		$	0.62		$	(0.01	)
Net income (loss) per common share — basic	$	(0.34	)	$	0.09		$	0.63		$	0.26		$	(0.01	)
Net income (loss) per common share — diluted	$	(0.32	)	$	0.08		$	0.58		$	0.24		$	(0.01	)
Balance Sheet Data(1):
Cash, cash equivalents and marketable securities	$	72,645		$	60,554		$	60,233		$	51,652		$	52,140
Working capital		75,040			57,886			51,225			41,523			45,624
Total assets		113,761			110,193			107,029			94,358			79,477
Long-term debt obligations (excluding deferred revenue)		305			394			521			537			641
Stockholders’ equity		85,414			83,957			80,149			69,579			60,649

(1)

As a result of our June 2007 divestiture of the Manufacturing Solutions (“MS”) division, we are reporting the results of this division as a discontinued operation for all periods presented. See Note 3 to the Consolidated Financial Statements, Discontinued Operations, for further discussion of the Manufacturing Solutions division divestiture.

(2)

In the third quarter of fiscal 2004, we reorganized into two divisions, the Design Analysis Solutions division and the MS division. This reorganization was substantially complete in fiscal 2004. Because we did not track certain items by division prior to the end of fiscal 2004, the allocation of revenue, costs, expenses and balance sheet amounts to each division required significant judgment and estimation, which may result in differences between later fiscal periods presented where the allocation was more clearly defined.

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Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K. In addition to the historical information contained in this document, the discussion in this Annual Report on Form 10-K contains forward-looking statements, made pursuant to Section 21E of the Exchange Act, that involve risks and uncertainties, such as statements of our plans, expectations and intentions. The cautionary statements made in this Annual Report on Form 10-K should be read as being applicable to all related forward-looking statements whenever they appear in this Annual Report on Form 10-K. Our actual results could differ materially from the results contemplated by these and any other forward-looking statements. Factors that could contribute to such differences include those discussed below as well as those cautionary statements and other factors set forth in “Item 1A: Risk Factors” and elsewhere herein.

Beginning on page 20, we discuss our Results of Operations for fiscal 2007 compared to fiscal 2006 and for fiscal 2006 compared to fiscal 2005. We then provide an analysis of changes in our balance sheet and cash flows, and discuss our financial commitments in the sections entitled “Liquidity and Capital Resources,” “Contractual Obligations” and “Off-Balance Sheet Financing Arrangements.”

Forward-Looking Statements

This portion of our Annual Report contains forward-looking statements. Investors are cautioned that all forward-looking statements involve risks and uncertainties, and actual results may differ materially from those discussed as a result of various factors, including those factors described in “Risk Factors” beginning on page 6. Readers should not place undue reliance on our forward-looking statements, and we assume no obligation to and do not intend to update any forward-looking statements.

Corporate Strategy Overview

Our goal is to be the leading global provider of software optimization solutions for the design and manufacture of plastic parts. We help companies manufacture less expensive and more reliable products by increasing the effectiveness of their product and mold design process and manufacturing operations as well as improving efficiencies across their entire design-through-manufacture process.

We believe that our key competitive strength is our extensive domain knowledge in the fields of materials science and characterization, numerical methods and predictive modeling through simulation and analysis, coupled with our expertise in packaging and delivering this knowledge to our customers in easy-to-use software applications. We develop software products internally and through cooperative research relationships with a number of public and private educational and research organizations around the world. In addition, some of our products are developed by commercial contractors. Because of the strong body of intellectual property and knowledge that we have created over the course of twenty-nine years in serving the product design, engineering and manufacturing markets, we have become the leading provider of highly sophisticated predictive software applications for the plastics design, engineering and manufacturing communities. Our growth strategy is derived from these strengths.

We continue to increase the business value of our products for our customers by improving the performance and functionality of existing products with each new release, and developing products addressing specific vertical market needs in each of our target market segments. In the design phase, for example, we provide applications that address the process of microchip encapsulation, a process which is involved in the manufacture of semiconductors.

Expanding our geographic coverage is a key element of our growth strategy. We believe that the rapidly growing economies in China, India, Eastern Europe, South America and other developing regions present significant longer-term growth opportunities for our business. Our ability to conduct research and development at various locations throughout the world allows us to optimize product development and lower costs. International development, however, also involves significant costs and challenges, including whether we can adequately protect our intellectual property and derive significant revenue in areas where laws regarding intellectual property are not in place or not effectively enforced.

A significant part of our growth strategy is directed toward increasing customer loyalty and further developing opportunities within our large installed customer base. We receive approximately 65% to 75% of our overall

15

revenue from existing customers. We deliver product releases on a regular basis which incorporate significant functionality improvements to ensure that our customers have access to the latest technology developments. We focus on customer satisfaction through programs aimed at involving our customers in the future direction of our products, enhancing their ease of use and user experience, and providing multiple points of contact within the Company to ensure that their needs are met. These efforts encourage our existing customers to both renew their annual maintenance contracts and purchase additional licenses.

Historically, we have generated cash through our ongoing operating and financing activities. Our uses of cash include capital expenditures to support our operations and product development, investments in growth initiatives, and repurchases of our outstanding common stock. We have also used cash to acquire other companies or strategic assets. We continue to evaluate merger and acquisition opportunities to the extent they support our strategy and growth objectives.

Discontinued Operations

On June 25, 2007, we announced that we had reached a definitive agreement to sell our Manufacturing Solutions (“MS”) division to Husky Injection Molding Systems Ltd. (the “Buyer”) for $7.0 million in cash, subject to a post-closing net asset value adjustment. On June 30, 2007 the sale was completed for an adjusted purchase price of $7.1 million, net of the post-closing adjustment and costs associated with the transaction. Pursuant to the sale agreement, $1.0 million of these proceeds were placed in escrow. As we do not expect the escrow to settle within the next twelve months, this balance was recorded as an other non-current asset on our consolidated balance sheet as of June 30, 2007. Due to the timing of the closing of the sale, the remaining proceeds were recorded as a receivable and included as an other current asset on our consolidated balance sheet. We recognized a net loss on the sale of the MS division of $869,000.

The post-closing net asset value adjustment will reflect the fair value of the assets and liabilities acquired at the date of closing. At June 30, 2007, we estimated that these post-closing adjustments would result in additional proceeds of $744,000. On August 31, 2007, we received a notice from the Buyer disputing certain portions of the estimated post-closing adjustment totaling $441,000. We believe the original estimated adjustment that was recorded is appropriate and will work with the Buyer through the resolution process defined by the sale agreement.

Prior to its divestiture, the MS division had revenues of $13.5 million in fiscal year 2007, $16.6 million in fiscal 2006 and $16.9 million in fiscal year 2005. The net loss from discontinued operations for the fiscal year 2007 was $11.5 million, primarily relating to the impairment of goodwill recorded in our third fiscal quarter. Net losses of the discontinued operations were $4.3 million and $1.5 million in fiscal 2006 and fiscal 2005, respectively.

In accordance with Statement of Accounting Standards (“SFAS”) No. 144, we are reporting the MS division as a discontinued operation in the consolidated financial statements for all periods presented throughout this Annual Report on Form 10-K. Unless indicated otherwise, the discussion and amounts provided in this “Results of Operations” section and elsewhere in this Form 10-K relate solely to our continuing operations.

Reporting Periods

Our fiscal year end is June 30. References to 2007, 2006 or 2005 mean the fiscal year ended June 30, unless otherwise indicated.

Critical Accounting Policies

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). In connection with the preparation of these financial statements, we make assumptions and estimates about future events, and apply judgments that affect the reported amounts of assets, liabilities, revenue, and expenses and the related disclosures.

A critical accounting policy is one that is both material to the presentation of our financial statements and requires us to make difficult, subjective or complex judgments for uncertain matters that could have a material effect on our financial condition and results of operations. Critical accounting policies for us include: Revenue Recognition, Asset Valuation Allowances, Acquisition Accounting, Impairment Accounting, Income Tax

16

Accounting, Capitalization of Software Development Costs, Stock Option Accounting and Restructuring. Management has reviewed these policies and related disclosures with the Audit Committee of our Board of Directors. A discussion of the Company’s analysis of the uncertainties involved in applying these policies at any given time or the variability that is reasonably likely to result from their application over time follows.

See Note 2 to our consolidated financials statements, Summary of Significant Accounting Policies, for a general discussion of the method of accounting we use to apply these critical accounting policies and other accounting policies that are significant to us.

Preparation of Financial Statements and Use of Estimates

The preparation of consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and related disclosure of contingent liabilities. On an on-going basis, management evaluates its estimates, including those related to revenue recognition, investments, goodwill, intangible and other long-lived assets, bad debts, income taxes, warranties, contingencies, and litigation. Management bases its estimates on historical experience and on customary assumptions that are believed 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 may differ significantly from these estimates.

A.  Revenue Recognition

Our continuing operations generate revenue from two principal sources: license fees for packaged software products and service fees from maintenance and support contracts, consulting, implementation, training and material testing services. For revenue derived from license fees for packaged software products, we follow American Institute of Certified Public Accountants (“AICPA”) Statement of Position (“SOP”) No. 97-2, “Software Revenue Recognition,” as amended by SOP No. 98-9, “Modification of SOP No. 97-2 with Respect to Certain Transactions.” The application of all such guidance requires judgment, including whether or not sufficient evidence of a sales arrangement exits, whether or not the arrangement fee is fixed or determinable, whether or not legal title has passed to the customer, whether or not all significant contractual obligations have been satisfied and whether or not the collection of the related receivable is reasonably assured and free of contingencies. The amount of recognized and unrecognized revenue could be materially impacted by changes in these judgments.

In addition, maintenance and support contracts are often entered into at the same time as the sale of software licenses. We consider these to be multiple elements of a single arrangement. We use the residual method to recognize revenue from arrangements like these with one or more elements to be delivered at a future date, when evidence of the fair value of all undelivered elements exists. Under the residual method, the fair value of the undelivered elements, such as maintenance services, is deferred and the remaining portion of the total arrangement fee is recognized as revenue, assuming all other revenue recognition criteria has been fulfilled. The deferred revenue related to these services is then recognized ratably over the related contract period or as the services are performed.

We determine vendor-specific objective evidence of the fair value (“VSOE”) of undelivered elements based on the prices that are charged when the same element is sold separately to customers. The fair value of maintenance and support services may also be determined based on the price to be paid upon renewal of that service in accordance with the optional renewal terms offered contractually to a customer. The determination of the existence of multiple elements and the sufficiency of evidence of fair value of those elements involves significant judgment, changes in which could materially impact the amount of recognized and unrecognized revenue. If sufficient evidence of the fair value of an undelivered element does not exist, all revenue from the arrangement is deferred and recognized upon delivery of that element or at the time that fair value can be established for the undelivered element.

B.  Asset Valuation Allowances

We evaluate the adequacy of the allowance for doubtful accounts by analyzing historical bad debts, changes in customer concentrations, customer creditworthiness, changes in customer payment patterns and current economic

17

trends. Changes in these factors may materially impact how we estimate the allowance for doubtful accounts and thus, the amount of earned revenue and income.

We also provide valuation allowances against deferred tax assets. We believe that the net deferred tax asset represents its best estimate, based upon the weight of available evidence, of the deferred tax asset that will be realized. If such evidence were to change, based upon near term operating results and longer term projections, the amount of the valuation allowance recorded against the gross deferred tax assets may be decreased or increased.

C.  Acquisition Accounting

We allocate the purchase price of each acquired business to the assets acquired and liabilities assumed, if any, at their fair value on the date of acquisition. In all cases, any excess purchase price over amounts allocated to the assets acquired and liabilities assumed is recorded as goodwill. Valuation methodologies as well as the determination of subsequent amortization periods involve significant judgments and estimates.

D.  Impairment of Acquired Intangible Assets, Goodwill and Other Long-Lived Assets

SFAS No. 142, “Goodwill and Other Intangible Assets,” requires that goodwill be tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, sale or disposition of a significant portion of a reporting unit. Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and determination of the fair value of each reporting unit. Changes in these estimates and assumptions could materially affect the determination of fair value and/or goodwill impairment for a reporting unit.

E.  Income Tax Accounting

SFAS No. 109, “Accounting for Income Taxes,” establishes financial accounting and reporting standards for the effect of income taxes. The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity’s financial statements or tax returns. Judgment is required in assessing the future tax consequences of events that have been recognized in our financial statements or tax returns. Variations in the actual outcome of these future tax consequences could materially impact our financial position, results of operations, or cash flows.

In June 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation (“FIN”) No. 48 “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109”. FIN No. 48 clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. This Interpretation also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN No. 48 will require disclosure at the end of the annual reporting period of the nature of uncertain tax positions and related events if it is reasonably possible that those positions and events could change the associated recognized tax benefit within the next twelve months.

In addition, our effective tax rate estimates may be materially impacted by the amount of income taxes associated with our foreign earnings, which are taxed at rates different from the U.S. federal statutory tax rate, as well as the timing and extent of the realization of deferred tax assets, changes in tax law and potential acquisitions. Further, our tax rates may fluctuate within a fiscal year, including from quarter to quarter, due to items arising from discrete events, including settlement of tax audits and assessments, acquisitions of other companies, and changes in GAAP or other events.

18

F.  Capitalization of Software Development Costs

We apply SFAS No. 86, “Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed,” which requires that costs associated with the development of computer software and related products be expensed prior to establishing technological feasibility, and capitalized thereafter until commercial release of the software products. Both the assessment of the amount of costs required to be capitalized and the determination of subsequent amortization periods involve significant judgments and estimates.

G.  Stock Option Accounting

We apply SFAS No. 123(R), “Share-Based Payment,” which requires us to expense the fair value of stock options and other forms of share-based compensation granted to employees and directors. The impact of expensing employee and director stock awards on our earnings is material and is further described in Note 14 to our consolidated financial statements, Share-Based Compensation and Stock Plans. Share-based compensation cost is measured at the grant date based on the estimated fair value of the award and is recognized as expense over the vesting period. Determining the fair value of share-based awards at the grant date requires judgment, including estimating the expected term of stock options, the expected volatility of our stock and expected dividends. In addition, judgment is also required in estimating the amount of share-based awards that are expected to be forfeited. If actual results differ significantly from these estimates, share-based compensation expense and our results of operations could be materially impacted.

H.  Restructuring

From time to time we may record charges resulting from restructuring our operations, including the consolidation of our operations, changes in our strategic plan, or managerial responses to declines in demand, increasing costs or other events. For these charges, we apply SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” Under SFAS No. 146, costs associated with exit or disposal activities are determined and recognized at their fair value when the liability is incurred rather than at the date we commit to an exit or disposal plan.

The recognition of these restructuring charges require us to make certain judgments and estimates regarding the nature, timing and amount of costs associated with the planned exit activity. To the extent our actual restructuring results differ from our estimates and assumptions, we may be required to revise the estimates of future liabilities, requiring the recognition of additional restructuring charges or the reduction of liabilities already recognized. Restructuring charges may include such costs and charges as those related to employee severance, termination benefits, the write-off of assets, professional service fees and costs for future lease commitments on excess facilities, net of any estimated income from subleases. On a quarterly basis, we evaluate the remaining accrued balances to ensure that no excess accruals are retained and the utilization of the provisions are for their intended purpose.

19

SELECTED RELATIONSHIPS WITHIN THE CONSOLIDATED STATEMENT OF OPERATIONS

	Year Ended June 30,
	2007			2006			2005
Percentage of revenue:
Revenue:
Product		50.9	%		49.9	%		50.8	%
Services		49.1			50.1			49.2
Total revenue		100.0			100.0			100.0
Costs and operating expenses:
Cost of product revenue		2.8			3.1			2.8
Cost of services revenue		8.1			8.8			8.1
Research and development		14.4			15.1			15.4
Selling and marketing		36.6			36.1			33.1
General and administrative		25.1			24.3			23.3
Restructuring charges		—			2.5			—
Amortization of acquired intangible assets		—			—			0.2
Total costs and operating expenses		87.0			89.9			82.9
Net interest and other income		6.2			5.6			3.6
Income from continuing operations before income taxes		19.2			15.7			20.7
Provision for income taxes		3.9			4.9			3.4
Income from continuing operations		15.3	%		10.8	%		17.3	%

Notable Items of Fiscal 2007 Results of Operations from Continuing Operations

•  Total revenue was $55.9 million and represented an increase of 14% from the previous year.

•  Product revenue was $28.4 million and represented an increase of 16% from the previous year.

•  Services revenue, primarily comprised of revenue from annual maintenance and support contracts, was $27.5 million and represented an increase of 12% from the previous year.

•  Total share-based compensation expense was $1.9 million and represented an increase of 2% from the previous year.

•  Cash provided by operating activities of our continuing operations was $13.2 million.

•  Stock repurchase program returned 403,900 shares to treasury at a cost of $5.4 million, or an average price of $13.47 per share.

Revenue

We generate revenue from two principal sources:

•  license fees for our packaged software and

•  services revenue derived from maintenance and support related to our products, consulting, training and material testing.

20

The following table sets forth our total revenue by source for each of fiscal 2007, 2006 and 2005:

			Increase							Increase
			Compared							Compared
			to Prior							to Prior
	Fiscal		Fiscal Year					Fiscal		Fiscal Year					Fiscal
	2007		$		%			2006		$		%			2005
	($ In thousands)
Revenue:
Product	$	28,403	$	3,970		16	%	$	24,433	$	270		1	%	$	24,163
Services		27,450		2,927		12			24,523		1,135		5			23,388
Total	$	55,853	$	6,897		14	%	$	48,956	$	1,405		3	%	$	47,551

The following table sets forth our revenue by geography for fiscal 2007, 2006 and 2005:

												Increase
				Increase								(Decrease)
				Compared								Compared
				to Prior								to Prior
	Fiscal			Fiscal Year					Fiscal			Fiscal Year						Fiscal
	2007			$		%			2006			$			%			2005
	($ In thousands)
Asia/Australia revenue:
Products	$	15,217		$	2,625		21	%	$	12,592		$	152			1	%	$	12,440
Services		10,123			1,143		13			8,980			776			9			8,204
Total		25,340			3,768		17			21,572			928			4			20,644
Americas revenue:
Products		4,268			1,122		36			3,146			(425	)		(12	)		3,571
Services		6,271			371		6			5,900			376			7			5,524
Total		10,539			1,493		17			9,046			(49	)		(1	)		9,095
Europe revenue:
Products		8,918			223		3			8,695			543			7			8,152
Services		11,056			1,413		15			9,643			(17	)		—			9,660
Total		19,974			1,636		9			18,338			526			3			17,812
Total revenue:
Products		28,403			3,970		16			24,433			270			1			24,163
Services		27,450			2,927		12			24,523			1,135			5			23,388
Total	$	55,853		$	6,897		14	%	$	48,956		$	1,405			3	%	$	47,551
Percentage of total revenue:
Asia/Australia		45	%							44	%								43	%
Americas		19								18									19
Europe		36								38									38
Total		100	%							100	%								100	%

Our product revenue represents license fees for our packaged software application products. Typically, our customers pay an up-front, one-time fee for our products. The amount of the fee depends upon the number and type of software modules licensed and the number of the customer’s employees or other users who can access the software product simultaneously. In addition, we receive royalty payments from developers of other software products related to the bundling of our software with their design software programs. We record these royalty payments and shipping and handling fees related to delivery of our products as components of product revenue, none of which have been significant to date.

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Our service revenue is derived from maintenance and support contracts that require us to provide technical support services to customers and unspecified product upgrades and enhancements on a when-and-if-available basis. We also provide consulting services, training of customers’ employees and material testing services.

Our product revenue was $28.4 million and $24.4 million for fiscal 2007 and fiscal 2006, respectively. The growth in fiscal 2007 was primarily attributable to increased product revenue from our Asia/Australia region, a result of strong sales in Japan, Korea and China, driven by significant follow-on orders from large customers in the electronics and automotive sectors. Overall, the increase in product revenue was primarily the result of the introduction of newer versions of our existing products into the marketplace, and, to a lesser extent, a result of continued economic recoveries in certain of our key markets and favorable movements in foreign currency exchange rates.

Compared to the prior year, product revenue derived from our Asia/Australia region for the full fiscal year increased 21%, our Americas region increased 36% and our European region increased 3%. Changes in currency exchange rates had a 3% positive impact on product revenue from fiscal 2007 when compared to fiscal year 2006.

Our total product revenue was $24.4 million and $24.2 million in fiscal years 2006 and 2005, respectively. The absence of growth in 2006 was partially attributable to the softness in our North American market, in particular the automotive market. Compared to 2005, product revenue derived from our Asia/Australia region for 2006 increased 1%, our Americas region decreased 12% and our European region increased 7%.

We sold 558 seats of our products in fiscal 2007, compared to 421 and 488 seats in 2006 and 2005, respectively.

Services revenue accounted for approximately 49% of our total revenue in fiscal 2007, compared to 50% and 49% of our total revenue in 2006 and 2005, respectively. Service revenue increased by 12% in fiscal 2007 compared to 5% in fiscal 2006. These increases were primarily from the sale of maintenance and support contracts across all geographic regions and are a reflection of long-term growth in our installed customer base arising from software license sales made during the current and previous reporting periods.

Cost and Operating Expenses

Effective in fiscal 2006, we adopted SFAS No. 123(R), “Share-Based Payment.” SFAS No. 123(R) requires us to expense the fair value of stock options and other forms of equity instruments granted to employees and directors. Thus, prior to fiscal 2006, we did not record any significant compensation cost related to share-based awards. As allowed by SFAS No. 123(R), periods prior to fiscal 2006 were not restated to reflect the fair value method of expensing stock options and other forms of share-based compensation. The impact of expensing stock awards on our earnings is and will continue to be significant and is further described in Note 14 to our consolidated financial statements, Share-Based Compensation and Stock Plans.

Cost of Product Revenue

				Increase								Increase
				Compared								Compared
				to Prior								to Prior
	Fiscal			Fiscal Year					Fiscal			Fiscal Year					Fiscal
	2007			$		%			2006			$		%			2005
	($ In thousands)
Cost of product revenue	$	1,545		$	34		2	%	$	1,511		$	171		13	%	$	1,340
As a percentage of total revenue		3	%							3	%							3	%

Cost of product revenue consists of the costs of compact discs and related packaging material, duplication and shipping costs. In some cases, we pay royalties to third parties for usage-based licenses of their products that are embedded in our products. Product royalties are expensed when the related obligation arises, which is generally upon the license of our products. Also, included in cost of product revenue is amortization expense related to capitalized software development costs.

Cost of product revenue in 2007, 2006 and 2005 was consistent as a percentage of total revenue.

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Cost of Services Revenue

				Increase								Increase
				Compared								Compared
				to Prior								to Prior
	Fiscal			Fiscal Year					Fiscal			Fiscal Year					Fiscal
	2007			$		%			2006			$		%			2005
	($ In thousands)
Cost of services revenue	$	4,536		$	227		5	%	$	4,309		$	442		11	%	$	3,867
As a percentage of total revenue		8	%							9	%							8	%

Cost of services revenue consists primarily of salary, fringe benefits and facility related costs of our maintenance and support, consulting and training activities and of our material testing laboratories, and is expensed when incurred. Additionally, from time to time, we engage outside consultants to meet peaks in customer demand for consulting and implementation services.

Cost of service revenue of $4.5 million and $4.3 million in 2007 and 2006, included $39,000 and $93,000 of share-based compensation expense, respectively. The increase in cost of services revenue in all periods was primarily due to an increase in compensation and facility related costs related to our support engineers. Our cost of services revenue increased $442,000 in fiscal 2006 primarily due to increases in compensation and facility related costs, primarily a result of support engineers added during the year.

Research and Development

				Increase								Increase
				Compared								Compared
				to Prior								to Prior
	Fiscal			Fiscal Year					Fiscal			Fiscal Year					Fiscal
	2007			$		%			2006			$		%			2005
	($ In thousands)
Research and development	$	8,026		$	636		9	%	$	7,390		$	83		1	%	$	7,307
As a percentage of total revenue		14	%							15	%							15	%

We employ a staff to develop new products and enhance our existing products. Product development expenditures, which include compensation, benefits, travel, payments to universities and other research institutions and facilities costs, are generally charged to operations as incurred. However, SFAS No. 86, “Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed,” requires the capitalization of certain software development costs subsequent to the establishment of technological feasibility up to the point the product is available for commercial release to customers. In accordance with SFAS No. 86, research and development costs of $340,000, $496,000 and $201,000 were capitalized in 2007, 2006 and 2005, respectively. All such capitalized costs are amortized to cost of product revenue over the estimated economic life of the related products, which ranges from three to five years.

