**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

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**FORM 10-Q/A**

**AmendmentNo. 2**

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| **x**                                     | ** ** | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**  |
|-------------------------------------------|------------|-----------------------------------------------------------------------------------------------|
| ** **                                |
| **FOR  THE QUARTER ENDED June 30, 2006.** |
| ** **                                | ** ** | ** **                                                                                    |
| **o**                                     | ** ** | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

 

**COMMISSION FILE NUMBER: 0-51552**

 

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**FEDERALSERVICES ACQUISITION CORPORATION**

(Exactname of registrant as specified in its charter)

 

| **Delaware**                                                    | ** ** | **11-3747850**                        |
|-----------------------------------------------------------------|------------|---------------------------------------|
| (State  or other jurisdiction ofincorporation  or organization) |       | (I.R.S.  EmployerIdentification  No.) |

 

**900 Third Avenue, 33rdFloorNew York, New York, 10022-4775**

(Addressof principal executive office)

 

**(646) 403-9765**

(Registrant’stelephone number, including area code)

 

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Indicate by check markwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months and (2) has been subject to such filing requirements for the past 90days.    Yes  x    No  o

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer or anon-accelerated filer. See definition of “accelerated filer and largeaccelerated filer” in Rule 12b-2 of the Exchange Act.    Large Accelerated Filer  o    Accelerated Filer  o    Non-acceleratedFiler  x

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act). Yes  x    No  o

 

The number of shares ofthe issuer’s Common Stock, $0.0001 par value, outstanding as of July 31, 2006was 26,250,000.

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##### **FEDERALSERVICES ACQUISITION CORPORATION**

##### ** **

##### **Tableof Contents**

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Explanatory Note:

 

ThisQuarterly Report on Form 10-Q/A is being filed as Amendment No. 2 to ourQuarterly Report on Form 10-Q, which was originally filed with the Securitiesand Exchange Commission on August 10, 2006 and subsequently amended onSeptember 29, 2006. Amendment No. 1 was filed to restate our financialstatements for the quarter ended June 30, 2006 to reflect non-operatinggains and losses related to the classification and accounting for the warrantsto purchase common stock associated with the units sold in our initial publicoffering.

 

ThisAmendment No. 2 does not amend the financial data as reflected in Amendment No.1, but does conform certain disclosures in Notes C[2] and J to the financialstatements with disclosures that will be reflected in the definitive proxystatement for our special meeting of stockholders at which our proposedacquisition of Advanced Technology Systems, Inc., among other proposals, willbe voted upon.

 

ThisAmendment No. 2 amends only certain information in Part I – Item 1, FinancialStatements, as a result of the amendments described above.

 

Inaddition, we are also including currently dated Sarbanes-Oxley Act Section 302and Section 906 certifications of the Chief Executive Officer and ChiefFinancial Officer that are attached to this Form 10-Q/A as Exhibits 31.1, 31.2,and 32.1.

 

For the convenience of thereader, this Form 10-Q/A sets forth the entire Form 10-Q which was prepared andrelates to the Company as of June 30, 2006. However, this Form 10-Q/A onlyamends the Item described above to conform the disclosures referred to above tothose to be included in our definitive proxy statement. Accordingly, except forthe foregoing amended information and the amendments reflected in Amendment No.1, this Form 10-Q/A continues to speak as of August 10, 2006 (the originalfiling date of the June 30, 2006 Form 10-Q), and does not reflect eventsoccurring after the filing of our June 30, 2006 Form 10-Q and does not modifyor update those disclosures affected by subsequent events. Forward-lookingstatements made, and risk factors described, in the June 30, 2006 Form10-Q have not been revised to reflect events, results or developments that havebecome known to us after the date of the original filing (other than therestatements included in Amendment No. 1), and such forward-looking statementsshould be read in their historical context. Unless otherwise stated, theinformation in this Form 10-Q/A is unchanged and reflects the disclosures madeat the time of the original filing as previously amended.

 

