UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 WASHINGTON,
D.C. 20549
  
 
 FORM 10-Q
 
  (Mark
one)
 x
              QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934
 
 FOR
THE QUARTERLY PERIOD ENDED JUNE 30, 2009.
 
  ̈
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934
 
 FOR
THE TRANSITION PERIOD FROM
           TO
            .
 
 COMMISSION
FILE NUMBER: 0-51552
  
 ATS
CORPORATION
 (Exact
name of registrant as specified in its charter)
 
 Delaware
                
                11-3747850(State
      or other jurisdiction of
                  incorporation
      or organization)
                
                (I.R.S.
      Employer Identification No.)
 
 7925
Jones Branch Drive
 McLean,
Virginia 22102
 (Address
of principal executive offices)
 
 (571)
766-2400
 (Registrant’s
telephone number, including area code)
 
 
 (Former
name, former address and former fiscal year, if changed since last
report)
  
 Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.    Yes   x
   No    ̈
 
 Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes   ̈No   ̈
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (check
one):
 
 Large
      accelerated filer  ̈
                
                Accelerated
      filer   ̈Non-accelerated
      filer x
                
                Smaller
      reporting company   ̈(Do
      not check if a smaller reporting company)
 
 Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
 Yes  
 ̈
   No   x
 
 The
number of shares of the issuer’s common stock, $0.0001 par value, outstanding as
of August 7, 2009 was 22,740,110.
 
  
  ATS
CORPORATION
 
 TABLE
OF CONTENTS
 
 PART I
      — FINANCIAL INFORMATIONItem
      1.
                
                Financial
      Statements
                3Consolidated
      Balance Sheets as of June 30, 2009 (unaudited) and as of December 31,
      2008 (audited)
                3Consolidated
      Statements of Income (unaudited) for the three and six-month periods ended
      June 30, 2009 and June 30, 2008
                4Consolidated
      Statements of Cash Flows (unaudited) for the three and six-month periods
      ended June 30, 2009 and June 30, 2008
                5Notes
      to Consolidated Financial Statements
                6Item 2.
                
                Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                13Item 3.
                
                Quantitative
      and Qualitative Disclosures about Market Risk
                18Item 4.
                
                Controls
      and Procedures
                18PART II
      — OTHER INFORMATIONItem 1.
                
                Legal
      Proceedings
                19Item
      1A.
                
                Risk
      Factors
                19Item
      2.
                
                Unregistered
      Sales of Equity Securities and Use of Proceeds
                19Item 3.
                
                Defaults
      upon Senior Securities
                19Item
      4.
                
                Submission
      of Matters to a Vote of Security Holders
                20Item 5.
                
                Other
      Information
                20Item 6.
                
                Exhibits
                21SIGNATURES
                22
  2
  ATS
CORPORATION
 
 PART I — FINANCIAL
INFORMATION
 
 ITEM 1. — FINANCIAL
STATEMENTS
 
 CONSOLIDATED BALANCE
SHEETS
 
 June 30,
                                              
                                              
                                              December 31,2009
                                              
                                              
                                              2008(unaudited)
                                              
                                              
                                              (audited)ASSETSCurrent
      assetsCash
                                              
                                              $
                                              7,839
                                              
                                              
                                              $
                                              364,822Accounts
      receivable, net
                                              
                                              
                                              24,466,246
                                              
                                              
                                              
                                              29,268,647Other
      receivable - escrow
                                              
                                              
                                              3,793,771
                                              
                                              
                                              
                                              —Prepaid
      expenses
                                              
                                              
                                              607,618
                                              
                                              
                                              
                                              537,974Income
      taxes receivable, net
                                              
                                              
                                              608,598
                                              
                                              
                                              
                                              —Other
      current assets
                                              
                                              
                                              10,502
                                              
                                              
                                              
                                              22,771Deferred
      income taxes, current
                                              
                                              
                                              988,727
                                              
                                              
                                              
                                              1,321,890Total
      current assets
                                              
                                              
                                              30,483,301
                                              
                                              
                                              
                                              31,516,104Property
      and equipment, net
                                              
                                              
                                              3,349,076
                                              
                                              
                                              
                                              3,712,340Goodwill
                                              
                                              
                                              55,370,010
                                              
                                              
                                              
                                              59,128,648Intangible
      assets, net
                                              
                                              
                                              7,204,080
                                              
                                              
                                              
                                              8,304,686Restricted
      cash
                                              
                                              
                                              1,322,597
                                              
                                              
                                              
                                              1,316,530Other
      assets
                                              
                                              
                                              332,144
                                              
                                              
                                              
                                              387,897Deferred
      income taxes
                                              
                                              
                                              2,005,883
                                              
                                              
                                              
                                              2,003,348Total
      assets
                                              
                                              $
                                              100,067,091
                                              
                                              
                                              $
                                              106,369,553LIABILITIES
      AND SHAREHOLDERS’ EQUITYCurrent
      liabilities:Current
      portion of long-term debt
                                              
                                              $
                                              27,343,150
                                              
                                              
                                              $
                                              2,583,333Capital
      leases – current portion
                                              
                                              
                                              44,705
                                              
                                              
                                              
                                              86,334Accounts
      payable and accrued expenses
                                              
                                              
                                              9,807,944
                                              
                                              
                                              
                                              10,224,266Accrued
      salaries and related taxes
                                              
                                              
                                              3,671,643
                                              
                                              
                                              
                                              2,999,576Accrued
      vacation
                                              
                                              
                                              2,640,774
                                              
                                              
                                              
                                              2,220,865Income
      taxes payable, net
                                              
                                              
                                              —
                                              
                                              
                                              
                                              600,121Deferred
      revenue
                                              
                                              
                                              2,373,403
                                              
                                              
                                              
                                              1,745,352Deferred
      rent – current portion
                                              
                                              
                                              385,493
                                              
                                              
                                              
                                              379,520Total
      current liabilities
                                              
                                              
                                              46,267,112
                                              
                                              
                                              
                                              20,839,367Long-term debt
       – net of current
      portion
                                              
                                              
                                              810,214
                                              
                                              
                                              
                                              34,492,558Capital leases – net of current
      portion
                                              
                                              
                                              —
                                              
                                              
                                              
                                              745Deferred rent – net of current
      portion
                                              
                                              
                                              2,742,163
                                              
                                              
                                              
                                              2,842,171Other
      long-term liabilities (at fair value)
                                              
                                              
                                              1,869,329
                                              
                                              
                                              
                                              2,283,256Total
      liabilities
                                              
                                              
                                              51,688,818
                                              
                                              
                                              
                                              60,458,097Shareholders’
      equity:Preferred
      stock $0.0001 par value, 1,000,000 shares authorized, and no shares issued
      and outstanding
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —Common stock $0.0001 par value,
      100,000,000 shares authorized, 31,082,865 and 30,867,304 shares
      issued,respectively, and 22,740,110
      and 22,524,549 shares outstanding, respectively
                                              
                                              
                                              3,108
                                              
                                              
                                              
                                              3,087Additional
      paid-in capital
                                              
                                              
                                              131,274,763
                                              
                                              
                                              
                                              130,767,038Treasury
      stock, at cost, 8,342,755 shares held
                                              
                                              
                                              (30,272,007
                                              )
                                              
                                              
                                              (30,272,007
                                              )Accumulated
      deficit
                                              
                                              
                                              (51,593,445
                                              )
                                              
                                              
                                              (53,190,822
                                              )Accumulated
      other comprehensive loss (net of tax benefit of $651,778 and $887,416,
      respectively)
                                              
                                              
                                              (1,034,146
                                              )
                                              
                                              
                                              (1,395,840
                                              )Total
      shareholders’ equity
                                              
                                              
                                              48,378,273
                                              
                                              
                                              
                                              45,911,456Total
      liabilities and shareholders’ equity
                                              
                                              $
                                              100,067,091
                                              
                                              
                                              $
                                              106,369,553
  The
accompanying notes are an integral part of these consolidated financial
statements.
  3
  ATS
CORPORATION
 CONSOLIDATED STATEMENTS OF
INCOME
 
 Three Months
                                Ended June 30,
                              
                              
                              Six Months
                                Ended June 30,2009
                                (unaudited)
                              
                              
                              2008
                                (unaudited)
                              
                              
                              2009
                                (unaudited)
                              
                              
                              2008
                                (unaudited)Revenue
                              
                              $
                              30,266,809
                              
                              
                              $
                              33,788,772
                              
                              
                              $
                              57,423,323
                              
                              
                              $
                              68,662,297Operating
      costs and expensesDirect
      costs
                              
                              
                              20,451,932
                              
                              
                              
                              22,964,775
                              
                              
                              
                              38,647,669
                              
                              
                              
                              45,233,416Selling,
      general and administrative expenses
                              
                              
                              6,326,616
                              
                              
                              
                              7,764,830
                              
                              
                              
                              12,819,131
                              
                              
                              
                              17,214,511Depreciation
      and amortization
                              
                              
                              767,616
                              
                              
                              
                              2,034,302
                              
                              
                              
                              1,551,743
                              
                              
                              
                              4,076,910Total
      operating costs and expenses
                              
                              
                              27,546,164
                              
                              
                              
                              32,763,907
                              
                              
                              
                              53,018,543
                              
                              
                              
                              66,524,837Operating
      income
                              
                              
                              2,720,645
                              
                              
                              
                              1,024,865
                              
                              
                              