Research and development expenses of $8.0 million and $7.4 million in 2007 and 2006, included $363,000 and $346,000 of share-based compensation expense, respectively. Our research and development expenses increased by $636,000 in fiscal 2007 primarily due to employing a greater number of research and development personnel when compared to the previous year, partially offset by our capitalization of software development costs in accordance with SFAS No. 86. Our research and development expenses increased $83,000 in fiscal 2006 compared to fiscal 2005 primarily due to increased compensation expense.

Selling and Marketing

				Increase								Increase
				Compared								Compared
				to Prior								to Prior
	Fiscal			Fiscal Year					Fiscal			Fiscal Year					Fiscal
	2007			$		%			2006			$		%			2005
	($ In thousands)
Selling and marketing	$	20,436		$	2,739		15	%	$	17,697		$	1,944		12	%	$	15,753
As a percentage of total revenue		37	%							36	%							33	%

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We sell our products primarily through our direct sales force and indirect distribution channels. Selling and marketing expenses consist primarily of compensation paid to our sales staff, employee benefits costs, sales office facility rental and related costs, travel and promotional events such as trade shows, advertising, print and web-based collateral materials and public relations programs.

Selling and marketing expenses of $20.4 million and $17.7 million in 2007 and 2006, included $306,000 and $313,000 of share-based compensation expense, respectively. Our selling and marketing expenses increased by $2.7 million in fiscal 2007 primarily due to employing a greater number of sales personnel when compared to the previous year, which increased compensation costs by $2.0 million and travel expenses by $326,000. Our selling and marketing expenses increased by $1.9 million in fiscal 2006 primarily due to a $1.1 million increase in compensation expense, a result of personnel added during the year and share-based compensation expense.

General and Administrative

				Increase								Increase
				Compared								Compared
				to Prior								to Prior
	Fiscal			Fiscal Year					Fiscal			Fiscal Year					Fiscal
	2007			$		%			2006			$		%			2005
	($ In thousands)
General and administrative	$	14,042		$	2,149		18	%	$	11,893		$	833		8	%	$	11,060
As a percentage of total revenue		25	%							24	%							23	%

General and administrative expenses include legal, audit, tax consulting, regulatory compliance and insurance expenses and the compensation costs of our executive management, finance, information technology, human resources and administrative support groups.

General and administrative expenses of $14.0 million and $11.9 million in 2007 and 2006, included $1.2 million and $1.1 million of share-based compensation expense, respectively. The increase in expenses included a $781,000 increase in audit expenses, a $553,000 increase in personnel and facility related costs, $519,000 of costs incurred in the implementation of an enterprise resource planning system, $300,000 in severance costs and $325,000 of accelerated share-based compensation expense related to the departure of certain employees. These increases were partially offset by decreases in costs related to management’s assessment of the Company’s internal control environment and tax compliance expenses.

Our general and administrative expenses increased by $833,000 in fiscal 2006 primarily due to $1.1 million of share-based compensation expense, $1.1 million of increased legal, tax consulting and audit fees and $307,000 of increased compensation as a result of an increase in personnel. These increases were partially offset by a $2.0 million reduction in tax compliance and Sarbanes-Oxley compliance fees.

Restructuring Charges

In October 2005, we enacted a corporate restructuring plan to reduce costs and consolidate operations, which included the involuntary termination of certain employees. As a result of these actions, we recorded a charge of $1.2 million in fiscal 2006, which included legal and travel costs associated with the restructuring. All activities under the plan have been completed.

Amortization of Acquired Intangible Assets

These costs represent the amortization of intangible assets, other than goodwill, recorded in connection with our acquisitions. Those assets include customer base, developed technology, customer order backlog and non-compete agreements, which are amortized over their economic lives, ranging from six months to seven years.

The reduction in amortization expense in fiscal 2007 and 2006, reflects the completion of amortization of certain intangible assets that reached the end of their estimated useful life in 2005.

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Interest Income, Net

Interest income, net, includes interest income earned on invested cash balances, net of our cost of borrowings, including interest cost incurred on our working capital lines of credit.

Our interest income was $3.3 million in fiscal 2007, $2.6 million in 2006, and $1.7 million in 2005. For all years, growing levels of cash on-hand resulted in increased interest income.

Other Income, Net

Other income, net, includes realized and unrealized gains and losses arising from the remeasurement of our foreign currency denominated asset and liability balances recorded especially in the United States, Australia and Ireland, recognized gains and losses on our foreign currency hedging instruments, and other non-operating income and expense items.

Other income, net, was income of $218,000 in 2007, $162,000 in 2006, and $70,000 in 2005. During these periods, other income was primarily the result of our hedging activities.

Provision for Income Taxes

We are subject to income tax in numerous jurisdictions worldwide with varying statutory rates, and the use of estimates is required in determining our provision for income taxes. See Note 2 and Note 16 to our consolidated financial statements, Summary of Significant Accounting Policies, and Income Taxes, respectively, for further information regarding our income tax accounting and valuation allowance policies.

The fiscal 2007 tax provision was $2.2 million on income before tax of $10.7 million, resulting in an effective tax rate of approximately 20%, decreasing from an effective tax rate of 31% in fiscal 2006. In fiscal 2007, significant reconciling items between the 34% U.S. federal statutory income tax rate and the 20% effective tax rate included a $2.6 million favorable tax rate differential between the U.S. and certain foreign jurisdictions and the impact of a $432,000 revision of our estimated tax liabilities. The impact of the above items was partially offset by a $937,000 of expense incurred to increase our valuation allowance and $622,000 related to other permanent items, including nondeductible, stock-based compensation expenses.

We have established a valuation allowance against net deferred tax assets, consisting principally of net operating loss and foreign tax credit carryforwards and temporary differences in certain jurisdictions, including the United States. At June 30, 2007, we had total net deferred tax assets of $132,000, which included $4.0 million of gross deferred tax assets, a $3.5 million valuation allowance recorded against such tax assets and deferred tax liabilities of $328,000. We believe that we will earn sufficient taxable income in the future to realize our net deferred tax assets.

The American Jobs Creation Act of 2004 (the “AJCA”) was enacted in October 2004. The AJCA created a one-time incentive for U.S. corporations to repatriate undistributed earnings from their foreign subsidiaries by providing an 85% dividends-received deduction for certain foreign earnings. The Company repatriated $10.6 million of foreign subsidiary earnings to the United States under the provisions of the AJCA in fiscal 2006, incurring additional tax expense of $525,000 in that fiscal year.

In the first quarter of fiscal 2005, one of the Company’s Australian subsidiaries became subject to an audit by the Australian Tax Office (“ATO”). For the years of 1994, 1995 and 2001, the amount of liabilities assessed to date by the ATO, including tax penalties and interest, is approximately $6.6 million (A$7.8 million). Payments of $3.3 million (A$3.9 million) have been made to date with respect to these assessed amounts in order to limit the interest that may accrue on these amounts from the date of assessment through the ultimate resolution of these matters.

These payments have been recorded as current assets as of June 30, 2007 and 2006 as it was our expectation, as of both balance sheet dates, that these matters would be resolved within twelve months. The tax authority has agreed to defer any action to recover the remaining assessed tax amount outstanding and that no portion of the remaining interest and penalty charges need to be paid pending resolution of the dispute. The liability amount of approximately $6.6 million (A$7.8 million) referred to above represents the Company’s maximum potential exposure, but

25

does not reflect the potential tax benefits of such payments, which might serve to mitigate the net expense that would be reflected in the Company’s results of operations. During fiscal 2008 we may continue to make cash payments related to interest that is accruing on the amounts due. We expect that any such payments would be recorded as current assets.

We believe that the positions taken in our tax returns with respect to these matters have merit. We will continue to take steps to preserve our rights through the ATO’s objection process and believe that our positions will ultimately be sustained. Accordingly, we have not recorded any liabilities in our consolidated balance sheet related to any amounts of additional tax, penalty or interest that have been assessed to date or that may be assessed by the ATO in the future. Because the ultimate resolution of this matter is uncertain, it may have a material adverse effect on our results of operations. In addition, professional fees related to these matters have been and may continue to be significant.

Liquidity and Capital Resources

Our cash, cash equivalents and marketable securities balance increased $12.2 million in 2007 from 2006, to $72.7 million. Cash activity for 2007, 2006 and 2005 was as follows (in millions):

	Year Ended June 30,
	2007			2006			2005
Cash provided by operating activities of continuing operations	$	13.2		$	3.2		$	10.0
Cash used by operating activities of discontinued operations		(2.2	)		(1.3	)		(3.7	)
Net cash provided by operating activities	$	11.0		$	1.9		$	6.3
Cash provided by (used in) investing activities of continuing operations	$	(6.5	)	$	1.3		$	3.1
Cash provided by (used in) investing activities of discontinued operations		0.9			(0.2	)		(0.1	)
Total cash provided by (used for) investing activities	$	(5.6	)	$	1.1		$	3.0
Total cash provided by financing activities	$	1.3		$	0.7		$	2.5
Total effect of exchange rate changes on cash and cash equivalents	$	0.7		$	(0.5	)	$	1.1
Net increase in cash and cash equivalents	$	7.4		$	3.2		$	12.9
Cash and cash equivalents, beginning of year	$	52.1		$	48.9		$	36.0
Cash and cash equivalents, end of year	$	59.5		$	52.1		$	48.9
Marketable securities, end of year	$	13.2		$	8.4		$	11.3
Cash, cash equivalents and marketable securities, end of year	$	72.7		$	60.5		$	60.2

Historically, we have financed our continuing operations and met our capital expenditure requirements primarily through funds generated from operations and borrowings from lending institutions. As of June 30, 2007, our primary sources of liquidity consisted of our total cash and cash equivalents balance of $59.5 million, our marketable securities balance of $13.2 million and our credit facilities. In February 2007, we renewed our primary $5.0 million unsecured working capital credit facility for a term of two years. The available borrowing base of the facility is subject to a calculation that is based upon eligible accounts receivable. Advances may be in the form of loans, letters of credit, foreign exchange contracts or other cash management lines. The facility includes restrictive covenants, all of which we were in compliance with at June 30, 2007. These covenants include liquidity and profitability measures and restrictions that limit our ability to merge, acquire or sell assets without prior approval from the bank. At June 30, 2007, we had employed $296,000 of available borrowings through outstanding foreign exchange contracts and letters of credit. The remaining available borrowings were $4.7 million. In addition to our primary working capital line of credit, we also utilize domestic and foreign banking institutions to provide liquidity to our subsidiaries. We also have relationships with other banking institutions in order to facilitate foreign currency and hedging transactions. As of June 30, 2007, we had no outstanding debt.

26

At June 30, 2007, our marketable securities consisted of corporate bonds with maturities from the date of purchase in excess of three months. Investments in marketable securities are made in accordance with our corporate investment policy. The primary objective of this policy is the preservation of capital. Investments are limited to high quality corporate debt, government securities, municipal debt securities, money market funds and similar instruments. The policy establishes maturity limits, liquidity requirements and concentration limits. At June 30, 2007, we were in compliance with this internal policy.

Net cash provided by operating activities of our continuing operations in the fiscal year ended June 30, 2007, was $13.2 million. Cash of $12.0 million was provided by our net income from continuing operations adjusted for certain non-cash charges and expenses, such as depreciation and amortization and share-based compensation expense. Cash generated by increases in accrued expenses and other liabilities of $1.4 million was offset by the consumption of cash due to a $2.6 million increase in accounts receivables and a $313,000 increase in prepaid and other current assets. In addition, increases in our deferred revenue account balances, increased cash by $3.2 million, as a result of the timing of renewals of maintenance contracts.

Operating activities of our continuing operations generated $3.2 million of cash in fiscal year 2006. Cash of $8.9 million was provided by our net income from continuing operations adjusted for certain non-cash charges and expenses, such as depreciation and amortization. In addition, increases in deferred revenue due to customer renewals of prepaid maintenance contracts generated $692,000 of cash. These items were partially offset by a $3.3 million increase in prepaid expenses, which included the impact of our payment of a portion of the assessment received from the Australian tax authority, and a $526,000 increase in accounts receivable and payments against accounts payable balances of $1.3 million and accrued expenses and other liabilities of $1.2 million.

Investing activities of our continuing operations consumed $6.5 million of cash in fiscal 2007, a result of purchases of marketable securities of $25.7 million, purchases of fixed assets of $1.1 million and $340,000 of capitalized software development costs, all of which was partially offset by $21.0 million of cash generated from sales and maturities of marketable securities. In fiscal 2006, sales and maturities of marketable securities provided $22.4 million of cash, which was partially offset by purchases of marketable securities, fixed assets and the capitalization of software development costs which, in total, consumed $21.2 million of cash.

Financing activities generated $1.3 million of cash in fiscal 2007, a result of $6.2 million of cash received from the exercise of stock options and $532,000 in excess tax benefits related to share-based compensation, partially offset by our repurchase of 403,900 shares of common stock for $5.4 million. Financing activities generated $647,000 million of cash in fiscal 2006, a result of proceeds received from the exercise of stock options, partially offset by our repurchase of 196,100 shares of common stock.

On May 17, 2006, our Board of Directors authorized the repurchase of up to 600,000 shares under a stock repurchase plan. During fiscal year 2007, the Company acquired 403,900 shares for $5.4 million, an average purchase price of $13.47 per share. The total amount of shares the Company has repurchased to date is 600,000 shares for $8.0 million, at an average purchase price of $13.36 per share. All of these shares remained in treasury as of June 30, 2007.

We believe that our current cash, cash equivalents, marketable securities and available lines of credit will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next twelve months following the date of this report. Capital expenditure requirements of the Company’s continuing operations for fiscal 2008 are expected to be comparable to fiscal 2007. Long-term cash requirements, other than normal operating expenses, are anticipated for the continued development of new products, the financing of anticipated growth, and the possible acquisition of businesses, software products or technologies complementary to our business. On a long-term basis or to complete acquisitions in the short term, we may require additional external financing through credit facilities, sales of additional equity or other financing vehicles. There can be no assurance that such financing can be obtained on favorable terms, if at all.

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Contractual Obligations

The following table summarizes our significant financial contractual obligations at June 30, 2007 and the effect such obligations are expected to have on our liquidity and cash flows in future periods. This table excludes amounts already recorded on our balance sheet as liabilities at June 30, 2007.

	Payments Due by Period
			Less						More
			Than						Than
	Total		1 Year		1-3 Years		3-5 Years		5 Years
	(In thousands)
Operating lease obligations	$	7,092	$	2,199	$	2,438	$	1,809	$	646
Purchase obligations(1)		604		247		357		—		—
Total	$	7,696	$	2,446	$	2,795	$	1,809	$	646

(1) For the purposes of this table, contractual obligations for purchase of goods or services are defined as agreements that are enforceable and legally binding and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction.

Off-Balance Sheet Financing Arrangements

We do not have any special purpose entities or off-balance sheet financing arrangements.

Recent Accounting Pronouncements

In June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48 “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109” (FIN 48). FIN No. 48 clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. This Interpretation also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 will require disclosure at the end of the annual reporting period of the nature of uncertain tax positions and related events if it is reasonably possible that those positions and events could change the associated recognized tax benefit within the next twelve months. This Interpretation is effective for fiscal years beginning after December 15, 2006. The Company will adopt FIN No. 48 effective July 1, 2007. The cumulative effect of applying the provisions of FIN No. 48 will be recorded as an adjustment to opening retained earnings in the first quarter of the financial year 2008. The Company expects that the adoption of FIN No. 48 will result in a reduction in retained earnings, currently estimated between $300,000 and $500,000, with a corresponding increase in accrued income taxes.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value in generally accepted accounting principles (“GAAP”) and expands disclosure related to the use of fair value measures in financial statements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. We are currently evaluating the timing of adoption of SFAS No. 157 and the impact that adoption might have on our financial position and results of operations.

In February 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” SFAS No. 159 allows entities the option to measure eligible financial instruments at fair value as of specified dates. Such election, which may be applied on an instrument by instrument basis, is typically irrevocable once elected. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007, and early adoption of SFAS No. 159 is allowed under certain circumstances. We have not yet determined the impact this interpretation will have on our financial position.

Staff Accounting Bulletin No. 108

In September 2006, the SEC staff issued Staff Accounting Bulletin (“SAB”) No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.” SAB No. 108

28

was issued in order to eliminate the diversity of practice surrounding how public companies quantify financial statement misstatements.

Traditionally, there have been two widely-recognized methods for quantifying the effects of financial statement misstatements: the “roll-over” method and the “iron-curtain” method. The roll-over method focuses primarily on the impact of a misstatement on the income statement, but its use can lead to the accumulation of misstatements in the balance sheet. The iron-curtain method, on the other hand, focuses primarily on the effect of correcting the period-end balance sheet with less emphasis on the reversing effects of prior year errors on the income statement. Prior to the application of the guidance in SAB No. 108, we used the roll-over method for quantifying financial misstatements.

In SAB No. 108, the SEC staff established an approach that requires quantification of financial statement misstatements based on the effects of the misstatements on each of our financial statements and the related financial statement disclosures. This model is commonly referred to as a “dual approach” because it requires quantification of errors under both the iron curtain and the roll-over methods.

We adopted SAB No. 108 as of June 30, 2007, as required. Upon adoption of SAB No. 108, we assessed the effect of misstatements, regardless of when they originated. We concluded that the misstatements were not material, individually or in aggregate, to previous fiscal years, but that the cumulative effect from a “dual approach” perspective was material to fiscal 2007. As a result, we corrected such cumulative misstatements.

The following table summarizes the effects of applying the guidance in SAB No. 108 (in thousands):

	Retained
	Earnings
Beginning balance of retained earnings as of July 1, 2006 (as previously reported)	$	6,296
Adjustment 1		(376	)
Adjustment 2		(514	)
Adjusted beginning balance of retained earnings as of July 1, 2006	$	5,406

(1)	In February 2007, we determined we incorrectly recorded an entry against the prepaid income tax account in fiscal 2002. After further investigation conducted during fiscal 2007 we concluded that, as a result of this error, our income tax expenses were understated by $247,000, $61,000, $68,000 in fiscal 2002, 2003 and 2004, respectively.
(2)	In June 2006, we determined we incorrectly estimated the value of certain of our stock options granted in fiscal 2002 and fiscal 2003. The total combined impact of these matters was $514,000, of which $15,000, $297,000, $152,000, $47,000 and $3,000 should have been recorded in fiscal year 2002, 2003, 2004, 2005 and 2006, respectively.

Impact of Inflation

We believe that our revenue and results of operations have not been significantly impacted by inflation during the past three fiscal years. We do not believe that our revenue and results of operations will be significantly impacted by inflation in future periods.

Item 7A.   Quantitative and Qualitative Disclosures About Market Risk

We develop our products in research centers in Australia, the United Kingdom and the United States. We sell our products globally through our direct sales force and indirect distributor channels. As a result, a significant portion of our sales transactions are denominated in foreign currencies, which exposes us to foreign exchange risk. In addition, we are exposed to other primary market risks, including changes in interest rates and credit risk. In the future, we expect to increase our international operations in our existing markets and in geographic locations where we do not have any operations now. We do not enter into market risk sensitive instruments for trading or speculative purposes.

29

Foreign Exchange Risk

We collect amounts representing a substantial portion of our revenues and pay amounts representing a substantial portion of our operating expenses in foreign currencies. As a result, changes in currency exchange rates affect our operating results and our invested cash balances. At June 30, 2007, we had $11.6 million of cash and cash equivalents invested in foreign currency denominated accounts. Our consolidated cash position will continue to be impacted by changes in foreign currency exchange rates. We use currency options, zero-cost collars and other combinations of options that constitute net purchased options to hedge a portion of our forecasted foreign currency denominated intercompany sales and a portion of our foreign currency denominated intercompany research and development payments over a period of up to twelve months to reduce our exposure to changes in currency exchange rates. However, we cannot be sure that any efforts we make to hedge our exposure to currency exchange rate changes will be successful.

Using sensitivity analysis, we considered the historical trends in currency exchange rates and determined that it was reasonably possible that adverse changes in exchange rates of 10% for all currencies could be experienced over the next fiscal year. If the 10% change had occurred, it would have resulted in an adverse impact on operating income of approximately $514,000 at June 30, 2007, and $1.2 million at June 30, 2006. The adverse impact at June 30, 2007 and June 30, 2006 is after consideration of the offsetting effect of approximately $1.7 million for June 30, 2007 and $1.0 million for June 30, 2006 from currency options and collars put in place throughout the year. The decrease in the amount of adverse impact between fiscal 2007 and fiscal 2006 is due to a lower foreign currency balance in the Euro for fiscal 2007.

Interest Rate Risk

Our invested cash balances are subject to interest rate risk and, as a result, changes in interest rates from time to time may affect our operating results. We invest our excess cash balances in highly liquid, interest bearing instruments, including government and corporate bonds. At June 30, 2007, the fair value and principal amounts of our marketable securities portfolio amounted to $13.1 million, with a yield-to-maturity of 5.25%. Our investments are limited to high grade corporate debt securities, government issued debt, municipal debt securities, money market funds and similar high quality instruments. In a declining interest rate environment, we would experience a decrease in interest income. The opposite holds true in a rising interest rate environment.

Our interest income will continue to fluctuate based upon changes in market interest rates and levels of cash available for investment. We do not use derivative financial instruments in our investment portfolio to manage interest rate risk. However, given the relatively short maturities and investment-grade quality of our marketable securities portfolio, a sharp rise in interest rates should not have a material adverse effect on the fair value of these instruments. These instruments potentially expose us to credit risk; however, we place our investments in instruments that meet high credit quality standards, as specified in our investment policy guidelines. Those guidelines limit the amount of credit exposure to any one issue, issuer or type of instrument.

Using sensitivity analysis, we considered the historical volatility of short term interest rates and determined that it was reasonably possible that an adverse change of 0.5% (50 basis points) could be experienced over the next fiscal year. A hypothetical 0.5% increase in interest rates would not have had a material adverse impact on the Company in fiscal 2007 and fiscal 2006 primarily because we do not invest in debt securities with maturities greater than six months.

Credit Risk

Our accounts receivable from our customers expose us to credit risk. We believe that such credit risk is limited due to the large number of customers comprising our accounts receivable and their broad dispersion over geographic regions and industries. Our accounts receivable carrying values approximate their fair value.

Item 8.   Financial Statements and Supplementary Data

The consolidated financial statements listed in Item 15(a) are incorporated herein by reference and are filed as a part of this report and follow the signature pages to this Annual Report on Form 10-K on page F-2.

30

Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

None.

Item 9A.   Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As required by Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, our management, including our Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. In designing and evaluating our disclosure controls and procedures, we and our management recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily was required to apply its judgment in evaluating and implementing possible controls and procedures. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded, as of June 30, 2007, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act, (i) is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (ii) is accumulated and communicated to Moldflow’s management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. In compliance with the rules, we intend to continue to review and document our disclosure controls and procedures, including our internal control over financial reporting, on an ongoing basis, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended June 30, 2007 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Securities Rules 13a-15(f) and 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 in the United States of America and includes those policies and procedures that:

— Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company,

— Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company, and

— 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 its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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 June 30, 2007. 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, management concluded that, as of June 30, 2007, our internal control over financial reporting was effective based on those criteria.

31

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Moldflow Corporation

We have audited Moldflow Corporation’s (a Delaware Corporation) internal control over financial reporting as of June 30, 2007, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Moldflow Corporation’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 Moldflow Corporation’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 based on the assessed risk, 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 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 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.

In our opinion, Moldflow Corporation maintained, in all material respects, effective internal control over financial reporting as of June 30, 2007, based on criteria established in Internal Control-Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Moldflow Corporation as of June 30, 2007 and 2006 and the related consolidated statements of operations, stockholders’ equity and comprehensive income (loss), and cash flows for the year ended June 30, 2007 and our report dated September 13, 2007 expressed an unqualified opinion on those financial statements.