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**TABLE OF CONTENTS**

 
| **PART I  – FINANCIAL INFORMATION** | ** **                                                                                                                                                                                                                                                                                         | ** ** |
|------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
|                                     |                                                                                                                                                                                                                                                                                               |       |   |
| **Item  1.**                             | **Financial  Statements**                                                                                                                                                                                                                                                                          |       |   |
|                                     | Condensed  Balance Sheets as of June 30, 2006 (unaudited) and as of December 31, 2005                                                                                                                                                                                                              |       |   |
|                                     | Condensed  Statements of Operations (unaudited) for the three months ended June 30,  2006, for the six months ended June 30, 2006, for the period from April 12,  2005 (date of inception) through June 30, 2005 and for the period from April  12, 2005 (date of inception) through June 30, 2006 |       |   |
|                                     | Condensed  Statements of Changes in Stockholders’ Equity for the period from April 12,  2005 (date of inception) through December 31, 2005 and (unaudited) for the  six months ended June 30, 2006                                                                                            |       |   |
|                                     | Condensed  Statements of Cash Flows (unaudited) for the six months ended June 30, 2006,  for the period from April 12, 2005 (date of inception) through June 30, 2005  and for the period from April 12, 2005 (date of inception) through June 30, 2006                                            |       |   |
|                                     | Notes to Unaudited Financial  Statements                                                                                                                                                                                                                                                           |       |   |
|                                     |                                                                                                                                                                                                                                                                                               |       |   |
| **Item 2.**                         | **Management’s  Discussion and Analysis of Financial Condition and Results of Operation**                                                                                                                                                                                                     |       |   |
| **Item 3.**                         | **Quantitative  and Qualitative Disclosures about Market Risk**                                                                                                                                                                                                                                    |       |   |
| **Item 4.**                         | **Controls and  Procedures**                                                                                                                                                                                                                                                                       |       |   |
|                                     |                                                                                                                                                                                                                                                                                               |       |   |
| **PART  II – OTHER INFORMATION**    | ** **                                                                                                                                                                                                                                                                                         | ** ** |
|                                     |                                                                                                                                                                                                                                                                                               |       |   |
| **Item 1.**                         | **Legal  Proceedings**                                                                                                                                                                                                                                                                             |       |   |
| **Item 1A.**                             | **Risk  Factors**                                                                                                                                                                                                                                                                                  |       |   |
| **Item 2.**                         | **Unregistered  Sales of Equity Securities and Use of Proceeds**                                                                                                                                                                                                                                   |       |   |
| **Item 3.**                         | **Defaults  upon Senior Securities**                                                                                                                                                                                                                                                               |       |   |
| **Item 4.**                              | **Submission  of Matters to Vote by Securities Holders**                                                                                                                                                                                                                                           |       |   |
| **Item 5.**                         | **Other  Information**                                                                                                                                                                                                                                                                             |       |   |
| **Item 6.**                         | **Exhibits**                                                                                                                                                                                                                                                                                       |       |   |
| ** **                               |                                                                                                                                                                                                                                                                                               |       |
| **SIGNATURES**                           |                                                                                                                                                                                                                                                                                               |       |

 

2

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**FederalServices Acquisition Corporation**

(a development stagecompany)

**Condensed Balance Sheets**

 
| ** **                                                                                                                                                                     | ** ** | **June 30, 2006** | ** **  | **December 31, 2005** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------|-------------|---------------------------------|------------|
| ** **                                                                                                                                                                     | ** ** | **(Unaudited)**

****       | ** **  | **(See Note I)**                | ** ** |
| **ASSETS**                                                                                                                                                                     | ** ** | ** **                  | ** **  | ** **                      | ** ** |
| Current assets:                                                                                                                                                                |       |                        |        |                            |       |
| Cash and cash  equivalents                                                                                                                                                     |       | $                           | 1,299,534   |                            | $          | 1,855,394 |   |
| Prepaid expenses                                                                                                                                                               |       | 25,616                      |        | 72,122                          |       |
| Prepaid income  tax                                                                                                                                                            |       | 66,004                      |        | —                          |       |
|                                                                                                                                                                           |       |                        |        |                            |       |
| Total current  assets                                                                                                                                                          |       | 1,391,154                   |        | 1,927,516                       |       |
|                                                                                                                                                                           |       |                        |        |                            |       |
| Short-term  investments held in Trust Account (including interest receivable of $611,123  and $39,444, respectively) (fair value $119,010,275 and $117,709,036,  respectively) |       | 119,010,275                 |        | 117,709,036                     |       |
| Cash and cash  equivalents held in trust fund                                                                                                                                  |       | 264,419                     |        | 281,348                         |       |
|                                                                                                                                                                           |       |                        |        |                            |       |
| Deferred income  tax benefit                                                                                                                                                   |       | 410,705                     |        | 34,629                          |       |
| Deferred acquisition  costs                                                                                                                                                    |       | 614,625                     |        | —                          |       |
|                                                                                                                                                                           |       |                        |        |                            |       |
| Total assets                                                                                                                                                                   |       | $                           | 121,691,178 |                            | $          | 119,952,529 |   |
| ** **                                                                                                                                                                     | ** ** | ** **                  | ** **  | ** **                      | ** ** |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY**                                                                                                                                 | ** ** | ** **                  | ** **  | ** **                      | ** ** |
| Current  liabilities:                                                                                                                                                          |       |                        |        |                            |       |
| Accrued expenses                                                                                                                                                               |       | $                           | 923,951     |                            | $          | 34,289 |   |
| Income tax  payable—current                                                                                                                                               |       | 19,412                      |        | 356,000                         |       |
| Deferred income  tax                                                                                                                                                           |       | 275,738                     |        | 15,714                          |       |
| Warrant  liabilities                                                                                                                                                           |       | 18,900,000                  |        | 19,740,000                      |       |
|                                                                                                                                                                           |       |                        |        |                            |       |
| Total current  liabilities                                                                                                                                                     |       | 20,119,101                  |        | 20,146,003                      |       |
|                                                                                                                                                                           |       |                        |        |                            |       |
| Common Stock,  subject to possible redemption 4,197,900 shares                                                                                                                 |       | 23,424,282                  |        | 23,424,282                      |       |
| Interest income  attributable to common stock subject to possible redemption (net of taxes of  $294,871 and $64,000, respectively)                                             |       | 378,808                     |        | 97,996                          |       |
|                                                                                                                                                                           |       |                        |        |                            |       |
| Total common  stock, subject to possible redemption                                                                                                                            |       | 23,803,090                  |        | 23,522,278                      |       |
|                                                                                                                                                                           |       |                        |        |                            |       |
| COMMITMENTS AND  CONTINGENCIES (Note J)                                                                                                                                        | ** ** | ** **                  | ** **  | ** **                      | ** ** |
|                                                                                                                                                                           |       |                        |        |                            |       |
| STOCKHOLDERS’  EQUITY:                                                                                                                                                    | ** ** | ** **                  | ** **  | ** **                      | ** ** |
| Preferred  stock—$.0001 par value; 1,000,000 shares authorized; 0 issued and outstanding                                                                                  |       |                        |        |                            |       |
| Common  stock—$.0001 par value, 100,000,000 shares authorized; 26,250,000 issued and  outstanding (which includes 4,197,900 shares subject to possible redemption)        |       | 2,625                       |        | 2,625                           |       |
| Additional  paid-in capital                                                                                                                                                    |       | 81,467,698                  |        | 81,467,698                      |       |
| Deficit accumulated  during the development stage                                                                                                                              |       | (3,701,336                  | )           | (5,186,075                      | )          |
|                                                                                                                                                                           |       |                        |        |                            |       |
| Total  stockholders’ equity                                                                                                                                               |       | 77,768,987                  |        | 76,284,248                      |       |
|                                                                                                                                                                           |       |                        |        |                            |       |
|                                                                                                                                                                           |       | $                           | 121,691,178 |                            | $          | 119,952,529 |   |