                              4,404,780
                              
                              
                              
                              2,137,460Other
      (expense) incomeInterest,
      net
                              
                              
                              (792,604
                              )
                              
                              
                              (944,729
                              )
                              
                              
                              (1,566,684
                              )
                              
                              
                              (1,749,136
                              )Other
      (loss) income
                              
                              
                              —
                              
                              
                              
                              (4,705
                              )
                              
                              
                              —
                              
                              
                              
                              66,172Income
      before income taxes
                              
                              
                              1,928,041
                              
                              
                              
                              75,431
                              
                              
                              
                              2,838,096
                              
                              
                              
                              454,496Income
      tax expense
                              
                              
                              756,253
                              
                              
                              
                              8,579
                              
                              
                              
                              1,240,719
                              
                              
                              
                              112,615Net
      income
                              
                              $
                              1,171,788
                              
                              
                              $
                              66,852
                              
                              
                              $
                              1,597,377
                              
                              
                              $
                              341,881Weighted
      average number of shares outstanding—basic
                              
                              
                              22,660,767
                              
                              
                              
                              20,410,516
                              
                              
                              
                              22,601,811
                              
                              
                              
                              19,706,731—diluted
                              
                              
                              22,660,767
                              
                              
                              
                              20,465,439
                              
                              
                              
                              22,601,811
                              
                              
                              
                              19,734,193Net
      income per share—basic
                              
                              $
                              0.05
                              
                              
                              $
                              0.00
                              
                              
                              $
                              0.07
                              
                              
                              $
                              0.02—diluted
                              
                              $
                              0.05
                              
                              
                              $
                              0.00
                              
                              
                              $
                              0.07
                              
                              
                              $
                              0.02
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  4
  ATS
CORPORATION
 CONSOLIDATED STATEMENTS OF CASH
FLOWS
 Six Months Ended
                                          June 30,2009
                                        
                                        
                                        2008(unaudited)
                                        
                                        
                                        (unaudited)Cash
      flows from operating activitiesNet
      income
                                        
                                        $
                                        1,597,377
                                        
                                        
                                        $
                                        341,881Adjustments
      to reconcile net income to net cash from operating
    activities:Depreciation
      and amortization
                                        
                                        
                                        1,551,743
                                        
                                        
                                        
                                        4,076,910Stock-based
      compensation
                                        
                                        
                                        381,318
                                        
                                        
                                        
                                        765,266Deferred
      income taxes
                                        
                                        
                                        208,221
                                        
                                        
                                        
                                        (1,507,705
                                        )Deferred
      rent
                                        
                                        
                                        (94,036
                                        )
                                        
                                        
                                        (40,990
                                        )Gain
      on disposal of equipment
                                        
                                        
                                        —
                                        
                                        
                                        
                                        (16,638
                                        )Provision
      for bad debt
                                        
                                        
                                        276,262
                                        
                                        
                                        
                                        92,780Changes
      in assets and liabilities, net of adjustments related to other
      comprehensive loss:Accounts
      receivable
                                        
                                        
                                        4,491,003
                                        
                                        
                                        
                                        (5,159,974
                                        )Prepaid
      expenses and other current assets
                                        
                                        
                                        (69,644
                                        )
                                        
                                        
                                        (12,794
                                        )Restricted
      cash
                                        
                                        
                                        (6,067
                                        )
                                        
                                        
                                        (21,999
                                        )Other
      assets
                                        
                                        
                                        66,803
                                        
                                        
                                        
                                        (731,669
                                        )Accounts
      payable and other accrued expenses
                                        
                                        
                                        (426,282
                                        )
                                        
                                        
                                        (1,037,300
                                        )Accrued
      salaries and related taxes
                                        
                                        
                                        672,066
                                        
                                        
                                        
                                        (1,392,197
                                        )Accrued
      vacation
                                        
                                        
                                        419,908
                                        
                                        
                                        
                                        394,542Accrued
      interest
                                        
                                        
                                        193,365
                                        
                                        
                                        
                                        264,287Income
      taxes payable and receivable
                                        
                                        
                                        (1,321,944
                                        )
                                        
                                        
                                        879,118Other
      current liabilities
                                        
                                        
                                        628,051
                                        
                                        
                                        
                                        (347,088
                                        )Other
      long-term liabilities
                                        
                                        
                                        —
                                        
                                        
                                        
                                        (45,976
                                        )Net
      cash provided by (used in) operating activities
                                        
                                        
                                        8,568,144
                                        
                                        
                                        
                                        (3,499,546
                                        )Cash
      flows from investing activitiesPurchase
      of property and equipment
                                        
                                        
                                        (86,654
                                        )
                                        
                                        
                                        (57,574
                                        )Proceeds
      from disposals of equipment
                                        
                                        
                                        —
                                        
                                        
                                        
                                        21,103Payment
      on acquired businesses
                                        
                                        
                                        —
                                        
                                        
                                        
                                        (45,779
                                        )Net
      cash used in investing activities
                                        
                                        
                                        (86,654
                                        )
                                        
                                        
                                        (82,250
                                        )Cash
      flows from financing activitiesBorrowings
      on line of credit
                                        
                                        
                                        29,405,026
                                        
                                        
                                        
                                        30,451,556Payments
      on line of credit
                                        
                                        
                                        (37,200,267
                                        )
                                        
                                        
                                        (27,708,307
                                        )Payments
      on notes payable
                                        
                                        
                                        (1,127,286
                                        )
                                        
                                        
                                        (1,441,667
                                        )Payments
      on capital leases
                                        
                                        
                                        (42,374
                                        )
                                        
                                        
                                        (54,279
                                        )Proceeds
      from stock issued pursuant to Employee Stock Purchase Plan
                                        
                                        
                                        126,428
                                        
                                        
                                        
                                        211,813Proceeds
      from exchange of stock for warrants, net of expense
                                        
                                        
                                        —
                                        
                                        
                                        
                                        234,477Net
      cash (used in) provided by financing activities
                                        
                                        
                                        (8,838,473
                                        )
                                        
                                        
                                        1,693,593Net
      decrease in cash
                                        
                                        
                                        (356,983
                                        )
                                        
                                        
                                        (1,888,203
                                        )Cash,
      beginning of period
                                        
                                        
                                        364,822
                                        
                                        
                                        
                                        1,901,977Cash,
      end of period
                                        
                                        $
                                        7,839
                                        
                                        
                                        $
                                        13,774Supplemental
      disclosures:Cash
      paid or received during the period for:Income
      taxes paid
                                        
                                        $
                                        2,352,483
                                        
                                        
                                        $
                                        2,401,682Income
      tax refunds
                                        
                                        
                                        4,924
                                        
                                        
                                        
                                        1,350,000Interest
      paid
                                        
                                        
                                        1,373,319
                                        
                                        
                                        
                                        1,484,849Interest
      received
                                        
                                        
                                        46,406
                                        
                                        
                                        
                                        34,160Non-cash
      investing and financing activities and adjustment to other comprehensive
      loss:Unrealized
      other comprehensive income (loss) on interest rate swap, net of
      tax
                                        
                                        
                                        361,694
                                        
                                        
                                        
                                        (88,664
                                        )
 The
accompanying notes are an integral part of these consolidated financial
statements.
  5
  NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 NOTE 1 3⁄4
BASIS OF
PRESENTATION
 
 Principles of Consolidation -
The consolidated financial statements include the accounts of ATS Corporation
(“ATSC”) and its subsidiary Advanced Technology Systems, Inc. (“ATSI”)
(collectively, the “Company”). All material intercompany accounts, transactions,
and profits are eliminated in consolidation.
 
 The
accompanying consolidated financial statements of the Company have been prepared
by management in accordance with the instructions to Form 10-Q of the
Securities and Exchange Commission. These statements include all adjustments
considered necessary by management to present a fair statement of the
consolidated balance sheets, results of operations, and cash flows. Certain
information and note disclosures normally included in the annual financial
statements have been condensed or omitted pursuant to those instructions,
although the Company believes that the disclosures made are adequate to make the
information presented not misleading. Therefore, these financial statements
should be read in conjunction with the audited consolidated financial
statements, including the notes thereto, contained in the Company’s 2008 Annual
Report on Form 10-K. The results reported in these financial statements
should not be regarded as necessarily indicative of results that may be expected
for the entire year.
 
 Accounting Estimates – The
Company’s financial statements have been prepared in conformity with accounting
principles generally accepted in the United States of America (“US GAAP”). The
preparation of the financial statements requires management to make estimates
and judgments that affect the reported amounts of assets and liabilities and the
disclosure of contingencies at the date of the financial statements, as well as
the reported amounts of revenues and expenses during the reporting period.
Estimates have been prepared on the basis of the most current and best available
information and actual results could differ materially from those
estimates.
 
 Financial Statements
Reclassifications - Certain amounts on the prior period financial
statements and related notes have been reclassified to conform to the current
presentation.
 