/s/  Grant Thornton LLP

Boston, Massachusetts

September 13, 2007

32

PART III

Item 10.   Directors, Executive Officers and Corporate Governance

Directors.  Incorporated herein by reference is the information appearing under the captions “Information Regarding Directors” and “Information Regarding the Board of Directors and Its Committees” in our definitive Proxy Statement for the 2007 Annual Meeting of Stockholders.

Executive Officers.  Incorporated herein by reference is the information appearing under the caption “Executive Officers” in our definitive Proxy Statement for the 2007 Annual Meeting of Stockholders.

Section 16(a) Beneficial Ownership Reporting Compliance.  Incorporated herein by reference is the information appearing under the caption “Information Regarding Moldflow Stock Ownership — Section 16(a) Beneficial Ownership Reporting Compliance” in our definitive Proxy Statement for the 2007 Annual Meeting of Stockholders.

Code of Ethics.  Incorporated herein by reference is the information appearing under the caption “Code of Ethics” in our definitive Proxy Statement for the 2007 Annual Meeting of Stockholders.

Item 11.   Executive Compensation

Incorporated herein by reference is the information appearing under the caption “Compensation Discussion & Analysis” in our definitive Proxy Statement for the 2007 Annual Meeting of Stockholders.

Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Incorporated herein by reference is the information appearing under the captions “Information Regarding Moldflow Stock Ownership” and “Equity Compensation Plan Information” in our definitive Proxy Statement for the 2007 Annual Meeting of Stockholders.

Item 13.   Certain Relationships and Related Transactions, and Director Independence

Incorporated herein by reference is the information appearing under the caption “Director Independence” in our definitive Proxy Statement for the 2007 Annual Meeting of Stockholders.

Item 14.   Principal Accountant Fees and Services

Incorporated by reference is the information appearing under the caption “Independent Registered Public Accounting Firm” in our definitive Proxy Statement for the 2007 Annual Meeting of Stockholders.

33

PART IV

Item 15.   Exhibits and Financial Statement Schedules

15(a)(1) Consolidated Financial Statements

An “Index to Consolidated Financial Statements” has been filed as a part of this Form 10-K Annual Report on page F-1.

15(a)(2) Financial Statement Schedule

The following are contained on the indicated pages of this Annual Report on Form 10-K:

	Page No.
Schedule II — Valuation and Qualifying Accounts		38

Schedules not listed above are omitted because they are not required or because the required information is given in the Consolidated Financial Statements or Notes thereto.

15(a)(3) List of Exhibits

The following exhibits are filed as part of this report. Where such filing is made by incorporation by reference to a previously filed statement or report, such statement or report is identified.

EXHIBIT INDEX

Exhibit
No.			Title
	2	.1	Asset Purchase Agreement by and between Moldflow Corporation and Husky Injection Molding Systems Ltd., dated June 25, 2007 (Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on June 27, 2007, and incorporated by reference thereto.)
	3	.1	Third Amended and Restated Certificate of Incorporation of the Registrant. (Previously filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 1, 2000 filed with the Securities and Exchange Commission on May 12, 2000 and incorporated by reference thereto.)
	3	.2	Third Amended and Restated By-laws of the Registrant. (Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on May 4, 2007, and incorporated by reference thereto.)
	3	.3	Certificate of Amendment of Third Amended and Restated Certificate of Incorporation. (Previously filed as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2002 filed with the Securities and Exchange Commission on September 19, 2002 and incorporated by reference thereto.)
	3	.4	Certificate of Preferences and Designations, Preferences and Rights of a Series of Preferred Stock of Moldflow Corporation classifying and designating the Series A Junior Participating Preferred Stock. (Previously filed as an exhibit to the Company’s Registration Statement on Form 8-A filed with the Securities and Exchange Commission on February 3, 2003 and incorporated by reference thereto.)
	4	.1	Shareholder Rights Agreement, dated as of January 29, 2003, between Moldflow Corporation and EquiServe Trust Company, as Rights Agent. (Previously filed as an exhibit to the Company’s Registration Statement on Form 8-A filed with the Securities and Exchange Commission on February 3, 2003 and incorporated by reference thereto.)
	10	.1	Form of Incentive Stock Option Agreement for Executive Officers under the Moldflow Corporation 2000 Stock Option and Incentive Plan. (Previously filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 25, 2004 filed with the Securities and Exchange Commission on November 3, 2004 and incorporated by reference thereto.)
	10	.2	Form of Non-Qualified Stock Option Agreement for Executive Officers under the Moldflow Corporation 2000 Stock Option and Incentive Plan. (Previously filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 25, 2004 filed with the Securities and Exchange Commission on November 3, 2004 and incorporated by reference thereto.)

34

Exhibit
No.			Title
	10	.3	Form of Non-Qualified Stock Option Agreement for Non-Employee Directors under the Moldflow Corporation 2000 Stock Option and Incentive Plan. (Previously filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 25, 2004 filed with the Securities and Exchange Commission on November 3, 2004 and incorporated by reference thereto.)
	10	.4	Third Amendment to the Moldflow Corporation 2000 Stock Option and Incentive Plan. (Previously filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 27, 2003 filed with the Securities and Exchange Commission on February 10, 2004 and incorporated by reference thereto.)
	10	.7	Form of Incentive Stock Option Agreement under the Moldflow Corporation 2000 Stock Option and Incentive Plan. (Previously filed as an exhibit to the Company’s Registration Statement on Form S-1 (File No. 333-95289) and incorporated by reference thereto.)
	10	.8	Form of Non-Qualified Stock Option Agreement for Company Employees under the Moldflow Corporation 2000 Stock Option and Incentive Plan. (Previously filed as an exhibit to the Company’s Registration Statement on Form S-1 (File No. 333-95289) and incorporated by reference thereto.)
	10	.9	Moldflow Corporation 1997 Equity Incentive Plan. (Previously filed as an exhibit to the Company’s Registration Statement on Form S-1 (File No. 333-95289) and incorporated by reference thereto.)
	10	.10	Form of Director Indemnification Agreement to be entered into between the Registrant and Each Non-employee Director. (Previously filed as an exhibit to the Company’s Registration Statement on Form S-1 (File No. 333-95289) and incorporated by reference thereto.)
	10	.11	Form of Non-Qualified Stock Option Agreement for Non-Employee Directors under the Moldflow Corporation 2000 Stock Option and Incentive Plan. ** (Previously filed as an exhibit to the Company’s Registration Statement on Form S-1 (File No. 333-95289) and incorporated by reference thereto.)
	10	.12	Loan Agreement as of November 13, 2001 between Silicon Valley Bank and Moldflow Corporation. (Previously filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 29, 2001 filed with the Securities and Exchange Commission on February 11, 2002 and incorporated by reference thereto.)
	10	.13	Amended and Restated Employment Agreement, dated July 8, 2005, between the Registrant and Kenneth R. Welch.** (Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed July 14, 2005 and incorporated by reference thereto.)
	10	.14	Amended and Restated Employment Agreement, dated July 8, 2005, between the Registrant and A. Roland Thomas.** (Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on July 14, 2005 and incorporated by reference thereto.)
	10	.15	Amended and Restated Employment Agreement, dated July 8, 2005, between the Registrant and Ian M. Pendlebury.** (Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on July 14, 2005 and incorporated by reference thereto.)
	10	.16	Amended and Restated Employment Agreement, dated July 8, 2005, between the Registrant and Peter K. Kennedy.** (Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on July 14, 2005 and incorporated by reference thereto.)
	10	.17	Amended and Restated Employment Agreement, dated July 8, 2005, between the Registrant and Lori M. Henderson.** (Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on July 14, 2005 and incorporated by reference thereto.)
	10	.18	Amended and Restated Employment Agreement dated as of July 8, 2005 between Christopher L. Gorgone and Moldflow Corporation.** (Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on July 14, 2005, and incorporated by reference thereto.)
	10	.19	Form of Cash Bonus Plan for Certain Executive Officers and Key Employees.** (Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on September 29, 2005, and incorporated by reference thereto.)
	10	.20	Form of Restricted Stock Award Agreement for Executive Officers under the Moldflow Corporation 2000 Stock Option and Incentive Plan, except with respect to Ian Pendlebury and Peter Kennedy, in which case paragraph 8 has been deleted.** (Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on September 29, 2005, and incorporated by reference thereto.)

35

Exhibit
No.			Title
	10	.21	Employment Agreement dated as of August 27, 2007 between the Registrant and Gregory W. Magoon.** (Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on August 30, 2007, and incorporated by reference thereto.)
	10	.22	Form of Restricted Stock Unit Award Agreement for Non-Employee Directors.** (Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on September 12, 2006, and incorporated by reference thereto.)
	10	.23	Moldflow Corporation 2000 Stock Option and Incentive Plan, as amended. (Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on September 12, 2006, and incorporated by reference thereto.)
	10	.24	Change of Control Agreement between the Registrant and Gregory W. Magoon, (Filed herewith.)
	10	.25	Transition Agreement between the Registrant and Christopher L. Gorgone. (Filed herewith.)
	10	.26	Employment Agreement dated September 7, 2006 between the Registrant and G. Fred Humbert. (Filed herewith.)
	16	.1	Letter Regarding Change in Certifying Accountant. (Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on March 10, 2006, and incorporated by reference thereto.)
	21	.1	Subsidiaries of the Registrant. (Filed herewith.)
	23	.1	Consent of Grant Thornton LLP. (Filed herewith.)
	23	.2	Consent of PricewaterhouseCoopers LLP. (Filed herewith.)
	31	.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer. (Filed herewith.)
	31	.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer. (Filed herewith.)
	32	.1	Section 1350 Certification of Chief Executive Officer.(1) (Filed herewith.)
	32	.2	Section 1350 Certification of Chief Financial Officer.(1) (Filed herewith.)

**	Management contract or compensatory plan or arrangement required to be filed as an exhibit to this form pursuant to Item 15(c) of this report.
(1)	This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.

15(b) Exhibits

Exhibits filed with this Annual Report are as set forth in the Exhibit Index, which immediately follows the Notes to the Consolidated Financial Statements.

15(c) Other Financial Statements

36

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

Moldflow Corporation

By:  /s/  Gregory W. Magoon

Gregory W. Magoon

Executive Vice President and

Chief Financial Officer

Date: September 13, 2007

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 dates indicated.

Signature	Title	Date
/s/  A. Roland Thomas A. Roland Thomas	President, Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer)	September 13, 2007
/s/  Gregory W. Magoon Gregory W. Magoon	Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	September 13, 2007
/s/  Roger E. Brooks Roger E. Brooks	Director	September 13, 2007
/s/  Frank W. Haydu III Frank W. Haydu III	Director	September 13, 2007
/s/  Robert J. Lepofsky Robert J. Lepofsky	Director	September 13, 2007
/s/  Robert P. Schechter Robert P. Schechter	Director	September 13, 2007

37

SCHEDULE II

Schedule II.  Valuation and Qualifying Accounts

	Beginning								Ending
Item	Balance		Additions			Deductions			Balance
	(In thousands)
For the year ended June 30, 2007:
Allowance for doubtful accounts	$	164	$	152	(a)	$	(74	)(b)	$	242
Deferred tax asset valuation allowance		2,568		1,017	(a)		(73	)(c)		3,512
For the year ended June 30, 2006:
Allowance for doubtful accounts	$	125	$	39	(a)	$	—	(b)	$	164
Deferred tax asset valuation allowance		1,967		661	(a)		(60	)(c)		2,568
For the year ended June 30, 2005:
Allowance for doubtful accounts	$	389	$	95	(a)	$	(359	)(b)	$	125
Deferred tax asset valuation allowance		1,514		885	(a)		(432	)(c)		1,967

(a)	Additional provisions and foreign currency translation effects.
(b)	Specific write-offs, collections of previously reserved items recorded as a benefit to general and administrative expenses and foreign currency translation effects.
(c)	Utilization of net operating loss carryforwards, reductions in other deferred tax assets and foreign currency translation effects.

38

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Balance Sheet at June 30, 2007 and 2006	F-2
Consolidated Statement of Operations for the years ended June 30, 2007, 2006 and 2005	F-3
Consolidated Statement of Stockholders’ Equity and Comprehensive Income (Loss) for the years ended June 30, 2007, 2006 and 2005	F-4
Consolidated Statement of Cash Flows for the years ended June 30, 2007, 2006 and 2005	F-5
Notes to Consolidated Financial Statements	F-6
Report of Independent Registered Public Accounting Firms	F-30

F-1

MOLDFLOW CORPORATION

CONSOLIDATED BALANCE SHEET

	June 30,
	2007			2006
	(In thousands, except share and per share
	data)
ASSETS
Current assets:
Cash and cash equivalents	$	59,482		$	52,111
Marketable securities		13,163			8,443
Accounts receivable, net of allowance for doubtful accounts of $242 and $164 at June 30, 2007 and 2006, respectively		11,878			9,338
Prepaid expenses		6,383			6,415
Other current assets		10,594			2,987
Current portion of assets held for sale (Note 3)		—			5,378
Total current assets		101,500			84,672
Fixed assets, net		3,137			2,768
Goodwill		6,465			6,465
Other assets		2,659			1,870
Assets held for sale, net of current portion		—			14,418
Total assets	$	113,761		$	110,193
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	876		$	1,143
Accrued expenses		11,489			8,997
Deferred revenue		14,095			11,268
Current portion of liabilities held for sale		—			2,656
Total current liabilities		26,460			24,064
Deferred revenue		1,582			1,325
Other long-term liabilities		305			394
Liabilities held for sale, net of current portion		—			453
Total liabilities		28,347			26,236
Contingencies, commitments and guarantor arrangements (Note 19)
Stockholders’ equity:
Preferred stock, $0.01 par value; 5,000,000 shares authorized; no shares issued and outstanding at June 30, 2007 and 2006		—			—
Common stock, $0.01 par value; 40,000,000 shares authorized; 12,343,922 shares issued, and 11,743,922 outstanding at June 30, 2007 and 11,410,030 shares issued, and 11,213,930 outstanding at June 30, 2006		124			114
Treasury stock, at cost; 600,000 shares at June 30, 2007 and 196,100 shares at June 30, 2006		(8,018	)		(2,579	)
Additional paid-in capital		85,358			75,335
Retained earnings		1,617			6,296
Accumulated other comprehensive income		6,333			4,791
Total stockholders’ equity		85,414			83,957
Total liabilities and stockholders’ equity	$	113,761		$	110,193

The accompanying notes are an integral part of these consolidated financial statements.

F-2

MOLDFLOW CORPORATION

CONSOLIDATED STATEMENT OF OPERATIONS

	Year Ended June 30,
	2007			2006			2005
	(In thousands, except
	per share data)
Revenue:
Product	$	28,403		$	24,433		$	24,163
Services		27,450			24,523			23,388
Total revenue		55,853			48,956			47,551
Costs and operating expenses:
Cost of product revenue		1,545			1,511			1,340
Cost of services revenue		4,536			4,309			3,867
Research and development		8,026			7,390			7,307
Selling and marketing		20,436			17,697			15,753
General and administrative		14,042			11,893			11,060
Restructuring charges		—			1,247			—
Amortization of acquired intangible assets		—			—			83
Total costs and operating expenses		48,585			44,047			39,410
Income from continuing operations		7,268			4,909			8,141
Interest income, net		3,250			2,571			1,663
Other income, net		218			162			70
Income from continuing operations before income taxes		10,736			7,642			9,874
Provision for income taxes		2,187			2,381			1,604
Net income from continuing operations		8,549			5,261			8,270
Net loss from discontinued operations, net of income taxes (Note 3)		(11,469	)		(4,260	)		(1,513	)
Net loss on disposal of discontinued operations, net of income taxes (Note 3)		(869	)		—			—
Net income (loss)	$	(3,789	)	$	1,001		$	6,757
Basic net income per common share from continuing operations	$	0.76		$	0.47		$	0.77
Basic net loss per common share from discontinued operations		(1.02	)		(0.38	)		(0.14	)
Basic net loss per common share on the disposal of discontinued operations	$	(0.08	)		—			—
Basic net income (loss) per common share	$	(0.34	)	$	0.09		$	0.63
Diluted net income per common share from continuing operations	$	0.73		$	0.44		$	0.71
Diluted net loss per common share from discontinued operations		(0.98	)		(0.36	)		(0.13	)
Diluted net loss per common share on the disposal of discontinued operations		(0.07	)		—			—
Diluted net income (loss) per common share	$	(0.32	)	$	0.08		$	0.58
Shares used in computing net income (loss) per common share:
Basic		11,225			11,114			10,761
Diluted		11,746			11,817			11,625

The accompanying notes are an integral part of these consolidated financial statements.

F-3

MOLDFLOW CORPORATION

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME (LOSS)

															Retained			Accumulated
	Common Stock					Additional									Earnings/			Other			Total
	Shares			Par		Paid-In			Treasury Stock						(Accumulated			Comprehensive			Stockholders’			Comprehensive
	Issued			Value		Capital			Shares			Cost			Deficit)			Income			Equity			Income (Loss)
	(In thousands, except share data)
Balance at June 30, 2004		10,619,432		$	106	$	67,554			—			—		$	(1,462	)	$	3,381		$	69,579
Exercise of stock options		298,120			3		1,816															1,819
Issuance of stock under employee stock purchase plan		13,402					256															256
Comprehensive income:
Net income																6,757						6,757		$	6,757
Change in unrealized losses on investments, net of taxes																			17			17			17
Change in unrealized losses on hedging instruments, net of taxes																			(6	)		(6	)		(6	)
Foreign currency translation adjustment																			1,727			1,727			1,727
Comprehensive income																								$	8,495
Balance at June 30, 2005		10,930,954			109		69,626			—			—			5,295			5,119			80,149
Purchase of treasury stock										(196,100	)		(2,579	)								(2,579	)
Exercise of stock options		384,476			4		2,760															2,764
Issuance of restricted stock		94,733			1		(1	)
Forfeitures of restricted stock		(12,989	)
Share-based compensation							2,170															2,170
Tax benefit from share-based compensation transactions							639															639
Issuance of stock under employee stock purchase plan		12,856					141															141
Comprehensive income:
Net income																1,001						1,001		$	1,001
Change in unrealized losses on investments, net of taxes																			31			31			31
Change in unrealized losses on hedging instruments, net of taxes																			(9	)		(9	)		(9	)
Foreign currency translation adjustment																			(350	)		(350	)		(350	)
Comprehensive income																								$	673
Balance at June 30, 2006		11,410,030			114		75,335			(196,100	)		(2,579	)		6,296			4,791			83,957
Cumulative adjustment from adoption of SAB No. 108, net of tax (Note 17)							514									(890	)					(376	)
Purchase of treasury stock										(403,900	)		(5,439	)								(5,439	)
Exercise of stock options		820,971			9		6,253															6,262
Issuance of restricted stock		125,969			1		(80	)														(79	)
Forfeitures of restricted stock		(13,048	)
Share-based compensation							2,264															2,264
Tax benefit from share-based compensation transactions							1,072															1,072
Comprehensive (loss):
Net (loss)																(3,789	)					(3,789	)	$	(3,789	)
Change in unrealized losses on investments, net of taxes																			6			6			6
Change in unrealized losses on hedging instruments, net of taxes																			(1	)		(1	)		(1	)
Foreign currency translation adjustment																			1,537			1,537			1,537
Comprehensive (loss)																								$	(2,247	)
Balance at June 30, 2007		12,343,922		$	124	$	85,358			(600,000	)	$	(8,018	)	$	1,617		$	6,333		$	85,414

The accompanying notes are an integral part of these consolidated financial statements.

F-4

MOLDFLOW CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS

	Year Ended June 30,
	2007			2006			2005
	(In thousands)
Cash flows from operating activities:
Net income from continuing operations	$	8,549		$	5,261		$	8,270
Net loss from discontinued operations		(11,469	)		(4,260	)		(1,513	)
Loss on disposal of discontinued operations (Note 3)		(869	)		—			—
Net income (loss)	$	(3,789	)	$	1,001		$	6,757
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities of continuing operations:
Depreciation of fixed assets		1,130			1,157			1,479
Amortization of other intangible assets		849			564			621
Provisions for doubtful accounts		152			39			(95	)
Share-based compensation		1,932			1,896			—
Change in deferred income taxes due to share-based compensation		154			—			—
Excess tax benefits from shared-based compensation		(532	)		(254	)		—
Other non-cash charges		(200	)		254			(182	)
Changes in operating assets and liabilities, net of businesses sold:
Accounts receivable		(2,616	)		(526	)		(2,653	)
Prepaid expenses, and other current assets		(313	)		(3,304	)		(547	)
Other assets		(217	)		(101	)		367
Accounts payable		(294	)		(1,275	)		312
Accrued expenses and other liabilities		1,425			(1,200	)		899
Deferred revenue		3,177			692			1,573
Net cash provided by operating activities of continuing operations		13,196			3,203			10,044
Net cash used in operating activities of discontinued operations		(2,195	)		(1,264	)		(3,706	)
Net cash provided by operating activities		11,001			1,939			6,338
Cash flows from investing activities:
Purchases of fixed assets		(1,066	)		(1,029	)		(1,086	)
Capitalization of software development costs		(340	)		(496	)		(201	)
Purchases of marketable securities		(25,738	)		(19,481	)		(5,096	)
Sales and maturities of marketable securities		21,018			22,361			9,455
Proceeds from sale of business		(391	)		—			—
Net cash (used in) provided by investing activities of continuing operations		(6,517	)		1,355			3,072
Net cash (used in) provided by investing activities of discontinued operations		948			(220	)		(81	)
Net cash (used in) provided by investing activities		(5,569	)		1,135			2,991
Cash flows from financing activities:
Proceeds from issuance of common stock		6,183			2,972			2,490
Purchase of treasury stock		(5,439	)		(2,579	)		—
Excess tax benefits from share-based compensation		532			254			—
Net cash provided by financing activities		1,276			647			2,490
Effect of exchange rate changes on cash and cash equivalents		663			(520	)		1,104
Net increase in cash and cash equivalents		7,371			3,201			12,923
Cash and cash equivalents, beginning of period		52,111			48,910			35,987
Cash and cash equivalents, end of period	$	59,482		$	52,111		$	48,910
Supplemental disclosure of cash flow information:
Cash paid during the year for income taxes	$	1,837		$	1,713		$	1,764

The accompanying notes are an integral part of these consolidated financial statements.

F-5

MOLDFLOW CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   Basis of Presentation and Nature of Business

Moldflow Corporation (“Moldflow” or the “Company”) designs, develops, manufactures and markets computer software solutions for the design and engineering of injection-molded plastic parts. The Company’s revenues are derived primarily from the plastics design and manufacturing industry. The Company sells its products primarily to customers in the United States, Europe and Asia.

In June 2007, the Company sold its Manufacturing Solutions (“MS”) division. The results of operations of the MS division and the balance sheet amounts pertaining to this business have been classified as discontinued operations in the consolidated financial statements (Note 3). Unless indicated otherwise, both current and historical amounts provided in these financial statements and notes pertain to the Company’s continuing operations. Prior year amounts have been reclassified to conform with the fiscal 2007 presentation.

The Company’s fiscal year end is June 30. References to 2007, 2006 or 2005 mean the fiscal year ended June 30, unless otherwise indicated.

2.   Summary of Significant Accounting Policies

Estimates and Assumptions

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management of the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Examples include estimates of loss contingencies, acquisition accounting valuations, software development costs eligible for capitalization, amortization and depreciation period estimates, and the potential outcome of future tax consequences of events that have been recognized in the financial statements or tax returns. Actual results and outcomes may differ from these estimates and assumptions.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and all of its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in the consolidated financial statements. The Company has no special purpose entities.

Acquisition Accounting

The purchase price of each acquired business is allocated to the assets acquired and liabilities assumed, if any, at their respective fair value on the date of acquisition. In certain cases, third-party appraisers may be engaged to determine the fair value of the assets acquired. In other cases, depending upon the size of the acquisition and the nature of assets and liabilities acquired, management of the Company estimates the fair value of acquired assets and liabilities based upon a number of generally accepted valuation methodologies. In all cases, any excess purchase price over the amounts allocated to the assets acquired and liabilities assumed is recorded as goodwill.

Foreign Currency Translation

Assets and liabilities of international subsidiaries whose functional currency is the local currency are translated at the month end spot rate each fiscal month. Statement of operation amounts are translated at the average currency exchange rate for the year. Resulting translation adjustments are recorded in stockholders’ equity as a component of accumulated other comprehensive income. Foreign currency transaction gains and losses are included in other income and expense. Net foreign currency transaction gains were $200,000, $214,000, and $83,000 for the years ended June 30, 2007, 2006 and 2005, respectively.