 

See notes to condensed financial statements

 

3

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**FederalServices Acquisition Corporation**

(a development stagecompany)****

**Condensed Statements of Operations**

**(Unaudited)**

 
| ** **                                                 | ** ** | **For the Three Months  ended June 30, 2006** | ** ** | **For the Six Months ended  June 30, 2006** | ** ** | **For the period from April  12, 2005 (date of  inception) through  June 30, 2005** | ** ** | **For the period from April  12, 2005 (date of  inception) through  June 30, 2006** | ** ** |
|------------------------------------------------------------|------------|-----------------------------------------------------------------------------|------------|---------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------|------------|
| ** **                                                 | ** ** | ****                                                                        | ** ** | ****                                                                      | ** ** | ** **                                                                                                                            | ** ** | ****                                                                                                                                  | ** ** |
| Expenses:                                                  |       |                                                                        |       |                                                                      |       |                                                                                                                                  |       |                                                                                                                                  |       |
| Operating costs                                            |       | $                                                                           | 283,424    |                                                                      | $          | 893,621                                                                                                                               |       | $                                                                                                                                     | (1,000     | ) | $ | 1,026,782 |   |
| Other income  (loss):                                      |       |                                                                        |       |                                                                      |       |                                                                                                                                  |       |                                                                                                                                  |       |
| Bank interest                                              |       | 11,233                                                                      |       | 24,217                                                                    |       | 44                                                                                                                                    |       | 33,000                                                                                                                                |       |
| Interest on cash  and short term investments held in trust |       | 1,382,968                                                                   |       | 2,559,696                                                                 |       | 0                                                                                                                                     |       | 3,370,080                                                                                                                             |       |
| Gain (loss) on warrant  liabilities                        |       | 11,760,000                                                                  |       | 840,000                                                                   |       | 0                                                                                                                                     |       | (4,620,000                                                                                                                            | )          |
|                                                       |       |                                                                        |       |                                                                      |       |                                                                                                                                  |       |                                                                                                                                  |       |
| Total other  income (loss)                                 |       | 13,154,201                                                                  |       | 3,423,913                                                                 |       | 44                                                                                                                                    |       | (1,216,920                                                                                                                            | )          |
|                                                       |       |                                                                        |       |                                                                      |       |                                                                                                                                  |       |                                                                                                                                  |       |
| **Income  (loss) before provision for taxes**              |       | 12,870,777                                                                  |       | 2,530,292                                                                 |       | (956                                                                                                                                  | )          | (2,243,702                                                                                                                            | )          |
| (Provision)  benefit for income taxes                      |       |                                                                        |       |                                                                      |       |                                                                                                                                  |       |                                                                                                                                  |       |
| Current                                                    |       | (366,797                                                                    | )          | (880,793                                                                  | )          | 0                                                                                                                                     |       | (1,213,793                                                                                                                            | )          |
| Deferred                                                   |       | (134,384                                                                    | )          | 116,052                                                                   |       | 0                                                                                                                                     |       | 134,967                                                                                                                               |       |
| Net income (loss)                                          |       | 12,369,596                                                                  |       | 1,765,551                                                                 |       | (956                                                                                                                                  | )          | (3,322,528                                                                                                                            | )          |
| Weighted average  number of shares outstanding—basic  |       | 26,250,000                                                                  |       | 26,250,000                                                                |       | 5,250,000                                                                                                                             |       |                                                                                                                                  |       |
|                                                       |       |                                                                        |       |                                                                      |       |                                                                                                                                  |       |                                                                                                                                  |       |
| Net income per  share—basic                           |       | $                                                                           | 0.47       |                                                                      | $          | 0.07                                                                                                                                  |       | 0.00                                                                                                                                  |       |   |   |
|                                                       |       |                                                                        |       |                                                                      |       |                                                                                                                                  |       |                                                                                                                                  |       |
| Net income                                                 |       | $                                                                           | 11,369,596 |                                                                      | 1,765,551  |                                                                                                                                  |       |                                                                                                                                  |       |   |
| Gain on  derivative liabilities attributed to warrants     |       | 11,760,000                                                                  |       | 840,000                                                                   |       |                                                                                                                                  |       |                                                                                                                                  |       |
| Adjusted net  income - for diluted earnings                |       | $                                                                           | 609,596    |                                                                      | $          | 925,551                                                                                                                               |       |                                                                                                                                  |       |   |   |
| Weighted average  shares outstanding                       |       | 26,250,000                                                                  |       | 26,250,000                                                                |       | 5,250,000                                                                                                                             |       |                                                                                                                                  |       |
| Shares from  assumed conversion of warrants                |       | 4,298,025                                                                   |       | 4,162,162                                                                 |       | 0                                                                                                                                     |       |                                                                                                                                  |       |
| Weighted average  number of shares outstanding - diluted   |       | 30,548,025                                                                  |       | 30,412,162                                                                |       | 5,250,000                                                                                                                             |       |                                                                                                                                  |       |
| Net income per  share - diluted                            |       | $                                                                           | 0.02       |                                                                      | $          | .03                                                                                                                                   |       | $                                                                                                                                     | 0.00       |   |   |   |
|                                                            |            |                                                                             |            |                                                                           |            |                                                                                                                                       |            |                                                                                                                                       |            |  |  |  |  |  |  |  |