 NOTE 2 3⁄4
RECENT ACCOUNTING
PRONOUNCEMENTS
 
 Adoption
of New Accounting Standards
 
 In
September 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements
(“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles
and expands disclosures about fair value measurements. Specifically, this
Statement sets forth a definition of fair value, and establishes a hierarchy
prioritizing the inputs to valuation techniques, giving the highest priority to
quoted prices in active markets for identical assets and liabilities and the
lowest priority to unobservable inputs. The provisions of SFAS No. 157 are
generally required to be applied on a prospective basis, except to certain
financial instruments accounted for under SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, for which the provisions of SFAS
No. 157 should be applied retrospectively. In February 2008, the FASB
issued Staff Position FAS 157-2, Effective Date of FASB Statement
No. 157, which defers the implementation for the non-recurring
nonfinancial assets and liabilities from fiscal years beginning after
November 15, 2007 to fiscal years beginning after November 15, 2008.
The disclosure requirements of SFAS No. 157, which took effect on
January 1, 2008, are presented in Note 4. On January 1, 2009, the
Company implemented the previously-deferred provisions of SFAS No. 157 for
nonfinancial assets and liabilities recorded at fair value as required. The
implementation did not have a material effect on the Company’s consolidated
financial position or results of operations.
  6
 
 In
December 2007, the FASB issued SFAS No. 141(R) — Business Combinations (“SFAS
No. 141(R)”). SFAS No. 141(R) replaces FASB Statement
No. 141— Business
Combinations. The new statement retains the fundamental requirements that
the acquisition (or purchase) method of accounting be used for all business
combinations and expands the definition of a business, thus increasing the
number of transactions which may qualify as business combinations. Contingent
consideration will be measured at fair value at the acquisition date, with
changes in fair value recognized in earnings, and transaction-related expenses
and restructuring costs will be expensed as incurred. Changes in acquired tax
contingencies will be recognized in earnings if outside the purchase price
allocation period (generally one year or less). Adjustments to finalize purchase
price allocations have been revised post-acquisition financial statements to
reflect the adjustments as if they had been recorded on the acquisition date.
Also, in the event of a bargain purchase (acquisition of a business at below
fair market value of net assets acquired), a gain could be recognized, or in the
event of a change in control of an existing investment, a gain or loss could be
recognized. SFAS No. 141(R) will be applied prospectively to business
acquisitions with acquisition dates on or after January 1, 2009. There is
no current impact as we have made no acquisitions since January 1,
2009.
 
 SFAS No.
162 — In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles (SFAS 162). SFAS 162 identifies a consistent
framework, or hierarchy, for selecting accounting principles to be used in
preparing financial statements that are presented in conformity with GAAP for
nongovernmental entities (the “Hierarchy”). The Hierarchy within SFAS 162 is
consistent with that previously defined in the American Institute of Certified
Public Accountants (“AICPA”) Statement on Auditing Standards No. 69, The Meaning
of “Present Fairly in Conformity With Generally Accepted Accounting Principles”
(“SAS 69”). SFAS 162 is effective 60 days following the SEC’s approval of the
Public Company Accounting Oversight Board amendments to the AICPA’s Auditing
section No. 411, The Meaning of “Present Fairly in Conformity With Generally
Accepted Accounting Principles.” SFAS 162 did not have a material effect because
we utilize the guidance within SAS 69.
 
 The SEC
issued a final rule (RIN 3235-AJ71 Interactive Data to Improve Financial
Reporting) requiring companies to provide financial statement information in a
form that is intended to improve its usefulness to investors. This final rule
applies to public companies and foreign private issuers that prepare their
financial statements in accordance with generally accepted accounting principles
(GAAP) and foreign private issuers that prepare their financial statements using
International Financial Reporting Standards (IFRS). Companies will provide their
financial statements to the SEC and on their corporate website in interactive
data format using eXtensible Business Reporting Language (XBRL). The interactive
data will be provided as an exhibit to periodic and current reports and
registration statements, as well as to transition reports for a change in fiscal
year. We will be required to submit an interactive data file for our June 30,
2010 quarterly report on Form 10-Q.
 
 In April
2009, the Financial Accounting Standards Board (FASB) issued FASB Staff Position
No. FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial
Instruments” (FSP 107-1), which amends SFAS No. 107, “Disclosures about Fair
Value of Financial Instruments” (SFAS No. 107) and APB 28-1, “Interim Financial
Reporting.” FSP 107-1 expands the fair value disclosures required for all
financial instruments within the scope of SFAS No. 107 to interim periods. FSP
107-1 also requires entities to disclose in interim periods the methods and
significant assumptions used to estimate the fair value of financial
instruments. FSP 107-1 is effective for interim reporting periods ending after
June 15, 2009. The adoption of FSP 107-1 has not had a material impact on our
financial position, results of operations or cash flows.
 
 In May
2009, the FASB issued SFAS No. 165, "Subsequent Events" ("SFAS 165"). SFAS 165
sets forth the period after the balance sheet date during which management of a
reporting entity should evaluate events or transactions that may occur for
potential recognition or disclosure in the financial statements, the
circumstances under which an entity should recognize events or transactions
occurring after the balance sheet date in its financial statements, and the
disclosures that an entity should make about events or transactions that
occurred after the balance sheet date. SFAS 165 is effective for interim or
annual periods ending after June 15, 2009. The Company has adopted the
requirements of this pronouncement. The Company has evaluated its operations
through August 7, 2009, which is the date that the interim financial statements
for the six-month period ended June 30, 2009 are to be issued and concluded that
there have been no recognizable subsequent events. The adoption of SFAS 165 has
not had a material impact on our financial position, results of operations or
cash flows.
 
 NOTE 3 3⁄4
RESTRICTED
CASH
 
 The
Company is required to maintain $1.2 million on deposit with a financial
institution to support a bonding requirement for one of the ATSI state
contracts. This amount, and accumulated interest of $122,597 and $116,530 earned
thereon as of June 30, 2009 and December 31, 2008, respectively, is reflected in
restricted cash in the accompanying consolidated balance
sheets.
  7


NOTE 4 3⁄4
FAIR VALUE OF FINANCIAL
INSTRUMENTS
 
 In order
to manage interest rate fluctuation exposure on bank debt, the Company entered
into an interest rate swap agreement with Bank of America on November 9,
2007 providing the Company an ability to eliminate the variability of interest
expense based on $35 million of floating rate debt. The purpose of the
derivative instrument is to hedge cash flows and not for trading purposes. The
Company records cash payments and receipts related to its interest rate swap as
adjustments to interest expense and as a component of operating cash
flow.
 
 The
Company accounts for its interest rate swap agreement as a cash flow hedge under
the provisions of SFAS No. 133. The Company has determined that the swap is
90.2% effective for the variable rate debt. Accordingly, the fair value of the
interest rate swap agreement of $1,869,000 and $2,283,000 is included in other
long-term liabilities, as of June 30, 2009 and December 31, 2008,
respectively. This valuation method, which is consistent with the second highest
level of the valuation hierarchy described in SFAS No. 157, Fair Value Measurements, is
based upon an extrapolation of forward rates for the remaining term of the
interest rate swap. A change in fair value of $414,000 for this derivative, net
of a tax benefit of $165,000, was recorded in other comprehensive loss for the
six months ended June 30, 2009. Hedge ineffectiveness of $128,000 and $183,000
was recognized for the three and six-month periods ended June 30, 2009 as a
portion of the notional amount exceeds expected borrowings in the Company’s
variable rate debt.
 
 NOTE 5 3⁄4
STOCK PLANS AND STOCK-BASED
COMPENSATION
 
 Under the
fair value recognition provisions of SFAS No. 123(R),Share Based Payment, the
Company recognizes stock-based compensation based upon the fair value of the
stock-based awards taking into account the effects of the employees’ expected
exercise and post-vesting employment termination behavior. A summary of the
components of the stock-based compensation expense recognized during the three
and six-month periods ended June 30, 2009 and 2008 is as follows:
 
 Compensation Related to
                      Options and RestrictedStock
                    
                    Three Months
                      Ended
                      June 30, 2009
                    
                    
                    Three Months
                      Ended
                      June 30, 2008
                    
                    
                    Six Months
                      Ended
                      June 30, 2009
                    
                    
                    Six Months
                      Ended
                      June 30, 2008Non-qualified stock options
                    
                    $
                    —
                    
                    
                    $
                    —
                    
                    
                    $
                    —
                    
                    
                    $
                    —Incentive
      stock options
                    
                    
                    45,000
                    
                    
                    
                    48,000
                    
                    
                    
                    82,000
                    
                    
                    
                    90,000Restricted
      stock
                    
                    
                    124,000
                    
                    
                    
                    213,000
                    
                    
                    
                    198,000
                    
                    
                    
                    495,000Stock
      grants to Directors in lieu of cash
                    
                    
                    114,000
                    
                    
                    
                    180,000
                    
                    
                    
                    114,000
                    
                    
                    
                    180,000Forfeitures
      in excess of estimate
                    
                    
                    (7,000
                    )
                    
                    
                    —
                    
                    
                    
                    (13,000
                    )
                    
                    
                    —Total
      stock-based compensation expense
                    
                    $
                    276,000
                    
                    
                    $
                    441,000
                    
                    
                    $
                    381,000
                    
                    
                    $
                    765,000
 
 Stock
Options - The Company estimates the fair value of options as of the date
of grant using the Black-Scholes option pricing model. A total of 202,000 and
312,000 options were granted during the three and six-month periods ended June
30, 2009, respectively. A total of 178,500 options were granted during the three
and six-month periods ended June 30, 2008.  The fair value of options
granted during the six-month period ended June 30, 2009 have been estimated as
of the date of grant using the Black-Scholes option pricing model with the
following assumptions:
 
 Options
      Granted
                            January
      2, 2009
                          
                          
                          Options
      Granted
                            April
      30, 2009
                          
                          
                          Options
      Granted
                            May
      5, 2009Expected
      dividend yield
                          