F-6

MOLDFLOW CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Cash and Cash Equivalents

All highly liquid investments with an original maturity of three months or less from the date of purchase are considered to be cash equivalents. The Company invests excess cash primarily in overnight investments and money market accounts of major financial institutions. Accordingly, these investments are subject to minimal credit and market risk and are reported at amortized cost, which approximates fair value. At June 30, 2007, 42%, 25%, 14%, 14% and 1% of the Company’s cash and cash equivalents was invested in accounts of five separate financial institutions; the remaining 4% was held in various operating bank accounts. At June 30, 2007, the Company had $11.6 million of cash and cash equivalents invested in foreign currency accounts. At June 30, 2006, 49%, 28%, 17%, and 1% of the Company’s cash and cash equivalents was invested in accounts of four separate financial institutions; the remaining 5% was held in various operating bank accounts. At June 30, 2006, the Company had $6.9 million of cash and cash equivalents invested in foreign currency accounts.

Marketable Securities and Investment Policy

The Company invests its excess cash in financial instruments with high credit quality in accordance with its investment policy, as approved by the Company’s board of directors. The primary objective of this policy is the preservation of the Company’s capital. Investments are limited to high grade corporate debt securities, government issued debt, municipal debt securities and similar high quality instruments.

At June 30, 2007 and 2006, the Company’s marketable securities consisted of debt securities with maturities from the date of purchase in excess of three months, but less than one year. At June 30, 2007 and 2006, respectively, marketable securities consisted entirely of corporate bonds. These investments are classified as available-for-sale and are reported at fair value, with unrealized gains and losses included in accumulated other comprehensive income, net of any related tax effect. As of June 30, 2007, and 2006, respectively, the unrealized losses on these marketable securities were immaterial.

Concentration of Credit Risk

Financial instruments which potentially expose the Company to concentrations of credit risk include accounts receivable and marketable securities. The Company’s customer base consists of a large number of geographically dispersed customers. The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Reserves are recorded primarily on a specific identification basis. To date, such losses, in the aggregate, have not exceeded management expectations.

Fair Value of Financial Instruments

The Company’s financial instruments consist of primarily cash equivalents, marketable securities, accounts receivable, hedging instruments and accounts payable. The carrying amounts of these instruments at June 30, 2007 and 2006 approximated their fair values.

Hedging

The Company uses currency options, zero-cost collars and other combinations of options that constitute net purchased options to hedge a portion of its forecasted foreign currency denominated intercompany sales and a portion of its foreign currency denominated intercompany research and development payments over a period of up to twelve months. These derivatives have been designated as cash-flow hedges and the effective portion of the change in their fair value is recorded as a component of accumulated other comprehensive income until the underlying forecasted transaction impacts earnings or is considered probable of not occurring. Once the underlying forecasted transaction is realized or is considered probable of not occurring, the gain or loss from the derivative is

F-7

MOLDFLOW CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

reclassified from other accumulated comprehensive income to current earnings as a component of other income and expense.

At the inception of the hedge transaction and at least on a quarterly basis, the Company assesses whether the derivatives that are used in hedging transactions are highly effective in offsetting the changes in cash flows of the hedged items. The assessment of hedge effectiveness is based on changes in an instrument’s total value. Management believes through the date of the forecasted net sales and research and development payments, the hedge will be completely effective since the critical terms of the derivative contract exactly match those of the forecasted transaction.

If the Company determines that a forecasted transaction is no longer probable of occurring, the Company discontinues hedge accounting for the ineffective portion of the instrument hedging the transaction. At that time and prospectively, any gain or loss on the instrument is recognized in current earnings as a component of other income and expense.

Fixed Assets

Fixed assets, excluding buildings, are recorded at cost and are depreciated using the straight-line method over their estimated useful lives. The Company’s building has been recorded at cost and is being depreciated over its estimated useful life using the diminishing value method. Maintenance and repair costs are charged to expense as incurred while improvements are capitalized. Upon retirement or sale, the cost of the asset disposed of and the related accumulated depreciation are removed from the accounts.

Goodwill and Acquired Intangible Assets

Goodwill represents the excess of cost over the fair value of the net assets acquired in the Company’s business combinations (Note 4).

To assess the impairment of these assets or any identifiable acquired intangible assets, goodwill and other long-lived assets not subject to amortization, the Company applies the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 142 requires, among other things, the Company to test goodwill for impairment on at least an annual basis. The impairment test compares the fair value of the reporting unit to its carrying amount, including goodwill, to assess whether impairment is present. The Company completes this test during its third fiscal quarter.

Important factors which could trigger an impairment review, if significant, include the underperformance of a product line or operating activity relative to projected future operating results, changes in the manner of use of the acquired assets or the strategy for the overall business, and negative industry or economic trends.

Long-Lived Assets

The Company periodically evaluates its long-lived assets, which include fixed assets and acquired intangible assets subject to depreciation and amortization, for events and circumstances that indicate a potential impairment in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” The Company reviews long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Each impairment test is based on a comparison of the estimated undiscounted cash flows to the recorded value of the asset. If impairment is indicated, the asset is written down to its estimated fair value based on a discounted cash flow analysis.

F-8

MOLDFLOW CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Revenue Recognition

The Company generates revenue from two principal sources: license fees for packaged software products and service fees from maintenance and support contracts, consulting, implementation, training and material testing services.

Licenses Fees:  For revenue derived from license fees for packaged software products the Company follows American Institute of Certified Public Accountants (“AICPA”) Statement of Position (“SOP”) No. 97-2, “Software Revenue Recognition,” as amended by SOP No. 98-9, “Modification of SOP No. 97-2 with Respect to Certain Transactions,” both of which provide guidance on applying generally accepted accounting principles in recognizing revenue on software transactions. The Company recognizes revenue from sales of software licenses upon product shipment provided that evidence of the arrangement exists, the arrangement fee is fixed or determinable, and collection of the related receivable is reasonably assured and free of contingencies.

Service Fees:  Software maintenance and support contracts are often entered into at the same time as the sale of software licenses. In accordance with SOP 97-2, the Company considers these to be multiple elements of a single arrangement. The Company applies the residual method to recognize revenues from arrangements like these with one or more elements to be delivered at a future date, when evidence of the fair value of all undelivered elements exists. Under the residual method, the fair value of the undelivered elements, such as implementation and maintenance services, is deferred and the remaining portion of the total arrangement fee is recognized as revenue. The Company determines vendor-specific objective evidence of the fair value of undelivered services based on the prices that are charged when the same element is sold separately to customers. The fair value of maintenance and support services may also be determined based on the price to be paid upon renewal of that service in accordance with the optional renewal terms offered contractually to a customer. If sufficient evidence of the fair value of an undelivered element does not exist, all revenue from the arrangement is deferred and recognized upon delivery of that element or at the time that fair value can be established for the undelivered element. The Company recognizes revenue from software maintenance and support contracts ratably over the related contract period and from training and other services as they are performed.

Modification or Customization:  The Company’s products do not require significant modification or customization after shipment. Installation of the products is generally routine and can be performed by the customer or other third-party providers.

Evidence of an Arrangement:  In order to recognize revenue, sufficient evidence of an arrangement must exist, which is typically in form of a written purchase commitment from a customer. For sales of software products, the Company requires its customers to enter into an End-User License Agreement, which for certain products is in the form of a “click-wrapped” software license agreement that is included as part of each customer’s installation process.

Collectibility:  Management assesses each customer account for collectibility considering the customer’s credit worthiness and relevant historical payment experience. Revenue is recognized only if collection of the fee is reasonably assured. If a particular sale is not reasonably assured, revenue is deferred until such time as collection becomes reasonably assured, which generally occurs upon the receipt of the customer’s payment.

Fixed or Determinable Price:  Management assesses whether the total fee payable to the Company for the order is fixed or determinable and free of contingencies at the time of delivery. Management considers the payment terms of the transaction, including whether the terms are extended, and its collection experience in similar transactions that did not require concessions, among other factors. If the total consideration payable to the Company is not fixed or determinable, revenue is recognized only as payments become due from the customer, provided that all other revenue recognition criteria are met.

Customer Acceptance Criteria:  If an arrangement includes customer acceptance criteria, the Company defers all revenue from the arrangement until acceptance is received or the acceptance period has lapsed, unless

F-9

MOLDFLOW CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

those acceptance criteria only require that the product perform in accordance with the Company’s standard published product specifications. If a customer’s obligation to pay the Company is contingent upon a future event such as installation or acceptance, the Company defers all revenue from the arrangement until that event has occurred. The Company’s arrangements do not typically contain customer acceptance criteria.

Resellers:  A portion of the Company’s revenue is derived from sales to resellers. The Company generally recognizes revenue upon delivery of the product to these resellers, provided that the same conditions for revenue recognition described above are met.

Product Return/Stock Rotation/Price Protection:  The Company’s arrangements with customers, including resellers, do not contain any unilateral rights of product return, other than those related to standard warranty provisions that permit repair or replacement of defective goods, or returns that are in the sole discretion of Moldflow. Estimated warranty costs are accrued upon product shipment. In addition, the Company’s arrangements with resellers do not contain provisions that permit stock rotation or provide assurance for price protection.

Shipping and Handling Fees:  Fees charged to customers for shipping and handling are included as a component of product revenue. Shipping and handling costs are recorded as a component of cost of product revenue.

Software Development Costs

Costs associated with the research and development of the Company’s products are expensed as incurred. Costs associated with the development of computer software are expensed prior to establishing technological feasibility, as defined by SFAS No. 86, “Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed,” and are capitalized thereafter until the product is available for general release to customers. Subsequently, the costs are amortized to cost of product revenue over the estimated economic life of the product, which ranges from three to five years.

Costs of software applications developed or obtained for internal use that are incurred during the applications’ development stage are capitalized in accordance with SOP No. 98-1, “Accounting for the Costs of Computer Software Developed or Obtained For Internal Use.”

Advertising Costs

The Company expenses the cost of advertising as incurred. Advertising expenses for the years ended June 30, 2007, 2006 and 2005 were $1.3 million, $1.5 million and $1.2 million, respectively.

Income Taxes

Deferred tax assets and liabilities are recorded for the effects of temporary differences between the tax basis of an asset or liability and its reported amount in the consolidated financial statements. The Company assesses its ability to realize deferred tax assets primarily based on the earnings history and future earnings potential of the legal entities through which the deferred tax assets will be realized as proscribed by SFAS No. 109, “Accounting for Income Taxes” (Note 16). Valuation allowances are provided against deferred tax assets, if, based on the weight of available evidence, it is more likely than not they will not be realized.

Share-Based Compensation

Effective July 1, 2005, the Company adopted the provisions of SFAS No. 123(R), “Share-Based Payment,” which establishes accounting for equity instruments exchanged for employee and director services. Under the provisions of SFAS No. 123(R), share-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the requisite service period, which generally is the vesting period of the equity grant. Prior to July 1, 2005, the Company accounted for share-based

F-10

MOLDFLOW CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

compensation to employees and directors in accordance with Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. The Company also followed the disclosure requirements of SFAS No. 123, “Accounting for Stock-Based Compensation.” The Company elected to adopt the modified prospective transition method as provided by SFAS No. 123(R) and, accordingly, financial statement amounts for the periods prior to fiscal 2006 have not been restated to reflect the fair value method of expensing share-based compensation (Note 14).

SFAS No. 123(R) also requires the benefits of tax deductions in excess of recognized compensation expense be reported as a cash flow from financing activities, rather than as a cash flow from operating activities, as was prescribed under accounting rules prior to adoption of SFAS No. 123(R).

Restructuring

The Company accounts for charges resulting from operational restructuring in accordance with SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS No. 146, which addresses financial accounting reporting associated with certain exit or disposal activities. Under SFAS No. 146, costs associated with certain exit or disposal activities are recognized and measured at their fair value in the period in which the liability is incurred rather than at the date of a commitment to an exit or disposal plan. The determination of restructuring charges requires management’s judgment and may include such costs and charges as those related to employee severance, termination benefits, the write-off of assets, professional service fees and costs for future lease commitments on excess facilities, net of any estimated income from subleases. All such judgments and related estimates are reviewed and, if necessary, revised on a quarterly basis, which may result in adjustments to previously recorded liability accruals (Note 9).

Net Income (Loss) Per Common Share

Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding and all potential common equivalent shares outstanding including options and unvested restricted stock except where the result would be antidilutive. The dilutive effect of options and unvested restricted stock is determined under the treasury stock method using the average fair value of common stock for the period (Note 15). Under the provisions of SFAS No. 128 “Earnings per Share,” when there is income from continuing operations and an overall net loss, the Company computes diluted net loss per common share from discontinued operations and diluted net income (loss) per common share using the same number of potentially dilutive securities applied in computing diluted net income per common share from continuing operations, even though this would result in an anti-dilutive effect.

Comprehensive Income

Comprehensive income is comprised of net income and other comprehensive income. Other comprehensive income includes certain changes in equity that are excluded from net income(loss). At June 30, 2007, accumulated other comprehensive income was $6.3 million comprised primarily of net gains from cumulative foreign currency translation adjustments, and $9,000 of unrealized losses on hedging instruments. At June 30, 2006, accumulated other comprehensive income was $4.8 million comprised primarily of net gains from cumulative foreign currency translation adjustments, and $8,000 of unrealized losses on hedging instruments. The individual components of comprehensive income are reflected in the consolidated statement of stockholders’ equity.

Recent Accounting Pronouncements

In February 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” SFAS No. 159 allows entities the option to measure eligible financial instruments at fair value as of specified dates. Such election, which may be applied on an instrument by

F-11

MOLDFLOW CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

instrument basis, is typically irrevocable once elected. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007, and early adoption of SFAS No. 159 is allowed under certain circumstances. The Company has not yet determined the impact this interpretation will have on its financial position.

In June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48 “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109” (“FIN 48”). FIN No. 48 clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. This Interpretation also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 will require disclosure at the end of the annual reporting period of the nature of uncertain tax positions and related events if it is reasonably possible that those positions and events could change the associated recognized tax benefit within the next twelve months. This Interpretation is effective for fiscal years beginning after December 15, 2006. The Company will adopt FIN No. 48 effective July 1, 2007. The cumulative effect of applying the provisions of FIN No. 48 will be recorded as an adjustment to opening retained earnings in the first quarter of the fiscal 2008. The Company expects that the adoption of FIN No. 48 will result in a reduction in retained earnings, currently estimated between $300,000 and $500,000, with a corresponding increase in accrued income taxes.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value in generally accepted accounting principles (“GAAP”) and expands disclosure related to the use of fair value measures in financial statements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company is currently evaluating the timing of adoption of SFAS No. 157 and the impact that adoption might have on its financial position and its results of operations.

3.   Discontinued Operations

During March 2007, in light of the Company’s overall strategy, most specifically its intent to focus on its core Design Analysis Solutions (“DAS”) software business, the Company committed to a plan to divest its Manufacturing Solutions (“MS”) division. Accordingly, the financial information for this division qualified for accounting as a discontinued operation under the provisions SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” and therefore was reclassified to discontinued operations for all periods presented.

The Company tested the recoverability of the carrying value of the MS division by comparing it to the division’s estimated fair value which was based upon indications of fair value of the division expressed by third parties. As a result, the Company concluded that the goodwill associated with the division was impaired, and, accordingly, a charge of $10.2 million was recorded in the Company’s third fiscal quarter.

In June 2007, the Company sold its MS division to Husky Injection Molding Systems, Ltd. (“the Buyer”) for $7.0 million in cash, subject to a post-closing net asset value adjustment, estimated by the Company to be $744,000. The Company incurred $620,000 of transaction costs, resulting in a total net purchase price of $7.1 million. Pursuant to the sale agreement, $1.0 million of these proceeds were placed in escrow. As the Company did not expect the escrow to settle within the next twelve months, this balance was recorded as an other non-current asset as of June 30, 2007. Due to the timing of the closing of the sale, the remaining proceeds were recorded as a receivable and included as an other current asset as of June 30, 2007. In conjunction with the sale, the Company recognized a net loss on the sale of the MS division of $869,000.

On August 31, 2007, the Company received a notice from the Buyer disputing certain portions of the estimated post-closing net asset value adjustment totaling $441,000. The Company believes the original estimated adjustment that was recorded was appropriate and will work with the Buyer through the resolution process defined by the sale agreement.

Prior to its divestiture, the MS division had revenues of $13.5 million for the fiscal year ended June 30, 2007, $16.6 million for the year ended June 30, 2006 and $16.9 million for the year ended June 30, 2005. Net loss from

F-12

MOLDFLOW CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

discontinued operations for the year ended June 30, 2007 was $11.5 million, primarily relating to the impairment of goodwill recorded in the third fiscal quarter (Note 4). Net loss of the discontinued operations was $4.3 million and $1.5 million in fiscal 2006 and 2005, respectively.

4.   Goodwill and Acquired Intangible Assets

In conjunction with the Company’s commitment to divest its MS division, the Company tested the recoverability of the carrying value of the MS division by comparing it to the division’s estimated fair value, concluding that $10.2 million of the MS division’s goodwill was impaired. For the purposes of this test, the estimated fair value was based upon indications of fair value of the MS division expressed by third parties, and the resulting impairment charge was recorded in the net loss from discontinued operations in the Company’s third quarter of fiscal 2007.

Subsequent to the divestiture of the MS division, the Company has reviewed the provisions of SFAS No. 131 with respect to the criteria necessary to evaluate the number of reporting units that exist. Based on its review, the Company has determined that it operates as a single reporting unit. The Company conducted its annual goodwill impairment test for fiscal 2007 as of the end of its third fiscal quarter, concluding that there was no indication of impairment of the goodwill associated with this reporting unit. The total carrying value of goodwill at both June 30, 2007 and June 30, 2006 was $6.5 million. As of June 30, 2007 and June 30, 2006, the Company’s other acquired intangibles were fully amortized.

5.   Derivative Financial Instruments and Hedging Activities

As of June 30, 2007, hedging instruments to exchange Euros with nominal amounts of $1.4 million were outstanding. The fair value of these instruments, as derived from dealer quotations, was $2,000 and was recorded as a component of other current assets. Net unrealized losses of $10,000 on these instruments were included in accumulated other comprehensive income. During the year ended June 30, 2007 gains of $327,000 were recorded as components of other income on the effective portion of options that were settled. During the year ended June 30, 2007, there was no gain or loss recognized on the ineffective portion of these options.

As of June 30, 2006, hedging instruments with nominal amounts of $4.5 million, $7.6 million and $5.7 million were outstanding to exchange Euros, Japanese yen and Australian dollars, respectively. The fair value of these instruments, as derived from dealer quotations, was $92,000 and was recorded as a component of other current assets. Net unrealized losses of $8,000 on these instruments were included in accumulated other comprehensive income. During the year ended June 30, 2006, gains of $54,000 were recorded as components of other income on the effective portion of options that were settled. During the year ended June 30, 2006, there was no gain or loss recognized on the ineffective portion of these options.

The Company held no derivatives during fiscal 2007, 2006 or 2005 for non-hedging purposes.

6.   Software Development Costs

Costs associated with the development of computer software and related products are expensed prior to establishing technological feasibility, as defined by SFAS No. 86, “Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed,” and capitalized thereafter until the product is available for general release to customers. Eligible development costs of $340,000, $496,000 and $201,000 were capitalized in fiscal 2007, 2006, and 2005, respectively. All such costs have been included in other non-current assets in the Company’s consolidated balance sheet and are being amortized to cost of product revenue over their estimated useful lives, which range from three to five years. Related amortization expense for fiscal years 2007, 2006 and 2005 was $531,000, $470,000 and $395,000, respectively, and has been included as a component of cost of product revenue in the Company’s consolidated statement of operations.

F-13

MOLDFLOW CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Capitalized software development costs consisted of the following:

	June 30,
	2007			2006
	(In thousands)
Gross carrying amount	$	2,549		$	2,209
Less — accumulated amortization		(1,844	)		(1,313	)
Net carrying amount	$	705		$	896

7.   Fixed Assets

Fixed assets consisted of the following:

	Estimated
	Useful Life	June 30,
	(Years)	2007			2006
		(In thousands)
Land	—	$	305		$	266
Buildings	30		2,029			1,775
Machinery and Equipment	4-7		1,250			1,487
Computer equipment	3-5		4,918			4,610
Furniture and fixtures	7-10		707			691
Computers and equipment under capital leases	3-7		424			626
Software	3-5		251			335
Leasehold improvements	varies		658			626
Other	3-10		317			250
			10,859			10,666
Less — accumulated depreciation and amortization			(7,722	)		(7,898	)
		$	3,137		$	2,768

Depreciation expense, including amortization of assets under capital leases, was $1.1 million, $1.2 million and $1.5 million for the years ended June 30, 2007, 2006 and 2005, respectively. Accumulated amortization for assets held under capital leases was $424,000 and $626,000 at June 30, 2007 and 2006, respectively. The useful life of leasehold improvement is the lesser of its economic life or the listed term of the lease.

F-14

MOLDFLOW CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

8.   Accrued Expenses

Accrued expenses included the following accruals and other current liabilities:

	June 30,
	2007		2006
	(In thousands)
Employee wages, commissions and other compensation	$	1,500	$	614
Employee leave costs		2,944		2,356
Employee retirement costs		796		576
Professional fees		579		434
Income and withholding taxes		4,064		3,911
Restructuring costs		117		213
Other		1,489		893
	$	11,489	$	8,997

9.   Restructuring Plans

October 2005 Plan

In October 2005, the Company initiated a corporate restructuring plan (the “October 2005 plan”) to reduce its operating costs, which included the involuntary termination of certain employees within various departments of the Company. As a result of the October 2005 plan, the Company recorded a restructuring charge of $1.2 million in fiscal 2006, which included legal and travel costs associated with the activities. All activities under the October 2005 plan were completed before June 30, 2006.

10.   Credit Facilities

The Company has an unsecured $5.0 million working capital credit facility with a domestic bank that expires in February 2009. The available borrowing base of the facility is subject to a calculation that is based on eligible accounts receivable. Advances may be in the form of loans, letters of credit, foreign exchange contracts or other cash management lines. This facility includes certain restrictive covenants, all of which the Company was in compliance with as of June 30, 2007. These covenants include liquidity and profitability measures and restrictions that limit the ability of the Company to merge, acquire or sell certain assets without prior approval from the bank. Loans against the facility bear interest at the bank’s prime rate. As of June 30, 2007, the Company had utilized $296,000 of the available borrowing base through outstanding foreign exchange contracts and letters of credit. The remaining available borrowing base was $4.7 million. As of June 30, 2007 and 2006, there were no loans against the facility, which would bear interest at the bank’s prime rate.

Certain subsidiaries of the Company have established unsecured foreign exchange credit facilities with two separate financial institutions for the purposes of establishing foreign exchange contracts. As of June 30, 2007 and 2006, there were no advances against these facilities which would be guaranteed by the Company.

Certain subsidiaries of the Company have established other credit facilities, totaling approximately $460,000 at June 30, 2007, with two separate financial institutions for general working capital requirements and foreign exchange facilities. Advances against these facilities bear interest at the institutions’ published rates, plus 2.0% per annum. As of June 30, 2007 and 2006, there were no advances against these facilities.

11.   Preferred Stock

At June 30, 2007, there were no shares of preferred stock issued or outstanding.

F-15

MOLDFLOW CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

12.   Common Stock

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are entitled to dividends when and if declared by the Company’s Board of Directors.

13.   Share Repurchase Program and Treasury Stock

On May 17, 2006, the Company’s Board of Directors established a stock repurchase program under which the Company was authorized to repurchase up to 600,000 shares of its outstanding common stock. In fiscal 2006, pursuant to the program, the Company acquired 196,100 shares of its outstanding common stock for $2.6 million, an average purchase price of $13.15 per share. During fiscal 2007, the Company acquired 403,900 shares of its outstanding common stock for $5.4 million, an average purchase price of $13.47 per share. All such shares were held as treasury stock as of June 30, 2007.