 

See notes to condensedfinancial statements

 

4

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**FederalServices Acquisition Corporation**

(a development stagecompany)

**Condensed Statements of Changes in Stockholders’ EquityFor the period from April 12, 2005 (date of inception) through June 30, 2006**

 
| ** **                                                                                                                                                       | ** ** | ** **            | ** ** | ** **  | ** ** | ** **      | ** ** | **Deficit**         | ** ** | ** **  | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------|------------|-------------|------------|-----------------|------------|---------------------|------------|-------------|------------|
| ** **                                                                                                                                                       | ** ** | ** **            | ** ** | ** **  | ** ** | ** **      | ** ** | **Accumulated**     | ** ** | ** **  | ** ** |
| ** **                                                                                                                                                       | ** ** | ** **            | ** ** | ** **  | ** ** | **Additional**  | ** ** | **During the** | ** ** | ** **  | ** ** |
| ** **                                                                                                                                                       | ** ** | **Common Stock** | ** ** | **Paid-In** | ** ** | **Development** | ** ** | ** **          | ** ** |
| ** **                                                                                                                                                       | ** ** | **Shares**            | ** ** | **Amount**  | ** ** | **Capital**     | ** ** | **Stage**           | ** ** | **Total**   | ** ** |
|                                                                                                                                                             |       |                  |       |        |       |            |       |                |       |        |       |
| **Balance—April 12,  2005 (date of inception)**                                                                                                        |       |                  |       |        |       |            |       |                |       |        |       |
| ** **                                                                                                                                                       |       |                  |       |        |       |            |       |                |       |        |       |
| Initial capital  from founding stockholders                                                                                                                      |       | 5,250,000             |       | $           | 525        |            | $          | 5,475               |       | $           | —     |   | $ | 6,000 |   |
| Sale of  21,000,000 units (including 4,197,900 shares of common stock subject to  possible redemption), net of underwriters’ discount and offering expenses |       | 21,000,000            |       | 2,100       |       | 119,166,505     |       | —              |       | 119,168,605 |       |
| Reclassification  of proceeds allocated to warrants - derivatives liability                                                                                      |       | —                |       | —      |       | (14,280,000     | )          | —              |       | (14,280,000 | )          |
| Reclassification  of 4,197,900 shares of common stock being subject to possible redemption                                                                       |       | —                |       | —      |       | (23,424,282     | )          | —              |       | (23,424,282 | )          |
| Accretion of  trust fund relating to common stock subject to possible redemption                                                                                 |       | —                |       | —      |       | —          |       | (97,996             | )          | (97,996     | )          |
| Net loss for the  period                                                                                                                                         |       | —                |       | —      |       | —          |       | (5,088,079          | )          | (5,088,079  | )          |
| **Balance—December  31, 2005**                                                                                                                              |       | 26,250,000            |       | 2,625       |       | 81,467,698      |       | (5,186,075          | )          | 76,284,248  |       |
|                                                                                                                                                             |       |                  |       |        |       |            |       |                |       |        |       |
| Accretion of  trust fund relating to common stock subject to possible redemption                                                                                 |       | —                |       | —      |       | —          |       | (280,812            | )          | (280,812    | )          |
| Net income for  the period                                                                                                                                       |       | —                |       | —      |       | —          |       | 1,765,551           |       | 1,765,551   |       |
|                                                                                                                                                             |       |                  |       |        |       |            |       |                |       |        |       |
| **Balance—June  30, 2006 (Unaudited)**                                                                                                                      |       | 26,250,000            |       | $           | 2,625      |            | $          | 81,467,698          |       | $           | (3,701,336 | ) | $ | 77,768,987 |   |
|                                                                                                                                                                  |            |                       |            |             |            |                 |            |                     |            |             |            |  |  |  |  |  |