                          
                          —
                          %
                          
                          
                          —
                          %
                          
                          
                          —
                          %Expected
      volatility
                          
                          
                          55.3
                          %
                          
                          
                          71.6
                          %
                          
                          
                          71.6
                          %Risk
      free interest rate
                          
                          
                          2.9
                          %
                          
                          
                          0.5
                          %
                          
                          
                          0.5
                          %Expected
      life of options
                          
                          6.3
      years
                          
                          
                          6.3
      years
                          
                          
                          6.3
      yearsForfeiture
      rate
                          
                          
                          4.25
                          %
                          
                          
                          4.25
                          %
                          
                          
                          4.25
                          %
  8
  The
average fair value per option granted during the six months ended June 30, 2009
was $0.89. As of June 30, 2009, there was $634,071 of unrecognized compensation
expense related to unvested options. This cost is expected to be recognized over
a weighted-average period of 3.2 years. The table below provides stock option
information for the six months ended June 30, 2009:
 
 Number of
                        Shares
                      
                      
                      Weighted
                        Average
                        Exercise
                        Price Per
                        Share
                      
                      
                      Weighted-
                        Average
                        Remaining
                        Contractual
                        Life
      in Years
                      
                      
                      Aggregate
                        Intrinsic
                        Value of
                        In-the-
                        Money
                        OptionsOptions
      outstanding at
                        January
      1, 2009
                      
                      
                      394,500
                      
                      
                      $
                      3.16
                      
                      
                      
                      9.0
                      
                      
                      $
                      —
                      (1)Options
      granted
                      
                      
                      312,000
                      
                      
                      
                      1.46
                      
                      
                      
                      9.7
                      
                      
                      
                      195,080
                      (2)Options
      expired
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —Options
      forfeited
                      
                      
                      (26,000
                      )
                      
                      
                      2.44
                      
                      
                      
                      8.7
                      
                      
                      
                      —Options
      outstanding at
                        June
      30, 2009
                      
                      
                      680,500
                      
                      
                      $
                      2.41
                      
                      
                      
                      9.0
                      
                      
                      $
                      195,080
                      (2)Options
      exercisable at
                        June
      30, 2009
                      
                      
                      110,875
                      
                      
                      $
                      3.47
                      
                      
                      
                      8.3
                      
                      
                      $
                      —
                      (2)
 
 (1)
Intrinsic value represents the excess of the closing stock price on the last
trading day of the preceding period, which was $1.40 as of December 31, 2008,
over the exercise price, multiplied by the number of options.
 (2)
Intrinsic value represents the excess of the closing stock price on the last
trading day of the period, which was $2.09 as of June 30, 2009, over the
exercise price, multiplied by the number of options.
 
 The
following table summarizes information about stock options outstanding at June
30, 2009:
 
 Options Outstanding
                      
                      Options ExercisableWeighted-average
                      
                      Weighted-
                      
                      
                      
                      Weighted-Remaining
                      
                      average
                      
                      
                      
                      averageExercise
                      
                      Number
                      
                      Life in
                      
                      Exercise
                      
                      Number
                      
                      ExercisePrices
                      
                      Outstanding
                      
                      Years
                      
                      Price
                      
                      Exercisable
                      
                      Price$
                      1.40
                      
                      
                      110,000
                      
                      9.5
                      
                      $
                      1.40
                      
                      —
                      
                      $
                      —1.50
                      
                      
                      202,000
                      
                      9.8
                      
                      
                      1.50
                      
                      —
                      
                      
                      —2.15
                      
                      
                      149,000
                      
                      8.9
                      
                      
                      2.15
                      
                      37,250
                      
                      
                      2.153.40
                      
                      
                      80,000
                      
                      8.5
                      
                      
                      3.40
                      
                      20,000
                      
                      
                      3.403.50
                      
                      
                      30,000
                      
                      8.4
                      
                      
                      3.50
                      
                      7,500
                      
                      
                      3.503.67
                      
                      
                      30,000
                      
                      8.3
                      
                      
                      3.67
                      
                      7,500
                      
                      
                      3.673.75
                      
                      
                      4,500
                      
                      8.0
                      
                      
                      3.75
                      
                      1,125
                      
                      
                      3.754.32
                      
                      
                      15,000
                      
                      7.7
                      
                      
                      4.32
                      
                      7,500
                      
                      
                      4.324.88
                      
                      
                      60,000
                      
                      7.7
                      
                      
                      4.88
                      
                      30,000
                      
                      
                      4.88680,500
                      
                      9.0
                      
                      $
                      2.41
                      
                      110,875
                      
                      $
                      2.65
  9
  Restricted
Shares – Pursuant to the 2006 Omnibus Incentive Compensation Plan, during
the six-month period ended June 30, 2009, the Company granted 142,000 restricted
shares valued at $199,000. Such shares vest ratably over a five-year period. The
table below provides additional restricted share information for the six months
ended June 30, 2009:
  Six months
                            Ended June 30, 2009No. of
                            Shares
                          
                          Weighted
                            Average
      Grant
                            Date Fair
                            ValueUnvested
      at January 1, 2009
                          
                          
                          407,865
                          
                          
                          $
                          3.38Granted
                          
                          
                          263,142
                          
                          
                          
                          1.49Vested
                          
                          
                          (42,145
                          )
                          
                          
                          3.31Forfeited
                          
                          
                          (24,260
                          )
                          
                          
                          3.17Unvested at June 30, 2009
                          
                          
                          604,602
                          
                          
                          $
                          2.57
 
 NOTE 6 3⁄4
EMPLOYEE STOCK PURCHASE
PLAN
 
 The
Company adopted the 2007 Employee Stock Purchase Plan (the “Plan”) in July 2007.
The Plan was subsequently approved by Company stockholders in May 2008. The Plan
provides employees and management with an opportunity to acquire or increase
their ownership interest in the Company through the purchase of shares of the
Company’s common stock at periodic intervals, namely four month offering periods
during which payroll deductions are made and shares are subsequently purchased
at a discount. The Company initially reserved an aggregate of 150,000 shares of
Common Stock exclusively for issuance under the Plan. Additionally, the Company
may automatically increase the shares registered under this Plan on an annual
basis pursuant to the Plan’s “evergreen” provision. This provision allows the
Company to annually increase its registered Plan shares by the lesser of the
following: (i) 100,000 shares, (ii) 1% of the Company’s outstanding shares on
January 1 of such year, or (iii) a lesser amount as determined by the Board.
Accordingly, in the first quarter of 2009, the Company registered an additional
100,000 shares under the Plan.
 
 The Plan
is a qualified plan under Section 423 of the Internal Revenue Code and, for
financial reporting purposes, is considered non-compensatory under SFAS
No. 123R Share Based Payment. Accordingly, there is no stock-based
compensation expense associated with shares acquired under the Plan for the
three and six-month periods ended June 30, 2009. During the six-month period
ended June 30, 2009, participants have purchased 99,943 shares under the Plan at
a weighted average price per share of $1.26. During the three months ended June
30, 2009, 49,971 shares were purchased at a price per share of
$1.33.
 
 NOTE 7 3⁄4
EARNINGS (LOSS) PER
SHARE
 
 Basic and
diluted earnings per share information is presented in accordance with SFAS
No. 128, Earnings Per Share. Basic earnings per share is calculated by
dividing the net income/ (loss) attributable to common stockholders by the
weighted-average common shares outstanding during the period. Diluted earnings
per share is calculated by dividing net income attributable to common
stockholders by the weighted average common shares outstanding which includes
common stock equivalents. The Company’s common stock equivalents include stock
options, restricted stock, and warrants.
 
 The
weighted average shares outstanding for the three months ended June 30, 2009 and
2008 excludes unvested restricted shares and excludes an aggregate of
approximately 4,205,066 and 3,507,752 warrants and stock options to purchase
shares, respectively, because such common stock equivalents have an exercise
price in excess of the average market price of the Company’s common stock during
the period, or would be anti-dilutive.  The weighted average shares
outstanding for the six months ended June 30, 2009 and 2008 excludes unvested
restricted shares and excludes an aggregate of approximately 4,212,587 and
3,535,213 warrants and stock options to purchase shares, respectively, because
such common stock equivalents have an exercise price in excess of the average
market price of the Company’s common stock during the period, or would be
anti-dilutive.
  10
 
 NOTE 8 3⁄4
SEGMENT
ACCOUNTING
 
 The
Company reviewed its services by unit to determine if any unit of the business
is subject to management appraisal that are different than those of other units
in the Company. Based on this review, the Company has determined that all units
of the Company are providing comparable services to its clients, and the Company
has only one reportable segment.
 
 NOTE 9 3⁄4
WARRANTS
 
 On June
30, 2009, the Company had 2,980,175 outstanding warrants that will expire on
October 19, 2009, unless earlier exercised.
 
 NOTE 10 3⁄4
GOODWILL
VALUATION
  Goodwill
represents the excess of purchase price over the fair value of net assets
acquired because of various business acquisitions. In accordance with SFAS No.
142, “Goodwill and Other Intangible Assets,” goodwill must be recorded at the
reporting unit level. Reporting units are defined as one level below an
operating segment. We have identified one reporting unit and one operating
segment. SFAS No. 142 prohibits the amortization of goodwill, but requires that
it be tested for impairment at least annually (at any time during the year, but
at the same time each year), or more frequently if events or circumstances
change, such as adverse changes in the business climate, that would more likely
than not reduce the reporting unit’s fair value below its carrying
amount.
 