14.   Share-Based Compensation and Stock Plans

Share-Based Compensation

Effective July 1, 2005, the Company adopted the provisions of SFAS No. 123(R), “Share-Based Payment,” which establishes accounting for equity instruments exchanged for employee and director services. Under the provisions of SFAS No. 123(R), share-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the requisite service period, which generally is the vesting period of the equity grant. The following table presents share-based compensation expenses included in the Company’s consolidated statement of operations:

	Year Ended			Year Ended
	June 30,			June 30,
	2007			2006
	(In thousands)
Cost of product revenue	$	4		$	11
Cost of services revenue		39			93
Research and development		364			346
Selling and marketing		306			313
General and administrative		1,219			1,133
Share-based compensation expense before related tax effects		1,932			1,896
Provision for Income taxes		(85	)		(151	)
Net share-based compensation expense	$	2,017		$	2,047

Prior to fiscal 2006, no significant compensation cost related to share-based awards was recognized in the Company’s consolidated statement of operations.

The Company estimates the fair value of stock options using the Black-Scholes valuation model. Key input assumptions used to estimate the fair value of stock options include the exercise price of the award, the expected option term, the expected volatility of the Company’s stock over the option’s expected term, the risk-free interest rate over the option’s expected term, and the Company’s expected annual dividend yield. Pre-vesting forfeiture rates for purposes of determining share-based compensation expense for stock options, restricted stock and restricted stock units for the year ended June 30, 2007 was 8.6%. The Company believes that the valuation technique and the approach utilized to develop the underlying assumptions are appropriate in calculating the fair values of the Company’s stock options granted in the year ended June 30, 2007. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by persons who receive equity awards.

F-16

MOLDFLOW CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The fair value of each option grant for both the Company’s continuing and discontinued operations was estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions:

	Year Ended			Year Ended
	June 30,			June 30,
	2007			2006
Dividend yield		0	%		0	%
Expected volatility factor(1)		41.1	%		38.5-49.2	%
Risk-free interest rate(2)		4.9%-5.0	%		3.9%-5.0	%
Expected term (in years)(3)		3.5-5.0			3.5-5.8

(1)	Measured using a weighted average of historical daily price changes of the Company’s stock over the most recent period that matches the expected term of the option.
(2)	The risk-free interest rate for periods equal to the expected term of the share option is based on the U.S. Treasury yield in effect at the time of grant.
(3)	The expected term is the number of years that the Company estimates, based primarily on historical experience, that the options will be outstanding prior to exercise.

No compensation cost was recognized for share-based awards for fiscal 2005. Had compensation cost been determined based on the fair value at the grant dates, the Company’s net income would have been the pro forma amounts indicated in the table below.

	Year Ended
	June 30,
	2005
	(In thousands,
	except per
	share data)
Net income from continuing operations as reported	$	8,270
Less:
Total share-based compensation expense determined under fair value based method for all awards, net of related tax effects		(2,708	)
Pro forma net income	$	5,562
Pro forma income from continuing operations:
Net income from continuing operations per common share — basic	$	0.77
Net income from continuing operations per common share — diluted	$	0.71
Net income from continuing operations per common share — basic pro forma	$	0.52
Net income from continuing operations per common share — diluted pro forma	$	0.48

Stock Plans

In August 1997, the Company adopted the 1997 Equity Incentive Plan (the “1997 Plan”), which provides for the grant of incentive stock options, non-qualified stock options, stock awards and stock purchase rights for the purchase of up to 931,303 shares of the Company’s common stock by officers, employees, consultants and directors of the Company. In April 1999, the number of shares available under the 1997 Plan was increased to 1,537,158 shares. The Board of Directors is responsible for administration of the 1997 Plan. The Company will not issue any more shares under the 1997 Plan.

On January 20, 2000, the Board of Directors approved the Moldflow Corporation 2000 Stock Option and Incentive Plan (the “2000 Plan”), which, as amended, provides for the grant of incentive stock options, stock awards and stock purchase rights for the purchase of up to 4,096,219 shares of common stock by officers, employees,

F-17

MOLDFLOW CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

consultants and directors of the Company. The number of shares issuable under the 2000 Plan is also increased as of each June 30 and December 31 by a number of shares equal to 20% of the shares issued by the Company during such six-month period. The Board determines the term of each option, the option exercise price, the number of shares for which each option is granted and the rate at which each option is exercisable. Incentive stock options may be granted to any officer or employee at an exercise price per share of not less than the fair value per common share on the date of the grant (not less than 110% of fair value in the case of holders of more than 10% of the Company’s voting stock) and with a term not to exceed ten years from the date of the grant (five years for incentive stock options granted to holders of more than 10% of the Company’s voting stock). Non-qualified stock options may be granted to any officer, employee, consultant or director at an exercise price per share of not less than the par value per share. As of June 30, 2007, there were 1,223,412 shares available for future grant under the 2000 Plan.

The following sections, Stock Options, Restricted Stock, and Restricted Stock Units, summarize activity under the Company’s stock plans for both its continuing and discontinued operations.

Stock Options:

A summary of the Company’s stock option activity follows:

	Year Ended
	June 30, 2007					June 30, 2006					June 30, 2005
				Weighted					Weighted					Weighted
				Average					Average					Average
	Shares			Exercise Price		Shares			Exercise Price		Shares			Exercise Price
Outstanding at beginning of period		2,086,551		$	10.85		2,487,267		$	10.22		2,634,157		$	9.77
Granted		248,513			12.42		185,529			15.05		337,800			12.20
Exercised		(820,971	)		7.62		(415,748	)		7.72		(349,947	)		7.72
Canceled		(304,251	)		13.48		(170,497	)		13.95		(134,743	)		12.74
Outstanding at end of period		1,209,842		$	12.68		2,086,551		$	10.85		2,487,267		$	10.22
Options exercisable at end of period		875,642		$	12.55		1,667,556		$	10.33		1,733,684		$	10.26
Weighted average fair value of options granted in the period				$	5.35				$	5.99				$	7.08

The following table summarizes information about outstanding stock options as of June 30, 2007:

	Options Outstanding
			Weighted				Options Exercisable
			Average		Weighted				Weighted
			Remaining		Average				Average
			Contractual		Exercise				Exercise
Range of Exercise Prices	Shares		Life		Price		Shares		Price
$0.36-$5.00		106,778		0.1 years	$	4.62		106,778	$	4.62
$5.01-$10.00		210,419		1.9 years		9.38		210,419		9.38
$10.01-$15.00		515,812		4.9 years		11.94		256,867		11.77
$15.01-$20.00		298,927		2.2 years		16.57		232,478		16.88
$20.01-$25.00		63,306		2.3 years		21.99		54,500		21.87
$25.01-$30.00		14,600		1.5 years		26.23		14,600		26.23
		1,209,842		3.1 years	$	12.68		875,642	$	12.55

The intrinsic value of options exercised in the year ended June 30, 2007 was $7.2 million, and the intrinsic value of options that vested during the period was $12.2 million. The total compensation cost from continuing operations not yet recognized as of June 30, 2007 related to non-vested stock option awards was $1.0 million, which

F-18

MOLDFLOW CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

will be recognized over a weighted-average period of 1.5 years. The weighted average remaining contractual life for options exercisable at June 30, 2007 was 2.1 years.

Restricted Stock:

The following table summarizes restricted stock award activity under the 2000 Plan during the periods presented:

	Year Ended
	June 30, 2007					June 30, 2006
				Weighted					Weighted
				Average					Average
	Number of			Grant Date		Number of			Grant Date
	Shares			Fair Value		Shares			Fair Value
Nonvested at beginning of period		81,744		$	15.39		—		$	—
Granted		132,610			12.58		94,733			15.39
Vested		(37,721	)		14.47		—			—
Forfeited		(13,048	)		12.89		(12,989	)		15.39
Nonvested at end of period		163,585		$	13.52		81,744		$	15.39

The shares of restricted stock have been issued at no cost to the recipients. The restricted stock vests annually over a three-year period. The fair value of the restricted stock is expensed ratably over the vesting period. The Company recorded share-based compensation expense from continuing operations related to restricted stock of $903,000 and $303,000 for the years ended June 30, 2007 and June 30, 2006, respectively. As of June 30, 2007, the total compensation cost from continuing operations not yet recognized related to non-vested restricted stock awards was $1.2 million, which will be recognized over a weighted-average period of 1.9 years.

For United States employees, vested restricted stock awards were net-share settled such that the Company withheld shares with value equivalent to employees’ minimum statutory obligation for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities. The total shares withheld of 6,641 for the year ended June 30, 2007 was based on the value of the restricted stock on their vesting date as determined by the Company’s closing stock price. Total payment for employees’ tax obligations was approximately $80,000. These net-share settlements had the effect of share repurchases by the Company as they reduced the number of shares that would have otherwise been issued as a result of the vesting and did not represent an expense to the Company.

Restricted Stock Units:

During the year ended June 30, 2007, the Company issued 24,620 restricted stock units to non-employee directors of the Company at no cost to the recipients. Each restricted stock unit vests annually over a three-year period. Vesting of the restricted stock units automatically accelerates upon a change of control of the Company. Vested restricted stock units are paid out in common stock upon the earlier of a termination of services by the recipient or a change of control of the Company. Restricted stock units do not have voting rights until such time as the restricted stock units are paid out in shares. These post-vesting restrictions were reflected in the discount rate and thus considered in the determination of the fair value of the restricted stock units. Two approaches were considered in estimating the discount rate: empirical studies related to transactions involving restricted shares and the level of discount implied by the Black-Scholes valuation model. The fair value of the restricted stock unit was determined to be $8.81 at date of grant, approximately 30% less than the intrinsic value of $12.59. The fair value of the restricted stock units is expensed ratably over the vesting period. Related to its continuing operations, the Company recorded share-based compensation expense related to restricted stock units of $39,000 for the year ended June 30, 2007. As of June 30, 2007, the total compensation cost not yet recognized related to non-vested

F-19

MOLDFLOW CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

restricted stock units was $143,000, which will be recognized as an expense to continuing operations over a weighted-average period of 2.5 years.

Employee Stock Purchase Plan

On January 20, 2000, the Board of Directors approved the Moldflow Corporation Employee Stock Purchase Plan (the “ESPP”) with an authorization of up to 500,000 shares of common stock. Subsequent to the last issuance noted below, the ESPP was terminated by the Board of Directors. The ESPP was open to all eligible employees of the Company. Under the ESPP, each participating employee elected to have up to 10% of his or her base salary withheld and applied toward the purchase of shares within each six-month offering period. The purchase price per share was determined based on 85% of the lower of the fair market value of the stock on the first or the last day of each offering period.

The following table displays the shares issued subsequent to the end of each offering period under the ESPP for the last three fiscal years:

	Shares		Share
End of Offering Period:	Issued		Price
June 2005		12,856	$	11.02

Shareholder Rights Plan

On January 29, 2003, the Board of Directors adopted a Shareholder Rights Plan and declared a dividend distribution of one preferred stock purchase right (a “Right”) for each outstanding share of the Company’s common stock to shareholders of record as of the close of business on January 30, 2003. Initially, these rights will not be exercisable and will trade with the shares of the Company’s common stock. Each share of common stock newly issued after that date also will carry with it one Right. Under the Shareholder Rights Plan, a Right generally will become exercisable if a person becomes an “acquiring person” by acquiring 15% or more of the common stock of the Company or if a person commences a tender offer that could result in that person owning 15% or more of the common stock of the Company. If a person becomes an “acquiring person,” each holder of a Right (other than the acquiring person) would be entitled to purchase, at the then-current exercise price, such number of shares of preferred stock which are equivalent to shares of the Company’s common stock having a value of twice the exercise price of the Right. If the Company is acquired in a merger or other business combination transaction after any such event, each holder of a Right would then be entitled to purchase, at the then-current exercise price, shares of the acquiring company’s common stock having a value of twice the exercise price of the Right.

F-20

MOLDFLOW CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

15.   Net Income (loss) per Common Share

The following table sets forth the computation of basic and diluted net income from continuing operations and net income (loss) per common share:

	Year Ended June 30,
	2007			2006			2005
	(In thousands,
	except per share amounts)
Net income from continuing operations	$	8,549		$	5,261		$	8,270
Net loss from discontinued operations		(11,469	)		(4,260	)		(1,513	)
Net loss on disposal of discontinued operations		(869	)		—			—
Net income (loss)	$	(3,789	)	$	1,001		$	6,757
Shares used in computing net income from continuing operations per common share — basic		11,225			11,114			10,761
Employee and director stock options		521			703			864
Dilutive potential common shares		521			703			864
Shares used in computing net income from continuing operations per common share — diluted		11,746			11,817			11,625
Net income (loss) per common share — basic
Continuing operations	$	0.76		$	0.47		$	0.77
Discontinued operations		(1.02	)		(0.38	)		(0.14	)
Net loss on disposal of discontinued operations		(0.08	)		—			—
	$	(0.34	)	$	0.09		$	0.63
Net income (loss) per common share — diluted
Continuing operations	$	0.73		$	0.45		$	0.71
Discontinued operations		(0.98	)		(0.37	)		(0.13	)
Net loss on disposal of discontinued operations		(0.07	)		—			—
	$	(0.32	)	$	0.08		$	0.58

Weighted average common stock equivalents related to stock options of 404,009, 485,823, and 492,400 shares were outstanding for the years ended June 30, 2007, 2006, and 2005, respectively, but were not included in the calculation of diluted net income per share as the sum of the option exercise proceeds, including unrecognized compensation and unrecognized future tax benefits, divided by the aggregate number of shares under outstanding options exceeded the average stock price and, therefore, would be antidilutive.

16.   Income Taxes

The components of income from continuing operations before income taxes consisted of the following:

	Year Ended June 30,
	2007			2006			2005
	(In thousands)
Domestic loss	$	(2,936	)	$	(3,258	)	$	(3,629	)
Foreign income		13,672			10,900			13,503
Income before income taxes	$	10,736		$	7,642		$	9,874

F-21

MOLDFLOW CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The provision for income taxes from continuing operations consisted of the following:

	Year Ended June 30,
	2007			2006		2005
	(In thousands)
Current:
Federal	$	(132	)	$	43	$	(927	)
State		(118	)		11		10
Foreign		2,179			1,811		2,761
Total current tax expense		1,929			1,865		1,844
Deferred:
Federal		310			134		37
State		57			25		7
Foreign		(109	)		357		(284	)
Total deferred tax expense		258			516		(240	)
Provision for income taxes	$	2,187		$	2,381	$	1,604

The reconciliation of the provision for income taxes computed at the U.S. federal statutory rate to the actual provision is as follows:

	Year Ended June 30,
	2007			2006			2005
	(In thousands)
Income taxes computed at the statutory federal rate of 34%	$	3,645		$	2,598		$	3,360
State income taxes, net of federal benefit		16			11			10
Revision of estimated tax liabilities		(432	)		—			—
Other permanent items		606			1,030			604
Change in valuation allowance		937			487			(460	)
Foreign tax rate differential		(2,586	)		(1,848	)		(2,354	)
Other		1			103			444
Provision for income taxes	$	2,187		$	2,381		$	1,604

The total income tax provision for the years ended June 30, 2007, 2006 and 2005 is as follows:

	Year Ended June 30,
	2007		2006			2005
	(In thousands)
Continuing operations	$	2,187	$	2,381		$	1,604
Discontinued operations		444		(465	)		61
Total income tax provision	$	2,631	$	1,916		$	1,665

Provision for Income Tax

The fiscal 2007 tax provision was $2.2 million on income from continuing operations before tax of $10.7 million resulting in an effective tax rate of approximately 20%, decreasing from an effective tax rate of 31% in fiscal 2006. In fiscal 2007, significant reconciling items between the 34% U.S. federal statutory income tax rate and the 20% effective tax rate included a $2.6 million favorable tax rate differential between the U.S. and

F-22

MOLDFLOW CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

certain foreign jurisdictions and the impact of a $432,000 revision of our estimated tax liabilities. The impact of these favorable items was partially offset by a $937,000 of expense incurred to increase the valuation allowance and $622,000 related to other permanent items, including nondeductible, share-based compensation expenses.

Undistributed Earnings of Foreign Subsidiaries

The Company does not provide for U.S. income taxes or benefits or foreign withholding taxes on undistributed earnings of its foreign subsidiaries because such earnings are indefinitely reinvested with the exception of the 2006 earnings repatriation discussed below. The cumulative amount of undistributed foreign subsidiary earnings was $25.0 million and $15.1 million at June 30, 2007 and 2006, respectively.

Deferred Tax Assets and Liabilities

The deferred tax assets and liabilities consist of the following:

	June 30,
	2007			2006
	(In thousands)
Deferred tax assets:
Net operating loss carryforwards	$	1,222		$	1,195
Foreign tax and other credit carryforwards		757			822
Accrued expenses not yet deductible for tax purposes		1,846			1,227
Other		147			169
Gross deferred tax assets		3,972			3,413
Valuation allowance on deferred tax assets		(3,512	)		(2,568	)
Total deferred tax assets		460			845
Deferred tax liabilities		(328	)		(798	)
Net deferred tax asset	$	132		$	47

Net Operating Loss and Other Carryforwards

At June 30, 2007, the Company had available net operating loss carryforwards for U.S. federal tax purposes of approximately $2.3 million, which expire in 2025 and 2027. The Company also had foreign net operating loss carryforwards of $1.2 million, some of which have varying expiration dates, with the balance subject to unlimited carryforward periods. The Company has $757,000 of foreign or business tax credits available which expire at various dates through 2016. Substantially all of the U.S. net operating loss carryforwards and foreign tax credits are included in the valuation allowance. Excluded in the net operating loss deferred tax asset is approximately $791,000 related to certain net operating loss carryforwards resulting from exercise of employee stock options, the tax benefit of which when recognized, will be accounted for as a credit to additional paid in capital rather than a reduction in income tax.

Valuation Allowance

A portion of the Company’s valuation allowance as of June 30, 2007 was established to reserve against certain deferred tax assets resulting from the exercise of employee stock options, in accordance with SFAS No. 109 “Accounting for Income Taxes”. Removal of the valuation allowance related to these assets would result in a credit to additional paid-in capital within stockholders’ equity rather than a reduction in the provision for income taxes. If the valuation allowance of $3.5 million as of June 30, 2007 were to be removed in its entirety, a $499,000 non-cash

F-23

MOLDFLOW CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

reduction in income tax expense and a $499,000 credit to additional paid-in capital would be recorded in the period of removal.

Repatriation of International Earnings

The American Jobs Creation Act of 2004 (the “AJCA”) was enacted in October 2004. The AJCA created a one-time incentive for U.S. corporations to repatriate undistributed earnings from their foreign subsidiaries by providing an 85% dividends-received deduction for certain foreign earnings. The deduction is available to corporations during the tax year that includes October 22, 2004 or in the immediately subsequent tax year. The Company repatriated $10.6 million in foreign subsidiary earnings under the provisions of the AJCA in fiscal 2006, incurring tax expenses of $525,000.

Tax Audit

In the first quarter of fiscal 2005, one of the Company’s Australian subsidiaries became subject to an audit by the Australian Tax Office (“ATO”). The amount of liabilities assessed to date by the ATO, including tax penalties and interest, is approximately $6.6 million (A$7.8 million). Payments of $3.3 million (A$3.9 million) have been made to date with respect to these assessed amounts. The liability amount of approximately $6.6 million (A$7.8 million) referred to above represents the Company’s maximum potential exposure, but does not reflect the potential tax benefits of such payments, which might serve to mitigate the net expense that would be reflected in the Company’s results of operations.

In November 2005, the Company received a notice of assessment from the tax authority related to its 2001 tax year, which assessed a tax due in an amount of $1.5 million (A$1.8 million). Subsequently, the Company was issued penalty and interest charges totaling $1.2 million (A$1.4 million) related to the tax assessment for the 2001 year.

In order to limit the interest that may accrue on these amounts from the date of assessment through the ultimate resolution of this matter, the Company paid $771,000 (A$907,000), approximately 50% of the income tax assessment for 2001, to the tax authority in December 2005. In April 2006, the Company paid 50% of the penalty and interest charges totaling $602,000 (A$708,000) related to the tax assessment for the 2001 year. The tax authority has agreed to defer any action to recover the remaining assessed tax amount outstanding and that no portion of the remaining interest and penalty charge for the 2001 tax year needs to be paid pending the resolution of the dispute.

In May 2006, the Company received a notice of assessment for tax, interest and penalties related to 1994 and 1995 totaling approximately $3.8 million (A$4.5 million). In order to limit the interest that may accrue on these amounts from the date of assessment through the ultimate resolution of this matter, in the fourth quarter of 2006, the Company paid approximately $935,000 (A$1.1 million) to the tax authority, which represented 50% of the outstanding interest assessments for the 1994 and 1995 years and $935,000 (A$1.1 million), which represented 50% of the outstanding tax and penalty assessments for the 1994 and 1995 years. The tax authority has agreed to defer any action to recover the remaining assessed tax amount outstanding and that no portion of the remaining interest and penalties for 1994 and 1995 need to be paid pending the resolution of the dispute.

The Company believes that the positions on its tax returns have merit. The Company has taken steps to preserve its rights through the ATO’s objection process and believes that its position will ultimately be sustained. Accordingly, the Company has not recorded any liabilities in its consolidated balance sheet related to these matters. All payments made to the ATO have been recorded as current assets in all periods presented, as the Company currently expects a resolution to these matters within the next twelve months.

17.   Staff Accounting Bulletin No. 108

In September 2006, the SEC staff issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.” SAB No. 108 was

F-24

MOLDFLOW CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

issued in order to eliminate the diversity of practice surrounding how public companies quantify financial statement misstatements.

Traditionally, there have been two widely-recognized methods for quantifying the effects of financial statement misstatements: the “roll-over” method and the “iron-curtain” method. The roll-over method focuses primarily on the impact of a misstatement on the income statement, but its use can lead to the accumulation of misstatements in the balance sheet. The iron-curtain method, on the other hand, focuses primarily on the effect of correcting the period-end balance sheet with less emphasis on the reversing effects of prior year errors on the income statement. Prior to the application of the guidance in SAB No. 108, we used the roll-over method for quantifying financial misstatements.

In SAB No. 108, the SEC staff established an approach that requires quantification of financial statement misstatements based on the effects of the misstatements on each of the company’s financial statements and the related financial statement disclosures. This model is commonly referred to as a “dual approach” because it requires quantification of errors under both the iron curtain and the roll-over methods.

The Company adopted SAB No. 108 as of June 30, 2007, as required. Upon adoption of SAB No. 108, the Company assessed the effect of misstatements, regardless of when they originated. The Company concluded that the misstatements were not material, individually or in aggregate, to previous fiscal years, but that its cumulative effect from a “dual approach” perspective was material to fiscal year 2007. As a result, the Company corrected such cumulative misstatements, which included accounting for stock option expenses and prepaid income taxes.

The following table summarizes the effects of applying the guidance in SAB No. 108 (in thousands):

	Retained
	Earnings
Beginning balance of retained earnings as of July 1, 2006 (as previously reported)	$	6,296
Adjustment 1		(376	)
Adjustment 2		(514	)
Adjusted beginning balance of retained earnings as of July 1, 2006	$	5,406

(1)	In February 2007, the Company determined it incorrectly recorded an entry against the prepaid income tax account in fiscal 2002. After further investigation conducted in fiscal 2007 the Company concluded that, as a result of this error, its income tax expenses were understated by $247,000, $61,000, $68,000 in fiscal 2002, 2003 and 2004, respectively.
(2)	In June 2006, the Company determined it incorrectly estimated the value of certain of its stock options granted in fiscal 2002 and fiscal 2003. The total combined impact of these matters was $514,000, of which $15,000, $297,000, $152,000, $47,000 and $3,000 should have been recorded in fiscal year 2002, 2003, 2004, 2005 and 2006, respectively.

18.   Benefit Plans

401(k) Savings Plan

The Company has established a retirement savings plan under Section 401(k) of the U.S. Internal Revenue Code (the “401(k) Plan”). The 401(k) Plan covers substantially all U.S.-based employees of the Company who meet minimum age and service requirements, and allows participants to defer a portion of their annual compensation on a pre-tax basis. Matching contributions to the 401(k) Plan may be made at the discretion of the Company. The Company contributed $374,000, $365,000, and $365,000 to the 401(k) Plan in the years ended June 30, 2007, 2006 and 2005, respectively.