 

See notes to condensedfinancial statements

 

5

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**FederalServices Acquisition Corporation**

(a development stagecompany)****

**Condensed Statements of Cash Flows**

**(Unaudited)**
| ** **                                                                         | ** ** | **For the Six Months  ended June 30, 2006** | ** ** | **For the period from April  12, 2005 (date of  inception) through  June 30, 2005** | ** ** | **For the period from April  12, 2005 (date of  inception) through  June 30, 2006** | ** ** |
|------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------|------------|
| ** **                                                                         | ** ** | ****                                                                      | ** ** | ** **                                                                                                                            | ** ** | ****                                                                                                                                  | ** ** |
| **Cash  flows from operating activities:**                                         |       |                                                                      |       |                                                                                                                                  |       |                                                                                                                                  |       |
|                                                                               |       |                                                                      |       |                                                                                                                                  |       |                                                                                                                                  |       |
| Net income  (loss)                                                                 |       | $                                                                         | 1,765,551  |                                                                                                                                  | $          | (956                                                                                                                                  | )          | $ | (3,322,528 | ) |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |                                                                      |       |                                                                                                                                  |       |                                                                                                                                  |       |
| Deferred income  tax                                                               |       | (116,052                                                                  | )          | —                                                                                                                                |       | (134,967                                                                                                                              | )          |
| (Gain) Loss on warrant  liabilities                                                |       | (840,000                                                                  | )          | —                                                                                                                                |       | 4,620,000                                                                                                                             |       |
| Changes in:                                                                        |       |                                                                      |       |                                                                                                                                  |       |                                                                                                                                  |       |
| Interest  receivable                                                               |       | (571,679                                                                  | )          | —                                                                                                                                |       | (611,123                                                                                                                              | )          |
| Prepaid expenses                                                                   |       | 46,506                                                                    |       | —                                                                                                                                |       | (25,616                                                                                                                               | )          |
| Accrued expenses                                                                   |       | 889,662                                                                   |       | 1,000                                                                                                                                 |       | 923,951                                                                                                                               |       |
| Income taxes  payable—current                                                 |       | (402,592                                                                  | )          | —                                                                                                                                |       | (46,592                                                                                                                               | )          |
|                                                                               |       |                                                                      |       |                                                                                                                                  |       |                                                                                                                                  |       |
| Net cash  provided by operating activities                                         |       | 771,396                                                                   |       | 44                                                                                                                                    |       | 1,403,125                                                                                                                             |       |
|                                                                               |       |                                                                      |       |                                                                                                                                  |       |                                                                                                                                  |       |
| **Cash  flows from investing activities:**                                         |       |                                                                      |       |                                                                                                                                  |       |                                                                                                                                  |       |
| Purchase of U.S.  government securities held in Trust fund                         |       | (236,619,372                                                              | )          | —                                                                                                                                |       | (471,468,030                                                                                                                          | )          |
| Maturities of  U.S. government securities held in Trust fund                       |       | 235,889,812                                                               |       | —                                                                                                                                |       | 353,068,878                                                                                                                           |       |
| Cash held in  Trust Fund                                                           |       | 16,929                                                                    |       | —                                                                                                                                |       | (264,419                                                                                                                              | )          |
| Deferred  acquisition costs                                                        |       | (614,625                                                                  | )          | —                                                                                                                                |       | (614,625                                                                                                                              | )          |
|                                                                               |       |                                                                      |       |                                                                                                                                  |       |                                                                                                                                  |       |
| Net cash used in  investing activities                                             |       | (1,327,256                                                                | )          | —                                                                                                                                |       | (119,278,196                                                                                                                          | )          |
|                                                                               |       |                                                                      |       |                                                                                                                                  |       |                                                                                                                                  |       |
| **Cash  flows from financing activities:**                                         |       |                                                                      |       |                                                                                                                                  |       |                                                                                                                                  |       |
| Proceeds from  public offering, net of expenses                                    |       | —                                                                    |       | —                                                                                                                                |       | 119,168,605                                                                                                                           |       |
| Proceeds from  notes payable to stockholders                                       |       | —                                                                    |       | 154,000                                                                                                                               |       | 154,000                                                                                                                               |       |
| Repayment of  notes to stockholders                                                |       | —                                                                    |       | —                                                                                                                                |       | (154,000                                                                                                                              | )          |
| Payments of  deferred offering costs                                               |       | —                                                                    |       | (103,494                                                                                                                              | )          | —                                                                                                                                |       |
| Proceeds from  sale of common stock to founders                                    |       | —                                                                    |       | 6,000                                                                                                                                 |       | 6,000                                                                                                                                 |       |
|                                                                               |       |                                                                      |       |                                                                                                                                  |       |                                                                                                                                  |       |
| Net cash  provided by financing activities                                         |       | —                                                                    |       | 56,506                                                                                                                                |       | 119,174,605                                                                                                                           |       |
|                                                                               |       |                                                                      |       |                                                                                                                                  |       |                                                                                                                                  |       |
| **Net  (decrease) increase in cash and cash equivalents**                          |       | (555,860                                                                  | )          | 56,550                                                                                                                                |       | 1,299,534                                                                                                                             |       |
| Cash and cash  equivalents—beginning of period                                |       | 1,855,394                                                                 |       | —                                                                                                                                |       | —                                                                                                                                |       |
|                                                                               |       |                                                                      |       |                                                                                                                                  |       |                                                                                                                                  |       |
| Cash and cash  equivalents—end of period                                      |       | $                                                                         | 1,299,534  |                                                                                                                                  | $          | 56,550                                                                                                                                |       | $ | 1,299,534 |   |
|                                                                               |       |                                                                      |       |                                                                                                                                  |       |                                                                                                                                  |       |
| **Supplemental  Disclosure of noncash activities:**                                |       |                                                                      |       |                                                                                                                                  |       |                                                                                                                                  |       |
| Cash paid during  the period for:                                                  |       |                                                                      |       |                                                                                                                                  |       |                                                                                                                                  |       |
| Income taxes                                                                       |       | $                                                                         | 1,283,385  |                                                                                                                                  | $          | —                                                                                                                                |       | $ | 1,283,385 |   |
| Non-cash  activities:                                                              |       |                                                                      |       |                                                                                                                                  |       |                                                                                                                                  |       |
| Reclassification  of common stock subject to possible redemption                   |       | $                                                                         | —     |                                                                                                                                  | $          | —                                                                                                                                |       | $ | 23,424,282 |   |
| Accretion of  trust fund relating to common stock subject to possible redemption   |       | $                                                                         | 280,812    |                                                                                                                                  | $          | —                                                                                                                                |       | $ | 378,808 |   |
| Warrant  obligation in connection with sale of units in offering                   |       | $                                                                         | —     |                                                                                                                                  | $          | —                                                                                                                                |       | $ | 14,280,000 |   |
|                                                                                    |            |                                                                           |            |                                                                                                                                       |            |                                                                                                                                       |            |  |  |  |  |  |  |