 The
Company evaluates goodwill for impairment annually in the third fiscal quarter
or more frequently depending on specific events or when evidence of potential
impairment exists.  The annual impairment test is based on several
factors requiring judgment. Principally, a significant decrease in expected cash
flows or changes in general market conditions may indicate potential impairment
of recorded goodwill. Management has concluded that there were no triggering
events that would indicate an impairment during the quarter ended June 30, 2009.
The Company will continue to monitor the recoverability of the carrying value of
its goodwill and other long-lived assets.
  As of
June 30, 2009 and December 31, 2008, goodwill was $55.4 million and $59.1
million, respectively. As of June 30, 2009 and December 31, 2008, our net basis
in intangible assets was $7.2 million and $8.3 million, respectively. The
decrease in the goodwill is the result of the award of $3.8 million to ATSI
relating to claims against the former owners for a net working capital deficit
from what was required to be delivered by the sellers and amounts related to
accounting method tax escrows.
  NOTE 11 3⁄4
LEGAL
PROCEEDINGS
  From time
to time, we are involved in various legal matters and proceedings concerning
matters arising in the ordinary course of business. Other than the matters
discussed below, we currently believe that any ultimate liability arising out of
these matters and proceedings will not have a material adverse effect on our
financial position, results of operations or cash flows.
  We are a
defendant in Maximus, Inc. vs.
Advanced Technology Systems, Inc., pending in the Connecticut Superior
Court, Complex Litigation Docket. The lawsuit asserts breach of contract and
other claims related to a subcontract between Maximus and ATSI associated with a
prime contract between Maximus and the State of Connecticut. Based on the
complaint filed in the suit, Maximus seeks damages in excess of $3.5 million.
The case was filed in August 2007.
  We have
answered the complaint denying Maximus’ claims and have asserted counterclaims.
In January of 2009, the case was consolidated for discovery purposes with an
action brought by the State of Connecticut against Maximus relating to the prime
contract. Discovery has commenced, although at a hearing conducted on March 9,
2009, further depositions were delayed until September 4, 2009 in order to give
the State of Connecticut sufficient time to review documents received from
Maximus. Trial, which had been scheduled for July 2010, is now scheduled to
commence in April 2011. Based on the claims asserted in the lawsuit, we have
made an indemnification demand against the former principal owners of ATSI under
the stock purchase agreement governing the transaction in which the Company
(then Federal Services Acquisition Corporation) acquired ATSI.
  Following
the indemnification demand, the former principal owners of ATSI brought an
arbitration against us with the American Arbitration Association claiming that
the former owners do not owe us any indemnification obligations for the Maximus
lawsuit or the Maximus subcontract. At our request, the arbitration was stayed
pending the outcome of the Maximus lawsuit described above.
  11
  We had
also asserted other claims against the former principal owners of ATSI based on
the stock purchase agreement governing the transaction, and the former ATSI
owners asserted certain counterclaims against us. A final award was issued by
the arbitrator on June 26, 2009, under which the Company was to receive $3.8
million. This award is recorded as “Other receivable – escrow” on the June 30,
2009 balance sheet. The Company received these funds on July 1,
2009.
 
 NOTE 12 3⁄4
EMPLOYMENT
AGREEMENTS
 
 On May 5,
2009, the Company and Dr. Edward H. Bersoff, the Company’s Chairman, President
and Chief Executive Officer, amended Dr. Bersoff’s employment agreement,
extending his employment term as Chief Executive Officer through December 31,
2011. The Company originally entered into an employment agreement with Dr.
Bersoff on March 19, 2007, who had been serving in that capacity since January
16, 2007.
 
 NOTE 13 3⁄4
LONG TERM
DEBT
 
 Long term
debt consisted of the following:
 
 June 30,
                        2009
                      
                      December 31,
                        2008Bank
      Financing
                      
                      $
                      24,759,817
                      
                      
                      $
                      32,555,058Notes
      payable
                      
                      
                      3,393,547
                      
                      
                      
                      4,520,833Total
      debt
                      
                      $
                      28,153,364
                      
                      
                      $
                      37,075,891Less
      current portion
                      
                      
                      (27,343,150
                      )
                      
                      
                      (2,583,333
                      )Long-term
      debt
                      
                      $
                      810,214
                      
                      
                      $
                      34,492,558
  At June
30, 2009, the aggregate maturities of long-term debt were as
follows:
 
 Twelve-months Ending June
    30,2010
                      
                      $
                      27,343,1502011
                      
                      
                      810,214Total
      long-term debt
                      
                      $
                      28,153,364
  Bank
Financing
  The
Company has a credit facility with Bank of America, N.A. (the “Facility”) which
provides for borrowing up to $50 million. The Facility is a three-year, secured
facility that permits continuously renewable borrowings of up to $50.0 million,
with an expiration date of June 4, 2010. The Company pays a fee in the amount of
..20% to .375% on the unused portion of the Facility, based on its consolidated
leverage ratio, as defined in the credit agreement documentation. Any
outstanding balances under the Facility are due in full June 4,
2010.
  Borrowings
under the Facility bear interest at rates based on 30 day LIBOR plus applicable
margins based on the leverage ratio as determined quarterly. As of June 30,
2009, the effective interest rate, excluding the effect of amortization of debt
financing costs, for the outstanding borrowings under the Facility was
3.82%.
  The
Company entered into a forward interest rate swap agreement in November 2007
under which it exchanged floating-rate interest payments for fixed-rate interest
payments. The agreement has a notional amount of $35.0 million and provides for
swap payments through December 1, 2010 with such swaps being settled on a
monthly basis. The fixed interest rate provided by the swap agreement is
4.47%.
  As of
June 30, 2009, the Company’s aggregate outstanding debt balance was $24.8
million. As discussed in Note 4, the Company accounts for the interest rate swap
agreement as a cash flow hedge with the change in the fair value of the
effective portion of the swap being recorded in other comprehensive income
(loss) and any ineffectiveness is recorded to earnings.  It continues
to be probable that the Company will be exposed to rate variance associated with
future LIBOR based or fixed rate debt which has embedded LIBOR based risk and
the Company maintains its hedge with a counterparty that has the financial
strength to honor the hedge obligation, Bank of America.
  12
  Item 2.Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
 
 FORWARD-LOOKING
STATEMENTS
 
 Some of
the statements in this Quarterly Report on Form 10-Q constitute
forward-looking statements. These statements involve known and unknown risks,
uncertainties, and other factors that may cause our actual results, levels of
activity, performance or achievements to be materially different from any future
results, levels of activity, performance or achievements expressed or implied by
such forward-looking statements. In some cases, you can identify these
statements by forward-looking words such as “anticipate,” “believe,” “could,”
“estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “should,” “will,”
and “would” or similar words. You should read statements that contain these
words carefully because they discuss our future expectations, contain
projections of our future results of operations or of our financial position, or
state other forward-looking information. The factors described in our filings
with the SEC, as well as any cautionary language in this Quarterly Report on
Form 10-Q, provide examples of risks, uncertainties and events that may
cause our actual results to differ materially from the expectations we describe
in our forward-looking statements, including but not limited to:
 
 ·
              risks related to the government
      contracting industry, including possible changes in government spending
      priorities;
 
 ·
              risks related to our business,
      including our dependence on contracts with U.S. Federal Government
      agencies and departments, continued good relations, and being successful
      in competitive bidding, with those
  customers;
 
 ·
              uncertainties as to whether
      revenues corresponding to our contract backlog will actually be
      received;
 
 ·
              risks related to the
      implementation of our strategic plan, including the ability to identify,
      finance and complete acquisitions and the integration and performance of
      acquired businesses; and
 
 ·
              other risks and uncertainties
      disclosed in our filings with the Securities and Exchange
      Commission.
 
 Additional
factors that may affect our results are discussed in our Annual Report on
Form 10-K for the year ended December 31, 2008 under “Item 1A. Risk
Factors.” Although we believe the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance, or achievements. You should not place undue reliance on
these forward-looking statements, which apply only as of the date of this
Quarterly Report on Form 10-Q. We undertake no obligation to update these
forward-looking statements, even if our situation changes in the
future.
  The terms
“we” and “our” as used throughout this Quarterly Report on Form 10-Q refer
to ATS Corporation and Advanced Technology Systems, Inc., the wholly-owned
subsidiary of ATSC, unless otherwise indicated.
 
 Overview
 
 ATS
Corporation was organized as a “blank check” company under the laws of the State
of Delaware on April 12, 2005 and was formed for the purpose of acquiring,
through a merger, capital stock exchange, asset acquisition, stock purchase or
other similar business combination, an operating business in the federal
services and defense industries. ATSC acquired four companies in 2007. Their
results are included in the results of operations for 2007 from the dates of
acquisition. Calendar year 2008 was the first full year that ATSC was an
operating company with the acquisitions fully integrated into its
operations.
 
 ATSC
(www.atsc.com) is an information technology services firm serving both
government and commercial organizations, specializing in software and systems
development, systems integration, information technology infrastructure and
outsourcing, information sharing and consulting services.
 