F-25

MOLDFLOW CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Superannuation Plan

Employees of the Company’s Australian subsidiary are covered by a defined contribution Superannuation Plan. The Superannuation Plan covers substantially all Australian employees and, under Australian law, the Company is required to contribute a fixed percentage of taxable compensation to this plan. The Company contributed $352,000, $357,000, and $304,000 to the Superannuation Plan in the years ended June 30, 2007, 2006 and 2005, respectively.

19.   Contingencies, Commitments and Guarantor Arrangements

In the normal course of business, the Company indemnifies third parties and enters into commitments and guarantees (“Agreements”) under which it may be required to make payments. These Agreements include indemnities to the following parties: lessors in connection with facility leases; customers in relation to their performance of services subcontracted to other providers; vendors in connection with guarantees of Company employee expenses; and former employees in connection with their prior services as director or officer of the Company or its subsidiary companies, and performance under credit facilities of the Company’s subsidiaries. The duration of these Agreements varies, and in certain cases, is indefinite. Furthermore, the majority of these Agreements do not limit the Company’s maximum potential payment exposure. However, the Company has never incurred material costs to settle claims or defend lawsuits related to these Agreements and their estimated fair value is minimal. Accordingly, as of June 30, 2007, no liabilities have been recorded.

The Company generally warrants that its products will perform in all material respects in accordance with its standard published specifications in effect at the time of delivery of the products to the customer for a period of 90 days to two years from the date of shipment or any longer period that may be required by local law. The Company records a liability based upon its history of claims against the contractual warranty provisions. Historically, payments made under these provisions have been insignificant.

Lease Commitments

The Company leases certain of its office space, autos and equipment under noncancelable operating leases, which expire at various dates through 2012. At June 30, 2007, the Company had no outstanding capital lease obligations. At June 30, 2006, the Company had $21,000 in outstanding capital lease obligations. Future minimum lease commitments at June 30, 2007 are as follows:

	Operating
Year Ending June 30,	Leases
	(In thousands)
2006	$	2,199
2007		1,411
2008		1,027
2009		959
2010		850
Thereafter		646
	$	7,092

Total rent expense under these operating leases was $2.0 million, $2.3 million and $2.3 million, excluding lease termination costs associated with restructuring, for the years ended June 30, 2007, 2006 and 2005, respectively.

F-26

MOLDFLOW CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Purchase Commitments

The Company has various contractual obligations for the purchase of goods or services that are enforceable and legally binding on the part of the Company. At June 30, 2007, future purchase commitments are as follows:

	Purchase
Year Ending June 30,	Commitments
	(In thousands)
2007	$	247
2008		253
2009		104
	$	604

20.   Geographic Information

The Company has reviewed the provisions of SFAS No. 131 with respect to the criteria necessary to evaluate the number of operating segments that exist. Based on its review the Company has determined that it operates in one segment. The Company licenses and sells its products to customers throughout the world. Sales and marketing operations outside the United States are conducted principally through the Company’s foreign sales subsidiaries in Europe and Asia. Revenue classification below is based on the country in which the sale originates.

The following table sets forth our total revenue by geographic region for each of fiscal 2007, 2006 and 2005:

										Increase
			Increase							(Decrease)
			Compared							Compared
			to Prior							to Prior
	Fiscal		Fiscal Year					Fiscal		Fiscal Year						Fiscal
	2007		$		%			2006		$			%			2005
	($ In thousands)
Asia/Australia revenue:
Products	$	15,217	$	2,625		21	%	$	12,592	$	152			1	%	$	12,440
Services		10,123		1,143		13			8,980		776			9			8,204
Total		25,340		3,768		17			21,572		928			4			20,644
Americas revenue:
Products		4,268		1,122		36			3,146		(425	)		(12	)		3,571
Services		6,271		371		6			5,900		376			7			5,524
Total		10,539		1,493		17			9,046		(49	)		(1	)		9,095
Europe revenue:
Products		8,918		223		3			8,695		543			7			8,152
Services		11,056		1,413		15			9,643		(17	)		—			9,660
Total		19,974		1,636		9			18,338		526			3			17,812
Total revenue:
Products		28,403		3,970		16			24,433		270			1			24,163
Services		27,450		2,927		12			24,523		1,135			5			23,388
Total	$	55,853	$	6,897		14	%	$	48,956	$	1,405			3	%	$	47,551

Substantially all of the revenue in the Americas region is derived from the United States, the Company’s country of domicile.

F-27

MOLDFLOW CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table summarizes the Company’s revenue from unaffiliated customers attributed to its most significant geographic regions.

			% of					% of					% of
	Fiscal		Total			Fiscal		Total			Fiscal		Total
	2007		Revenue			2006		Revenue			2005		Revenue
	(In thousands)
Revenue:
United States	$	10,539		19	%	$	9,046		18	%	$	9,094		19	%
Japan	$	14,221		25	%	$	12,876		26	%	$	13,294		28	%

The following table summarizes the Company’s long-lived assets, including intangible assets and goodwill, by geographic location (in thousands):

	June 30,
	2007		2006
	(In thousands)
Fixed assets, net:
Asia/Australia	$	1,767	$	1,794
Americas		1,012		582
Europe		358		392
Total consolidated	$	3,137	$	2,768

21.   Selected Quarterly Results of Operations (Unaudited)

The following table sets forth the unaudited quarterly consolidated statement of operations data for each of the eight quarters in the Company’s fiscal 2007 and fiscal 2006. In the opinion of management, the unaudited financial results include all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the Company’s results of operations for those periods and have been prepared on the same basis as the audited consolidated financial statements.

	Quarter Ended
	June 30,		Mar. 31,		Dec. 31,		Sep. 30,		June 30,		Mar. 31,		Dec. 31,		Sep. 30,
	2007		2007		2006		2006		2006		2006		2005		2005
	(In thousands, except per share data)
Revenue:
Product	$	7,557	$	8,123	$	7,607	$	5,116	$	6,290	$	5,796	$	6,762	$	5,585
Services		7,468		6,653		6,684		6,645		6,587		5,992		6,120		5,824
Total revenue		15,025		14,776		14,291		11,761		12,877		11,788		12,882		11,409
Costs and operating expenses:
Cost of product revenue		451		367		370		357		407		406		332		366
Cost of services revenue		1,177		1,123		1,209		1,027		1,161		1,116		1,019		1,013
Research and development		2,192		1,958		2,029		1,847		1,906		1,940		1,577		1,967
Selling and marketing		5,677		5,198		5,359		4,202		4,852		4,193		4,413		4,239
General and administrative		3,575		3,481		3,331		3,655		2,745		2,475		3,296		3,377
Restructuring charges		—		—		—		—		—		—		1,247		—
Total costs and operating expenses		13,072		12,127		12,298		11,088		11,071		10,130		11,884		10,962

F-28

MOLDFLOW CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	Quarter Ended
	June 30,			Mar. 31,			Dec. 31,			Sep. 30,			June 30,			Mar. 31,			Dec. 31,			Sep. 30,
	2007			2007			2006			2006			2006			2006			2005			2005
	(In thousands, except per share data)
Income from continuing operations		1,953			2,649			1,993			673			1,806			1,658			998			447
Interest income, net		895			788			784			783			715			663			631			562
Other income (loss), net		203			(5	)		17			3			66			62			53			(19	)
Income from continuing operations before income taxes		3,051			3,432			2,794			1,459			2,587			2,383			1,682			990
Provision for (benefit from) income taxes(1)		1,075			638			632			(158	)		1,677			214			681			(191	)
Net income from continuing operations		1,976			2,794			2,162			1,617			910			2,169			1,001			1,181
Net income (loss) from discontinued operations, net of income taxes		(537	)		(10,615	)		(381	)		64			(1,347	)		(651	)		(1,111	)		(1,151	)
Net loss on disposal of discontinued operations, net of income taxes		(869	)		—			—			—			—			—			—			—
Net income (loss)	$	570		$	(7,821	)	$	1,781		$	1,681		$	(437	)	$	1,518		$	(110	)	$	30
Net income (loss) from continuing operations per common share— Basic	$	0.17		$	0.25		$	0.19		$	0.14		$	0.08		$	0.19		$	0.09		$	0.11
Net income (loss) from continuing operations per common share — Diluted	$	0.16		$	0.24		$	0.19		$	0.14		$	0.08		$	0.18		$	0.08		$	0.10
Net income (loss) per common share — Basic	$	0.05		$	(0.70	)	$	0.16		$	0.15		$	(0.04	)	$	0.14		$	(0.00	)	$	0.00
Net income (loss) per common share — Diluted	$	0.05		$	(0.67	)	$	0.15		$	0.14		$	(0.04	)	$	0.13		$	(0.00	)	$	0.00

(1) The Company’s benefit from income taxes in the first quarter of fiscal 2007 was $158,000 on income before tax of $1.5 million, which included a one-time benefit of $562,000 which resulted from a revised estimate of the tax liabilities related to certain tax positions of one of the Company’s foreign subsidiaries and taxes payable in certain foreign jurisdictions. The Company’s tax provision in our fourth quarter of fiscal 2006 was $1.7 million on profit before tax of $2.6 million, which included $525,000 of tax expense to repatriate $10.6 million from Australia and $463,000 of tax expense related to the use of net operating losses related to previous stock option exercises.

22.   Subsequent Events (Unaudited)

On July 2, 2007, the Company purchased hedging instruments with notional amounts of $5.7 million, $8.0 million and $5.4 million to exchange Euros, Japanese yen and Australian dollars, respectively. These hedging instruments were purchased as a component of the Company’s efforts to hedge a portion of its forecasted foreign currency denominated intercompany sales and a portion of its foreign currency denominated intercompany research and development payments.

On July 2, 2007, the Company received $6.0 million in cash proceeds from the sale of the MS division.

F-29

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Moldflow Corporation

We have audited the accompanying consolidated balance sheets of Moldflow Corporation (a Delaware corporation) as of June 30, 2007 and 2006, and the related consolidated statements of operations, stockholders’ equity and comprehensive income (loss), and cash flows for the years then ended. 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, the financial statements referred to above present fairly, in all material respects, the financial position of Moldflow Corporation as of June 30, 2007, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

We also have audited the adjustment described in Note 3 to the financial statements that was applied to restate the 2005 consolidated statement of operations, stockholders’ equity and comprehensive income (loss) and cash flows to reflect the discontinued operations. In our opinion, this adjustment is appropriate and has been properly applied. We were not engaged to audit, review, or apply any procedures to the 2005 financial statements of the Company other than with respect to such adjustment and, accordingly, we do not express an opinion or any other form of assurance on the 2005 financial statements taken as a whole.

Our audits were conducted for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. Schedule II, appearing under Item 15 (a)(2), is presented for purposes of additional analysis and is not a required part of the basic consolidated financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic consolidated financial statements taken as a whole.

As discussed in Note 14 to the consolidated financial statements, Moldflow Corporation changed its method of accounting for share-based payments as of July 1, 2005.

As discussed in Note 17 to the consolidated financial statements, the Company recorded a cumulative effect adjustment as of July 1, 2006, in connection with the adoption of SEC Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Qualifying Misstatements in Current Year Financial Statements.”

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Moldflow Corporation’s internal control over financial reporting as of June 30, 2007, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated September 13, 2007 expressed an unqualified opinion on internal control effectiveness.

/s/  Grant Thornton LLP

Boston, Massachusetts

September 13, 2007

F-30

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders

of Moldflow Corporation:

In our opinion, the consolidated statements of operations, of stockholders’ equity and comprehensive income (loss), and of cash flows for the year ended June 30, 2005, before the effects of the adjustments to retrospectively reflect the discontinued operations described in Note 3, present fairly, in all material respects, the results of operations and cash flows of Moldflow Corporation and its subsidiaries for the year ended June 30, 2005, in conformity with accounting principles generally accepted in the United States of America (the 2005 financial statements before the effects of the adjustments discussed in Note 3 are not presented herein). In addition, in our opinion, the financial statement schedule, before the effects of the adjustments described above, for the year ended June 30, 2005 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audit. We conducted our audit, before the effects of the adjustments described above, of these statements 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

We were not engaged to audit, review, or apply any procedures to the adjustments to retrospectively reflect the discontinued operations described in Note 3 and, accordingly, we do not express an opinion or any other form of assurance about whether such adjustments are appropriate and have properly been applied. Those adjustments were audited by other auditors.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts

September 13, 2005

F-31

EXHIBIT INDEX

Exhibit
No.			Title
	2	.1	Asset Purchase Agreement by and between Moldflow Corporation and Husky Injection Molding Systems Ltd., dated June 25, 2007 (Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on June 27, 2007, and incorporated by reference thereto.)
	3	.1	Third Amended and Restated Certificate of Incorporation of the Registrant. (Previously filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 1, 2000 filed with the Securities and Exchange Commission on May 12, 2000 and incorporated by reference thereto.)
	3	.2	Third Amended and Restated By-laws of the Registrant. (Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on May 4, 2007, and incorporated by reference thereto.)
	3	.3	Certificate of Amendment of Third Amended and Restated Certificate of Incorporation. (Previously filed as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2002 filed with the Securities and Exchange Commission on September 19, 2002 and incorporated by reference thereto.)
	3	.4	Certificate of Preferences and Designations, Preferences and Rights of a Series of Preferred Stock of Moldflow Corporation classifying and designating the Series A Junior Participating Preferred Stock. (Previously filed as an exhibit to the Company’s Registration Statement on Form 8-A filed with the Securities and Exchange Commission on February 3, 2003 and incorporated by reference thereto.)
	4	.1	Shareholder Rights Agreement, dated as of January 29, 2003, between Moldflow Corporation and EquiServe Trust Company, as Rights Agent. (Previously filed as an exhibit to the Company’s Registration Statement on Form 8-A filed with the Securities and Exchange Commission on February 3, 2003 and incorporated by reference thereto.)
	10	.1	Form of Incentive Stock Option Agreement for Executive Officers under the Moldflow Corporation 2000 Stock Option and Incentive Plan. (Previously filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 25, 2004 filed with the Securities and Exchange Commission on November 3, 2004 and incorporated by reference thereto.)
	10	.2	Form of Non-Qualified Stock Option Agreement for Executive Officers under the Moldflow Corporation 2000 Stock Option and Incentive Plan. (Previously filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 25, 2004 filed with the Securities and Exchange Commission on November 3, 2004 and incorporated by reference thereto.)
	10	.3	Form of Non-Qualified Stock Option Agreement for Non-Employee Directors under the Moldflow Corporation 2000 Stock Option and Incentive Plan. (Previously filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 25, 2004 filed with the Securities and Exchange Commission on November 3, 2004 and incorporated by reference thereto.)
	10	.4	Third Amendment to the Moldflow Corporation 2000 Stock Option and Incentive Plan. (Previously filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 27, 2003 filed with the Securities and Exchange Commission on February 10, 2004 and incorporated by reference thereto.)
	10	.7	Form of Incentive Stock Option Agreement under the Moldflow Corporation 2000 Stock Option and Incentive Plan. (Previously filed as an exhibit to the Company’s Registration Statement on Form S-1 (File No. 333-95289) and incorporated by reference thereto.)
	10	.8	Form of Non-Qualified Stock Option Agreement for Company Employees under the Moldflow Corporation 2000 Stock Option and Incentive Plan. (Previously filed as an exhibit to the Company’s Registration Statement on Form S-1 (File No. 333-95289) and incorporated by reference thereto.)
	10	.9	Moldflow Corporation 1997 Equity Incentive Plan. (Previously filed as an exhibit to the Company’s Registration Statement on Form S-1 (File No. 333-95289) and incorporated by reference thereto.)
	10	.10	Form of Director Indemnification Agreement to be entered into between the Registrant and Each Non-employee Director. ** (Previously filed as an exhibit to the Company’s Registration Statement on Form S-1 (File No. 333-95289) and incorporated by reference thereto.)
	10	.11	Form of Non-Qualified Stock Option Agreement for Non-Employee Directors under the Moldflow Corporation 2000 Stock Option and Incentive Plan. ** (Previously filed as an exhibit to the Company’s Registration Statement on Form S-1 (File No. 333-95289) and incorporated by reference thereto.)

Exhibit
No.			Title
	10	.12	Loan Agreement as of November 13, 2001 between Silicon Valley Bank and Moldflow Corporation. (Previously filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 29, 2001 filed with the Securities and Exchange Commission on February 11, 2002 and incorporated by reference thereto.)
	10	.13	Amended and Restated Employment Agreement, dated July 8, 2005, between the Registrant and Kenneth R. Welch.** (Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed July 14, 2005 and incorporated by reference thereto.)
	10	.14	Amended and Restated Employment Agreement, dated July 8, 2005, between the Registrant and A. Roland Thomas.** (Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on July 14, 2005 and incorporated by reference thereto.)
	10	.15	Amended and Restated Employment Agreement, dated July 8, 2005, between the Registrant and Ian M. Pendlebury.** (Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on July 14, 2005 and incorporated by reference thereto.)
	10	.16	Amended and Restated Employment Agreement, dated July 8, 2005, between the Registrant and Peter K. Kennedy.** (Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on July 14, 2005 and incorporated by reference thereto.)
	10	.17	Amended and Restated Employment Agreement, dated July 8, 2005, between the Registrant and Lori M. Henderson.** (Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on July 14, 2005 and incorporated by reference thereto.)
	10	.18	Amended and Restated Employment Agreement dated as of July 8, 2005 between Christopher L. Gorgone and Moldflow Corporation.** (Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on July 14, 2005, and incorporated by reference thereto.)
	10	.19	Form of Cash Bonus Plan for Certain Executive Officers and Key Employees.** (Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on September 29, 2005, and incorporated by reference thereto.)
	10	.20	Form of Restricted Stock Award Agreement for Executive Officers under the Moldflow Corporation 2000 Stock Option and Incentive Plan, except with respect to Ian Pendlebury and Peter Kennedy, in which case paragraph 8 has been deleted.** (Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on September 29, 2005, and incorporated by reference thereto.)
	10	.21	Employment Agreement dated as of August 27, 2007 between the Registrant and Gregory W. Magoon.** (Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on August 30, 2007, and incorporated by reference thereto.)
	10	.22	Form of Restricted Stock Unit Award Agreement for Non-Employee Directors.** (Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on September 12, 2006, and incorporated by reference thereto.)
	10	.23	Moldflow Corporation 2000 Stock Option and Incentive Plan, as amended. (Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on September 12, 2006, and incorporated by reference thereto.)
	10	.24	Change of Control Agreement between the Registrant and Gregory W. Magoon **. (Filed herewith.)
	10	.25	Transition Agreement between the Registrant and Christopher L. Gorgone**. (Filed herewith.)
	10	.26	Employment Agreement dated September 7, 2006 between the Registrant and G. Fred Humbert**. (Filed herewith.)
	16	.1	Letter Regarding Change in Certifying Accountant. (Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on March 10, 2006, and incorporated by reference thereto.)
	21	.1	Subsidiaries of the Registrant. (Filed herewith.)
	23	.1	Consent of Grant Thornton LLP. (Filed herewith.)
	23	.2	Consent of PricewaterhouseCoopers LLP. (Filed herewith.)
	31	.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer. (Filed herewith.)
	31	.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer. (Filed herewith.)
	32	.1	Section 1350 Certification of Chief Executive Officer.(1) (Filed herewith.)
	32	.2	Section 1350 Certification of Chief Financial Officer.(1) (Filed herewith.)

**	Management contract or compensatory plan or arrangement required to be filed as an exhibit to this form pursuant to Item 15(c) of this report.
(1)	This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.

EX-10.24

EXHIBIT 10.24

CHANGE OF CONTROL AGREEMENT

     This CHANGE OF CONTROL AGREEMENT (“Agreement”) is made as of the 13th day of December, 2006 between Moldflow Corporation, a Delaware corporation (the “Company”), and Gregory W. Magoon (“Employee”).

     WHEREAS, the Company and the Employee desire that the Employee receive certain benefits in the event that his employment with the Company is terminated at or following a change of control of the Company.

     NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

1. Position and Duties. As of the date of this Agreement, Employee is serving as the Corporate Controller and has such duties as may from time to time be prescribed by the Chief Executive Officer or the Chief Financial Officer of the Company. Employee and the Company agree that his position, title and duties may change from time to time and that the terms of this Agreement are not dependent on any specific position, title or duties. Employee’s annual compensation plan shall be determined in the normal course of business by the Company and shall not be modified by anything in this Agreement. This Agreement is not designed as a guarantee or contract of employment and Moldflow and Employee retains all rights to terminate the employment relationship for any reason at any time.

2. Change of Control Benefit: In the event that within six months of the closing of a Change of Control, Employee’s employment with Moldflow Corporation or any entity that assumes this Agreement as part of any Change of Control is terminated by Moldflow or such assuming entity for any reason other than for gross negligence or willful misconduct, then Employee will be entitled to the following benefits:

a. Upon termination and subject to the signing by Employee of a release in the form presented by the Company or any successor entity, Employee will be entitled to receive:

i.	An amount equal to 24 weeks of his current base salary.
ii.	An amount equal to Employee’s current “at plan” bonus.
iii.	The amounts determined pursuant to Section (a) (i) and (a) (ii) shall be referred to the Termination Amount, which Termination Amount shall be paid in a lump sum within 30 days following the effective date of the release.

b.

In addition to payment of the Termination Amount, the Employee may elect to continue the current group medical and dental insurance coverage for up to 18 months following the termination date provided that Employee or his eligible dependent(s) remain eligible for such coverage under the federal law known as “COBRA.” If Employee elects such continuation coverage and remains eligible, the Company, or successor company, would continue to pay on his behalf for 24 weeks following the Termination Date, 100% of the medical and dental premiums that it pays for active employees with the same coverage (the “Benefit Continuation”).

c.

The payment of the Termination Amount and the Benefit Continuation will be subject to all required withholdings and tax payments and is payable subject to the continued compliance by Employee with the terms of the Confidentiality, Non-Solicitation and

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Non-Compete Agreement dated March 8, 2001. To the extent required by Section 409A of the Internal Revenue Code and the regulations thereunder to avoid imposition of the 20% additional tax, the Termination Amount may be delayed until at least six (6) months after the date of termination.

3. Change in Control: For purposes of this Agreement, “Change in Control” shall mean any of the following:

a.	any “person,” as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Act”) (other than the Company, any of its subsidiaries, or any trustee, fiduciary or other person or entity holding securities under any employee benefit plan or trust of the Company or any of its subsidiaries), together with all “affiliates” and “associates” (as such terms are defined in Rule 12b-2 under the Act) of such person, shall become the “beneficial owner” (as such term is defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the Company representing forty percent (40%)or more of either (A) the combined voting power of the Company’s then outstanding securities having the right to vote in an election of the Company’s Board (“Voting Securities”) or (B) the then outstanding shares of Company’s common stock, par value $0.01 per share (“Common Stock”) (other than as a result of an acquisition of securities directly from the Company); or
b.	persons who, as of the Commencement Date, constitute the Company’s Board (the “Incumbent Directors”) cease for any reason, including, without limitation, as a result of a tender offer, proxy contest, merger or similar transaction, to constitute at least a majority of the Board, provided that any person becoming a director of the Company subsequent to the Commencement Date shall be considered an Incumbent Director if such person’s election was approved by or such person was nominated for election by a vote of at least a majority of the Incumbent Directors; but provided further, that any such person whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of members of the Board or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board, including by reason of agreement intended to avoid or settle any such actual or threatened contest or solicitation, shall not be considered an Incumbent Director; or
c.	the stockholders of the Company shall approve (A) any consolidation or merger of the Company where the stockholders of the Company, immediately prior to the consolidation or merger, would not, immediately after the consolidation or merger, beneficially own (as such term is defined in Rule 13d-3 under the Act), directly or indirectly, shares representing in the aggregate more than fifty percent (50%) of the voting shares of the Company issuing cash or securities in the consolidation or merger (or of its ultimate parent corporation, if any), (B) any sale, lease, exchange or other transfer (in one transaction or a series of transactions contemplated or arranged by any party as a single plan) of all or substantially all of the assets of the Company or (C) any plan or proposal for the liquidation or dissolution of the Company.