 

See notes to condensedfinancial statements

 

6

----

 

**FEDERALSERVICES ACQUISITION CORPORATION**

**(adevelopment stage company)**

 

**Notes to Condensed Financial Statements**

**June30, 2006**

 

**NOTEA(1)—BASIS OF PRESENTATION**

 

In the opinion ofmanagement, the accompanying unaudited condensed financial statements containall adjustments necessary to present fairly the financial position of FederalServices Acquisition Corporation (the “Company”) and its results of operationsand cash flows for the interim period presented. Such financial statements havebeen condensed in accordance with the applicable regulations of the Securitiesand Exchange Commission and, therefore, do not include all disclosures requiredby accounting principles generally accepted in the United States of America.These financial statements should be read in conjunction with Federal ServicesAcquisition Corporation’s audited financial statements for the period fromApril 12, 2005 (Date of Inception) to December 31, 2005 included on Form 10-K/Afiled on September 29, 2006. The results of the Company’s operations for theinterim period are not necessarily indicative of the operating results for thefull year.

 

**(2) PRIOR RESTATEMENT OF INITIALLY ISSUED FINANCIALSTATEMENTS**

 

In September 2006, theCompany concluded that it was necessary to restate its annual financialstatements for the period ended December 31, 2005 and for the interimperiods ended March 31, 2006 and June 30, 2006 to reflectnon-operating gains and losses related to the classification of and accountingfor the warrants to purchase common stock associated with the units sold at theinitial public offering of the Company. The Company had initially classified the value ofthese warrants to purchase common stock, when applicable, as equity. Afterfurther review in connection with the presentation of Amendment No. 2 to theProxy Statement related to the acquisition contemplated by the Stock PurchaseAgreement dated April 19, 2006 by and among the Company, AdvancedTechnology Systems, Inc., a Virginia corporation (“ATS”) and shareholders ofATS, the Company had determined that theseinstruments should have been classified as liabilities and, therefore, the fairvalue of each instrument must be recorded as a liability on the Company’sbalance sheet. Changes in the fair values of these instruments resulted in adjustments to the amount ofthe recorded liabilities, and the corresponding gain or loss was recorded in the Company’sstatement of operations. At the date of the conversion of each warrant orportion thereof (or exercise of the warrants or portion thereof, as the casemay be), the corresponding liability will be reclassified as equity. See Note Ifor the restatement and reclassifications.

 

**NOTEB—ORGANIZATION AND BUSINESS OPERATIONS**

 

The Company wasincorporated in Delaware on April 12, 2005. The Company was formed toserve as a vehicle for the acquisition of an operating business in the federalservices and defense industries through a merger, capital stock exchange, assetacquisition, stock purchase or other similar business combination. The Companyhas neither engaged in any operations nor generated revenue to date. TheCompany is considered to be in the development stage and is subject to therisks associated with activities of development stage companies.