 Our
diverse customer base consists primarily of U.S. government agencies. For the
six months ended June 30, 2009, we generated approximately 48% of our revenue
from federal civilian agencies, 34% from defense and homeland security agencies,
and 18% from commercial customers, including government-sponsored enterprises.
Our largest clients in the six months ended June 30, 2009 were the U.S.
Department of Housing and Urban Development (“HUD”), the Undersecretary of
Defense, Fannie Mae, and the Pension Benefit Guarantee Corporation, representing
approximately 19%, 9%, 8% and 7%, respectively, of total
revenue.
  13
  We derive
substantially all of our revenues from fees for consulting services. We generate
these fees from contracts with various payment arrangements, including time and
materials contracts and fixed-price contracts. During the six months ended June
30, 2009, revenue from time and materials and fixed-price contracts were
approximately 70% and 30% respectively, of total revenue. We typically issue
monthly invoices to our clients for services rendered. We recognize revenue on
time and materials contracts based on actual hours delivered at the contracted
billable hourly rate plus the cost of materials incurred. We recognize revenue
on fixed-price contracts using the percentage-of-completion method based on
costs we incurred in relation to total estimated cost. However, if the contract
is primarily for services, we recognize revenue on a straight-line basis over
the term of the contract.
 
 On
occasion, we enter into contracts that include the delivery of a combination of
two or more of our service offerings. Typically, such multiple-element
arrangements incorporate the design, development, or modification of systems and
an ongoing obligation to manage, staff, maintain, host, or otherwise run
solutions and systems provided to the client. Such contracts are divided into
separate units of accounting, and the total fee arrangement is allocated to each
unit based on its relative fair value. In accordance with our revenue
recognition policy, revenue is recognized separately for each element. If
evidence of the fair value of each element does not exist, all revenue must be
deferred until such evidence exists, or all elements have been delivered, or
evidence of fair value exists for the undelivered elements.
 
 The fees
under certain government contracts may be increased or decreased in accordance
with cost or performance incentive provisions that measure actual performance
against targets or other criteria. Such incentive fee awards or penalties are
included in revenue at the time the amounts can be reasonably determined.
Provisions for anticipated contract losses are recognized at the time they
become known.
 
 In the
six months ended June 30, 2009, we derived approximately 78% of our revenue from
contracts for which we were the prime contractor and 22% of our revenue as
subcontractors to other prime contractors, who contract directly with the
end-client and subcontract with us.
 
 Our most
significant expense is direct cost, which consists primarily of project
personnel salaries and benefits, and direct expenses incurred to complete
projects. The number of consulting personnel assigned to a project will vary
according to the size, complexity, duration, and demands of the project. As of
June 30, 2009, we had 525 personnel who worked on our contracts.
 
 General
and administrative expenses consist primarily of costs associated with our
executive management, finance and administrative groups, human resources, sales
and marketing personnel, and costs associated with marketing and bidding on
future projects, unassigned consulting personnel, personnel training, occupancy
costs, depreciation and amortization, travel and all other corporate
costs.
 
 Goodwill
Valuation
  Goodwill
represents the excess of purchase price over the fair value of net assets
acquired because of various business acquisitions. In accordance with SFAS No.
142, “Goodwill and Other Intangible Assets,” goodwill must be recorded at the
reporting unit level. Reporting units are defined as one level below an
operating segment. We have identified one reporting unit and one operating
segment. SFAS No. 142 prohibits the amortization of goodwill, but requires that
it be tested for impairment at least annually (at any time during the year, but
at the same time each year), or more frequently if events or circumstances
change, such as adverse changes in the business climate, that would more likely
than not reduce the reporting unit’s fair value below its carrying
amount.
  The
Company evaluates goodwill for impairment annually in the third fiscal quarter
or more frequently depending on specific events or when evidence of potential
impairment exists.  The annual impairment test is based on several
factors requiring judgment. Principally, a significant decrease in expected cash
flows or changes in general market conditions may indicate potential impairment
of recorded goodwill. Management has concluded there were no triggering events
that would indicate an impairment during the quarter ended June 30, 2009. The
Company will continue to monitor the recoverability of the carrying value of its
goodwill and other long-lived assets.
 
 As of
June 30, 2009 and December 31, 2008, goodwill was $55.4 million and 59.1
million, respectively. As of June 30, 2009 and December 31, 2008, our net basis
in intangible assets was $7.2 million and $8.3 million, respectively. The change
in the goodwill is the result of the award of $3.8 million to ATSI relating to
claims against the former owners for a net working capital deficit from what was
required to be delivered by the sellers and amounts related to accounting method
tax escrows.
  14
  Contract
Backlog
 
 We define
backlog as the future revenue we expect to receive from our existing contracts
and other current engagements. We generally include in backlog the estimated
revenue represented by contract options that have been priced, though not
exercised. We do not include any estimate of revenue relating to potential
future delivery orders that may be awarded under our General Services
Administration Multiple Award Schedule contracts, other Indefinite
Delivery/Indefinite Quantity (“IDIQ”) contracts, or other contract vehicles that
are also held by a large number of firms, an order under which potential future
delivery orders or task orders may be issued by any of a large number of
different agencies and are likely to be subject to a competitive bidding
process. Our backlog as of June 30, 2009, was approximately $156.1 million, of
which $49.5 million was funded.
 
 Recent
Events
 
 The
Company has evaluated its operations through August 7, 2009, which is the date
that the interim financial statements for the six-month period ended June 30,
2009 are to be issued and concluded that there have been no recognizable
subsequent events.
  Results
of Operations (unaudited)
 
 Results
of operations for the three and six-month periods ended June 30, 2009 compared
with the three and six-month periods ended June 30, 2008 are presented
below.
 
 The
following table sets forth certain financial data as dollars and as a percentage
of revenue.
  For the Three
                    
                    
                    %
                    
                    
                    For the Three
                    
                    
                    %
                    
                    
                    For the Six
                    
                    
                    %
                    
                    
                    For the Six
                    
                    
                    %Months Ended
                    
                    
                    
                    
                    
                    Months Ended
                    
                    
                    
                    
                    
                    Months Ended
                    
                    
                    
                    
                    
                    Months EndedJune
      30,
                    
                    
                    
                    
                    
                    June
      30,
                    
                    
                    
                    
                    
                    June
      30,
                    
                    
                    
                    
                    
                    June
      30,2009
                    
                    
                    
                    
                    
                    2008
                    
                    
                    
                    
                    
                    2009
                    
                    
                    
                    
                    
                    2008Revenue
                    
                    $
                    30,266,809
                    
                    
                    
                    
                    
                    $
                    33,788,772
                    
                    
                    
                    
                    
                    $
                    57,423,323
                    
                    
                    
                    
                    
                    $
                    68,662,297Operating
      costs and expensesDirect
      costs
                    
                    
                    20,451,932
                    
                    
                    
                    67.6
                    %
                    
                    
                    22,964,775
                    
                    
                    
                    68.0
                    %
                    
                    
                    38,647,669
                    
                    
                    
                    67.3
                    %
                    
                    
                    45,233,416
                    
                    
                    
                    65.9
                    %Selling,
      general and administrative expenses
                    
                    
                    6,326,616
                    
                    
                    
                    20.9
                    %
                    
                    
                    7,764,830
                    
                    
                    
                    23.0
                    %
                    
                    
                    12,819,131
                    
                    
                    
                    22.3
                    %
                    
                    
                    17,214,511
                    
                    
                    
                    25.1
                    %Depreciation
      and amortization
                    
                    
                    767,616
                    
                    
                    
                    2.5
                    %
                    
                    
                    2,034,302
                    
                    
                    
                    6.0
                    %
                    
                    
                    1,551,743
                    
                    
                    
                    2.7
                    %
                    
                    
                    4,076,910
                    
                    
                    
                    5.9
                    %Total
      operating costs and expenses
                    
                    
                    27,546,164
                    
                    
                    
                    91.0
                    %
                    
                    
                    32,763,907
                    
                    
                    
                    97.0
                    %
                    
                    
                    53,018,543
                    
                    
                    
                    92.3
                    %
                    
                    
                    66,524,837
                    
                    
                    
                    96.9
                    %Operating
      income
                    
                    
                    2,720,645
                    
                    
                    
                    9.0
                    %
                    
                    
                    1,024,865
                    
                    
                    
                    3.0
                    %
                    
                    
                    4,404,780
                    
                    
                    
                    7.7
                    %
                    
                    
                    2,137,460
                    
                    
                    
                    3.1
                    %Other
      (expense) incomeInterest
      (expense) income, net
                    
                    
                    (792,604
                    )
                    
                    
                    (2.6
                    )%
                    
                    
                    (944,729
                    )
                    
                    
                    (2.8
                    )%
                    
                    
                    (1,566,684
                    )
                    
                    
                    (2.7
                    )%
                    
                    
                    (1,749,136
                    )
                    
                    
                    (2.5
                    )%Other
      (expense) income
                    
                    
                    —
                    
                    
                    
                    0.0
                    %
                    
                    
                    (4,705
                    )
                    
                    
                    (0.0
                    )%
                    
                    
                    —
                    
                    
                    
                    0.0
                    %
                    
                    
                    66,172
                    
                    
                    
                    0.1
                    %Income
      (loss) before income taxes
                    
                    
                    1,928,041
                    
                    
                    
                    6.4
                    %
                    
                    
                    75,431
                    
                    
                    
                    0.2
                    %
                    
                    
                    2,838,096
                    
                    
                    
                    4.9
                    %
                    
                    
                    454,496
                    
                    
                    
                    0.7
                    %Income
      tax expense (benefit)
                    
                    
                    756,253
                    
                    
                    