     Notwithstanding the foregoing, a “Change of Control” shall not be deemed to have occurred for purposes of the foregoing clause (a) solely as the result of an acquisition of securities by the Company which, by reducing the number of shares of Common Stock or other Voting Securities outstanding, increases the proportionate number of shares beneficially owned by any person to forty percent (40%) or more of either (A) the combined voting power of all of the then outstanding Voting Securities or

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(B) Common Stock; provided, however, that if any person referred to in this sentence shall thereafter become the beneficial owner of any additional shares of Voting Securities or Common Stock (other than pursuant to a stock split, stock dividend, or similar transaction or as a result of an acquisition of securities directly from the Company) and immediately thereafter beneficially owns forty percent (40%) or more of either (A) the combined voting power of all of the then outstanding Voting Securities or (B) Common Stock, then a “Change of Control” shall be deemed to have occurred for purposes of the foregoing clause (a).

4. Notice. For purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States certified mail, return receipt requested, postage prepaid, addressed as follows:

if to the Employee:

At his home address as shown
in the Company’s personnel records;

if to the Company:

Moldflow Corporation
492 Old Connecticut Path
Framingham, MA 01701
Attention: Chief Executive Officer

Copy to: General Counsel

or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

5. Successor to Company. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and agree to perform this Agreement to the same extent that the Company would be required to perform it if no succession had taken place.

6. Miscellaneous. No provisions of this Agreement may be modified, waived, or discharged unless such waiver, modification, or discharge is agreed to in writing and signed by Employee and such officer of the Company. No agreements or representations, oral or otherwise, express or implied, unless specifically referred to herein, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. The validity, interpretation, construction, and performance of this Agreement shall be governed by the laws of the Commonwealth of Massachusetts (without regard to principles of conflicts of laws).

7. Validity. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

8. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

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     IN WITNESS WHEREOF, the parties have executed this Agreement is effective on the date and year first above written.

MOLDFLOW CORPORATION
By:	/s/ Roland Thomas
Its:	President and Chief Executive Officer
EMPLOYEE
/s/ Gregory W. Magoon
Gregory W. Magoon

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EX-10.25

Exhibit 10.25

TRANSITION AGREEMENT

     This TRANSITION AGREEMENT is made as of June 20, 2007, between Moldflow Corporation (“Moldflow” or the “Company”) and Christopher L. Gorgone (“Executive”).

     WHEREAS, the Executive is currently employed by the Company as Executive Vice President and Chief Financial Officer;

     WHEREAS, on July 8, 2005, the Executive and the Company entered an Amended and Restated Executive Employment Agreement (the “Employment Agreement”);

     WHEREAS, the Company and the Executive have agreed that the Executive’s employment will terminate no later than September 30, 2007 and that this Agreement shall serve as the written notice required by Section 6(f) of the Employment Agreement; and

     WHEREAS, the Company and the Executive seek to establish mutually acceptable terms for the Executive’s transition and departure from the Company’s employment.

     NOW, THEREFORE, in connection with the Executive’s transition from Moldflow and in consideration of the mutual covenants below, the parties agree as follows:

     1. Relationship with Moldflow. The Executive has agreed to resign from his position as Executive Vice President, Chief Financial Officer, Treasurer and Assistant Secretary and from all other positions and directorships that he holds at Moldflow and its subsidiaries and/or affiliates on the date of this Agreement. Beginning on the date hereof and continuing until the earlier of (a) his decision to leave Moldflow’s employment voluntarily (b) Moldflow’s decision to terminate his employment without Cause; or (c) September 30, 2007 (the earliest of which is referred to herein as the “Termination Date”), a period hereinafter referred to as the “Transition Period”, the Executive has agreed to provide services to Moldflow as Senior Advisor to the Chief Executive Officer regarding matters related to the disposition of the MMS Division, implementation of the Company’s ERP system and such other matters as may be requested from time to time by the Chief Executive Officer.

     2. Compensation and Benefits during Transition Period.

          (a) During the Transition Period, the Executive shall receive his current base salary, payable in accordance with Moldflow’s standard payroll practice. Executive will be eligible to continue participating in Moldflow’s 401(k) plan, group medical and dental plans and other similar health and welfare plans, including the Company’s portable life insurance plan with Unum, during the Transition Period on the terms and conditions available to the other members of the Company’s executive team.

          (b) Upon completion of the FY2007 audit and after approval by the Board of Directors or the appropriate committee thereof, Executive will also receive, if actually awarded, a bonus (the “FY07 Bonus”) pursuant to the terms of the Moldflow Corporation Cash Bonus Plan, which FY07 Bonus will be calculated using the same financial and non-financial targets and final fiscal 2007 actual financial and non-financial results as are applied to the other members of the executive team. The FY07 Bonus will be paid to Executive at the same time as the bonuses for FY07 are paid to the other members of the Executive Team, it being agreed that if the Termination Date occurs prior to such payment based on the reason set forth in Section 1(a) hereof, then the Executive shall forfeit such FY07 Bonus.

     3. Transition. The Executive agrees to fully cooperate in transitioning his current responsibilities to such Moldflow employees as determined by Moldflow. In addition, he agrees to sign,

execute, make and do all such deeds, documents, acts and things Moldflow may reasonably require to effect such transition. The Executive and the Company agree that the Executive will not be required to report to work after June 20, 2007 and that his duties shall be performed from time to time upon the request of the Chief Executive Officer.

     4. Termination Payments.

          (a) Termination Without Cause, Voluntarily Termination, or Termination on September 30, 2007. On the Termination Date, Moldflow shall pay the Executive for all earned salary and accrued and unused vacation time as of that date. Moldflow will provide the Executive with the following benefits, subject to signing by the Executive of a general release of claims in a form and manner satisfactory to the Company (the “Release”):

          (i) Moldflow shall pay the Executive one times the sum of (a) the result of (x) his base salary in effect on the Termination Date which the parties agree to be $222,789, less (y) the actual amount of base salary paid to Executive between the date that is 30 days from the date of this Agreement and the Date of Termination; and (b) a bonus amount which the parties agree to be $46,659. Because at the time of the Executive’s separation from service within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), the Executive will be considered a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, the payment described in this Section 4(a)(i) shall not be paid prior to the date that is the earliest of (i) six months and one day after the Date of Termination, or (ii) the Executive’s death.

          (ii) Beginning on the Termination Date, the Executive will be eligible to participate in Moldflow’s group medical and dental plans in accordance with the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”). To continue medical and dental insurance coverage, the Executive must elect COBRA continuation coverage. If the Executive elects COBRA continuation coverage and provided that he and his beneficiaries remain eligible for COBRA continuation coverage, Moldflow shall continue to pay for medical and dental insurance premiums for coverage of him and his beneficiaries to the same extent as if he had remained employed through the period determined by finding the result of (x) the period that is 12 months from the Termination Date, less (y) the number of whole months during which the Executive actually received such benefits during the Transition Period in excess of 30 days from the date of this Agreement. (For purposes of clarity in the event that the Date of Termination is September 30, 2007, then the total number of months shall be 12 months less 2 months or 10 months). The Executive will be responsible for the remaining portion of such coverage as if he remained employed. If the Executive elects COBRA continuation coverage, he may continue coverage for himself and any beneficiaries at his own expense for the remainder of the COBRA period; to the extent he and they remain eligible. Executive may at his option continue his life insurance after the Termination Date by contacting Unum directly.

          (iii) Upon the Termination Date, in accordance with the provisions of the Employment Agreement, all stock options which would otherwise vest over the next twelve (12) months shall immediately vest and become exercisable and, subject to the terms of the Moldflow Corporation 2000 Stock Option and Incentive Plan (the “Plan”), the Executive shall have 12 months from the Termination Date or the remaining option term, if earlier, to exercise all such stock options. On the Termination Date, in accordance with the provisions of the Employment Agreement, all repurchase rights and other restrictions on the shares of Restricted Stock held by the Executive which would otherwise lapse over the next twelve (12) months shall immediately lapse. All other stock-based grants and awards held by the Executive shall be canceled on the

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Termination Date in accordance with their terms. Executive understands and agrees that the exercise and sale of any stock options and shares of restricted stock shall be subject to the terms of the Plan and applicable securities law and regulations, including the Company’s insider trading policies. For purposes of this Section 4 (a)(iii) only, in the event that the Termination Date is earlier than September 30, 2007 as a result of the Company’s action in accordance with Section 1(b) hereof, then the acceleration of options and restricted stock referred to herein shall be calculated as if the Termination Date was September 30, 2007 and the twelve (12) months of acceleration shall be calculated from such date.

     5. Nondisparagement. Executive agrees not to take any action or make any statement, written or oral, to any current or former employee of the Company or to any other person which disparages or criticizes the Company, its management, or its practices or which disrupts or impairs its normal operations, including but not limited to actions that would (a) harm the reputation of the Company with its clients, suppliers, or the public; or (b) interfere with existing contractual or employment relationships with clients, suppliers or employees. The Company shall instruct all employees whom it informs of the terms of this Agreement not to make any statement, oral or written, that disparages or criticizes the Executive and, (a) that harms his reputation with suppliers or prospective employers; or (b) interferes with his contractual or employment relationships with others. These nondisparagement obligations shall not in any way affect the Executive’s or their obligation to testify truthfully in any legal proceeding.

     6. Return of Property. Executive confirms that, to the best of his knowledge, he has returned to the Company all Company property, including, without limitation, computer equipment, software, keys and access cards, credit cards, files, customer lists, rolodexes and any documents (including computerized data and any copies made of any computerized data or software) containing information concerning the Company, its business or its business relationships (in the latter two cases, actual or prospective). In the event that the Company agrees that the Executive may retain some Company property until the Termination Date, the Executive agrees to return all such property on or prior to the Termination Date. In the event that the Executive discovers that he continues to retain any such property, he shall return it to the Company immediately.

     7. Information Concerning Actual, Potential or Alleged Financial Irregularities. Executive represents that he is not aware of any actual, potential or alleged financial irregularities or fraudulent activities concerning the Company. Consistent with that representation, he acknowledges that he will sign the quarterly representation letter required normally of the Chief Financial Officer, as such representation letter relates to matters occurring in the quarter and fiscal year while the Executive was Chief Financial Officer of the Company.

     8. Securities Law Compliance. Executive agrees to adhere to, and fully cooperate with the Company in complying with, (i) the securities law and related disclosure requirements applicable to the Company and (ii) the Company’s policies in effect with respect to its executive officers and its employees generally. Executive acknowledges that his obligations under Section 15 of the Employment Agreement are also applicable to any investigations conducted by the Company or any governmental body.

     9. Release of Claims. In exchange for valuable consideration to which the Executive acknowledges he is not otherwise eligible, he voluntarily and irrevocably releases and discharges Moldflow, each related or affiliated entity, employee benefit plans, and the predecessors, successors, and assigns of each of them, and each of their respective current and former officers, directors, shareholders, employees, and agents (any and all of which are referred to as “Releasees”) generally from all charges, complaints, claims, promises, agreements, causes of action, damages, and debts that relate in any manner to the Executive’s employment with or services for Moldflow, known or unknown (“Claims”), which he

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has, claims to have, ever had, or ever claimed to have had against any of the Releasees through the date on which he executes this Agreement. This general release of Claims includes, without implication of limitation, all Claims related to the compensation provided to the Executive by Moldflow, his transition and separation from Moldflow, his resignation from his position as Executive Vice President, Chief Financial Officer, Treasurer and Assistant Secretary, directorships, offices and other positions with Moldflow, or his activities on behalf of Moldflow, including, without implication of limitation, any Claims of wrongful discharge, breach of contract, breach of an implied covenant of good faith and fair dealing, tortious interference with advantageous relations, any intentional or negligent misrepresentation, and unlawful retaliation or discrimination or deprivation of rights under the common law or any statute or constitutional provision (including, without implication of limitation, the Employee Retirement Income Security Act, the Sarbanes-Oxley Act of 2002, Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act and Chapter 151B of the Massachusetts General Laws). The Executive also waives any Claim for reinstatement, damages of any nature, severance pay, attorney’s fees, or costs. Nothing in this general release shall be construed to bar or limit the Executive’s rights, if any, to his rights under this Agreement, or to challenge the validity of this general release under the Age Discrimination in Employment Act.

     The Executive explicitly acknowledge that because he is over forty (40) years of age, he has specific rights under the Age Discrimination in Employment Act (“ADEA”) and the Older Workers Benefits Protection Act (“OWBPA”), which prohibit discrimination on the basis of age, and that the release set forth in this section is intended to release any right that he may have to file a claim against Moldflow alleging discrimination on the basis of age.

     It is Moldflow’s desire and intent to make certain that the Executive fully understands the provisions and effects of this Transition Agreement. To that end, he has been encouraged and given the opportunity to consult with legal counsel for the purpose of reviewing the terms of this Transition Agreement. Consistent with the provisions of ADEA and OWBPA, the Executive is being provided with twenty-one (21) days in which to consider and accept the terms of this Transition Agreement by signing below and returning it to Carol Trask, Director of Human Resources. In addition, the Executive may rescind his assent to this Transition Agreement within seven (7) days after he signs it (the “Effective Date”). To do so, the Executive must deliver a notice of rescission to Carol Trask. To be effective, such rescission must be hand delivered or postmarked within the seven (7) day period and sent by certified mail, return receipt requested.

     10. Tax Treatment. The Company shall undertake to make deductions, withholdings and tax reports with respect to payments and benefits under this Agreement to the extent that it reasonably and in good faith determines that it is required to make such deductions, withholdings and tax reports. Payments under this Agreement shall be in amounts net of any such deductions or withholdings. Nothing in this Agreement shall be construed to require the Company to make any payments to compensate the Executive for any adverse tax effect associated with any payments or benefits or for any deduction or withholding from any payment or benefit.

     11. Assignability. This Transition Agreement shall not be assignable by the Executive but, except to the foregoing extent, shall be binding on the parties hereto and their respective heirs, legal representatives, successors and assigns and shall inure to the benefit of and be assumed by Moldflow’s successors and assigns.

     12. Amendments; Waivers. This Transition Agreement and any exhibit attached hereto may be amended only by agreement in writing of all parties. No waiver of any provision nor consent to any exception to the terms of this Agreement shall be effective unless in writing and signed by the party to be bound and then only to the specific purpose, extent and instance so provided.

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     13. Integration. This Transition Agreement, together with any exhibit constitutes the entire agreement among the parties pertaining to the subject matter hereof and supersedes all prior agreements and understandings of the parties in connection therewith, whether oral or written; provided that Sections 4, 5, 6(c), 14, and 15 of the Employment Agreement remain in full force and effect.

     14. Choice of Law; Forum. This Transition Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, and shall in all respects be interpreted, enforced and governed under the internal laws of the Commonwealth without giving effect to the principles of conflict of law.

Moldflow Corporation

/s/ Roland Thomas By: Roland Thomas	6/20/07 Date
Title: President and CEO
/s/ Christopher L. Gorgone	6/20/07
Christopher L. Gorgone	Date

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EX-10.26

Exhibit 10.26

EXECUTIVE EMPLOYMENT AGREEMENT

     This EXECUTIVE EMPLOYMENT AGREEMENT (“Agreement”) is made as of the 7th day of September, 2006 between Moldflow Corporation, a Delaware corporation (the “Company”), and G. Fred Humbert (“Executive”).

     WHEREAS, the Company desires to employ Executive and Executive desires to be employed by the Company on the terms contained herein.

     NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

1. Employment. The term of this Agreement shall extend from the date hereof (the “Commencement Date”) until the first anniversary of the Commencement Date and shall automatically be extended for one additional year on each anniversary thereafter unless, not less than 30 days prior to each such date, either party shall have given notice that it does not wish to extend this Agreement; provided, further, that following a Change in Control or Transfer of Business the term of this Agreement shall continue in effect for a period of not less than twelve (12) months beyond the month in which the Change in Control or Transfer of Business occurred. The term of this Agreement shall be subject to termination as provided in Paragraph 6 and may be referred to herein as the “Period of Employment.”

2. Position and Duties. During the Period of Employment, Executive shall serve as the Senior Vice President and General Manager of the Manufacturing Solutions business unit (“MMS Business Unit”) and shall have such duties as may from time to time be prescribed by the Chief Executive Officer or the Board of Directors of the Company (the “Board”). Executive shall devote his full working time and efforts to the business and affairs of the Company.

3. Compensation and Related Matters.

     (a) Base Salary and Incentive Compensation. Executive’s initial annual base salary shall be $218,000. Executive’s base salary shall be redetermined annually by the Chief Executive Officer, the Board or a Committee thereof. The annual base salary in effect at any given time is referred to herein as “Base Salary.” The Base Salary shall be payable in a manner consistent with the general payroll policy of the Company. In addition to Base Salary, Executive shall be eligible to participate in such incentive compensation plans and Employee Benefit Plans as may be available to employees from time to time and as determined by the Chief Executive Officer or the Board of Directors. As used herein, the term “Employee Benefit Plans” includes, without limitation, each pension and retirement plan; supplemental pension, retirement and deferred compensation plan; savings and profit-sharing plan; stock ownership plan; stock purchase plan; stock option plan; life insurance plan; medical insurance plan; disability plan; and health and accident plan or arrangement established and maintained by the Company.

     (b) Vacations. Executive shall be entitled to twenty (20) paid vacation days in each fiscal year, which shall be accrued ratably during the fiscal year, and Executive shall also be

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entitled to all paid holidays given by the Company to its executives. Executive shall be entitled to additional vacation based on any policy of the Company that provides for additional vacation based on years of service or other criteria.

     (c) Indemnification and Directors’ and Officers’ Insurance. During Executive’s employment and for the period of time following termination of the Executive for any reason during which time Executive could be subject to any claim based on his position in the Company, Executive shall receive the maximum indemnification protection from the Company as permitted by the Company’s by-laws and shall receive directors’ and officers’ insurance coverage equivalent to that which is provided to any other director or officer of the Company.

4. Unauthorized Disclosure. Executive acknowledges that in the course of his employment with the Company and the predecessor to the Company’s MMS Business Unit, he has and will continue to be brought into frequent contact with, has had and will continue to have access to and become informed of confidential and proprietary information of the Company’s and its affiliates’, and particularly the MMS Business Unit’s, business affairs, information, trade secrets, and other matters which are of a proprietary or confidential nature, including but not limited to, methods of operations, business opportunities, business methods and processes, price and cost information, finance, customer information, product and service development information, production methodologies and processes, business plans, various sales techniques, manuals, letters, notebooks, procedures, reports, products, processes, services, and other confidential information and knowledge (collectively the “Confidential Information”). Executive understands and acknowledges that such Confidential Information is confidential, and he agrees not to disclose such Confidential Information to anyone outside the Company except to the extent that (i) Executive deems such disclosure or use reasonably necessary or appropriate in connection with performing his duties on behalf of the Company; (ii) Executive is required by order of a court of competent jurisdiction (by subpoena or similar process) to disclose or discuss any Confidential Information, provided that in such case, Executive shall promptly inform the Company of such event, shall cooperate with the Company in attempting to obtain a protective order or to otherwise restrict such disclosure, and shall only disclose Confidential Information to the minimum extent necessary to comply with any such court order; or (iii) such Confidential Information becomes generally known to and available for use in the Company’s industry, other than as a result of any action or inaction by Executive. Executive further agrees that he will not during employment and/or at any time thereafter use such Confidential Information in competing, directly or indirectly, with the Company. At such time as Executive shall cease to be employed by the Company, he will immediately turn over to the Company all Confidential Information, including papers, documents, writings, electronically stored information, other property, and all copies of them provided to or created by him during the course of his employment with the Company. The foregoing provisions shall be binding upon Executive’s heirs, successors, and legal representatives and shall survive the termination of this Agreement for any reason.

5. Covenants. Executive acknowledges and agrees that in his capacity of General Manager of the MMS Business Unit and his prior capacity as a lead salesperson of the MMS Business Unit and its predecessor, he has learned significant Confidential Information about the products and services of the MMS Business Unit and that his duties on behalf of the MMS Business Unit have required him to learn significant Confidential Information about the business of the

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Company. Executive further acknowledges and agrees that installing the MMS Business Unit’s products and services at customer sites requires close integration of all of the company’s products and services with customers’ manufacturing processes and that, as a result, Executive additionally has learned Confidential Information about the Company’s customers. The Executive recognizes that attempting to sell products and services that compete with the company’s products and services inevitably would require the Executive to use and disclose Confidential Information. In consideration for Executive’s employment by the Company under the terms provided in this Agreement and as a means to aid in the performance and enforcement of the terms of the provisions of Paragraph 4, Executive agrees that during the term of Executive’s employment with the Company and for a period of twelve (12) months thereafter, regardless of the reason for termination of employment, Executive will not directly or indirectly:

     (a) solicit or induce any present or future employee of the Company or any affiliate of the Company to accept employment with Executive or with any business, operation, corporation, partnership, association, agency, or other person or entity with which Executive may be associated, and Executive will not knowingly employ or cause any business, operation, corporation, partnership, association, agency, or other person or entity with which Executive may be associated to employ any present or future employee of the Company without providing the Company with ten (10) days’ prior written notice of such proposed employment; and

     (b) (i) solicit the business or patronage of any customer of the Company for any other person or entity, (ii) divert, entice, or otherwise take away from the Company the business or patronage of any customer of the Company or attempt to do so, or (iii) solicit or induce any customer of the Company to terminate or reduce its relationship with the Company.

     Should Executive violate any of the provisions of this Paragraph, then in addition to all other rights and remedies available to the Company at law or in equity, the duration of this covenant shall automatically be extended for the period of time from which Executive began such violation until he permanently ceases such violation.

6. Termination. Except for termination as specified in Subparagraph 6(a), any termination of Executive’s employment by the Company or any such termination by Executive shall be communicated by written notice of termination to the other party hereto (“Notice of Termination”). Executive’s employment hereunder may be terminated without any breach of this Agreement under the following circumstances:

     (a) Death. Executive’s employment hereunder shall terminate upon his death.

     (b) Disability. If, as a result of Executive’s incapacity due to physical or mental illness, Executive shall have been unable to perform the material duties of his position for one hundred eighty (180) calendar days in the aggregate in any twelve (12) month period, the Company may terminate Executive’s employment hereunder.

     (c) Termination by Company For Cause. At any time during the Period of Employment, the Company may terminate Executive’s employment hereunder for Cause if such termination is approved by not less than a majority of the Board. For purposes of this Agreement, “Cause” shall mean: (A) conduct by Executive constituting a material act of willful

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misconduct in connection with the performance of his duties; (B) criminal or civil conviction of Executive, a plea of nolo contendere by Executive or conduct by Executive that would reasonably be expected to result in material injury to the reputation of the Company if he were retained in his position with the Company; (C) continued, willful and deliberate non-performance by Executive of his duties hereunder (other than by reason of Executive’s physical or mental illness, incapacity or disability) which has continued for more than thirty (30) days following written notice of such non-performance from the Board; or (D) a breach by Executive of any of the provisions contained in Paragraphs 4 and 5 of this Agreement.

     (d) Termination Without Cause. At any time during the Period of Employment, the Company may terminate Executive’s employment hereunder without Cause if such termination is approved by a majority of the Company’s Board of Directors. Any termination by the Company of Executive’s employment under this Agreement which does not constitute a termination for Cause under Subparagraph 6(c) or result from the death or disability of the Executive under Subparagraph 6(a) or (b) or result from a Transfer of Business (as defined herein), shall be deemed a termination without Cause. If the Company provides notice to Executive under Paragraph 1 that it does not wish to extend the Period of Employment, such action shall be deemed a termination without Cause.

     (e) Termination by Executive. At any time during the Period of Employment, Executive may voluntarily terminate his employment hereunder. At any time after the earlier to occur of a Change of Control (as defined herein) or a Transfer of Business (as defined herein), Executive may terminate his employment hereunder for Good Reason upon thirty (30) days’ written notice to the Company describing with particularity the Executive’s basis for asserting Good Reason unless the Company cures the Good Reason within thirty (30) days of receipt. If Executive provides notice to the Company under Paragraph 1 that he does not wish to extend the Period of Employment, such action shall be deemed a voluntary termination by Executive and one without Good Reason. For purposes of this Agreement, “Good Reason” shall mean: (A) a substantial diminution or other substantive adverse change, not consented to by Executive, in the nature or scope of Executive’s responsibilities, authorities, powers, functions or duties; (B) any removal, during the Period of Employment, from Executive of his title as set forth in paragraph 2 of this Agreement; (C) an involuntary reduction in Executive’s Base Salary except for across-the-board reductions similarly affecting all or substantially all management employees; (D) a breach by the Company of any of its other material obligations under this Agreement and the failure of the Company to cure such breach within thirty (30) days after written notice thereof by Executive; (E) the involuntary relocation of the Company’s offices at which Executive is principally employed or the involuntary relocation of the offices of Executive’s primary workgroup to a location more than thirty (30) miles from such offices, or the requirement by the Company that Executive be based anywhere other than the Company’s offices at such location on an extended basis, except for required travel on the Company’s business to an extent substantially consistent with Executive’s business travel obligations; or (F) the failure of the Company to obtain the agreement from any successor to the Company to assume and agree to perform this Agreement as required by Paragraph 10.