 

The registrationstatement for the Company’s initial public offering (“Offering”) was declaredeffective on October 19, 2005.  The Company consummated the offering onOctober 25, 2005 and received net proceeds of $119,169,000. The Company’smanagement has broad discretion with respect to the specific application of thenet proceeds of the Offering, although substantially all of the net proceeds ofthe Offering are intended to be generally applied toward consummating abusiness combination with (or acquisition of) an operating business in thefederal services and defense industries (“Business Combination”). Nonetheless,there is no assurance that the Company will be able to successfully effect aBusiness Combination. As of June 30, 2006, an amount of $119,274,694 includinginterest receivable of $611,123 of the net proceeds is being held in a trustaccount (“Trust Account”) and is invested in U.S. government securities, andcash or cash equivalents until the earlier of (i) the consummation of its firstBusiness Combination or (ii) the distribution of the Trust Account to theCompany’s public stockholders. The remaining proceeds may be used to pay forbusiness, legal and accounting due diligence on prospective acquisitions andcontinuing general and administrative expenses. The Company, after signing adefinitive agreement for the acquisition of a target business, will submit suchtransaction for stockholder approval. In the event that public stockholders of20% or more of the outstanding stock (excluding, for this purpose, those sharesof common stock issued prior to the Offering) vote against the BusinessCombination and exercise their conversion rights, the Business Combination willnot be consummated.

 

In the event that theCompany does not consummate a Business Combination within 18 months fromthe date of the consummation of the Offering, or 24 months from theconsummation of the Offering if certain extension criteria have been satisfied(the “Acquisition Period”), the proceeds held in the Trust Account will bedistributed to the Company’s public stockholders, excluding the Founders(defined in the following sentence) to the extent of their stock acquired priorto the Offering. However, the persons who were stockholders prior to theOffering (the “Founders”) will participate in any liquidation distribution with

 

7

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respect to any shares ofthe common stock acquired in connection with or following the Offering. In theevent of such distribution, it is likely that the per share value of theresidual assets remaining available for distribution (including Trust Accountassets) will be less than the initial public offering price per unit in theOffering (assuming no value is attributed to the Warrants contained in theUnits offered in the Offering as discussed in Note D).

 

Public stockholdersowning less than 20% of the shares sold in the Offering who vote against aBusiness Combination and exercise their conversion rights will be entitled toconvert their stock into a pro rata share of the Trust Account, including anyinterest earned on their portion of the Trust Account (net of taxes payable),if the Business Combination is approved and consummated. The Founders cannotconvert their stock into a pro rata share of the Trust Account under thesecircumstances, because they have agreed to vote their stock in accordance withthe majority of the shares of common stock voted by the public stockholders.Public stockholders who convert their stock will retain any warrants they hold.

 

The Founders will beentitled to registration rights pursuant to an agreement signed as a part ofthe Offering. The holders of the majority of these shares are entitled to makeup to two demands that the Company register these shares. The holders of themajority of these shares can elect to exercise these registration rights at anytime after the date on which their shares of common stock are released fromescrow (see below). In addition, these stockholders have certain “piggy-back”registration rights on registration statements filed subsequent to such date.The Company will bear the expenses incurred in connection with the filing ofany such registration statement.

 

Upon consummation of theOffering, the Founders placed the shares they owned into an escrow account.These shares will not be transferable during the escrow period and will not bereleased from escrow until the earliest of:

 

•                           threeyears following the date of the Offering;

•                           liquidation;and

•                           theconsummation of a liquidation, merger, stock exchange or other similartransaction which results in all of the stockholders having the right toexchange their shares of common stock for cash, securities or other propertysubsequent to the Company consummating a Business Combination with a targetbusiness.

 

During the escrow period,the holders of these shares will not be able to sell or transfer theirsecurities except to their spouses and children or trusts established for theirbenefit, but will retain all other rights as stockholders, including, withoutlimitation, the right to vote their shares of common stock and the right toreceive cash dividends, if declared. If dividends are declared and payable inshares of common stock, such dividends will also be placed in escrow. If theCompany is unable to effect a Business Combination and liquidates, none of theFounders will receive any portion of the liquidation proceeds with respect tocommon stock owned by them.

 

**NOTEC—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

 

**[1]   Cashand cash equivalents:**

The Company considers allhighly liquid investments with original maturities of three months or less tobe cash equivalents. The Company had cash deposits in excess of the federallyinsured limits at June 30, 2006.

 

**[2]   Accountingfor Warrants and Derivative Instruments AsRestated:**

OnOctober 25, 2005, the Company consummated its initial public offering of21,000,000 units. Each unit consists of one share of common stock and tworedeemable common stock purchase warrants. Each warrant entitles the holder topurchase from the Company one share of itscommon stock at an exercise price of $5.00.

 

EmergingIssues Task Force 00-19, or EITF 00-19, “*Accountingfor Derivative Financial Instruments Indexed to and Potentially Settled in, aCompany’s Own Stock*,” provides criteria for determining whetherfreestanding contracts that are settled in a company’s own stock, includingcommon stock warrants, should be designated as either an equity instrument, anasset or as a liability under SFAS No. 133. Under the provisions of EITF 00-19,a contract designated as an asset or a liability must be carried at fair valueon a company’s balance sheet, with any changes in fair value recorded in acompany’s results of operations. A contract classified as an equity instrumentis included within equity, and no fair value adjustments are required fromperiod to period. In accordance with EITF 00-19, the warrants to purchasecommon stock included in the units sold in the Company’s initial publicoffering are separately accounted for as liabilities.