                    2.5
                    %
                    
                    
                    8,579
                    
                    
                    
                    0.0
                    %
                    
                    
                    1,240,719
                    
                    
                    
                    2.2
                    %
                    
                    
                    112,615
                    
                    
                    
                    0.2
                    %Net
      Income (loss)
                    
                    $
                    1,171,788
                    
                    
                    
                    3.9
                    %
                    
                    $
                    66,852
                    
                    
                    
                    0.2
                    %
                    
                    $
                    1,597,377
                    
                    
                    
                    2.8
                    %
                    
                    $
                    341,881
                    
                    
                    
                    0.4
                    %Weighted
      average number of shares outstanding—basic
                    
                    
                    22,660,767
                    
                    
                    
                    
                    
                    
                    
                    20,410,516
                    
                    
                    
                    
                    
                    
                    
                    22,601,811
                    
                    
                    
                    
                    
                    
                    
                    19,706,731—diluted
                    
                    
                    22,660,767
                    
                    
                    
                    
                    
                    
                    
                    20,465,439
                    
                    
                    
                    
                    
                    
                    
                    22,601,811
                    
                    
                    
                    
                    
                    
                    
                    19,734,193Net
      income (loss) per share—basic
                    
                    $
                    0.05
                    
                    
                    
                    
                    
                    
                    $
                    0.00
                    
                    
                    
                    
                    
                    
                    $
                    0.07
                    
                    
                    
                    
                    
                    
                    $
                    0.02—diluted
                    
                    $
                    0.05
                    
                    
                    
                    
                    
                    
                    $
                    0.00
                    
                    
                    
                    
                    
                    
                    $
                    0.07
                    
                    
                    
                    
                    
                    
                    $
                    0.02
  15
  Comparison
of the three months ended June 30, 2009 to the three months ended June 30,
2008.
 
 Revenue -
Revenue decreased by $3.5 million, or 10.4%, to $30.3 million for the three
months ended June 30, 2009 compared to the three months ended June 30, 2008.
Revenue from commercial contracts decreased by $1.2 million, or 16.8%, to $6.0
million. This decline resulted from the down-turn in the business climate that
began in the fourth quarter of 2008 and continued into 2009.  Although
Fannie Mae showed significant decreases from the second quarter 2008, these are
expected to be temporary reductions. Revenue from civilian and defense customers
decreased $2.6 million to $24.7 million, or 9.7% of this amount. The most
significant reduction was with the US Coast Guard, which decreased revenue by
$2.2 million as a result of a large contract being converted to a small-business
set-aside.
 
 Direct costs
- Direct costs were 67.6% and 68.0% of revenue for the three-month
periods ended June 30, 2009 and 2008 respectively, a decrease of 0.4%. Direct
costs are comprised of direct labor, fringe on this labor, subcontract labor
costs and material and other direct costs (“ODCs”). Material and ODCs are
incurred in response to specific client tasks and may vary from period to
period. The single largest component of direct costs, direct labor, was $9.8
million and $11.0 million for the three-month periods ended June 30, 2009 and
2008, respectively, which corresponds to the reduction in revenue. Overall
margins for the second quarter 2009 remained at 32.4%.
 
 Selling, general
and administrative (“SG&A”) expenses – The components of SG&A are
marketing, bid and proposal costs, indirect labor and the associated fringe
benefits, facilities costs and other discretionary expenses. As a percentage of
revenue, SG&A expenses were 20.9% and 23.0% for the three-month periods
ended June 30, 2009 and 2008, respectively. Reduced spending in the second
quarter of 2009 is attributable to cost reduction efforts that began in the
second half of 2008 and continue into this calendar year.  As a result
of these efforts, SG&A expenses decreased $1.4 million to $6.3 million, or
18.5%.  Reduction in the second quarter 2009 for building rent and
utilities expense associated with the relocation of the Company’s headquarters
was the primary factor impacting this decrease.
 
 Depreciation and
amortization - Depreciation and amortization expense decreased $1.4
million to $0.8 million or 2.5% of revenue for the three months ended June 30,
2009 compared to 6.0% for the three-month period ended June 30, 2008. This
decrease is primarily related to a reduction of amortization resulting from the
intangible asset impairment valuation taken during September 2008.
 
 Interest, net
- The net interest expense decreased to $0.8 million for the three-month
period ended June 30, 2009, compared to $0.9 million the three-month period
ended June 30, 2008, primarily due to significant decreases to our long-term
debt balance made possible by our positive operating cash flows. However, our
interest expense decreased to a lesser degree due to the higher interest rates
on the LIBOR monthly floating rate plus applicable rates based on our
consolidated leverage ratio and also $0.1 million charged to earnings for swap
ineffectiveness.
 
 Income
taxes - The Company reported an income tax expense of $0.8 million and
$8.6 thousand for the three-month periods ended June 30, 2009 and 2008,
respectively. The effective tax rates were 39.2% and 11.4% for the three-month
periods ended June 30, 2009 and 2008, respectively. The effective rate for the
three-month period ended June 30, 2008 was affected by non-recurring variances
in book-tax differences relative to pre-tax book income which decreased the
effective rate and which were not present during the three-month period ended
June 30, 2009.
 
 Comparison
of the six months ended June 30, 2009 to the six months ended June 30,
2008.
 
 Revenue -
Revenue decreased by $11.2 million, or 16.4%, to $57.4 million for the six
months ended June 30, 2009. Revenue from commercial contracts decreased by $5.1
million to $10.5 million, or 33.7%. This decline resulted from the down-turn in
the business climate that began in the fourth quarter of 2008 and continued into
the second quarter of 2009.  Fannie Mae showed significant decreases
in the six months of 2009, although these are expected to be temporary
reductions. Revenue from civilian and defense customers decreased $6.1 million
to $46.9 million, or 11.5%. Of this amount, the most significant reduction was
with the US Coast Guard, which decreased revenue by $4.1 million as a result of
a large contract being converted to a small-business set-aside.
 
 Direct costs
- Direct costs were 67.3% and 65.9% of revenue for the six-month periods
ended June 30, 2009 and 2008 respectively, an increase of 1.8%. Direct costs are
comprised of direct labor, fringe on this labor, subcontract labor costs and
material and other direct costs (“ODCs”). Material and ODCs are incurred in
response to specific client tasks and may vary from period to period. The single
largest component of direct costs, direct labor, was $19.2 million and $22.7
million for the six-month periods ended June 30, 2009 and 2008, respectively.
Overall margins for the first two quarters of 2009 decreased 1.4% to 32.7%. This
is primarily caused by a loss provision during the six-month period ended June
30, 2009 on a fixed price contract and reduced margins on our commercial
contracts.
  16
  “SG&A”
expenses – The components of SG&A are marketing, bid and proposal
costs, indirect labor and the associated fringe benefits, facilities costs and
other discretionary expenses. As a percentage of revenue, SG&A expenses were
22.3% and 25.1% for the six-month periods ended June 30, 2009 and 2008,
respectively. Reduced spending in the first half of 2009 is attributable to cost
reduction efforts that began in the second half of 2008 and continue into this
calendar year.  As a result of these efforts, SG&A expenses
decreased $4.4 million to $12.8 million, or 25.5%.  The following
major cost categories show the following reductions in the first half of 2009 as
compared with first half of 2008: salaries and related fringe benefits of $2.7
million and building rent and utilities’ expenses of $1.3 million due to the
relocation of the Company’s headquarters.
 
 Depreciation and
amortization - Depreciation and amortization expense decreased $2.5
million to $1.6 million or 2.7% of revenue for the six months ended June 30,
2009 compared to 5.9% for the six-month period ended June 30, 2008. This
decrease is primarily related to a reduction of amortization resulting from the
intangible asset impairment valuation taken during September 2008.
 
 Interest, net
- The net interest expense decreased to $1.6 million for the six-month
period ended June 30, 2009 compared to $1.7 million for the six-month period
ended June 30, 2008, primarily due to significant decreases to our long-term
debt balance made possible by our positive operating cash flows. Average bank
debt for the six months ended June 30, 2009 was $27.8 million, a decrease of 34%
or $14.4 million from an average balance of $42.2 million for the six months
ended June 30, 2008. However, our interest expense decreased to a lesser degree
due to the higher interest rates on the LIBOR monthly floating rate plus
applicable rate based on our consolidated leverage ratio and also $0.2 million
charged to earnings for swap ineffectiveness.
 
 Income
taxes - The Company reported an income tax expense of $1.2 million and
$0.1 million for the six-month periods ended June 30, 2009 and 2008,
respectively. The effective tax rates were 43.7% and 24.8% for the six-month
periods ended June 30, 2009 and 2008, respectively. The effective rate for the
six-month period ended June 30, 2008 was affected by non-recurring variances in
book-tax differences relative to pre-tax book income which decreased the
effective rate and which were not present during the six-month period ended June
30, 2009.
 
 Financial
Condition, Liquidity and Capital Resources
 
 Financial Condition. Total
assets decreased to $100.0 million as of June 30, 2009 from $106.4 million as of
December 31, 2008. This decrease was primarily driven by a $1.0 million
decrease in our accounts receivable related to increased collection efforts and
the resulting decrease in days sales outstanding, as well as a decrease in
overall revenues for the quarter. Additionally, goodwill and net intangible
assets decreased by $4.9 million.
 