     (f) Date of Termination. “Date of Termination” shall mean: (A) if Executive’s employment is terminated by his death, the date of his death; (B) if Executive’s employment is terminated under Subparagraph 6(b) or under Subparagraph 6(c), the date on which Notice of

4

Termination is given; (C) if Executive’s employment is terminated by the Company under Subparagraph 6(d), thirty (30) days after the date on which a Notice of Termination is given; and (D) if Executive’s employment is terminated by Executive under Subparagraph 6(e), thirty (30) days after the date on which a Notice of Termination is given, unless the Company cures the Good Reason event, if any, prompting the Executive to issue a Notice of Termination.

7. Compensation Upon Termination or During Disability.

     (a) If Executive’s employment terminates by reason of his death, the Company shall, within ninety (90) days of death, pay in a lump sum amount to such person as Executive shall designate in a notice filed with the Company or, if no such person is designated, to Executive’s estate, Executive’s accrued and unpaid Base Salary, plus accrued vacation, to the date of his death, plus his accrued and unpaid incentive compensation, provided that any bonus payment, if any, under Subparagraph 3(a) that is earned with respect to any financial period but which has not yet been authorized for payment by the Board of Directors or any committee thereof, which shall be paid if and when it is so authorized by the Board of Directors. Upon the death of Executive, (i) all stock options that are granted to the Executive on or after the date of this Agreement, which would otherwise vest over the next twelve (12) months shall immediately vest in Executive’s estate or other legal representatives and become exercisable, and Executive’s estate or other legal representatives shall have twelve (12) months from the Date of Termination or the remaining option term, if earlier, to exercise all such stock options granted to Executive and (ii) all repurchase rights and other restrictions on the shares of Restricted Stock that are granted to the Executive on or after the date of this Agreement held by the Executive which would otherwise lapse over the next twelve (12) months shall immediately lapse. All other stock-based grants and awards held by Executive shall be canceled upon the death of Executive in accordance with their terms. For a period of one (1) year following the Date of Termination, the Company shall pay such health and dental insurance premiums as may be necessary to allow Executive’s spouse and dependents to receive health and dental insurance coverage substantially similar to coverage they received immediately prior to the Date of Termination. In addition to the foregoing, any payments to which Executive’s spouse, beneficiaries, or estate may be entitled under any employee benefit plan shall also be paid in accordance with the terms of such plan or arrangement. Such payments, in the aggregate, shall fully discharge the Company’s obligations hereunder.

     (b) During any period while the Executive remains employed but fails to perform his duties hereunder as a result of incapacity due to physical or mental illness, Executive shall continue to receive his accrued and unpaid Base Salary, plus accrued vacation, and accrued and unpaid incentive compensation (including any bonus payment, if any, under Subparagraph 3(a) that is earned with respect to any financial period but which has not yet been authorized for payment by the Board of Directors or any committee thereof, which shall be paid if and when it is so authorized by the Board of Directors), until Executive’s employment is terminated due to disability in accordance with Subparagraph 6(b). Upon the Date of Termination, (i) all stock options that are granted to the Executive on or after the date of this Agreement which would otherwise vest over the next twelve (12) months shall immediately vest and become exercisable, and Executive shall have twelve (12) months from the Date of Termination or the remaining option term, if earlier, to exercise all such stock options granted to Executive and (ii) all repurchase rights and other restrictions on the shares of Restricted Stock that are granted to the

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Executive on or after the date of this Agreement held by the Executive which would otherwise lapse over the next twelve (12) months shall immediately lapse. All other stock-based grants and awards held by Executive shall vest or be canceled upon the Date of Termination in accordance with their terms. For a period of one (1) year following the Date of Termination, the Company shall pay such health and dental insurance premiums as may be necessary to allow Executive and Executive’s spouse and dependents to receive health and dental insurance coverage substantially similar to coverage they received prior to the Date of Termination. In addition to the foregoing, any payments to which Executive may be entitled under any employee benefit plan shall also be paid in accordance with the terms of such plan or arrangement.

     (c) If Executive’s employment is terminated by Executive then the Company shall, through the Date of Termination, pay Executive his accrued and unpaid Base Salary plus accrued vacation, at the rate in effect at the time Notice of Termination is given. Thereafter, the Company shall have no further obligations to Executive except as otherwise expressly provided under this Agreement. In addition, all vested but unexercised stock options held by Executive as of the Date of Termination must be exercised by Executive within three (3) months following the Date of Termination or by the end of the option term, if earlier. All other stock-based grants and awards held by Executive shall vest or be canceled upon the Date of Termination in accordance with their terms.

     (d) If Executive’s employment is terminated by the Company without Cause as provided in Subparagraph 6(d), then the Company shall, through the Date of Termination, pay Executive his accrued and unpaid Base Salary, plus accrued vacation, at the rate in effect at the time Notice of Termination is given and his accrued and unpaid incentive compensation (including any bonus payment, if any, under Subparagraph 3(a) that is earned with respect to any financial period but which has not yet been authorized for payment by the Board of Directors or any committee thereof, which shall be paid if and when it is so authorized by the Board of Directors). In addition, subject to signing by Executive of a general release of claims in a form and manner satisfactory to the Company (a “Release”), the Company shall provide the following benefits to Executive:

     (i) The Company shall pay Executive an amount equal one (1) times the sum of (A) Executive’s Base Salary in effect on the Date of Termination and (B) the Executive’s average annual bonus or other variable cash compensation (including commissions) over the five (5) fiscal years immediately prior to the year of termination (the “Termination Amount”). The Termination Amount shall be calculated by the Company within ten (10) business days following the Date of Termination and communicated to the Executive in writing and shall then be paid out in a lump sum within 30 days following the effective date of the Release, subject to Paragraph 11 below.

     (ii) Upon the Date of Termination, (i) all stock options that are granted to the Executive on or after the date of this Agreement which would otherwise vest over the next twelve (12) months shall immediately vest and become exercisable, and Executive shall have twelve (12) months from the Date of Termination or the remaining option term, if earlier, to exercise all such stock options granted to Executive and (ii) all repurchase rights and other restrictions on the shares of Restricted Stock that are granted to the Executive on or after the date of this Agreement held by the Executive which

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would otherwise lapse over the next twelve (12) months shall immediately lapse. All other stock-based grants and awards held by Executive shall be canceled upon the Termination Date in accordance with their terms.

     (iii) The Company shall, for so long as the Executive, his spouse and beneficiaries remain eligible for continuation coverage under the law know as COBRA, but not for longer than a period of one (1) year commencing on the Date of Termination, pay such health and dental insurance premiums as may be necessary to allow Executive and Executive’s spouse and dependents to continue to receive health and dental insurance coverage substantially similar to coverage they received prior to the Date of Termination. In addition to the foregoing, any payments to which Executive may be entitled under any employee benefit plan shall also be paid in accordance with the terms of such plan or arrangement.

     (e) If Executive’s employment is terminated by the Company for Cause as provided in Subparagraph 6(c), then the Company shall, through the Date of Termination, pay Executive his accrued and unpaid Base Salary at the rate in effect at the time Notice of Termination is given. Thereafter, the Company shall have no further obligations to Executive except as otherwise expressly provided under this Agreement. In addition, all stock options held by Executive as of the Date of Termination shall cease to vest as of the Date of Termination and Executive shall have 30 days from the Date of Termination or the remaining option term, if earlier, to exercise all such vested stock options. All other stock-based grants and awards held by Executive shall be canceled upon the Termination Date in accordance with their terms.

     (f) Nothing contained in the foregoing Subparagraphs 7(a) through 7(e) shall be construed so as to affect Executive’s rights or the Company’s obligations relating to agreements or benefits that are unrelated to termination of employment.

8. Change in Control and Transfer of Business Benefit.

     (a) Change in Control. Upon a Change of Control of the Company the following provisions shall apply in lieu of, and expressly supersede, the provisions of Subparagraph 7(d).

     (i) In the event that within 12 months following a Change of Control, the Executive terminates his employment for Good Reason or if the Executive’s employment is terminated by the Company without Cause and subject to the Executive’s entry into a Release, the Company shall pay Executive an amount equal to 1.5 times the sum of (A) Executive’s Base Salary and (B) the Executive’s cash bonus or other variable cash compensation (including commissions) that would be payable to the Executive during the fiscal year in which the Change of Control occurred if the Company and the Executive had met all of the targets required for a full payment of such cash bonus or other variable cash compensation (collectively, the “Severance Amount”); and, for so long as the Executive, his spouse and beneficiaries remain eligible for continuation coverage under the law know as COBRA, but not for longer than a period of one (1) year commencing on the Date of Termination, pay such health and dental insurance premiums as may be necessary to allow Executive, Executive’s spouse and dependents to continue to receive health and dental insurance coverage substantially similar to the coverage they received

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prior to the Date of Termination. The Severance Amount shall be calculated by the Company within ten (10) business days following the Date of Termination and communicated to the Executive in writing and shall then be paid out in a lump sum within 30 days after the effective date of the Release, subject to Paragraph 11 below. For purposes of this Agreement, “Base Salary” shall mean the annual Base Salary in effect on the Date of Termination. Furthermore, in the event Executive terminates his employment for Good Reason as provided in Subparagraph 6(e), he shall be entitled to the Severance Amount only if he provides the Notice of Termination provided for in Paragraph 6 within sixty (60) days after the occurrence of the event or events which constitute such Good Reason as specified in Subparagraph 6(e); and

     (ii) Notwithstanding anything to the contrary in any applicable option agreement or stock-based award agreement, upon a Change in Control, all stock options and other stock-based awards that are granted to the Executive shall immediately accelerate and become exercisable or non-forfeitable as of the effective date of such Change in Control. Executive shall also be entitled to any other rights and benefits with respect to stock-related awards, to the extent and upon the terms provided in the employee stock option or incentive plan or any agreement or other instrument attendant thereto pursuant to which such options or awards were granted.

     (b) Transfer of Business. In the event that at any time the Company engages in a Transfer of Business which is not a Change of Control, as defined herein, the following provisions shall apply in lieu of, and expressly supersede, the provisions of Subparagraph 7(d).

(i)	Upon the closing of any such Transfer of Business, subject to signing by Executive of a Release, the Company shall either pay directly or arrange for the direct payment to Executive of a bonus payment of $62,000, which shall be paid in a lump sum to Executive upon the closing of the Transfer of Business.
(ii)	Upon the closing of any such Transfer of Business (i) all stock options that are granted to the Executive on or after the date of this Agreement shall immediately vest and become exercisable, and Executive shall have twelve (12) months from the Date of Termination or the remaining option term, if earlier, to exercise all such stock options granted to Executive and (ii) all repurchase rights and other restrictions on the shares of Restricted Stock that are granted to the Executive on or after the date of this Agreement held by the Executive shall immediately lapse.
(iii)	In addition to the foregoing, subject to signing by Executive of a Release, Executive shall be entitled to certain other benefits in the event that his employment is terminated at the time of or following a Transfer of Business, as set forth below:

1. In the event that within 12 months following a Transfer of Business, the Executive terminates his employment for Good Reason or if the Executive’s

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	employment is terminated by the acquiring company without Cause, the Company shall pay the Executive an amount equal to 1 times the sum of (A) Executive’s Base Salary and (B) the Executive’s cash bonus or other variable cash compensation (including commissions) that would be payable to the Executive during the fiscal year in which the Transfer of Business occurred if the Company and the Executive had met all of the targets required for a full payment of such cash bonus or other variable cash compensation (collectively, the “Severance Amount”).
2.	In the event that at the time of a Transfer of Business, the Executive’s employment is terminated without Cause, the Company or the acquiring company shall pay the Executive an amount equal to 1 times Executive’s Base Salary (the “Severance Amount”).
3.	In the event of termination of employment pursuant to item 1 or 2 of this section, for so long as the Executive, his spouse and beneficiaries remain eligible for continuation coverage under the law know as COBRA, but not for longer than a period of one (1) year commencing on the Date of Termination, the Company or the acquiring company will pay such health and dental insurance premiums as may be necessary to allow Executive, Executive’s spouse and dependents to continue to receive health and dental insurance coverage substantially similar to the coverage they received prior to the Date of Termination. The Severance Amount shall be calculated by the Company within ten (10) business days following the date of closing of the termination of employment and communicated to the Executive in writing and shall then be paid out in a lump sum within 30 days after the effective date of the Release, subject to Paragraph 11 below. For purposes of this Agreement, “Base Salary” shall mean the annual Base Salary in effect on the date of the Transfer of Business.

     (c) Definitions. For purposes of this Agreement, the following terms shall have the following meanings:

     (i) “Change in Control” shall mean any of the following:

     (a) any “person,” as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Act”) (other than the Company, any of its subsidiaries, or any trustee, fiduciary or other person or entity holding securities under any employee benefit plan or trust of the Company or any of its subsidiaries), together with all “affiliates” and “associates” (as such terms are defined in Rule 12b-2 under the Act) of such person, shall become the “beneficial owner” (as such term is defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the Company representing forty percent (40%)or more of either (A) the combined voting power of the Company’s then outstanding securities having the right to vote in an election of the Company’s Board (“Voting Securities”) or (B) the then outstanding shares of Company’s common stock, par

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value $0.01 per share (“Common Stock”) (other than as a result of an acquisition of securities directly from the Company); or

     (b) persons who, as of the Commencement Date, constitute the Company’s Board (the “Incumbent Directors”) cease for any reason, including, without limitation, as a result of a tender offer, proxy contest, merger or similar transaction, to constitute at least a majority of the Board, provided that any person becoming a director of the Company subsequent to the Commencement Date shall be considered an Incumbent Director if such person’s election was approved by or such person was nominated for election by a vote of at least a majority of the Incumbent Directors; but provided further, that any such person whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of members of the Board or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board, including by reason of agreement intended to avoid or settle any such actual or threatened contest or solicitation, shall not be considered an Incumbent Director; or

     (c) the stockholders of the Company shall approve (A) any consolidation or merger of the Company where the stockholders of the Company, immediately prior to the consolidation or merger, would not, immediately after the consolidation or merger, beneficially own (as such term is defined in Rule 13d-3 under the Act), directly or indirectly, shares representing in the aggregate more than fifty percent (50%) of the voting shares of the Company issuing cash or securities in the consolidation or merger (or of its ultimate parent corporation, if any), (B) any sale, lease, exchange or other transfer (in one transaction or a series of transactions contemplated or arranged by any party as a single plan) of all or substantially all of the assets of the Company or (C) any plan or proposal for the liquidation or dissolution of the Company.

     Notwithstanding the foregoing, a “Change of Control” shall not be deemed to have occurred for purposes of the foregoing clause (a) solely as the result of an acquisition of securities by the Company which, by reducing the number of shares of Common Stock or other Voting Securities outstanding, increases the proportionate number of shares beneficially owned by any person to forty percent (40%) or more of either (A) the combined voting power of all of the then outstanding Voting Securities or (B) Common Stock; provided, however, that if any person referred to in this sentence shall thereafter become the beneficial owner of any additional shares of Voting Securities or Common Stock (other than pursuant to a stock split, stock dividend, or similar transaction or as a result of an acquisition of securities directly from the Company) and immediately thereafter beneficially owns forty percent (40%) or more of either (A) the combined voting power of all of the then outstanding Voting Securities or (B) Common Stock, then a “Change of Control” shall be deemed to have occurred for purposes of the foregoing clause (a).

     (ii) “Transfer of Business” shall mean the closing date of any transaction or related series or combination of transactions whereby the Company’s MMS Business

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Unit is acquired by a third party in a sale or exchange of stock, merger or consolidation, sales of assets, or other similar transaction not in the ordinary course of the Company’s business. A Transfer of Business shall not include any transaction related to the Company’s MMS Business Unit in the event that such transaction is part of a Change of Control.

9. Notice. For purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States certified mail, return receipt requested, postage prepaid, addressed as follows:

     if to the Executive:

At his home address as shown
in the Company’s personnel records;

     if to the Company:

Moldflow Corporation
492 Old Connecticut Path
Framingham, MA 01701
Attention: Chief Executive Officer
Copy to: General Counsel

or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

10. Successor to Company. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and agree to perform this Agreement to the same extent that the Company would be required to perform it if no succession had taken place. Failure of the Company to obtain an assumption of this Agreement at or prior to the effectiveness of any succession shall be a breach of this Agreement and shall constitute Good Reason if the Executive elects to terminate employment.

11. Taxes. The Company shall undertake to make deductions, withholdings and tax reports with respect to payments and benefits under this Agreement to the extent that it reasonably and in good faith believes that it is required to make such deductions, withholdings and tax reports. Payments under this Agreement shall be in amounts net of any such deductions or withholdings. Nothing in this Agreement shall be construed to require the Company to make any payments to compensate the Executive for any adverse tax effect associated with any payments or benefits or for any deduction or withholding from any payment or benefit. To the extent required by Section 409A of the Internal Revenue Code and regulations thereunder to avoid imposition of the 20% additional tax, the severance payments set forth in Subparagraphs 7(d), 8(a)(i) and 8(b)(i) shall be delayed until at least six (6) months after the Date of Termination.

12. Miscellaneous. No provisions of this Agreement may be modified, waived, or discharged unless such waiver, modification, or discharge is agreed to in writing and signed by

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Executive and such officer of the Company as may be specifically designated by the Board. No agreements or representations, oral or otherwise, express or implied, unless specifically referred to herein, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. The validity, interpretation, construction, and performance of this Agreement shall be governed by the laws of the Commonwealth of Massachusetts (without regard to principles of conflicts of laws).

13. Validity. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

14. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

15. Arbitration; Other Disputes. In the event of any dispute or controversy arising under or in connection with this Agreement, the parties shall first try in good faith for a period of 30 days to settle such dispute or controversy by mediation under the applicable rules of the American Arbitration Association before resorting to arbitration. Following such time period, the parties will settle any remaining dispute or controversy exclusively by arbitration in Boston, Massachusetts in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction. Notwithstanding the above, the Company shall be entitled to seek a restraining order or injunction in any court of competent jurisdiction to prevent any continuation of any violation of Paragraph 4 or 5 hereof.

16. Litigation and Regulatory Cooperation. During and after Executive’s employment, Executive shall reasonably cooperate with the Company in the defense or prosecution of any claims or actions now in existence or which may be brought in the future against or on behalf of the Company which relate to events or occurrences that transpired while Executive was employed by the Company; provided, however, that such cooperation shall not materially and adversely affect Executive or expose Executive to an increased probability of civil or criminal litigation. The Company shall also provide Executive with compensation on an hourly basis (to be derived from his Base Salary) for requested litigation and regulatory cooperation that occurs after his termination of employment, and reimburse Executive for all costs and expenses incurred in connection with his performance under this Paragraph 16, including, but not limited to, reasonable attorneys’ fees and costs.

—remainder of the page intentionally blank—

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Signature Page of Employment Agreement between Fred Humbert and Moldflow
Corporation.

     IN WITNESS WHEREOF, the parties have executed this Agreement effective on the date and year first above written.

MOLDFLOW CORPORATION
By:	/s/ Roland Thomas
Its:	President and Chief Executive Officer
EXECUTIVE
/s/ G. Fred Humbert
G. Fred Humbert

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EX-21.1

Exhibit 21.1
Subsidiaries of the Registrant

Moldflow Scandinavia AB (Sweden)
Moldflow International Pty. Ltd. (Australia)
Moldflow Pty. Ltd. (Australia)
Moldflow Italia S.r.l (Italy)
Moldflow Korea Ltd. (Korea)
Moldflow (Europe) Ltd. (United Kingdom)
Moldflow Vertriebs GmbH (Germany)
Moldflow Japan KK (Japan)
Moldflow Singapore Pte. Ltd. (Singapore)
Moldflow France (France)
Moldflow B.V. (Netherlands)
Moldflow Taiwan, Inc. (Taiwan)
Moldflow Ireland, Ltd. (Ireland)
Moldflow Iberia S.L. (Spain)
Moldflow Merger Corp. (Delaware)
Moldflow Securities Corp. (Massachusetts)

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     We have issued our reports dated September 13, 2007, accompanying the consolidated financial statements and schedules (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the application of Statement of Financial Accounting Standards No. 123(R) and SEC Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Qualifying Misstatements in Current Year Financial Statements” as of June 30, 2007) and accompanying Management’s Report on Internal Control over Financial Reporting (which report expresses an unqualified opinion on the effectiveness of the Company’s internal controls over financial reporting) included in the Annual Report of Moldflow Corporation on Form 10-K for the year ended June 30, 2007. We hereby consent to the incorporation by reference of said reports in the Registration Statements on Form S-3 (No. 333-112696) and Form S-8 (No. 333-102833, No. 333-46162, No. 333-100122, No. 333-119025, No. 333-70124 and No. 333-140524).

/s/ Grant Thornton LLP
Boston, Massachusetts
September 13, 2007

EX-23.2

Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-112696) and Form S-8 (No. 333-102833, No. 333-46162, No. 333-100122, No. 333-119025, No. 333-70124 and No. 333-140524) of Moldflow Corporation of our report dated September 13, 2005 relating to the financial statements and financial statement schedule, before the effects of the adjustments to retrospectively reflect the discontinued operations described in Note 3 to the consolidated financial statements, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts
September 13, 2007

EX-31.1

MOLDFLOW CORPORATION

Exhibit 31.1

Certifications

I, A. Roland Thomas, certify that:

1. I have reviewed this annual report on Form 10-K of Moldflow Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

     a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

     c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 13, 2007

/s/ A. ROLAND THOMAS  

A. Roland Thomas 

President and Chief Executive Officer
(Principal Executive Officer) 

EX-31.2

Exhibit 31.2

Certifications

I, Gregory W. Magoon, certify that:

1. I have reviewed this annual report on Form 10-K of Moldflow Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

     a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

     c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonable likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 13, 2007

/s/ GREGORY W. MAGOON  

Gregory W. Magoon

Executive Vice President,
Chief Financial Officer, Assistant Secretary
and Treasurer
(Principal Financial Officer) 

EX-32.1

Exhibit 32.1

Certification of Periodic Financial Report
Pursuant to 18 U.S.C. Section 1350

The undersigned officer of Moldflow Corporation (the “Company”) hereby certifies that to his knowledge the Company’s annual report on Form 10-K for the annual period ended June 30, 2007 to which this certification is being furnished as an exhibit (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. This certification is provided solely pursuant to 18 U.S.C. Section 1350 and Item 601(b)(32) of Regulation S-K (“Item 601(b)(32)”) promulgated under the Securities Act of 1933, as amended (the “Securities Act”), and the Exchange Act. In accordance with clause (ii) of Item 601(b)(32), this certification (A) shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and (B) shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.

Date: September 13, 2007

/s/ A. ROLAND THOMAS
Name:	A. Roland Thomas
Title:	President and Chief Executive Officer

EX-32.2

Exhibit 32.2

Certification of Periodic Financial Report
Pursuant to 18 U.S.C. Section 1350

The undersigned officer of Moldflow Corporation (the “Company”) hereby certifies that to his knowledge the Company’s annual report on Form 10-K for the annual period ended June 30, 2007 to which this certification is being furnished as an exhibit (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. This certification is provided solely pursuant to 18 U.S.C. Section 1350 and Item 601(b)(32) of Regulation S-K (“Item 601(b)(32)”) promulgated under the Securities Act of 1933, as amended (the “Securities Act”), and the Exchange Act. In accordance with clause (ii) of Item 601(b)(32), this certification (A) shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and (B) shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.

Date: September 13, 2007

/s/ GREGORY W. MAGOON
Name:	Gregory W. Magoon
Title:	Executive Vice President, Chief Financial Officer, Assistant Secretary and Treasurer