 Our total
liabilities decreased $8.8 million to $51.7 million as of June 30, 2009 from
$60.5 million as of December 31, 2008. The decrease in total liabilities
was primarily attributable to the decrease in notes payable and the revolving
credit facility of $8.9 million due to favorable cash collections.
 
 Liquidity and Capital
Resources.  Our primary liquidity needs are to fund the debt,
finance the costs of operations, acquire capital assets and to make selective
strategic acquisitions. We expect to meet our short-term requirements through
funds generated from operations and from our $50 million line of credit
facility. As of June 30, 2009, we had an outstanding balance of $24.8 million on
our credit facility. As noted above, the Company has elected to curtail this
outstanding debt given our positive cash flows from operations. The credit
facility is considered adequate to meet the operations liquidity and capital
requirements. As of June 30, 2009, the Company could borrow an additional $2.2
million while remaining within our loan covenant agreements.
 
 Net cash
generated by operating activities was $8.6 million for the six months ended June
30, 2009, compared to cash used in operating activities of $3.5 million for the
same period in 2008. Cash generated by operating activities was primarily driven
by ongoing operations, specifically collecting receivables, which were utilized
to pay down the balance on our line of credit facility as discussed above, as
well as income taxes payable and accrued expenses. Depreciation and amortization
were also lower due to the effect of the asset impairment recorded in September
of 2008.
 
 Net cash
used in investing activities remained less than $0.1 million for the six months
ended June 30, 2009, just as it did for the same period in 2008.
 
 Net cash
used in financing activities was $8.8 million for the six months ended June 30,
2009, compared to cash provided by financing activities of $1.7 million in the
same period in 2008. The cash was primarily used to pay down the credit facility
and the notes payable from acquisitions in 2007.
  17





We expect
to retain future earnings, if any, for use in the operation and expansion of our
business and do not anticipate paying any cash dividends in the foreseeable
future.





ATSC has
a credit facility which is a three-year, secured facility that permits
continuously renewable borrowings of up to $50.0 million, with an expiration
date of June 4, 2010 (the “Agreement”). The interest rate is based on LIBOR
plus the applicable rate ranging from 200 to 350 basis points depending on the
Company’s consolidated leverage ratio. The Company pays a fee in the amount of
..20% to .375% on the unused portion of the facility, based on its consolidated
leverage ratio, as defined in the Agreement. Any outstanding balances under the
facility are due on the expiration date. The Agreement places certain
restrictions on the Company’s ability to make acquisitions. It also requires the
Company to reduce the principal amount on its loan outstanding by between 50% to
100% of the net cash proceeds from the sale or issuance of equity interests.
 At June 30, 2009, the Company was in compliance with its covenant
agreements. The Company is exploring its renewal alternatives with regard to the
credit facility.





Off-Balance
Sheet Arrangements





For the
six months ended June 30, 2009, we did not have any off-balance sheet
arrangements.





Contractual
Obligations





The
following table summarizes our contractual obligations as of June 30, 2009 that
require us to make future cash payments.




Less than
                            One Year
                          
                          
                          One to Three
                            Years
                          
                          
                          Three to Five
                            Years
                          
                          
                          More than
                            FiveYears
                          
                          
                          Total(in thousands)Long-Term Debt Obligations
                          
                          $
                          27,343
                          
                          
                          $
                          810
                          
                          
                          $
                          —
                          
                          
                          $
                          —
                          
                          
                          $
                          28,153Capital Leases, including
      interest
                          
                          
                          45
                          
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          45Operating Leases
                          
                          
                          2,240
                          
                          
                          
                          3,660
                          
                          
                          
                          3,578
                          
                          
                          
                          7,528
                          
                          
                          
                          17,006Total
                          
                          $
                          29,628
                          
                          
                          $
                          4,470
                          
                          
                          $
                          3,578
                          
                          
                          $
                          7,528
                          
                          
                          $
                          45,204




Recent
Accounting Pronouncements





See Note
2 of the June 30, 2009 Interim Financial Statements.





Standards
Issued But Not Yet Effective





Other new
pronouncements issued but not yet effective until after June 30, 2009 are not
expected to have a significant effect on the Company’s consolidated financial
position or results of operations.





Item 3. Quantitative and Qualitative
Disclosures about Market Risk.





We are
exposed to certain financial market risks, the most predominant being
fluctuations in interest rates for a portion of our borrowings under our credit
facility. As of June 30, 2009, we had an outstanding balance of $24.8 million
under our variable interest rate line of credit. In November 2007, we
hedged the interest rate risk on such debt by executing an interest rate swap as
discussed in Note 4 of the notes to consolidated financial
statements.





Item 4. Controls and
Procedures.





Our
management performed an assessment, under the supervision and with the
participation of our Chief Executive Officer (principal executive officer) and
our Chief Financial Officer (principal financial officer), of the effectiveness
of the design and operation of our disclosure controls and procedures (as
defined in Rule 13a-15(e) or 15d-15(e) of the Securities Exchange
Act of 1934, as amended) as of June 30, 2009 and have concluded that these
controls and procedures are effective to ensure that information required to be
disclosed by the Company is recorded, processed, summarized, and reported within
the time periods specified in the Securities and Exchange Commission’s (the
“SEC”) rules and forms. The forms of certification are required in
accordance with Section 302 of the Sarbanes - Oxley Act of
2002.





18


Disclosure
controls and procedures are designed with the objective of ensuring that
information required to be disclosed in our reports filed or submitted under the
Securities Exchange Act of 1934, such as this Quarterly Report on
Form 10-Q, is recorded, processed, summarized and reported within the time
periods specified in the SEC’s rules and forms. Disclosure controls and
procedures are also designed with the objective of ensuring that such
information is accumulated and communicated to our management, including our
Chief Executive Officer and Chief Financial Officer, as appropriate, to allow
timely decisions regarding required disclosure.





Changes
in Internal Control Over Financial Reporting





During
the three months ended June 30, 2009, no change occurred in the Company’s
internal control over financial reporting that materially affected, or is likely
to materially affect, the Company’s internal control over financial
reporting.





PART II — OTHER
INFORMATION





Item 1. Legal
Proceedings.




See Note
11 of the June 30, 2009 Interim Financial Statements included
herein.





Item 1A. Risk
Factors.




See Part
I, Item 1A, “Risk Factors,” of the Company’s 2008 Form 10-K for a detailed
discussion of the risk factors affecting the Company.





Item
2. Recent Sales of Unregistered Securities.





There
have been no changes to the “Recent Sales of Unregistered Securities” disclosed
in Part II, Item 2 of our Form 10-Q for the quarter ended March 31, 2009, other
than a total of 73,474 shares of unregistered stock valued at approximately
$114,000 issued to four directors of the Company on May 7, 2009 and June 1,
2009.  The issuances of these shares are exempt under Section 4(2) of
the Securities Act of 1933, as amended.





Purchases
of Equity Securities by Issuer





The
Company has not repurchased any of its securities in the quarter ended June 30,
2009.





Item 3.  Defaults upon Senior
Securities.





Not
applicable.


19


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





The
annual meeting of shareholders was held on May 5, 2009.  The following
matters were presented to the shareholders and the results of the votes were as
follows:





To
      elect Edward H. Bersoff as a Class One Director for a three-year
      term.Votes
      for
                    
                    
                    20,365,138Votes
      withheld
                    
                    
                    4,375





To
      elect Ginger Lew1 as
      a Class One Director for a three-year term.Votes
      for
                  
                  
                  20,369,513Votes
      withheld
                  
                  
                  —





To
      elect Jack Tomarchio as a Class One Director for a three-year
      term.Votes
      for
                  
                  
                  20,369,513Votes
      withheld
                  
                  
                  —




To
      approve an amendment to the ATS Corporation 2006 Omnibus Incentive
      Compensation Plan (“the Omnibus Plan”) to increase the number of shares
      authorized for issuance under the Omnibus Plan from 1,500,000 to
      2,000,000.Votes
      for
                  
                  
                  13,580,852Votes
      against
                  
                  
                  4,059Abstentions
                  
                  
                  —Not
      Voted
                  
                  
                  6,784,602


To
      ratify the appointment of Grant Thornton, LLP as the Company’s independent
      registered public accounting firm for the fiscal year
  2009.Votes
      for
                        
                        
                        20,369,513Votes
      against
                        
                        
                        —Abstentions
                        
                        
                        —





Note 1:
Effective May 31, 2009, Ms. Lew resigned from the Company’s Board of Directors
due to her assuming a position in the Obama Administration. She has been
replaced by Mr. Kevin Flannery.




Item 5.  Other
Information.





None.


20


Item 6. 
Exhibits.





Exhibit
                Number
              
              Description10.1
              
              Amended
      and Restated Employment Agreement by and Between Edward H. Bersoff and ATS
      Corporation31.1
              
              Certification
      of Principal Executive Officer pursuant to
      Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934,
      as amended31.2
              
              Certification
      of Principal Financial Officer pursuant to
      Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934,
      as amended32.1
              
              Certification
      of Principal Executive Officer pursuant to Section 906 of the
      Sarbanes-Oxley Act of 200232.2
              
              Certification
      of Principal Financial Officer pursuant to Section 906 of the
      Sarbanes-Oxley Act of
2002


21





SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.





ATS
      CorporationBy:
                    /s/
      Edward H. BersoffChairman
      of the Board, President andChief
      Executive OfficerBy:
                    /s/
      Pamela A. LittleExecutive
      Vice President and Chief Financial OfficerDate:
      August 7, 2009


22