 

Theagreement related to the Company’s warrants provides for the Company toregister and maintain the registration of the shares underlying the warrantsand does not specify a penalty in the absence of the Company’s ability todeliver registered shares to holders upon exercise of the warrants. Further, the warrant agreement does not specifythat the Company cannot be obligated to net cash settle theinstrument. Paragraph14 of EITF 00-19 states that if the contract allows the companyto net-share or physically settle the contract only by deliveringregistered shares, it isassumed that the companywill be requiredto net-cash settle the contract, and as a result liability classification willbe required. Paragraph 17 ofEITF 00-19 states that if the contract requires physical or net-share settlement by deliveryof registered shares and does not specify any circumstances under which net-cash settlement is permitted or required, and the contract does not specify how the contractwould be settledin the event that the company is unable todeliver registered shares,then net cash settlement is assumed if the company is unable todeliver registered shares (because itis unlikely that nonperformance would be an acceptable alternative).Under EITF 00-19,registration of the common stock underlying the warrants is not within theCompany’s control and, as a result, the Company must assume that it could berequired to settle the securities on a net-cash basis, thereby necessitatingthe treatment of the potential settlement obligation as a liability. The fairvalue of these securities is presented on the Company’s balance sheet as “warrantliabilities,” and the unrealized changes in the values of these derivatives areshown in the Company’s statement of operations as “Gain (loss) on warrantliability.”

 

Fair values for traded securities and derivativesare based on quoted market prices. Where market prices are not readilyavailable, as in the case of the Company’s warrants as of the date of issuance,fair values are determined using methods requiring judgment and estimates.Utilizing such methods, the fair value of the warrant liability at October 20,2005 (the date of issuance) was determined to be $0.34 per warrant. At the dateof issuance, the Company allocated the unit price between the share of commonstock and the warrants issued based upon relative fair value determined, amongother things, by reference to the underlying cash held in the trust fund. Thewarrants included in the units sold in the Company’s initial public offeringbegan to be publicly traded on the Over the Counter Bulletin Board on December5, 2005, and consequently the fair value of the warrants is reflected as themarket price of a warrant at each period end. To the extent that the marketprices of the Company’s warrants increase or decrease, the Company’s derivativeliabilities will also increase or decrease with a corresponding impact on itsstatement of operations.

 

**[3]   Income(Loss) per common share:**

Basic income/loss pershare is based on the weighted average number of common shares outstandingduring the period. The per share effects of potential common shares such as warrants,aggregating 4,298,025 shares, have been included for the three months endedJune 30, 2006 and 4,162,162 shares for the six months ended June 30, 2006.These potential shares have not been included in the other reporting periods becausethe effect would be anti-dilutive.

 

The following tablepresents pro forma income per share attributable to common stockholders subjectto possible conversion and not subject to possible conversion:

 
| ** **                                                                                                                                               | ** ** | **Three  months  ended  June 30, 2006** | ** ** | **Six  months  ended  June 30, 2006** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------|------------|---------------------------------------|------------|
|                                                                                                                                                     |       |                                    |       |                                  |       |
| Net income                                                                                                                                               |       | $                                       | 12,369,596 |                                  | 1,765,551  |   |
|                                                                                                                                                     |       |                                    |       |                                  |       |
| Interest income  attributable to common stock subject to possible conversion                                                                             |       | $                                       | (151,719   | )                                     | $          | (280,812 | ) |
|                                                                                                                                                     |       |                                    |       |                                  |       |
| Pro forma net  income attributable to common stockholders not subject to possible conversion                                                             |       | $                                       | 12,217,877 |                                  | $          | 1,484,739 |   |
|                                                                                                                                                     |       |                                    |       |                                  |       |
| Pro forma  weighted average number of shares outstanding, excluding shares subject to  possible conversion - basic                                       |       | 22,052,100                              |       | 22,052,100                            |       |
|                                                                                                                                                     |       |                                    |       |                                  |       |
| Pro forma net  income per share, excluding shares subject to possible conversion - basic                                                                 |       | $                                       | 0.55       |                                  | $          | 0.07 |   |
|                                                                                                                                                     |       |                                    |       |                                  |       |
| Net income                                                                                                                                               |       | $                                       | 12,369,596 |                                  | $          | 1,765,551 |   |
|                                                                                                                                                     |       |                                    |       |                                  |       |
| Interest income  attributable to common stock subject to possible conversion                                                                             |       | (151,719                                | )          | (280,812                              | )          |
|                                                                                                                                                     |       |                                    |       |                                  |       |
| Gain on  derivative liabilities attributed to warrants                                                                                                   |       | (11,760,000                             | )          | (840,000                              | )          |
|                                                                                                                                                     |       |                                    |       |                                  |       |
| Pro forma net  income attributable to common stockholders not subject to possible conversion  less gain on derivative liabilities attributed to warrants |       | $                                       | 457,877    |                                  | $          | 644,739 |   |
|                                                                                                                                                     |       |                                    |       |                                  |       |
| Pro forma  weighted average number of shares outstanding excluding shares subject to  possible conversion - basic                                        |       | 22,052,100                              |       | 22,052,100                            |       |
|                                                                                                                                                     |       |                                    |       |                                  |       |
| Shares from  assumed conversion on warrants                                                                                                              |       | 4,298,025                               |       | 4,162,162                             |       |
|                                                                                                                                                     |       |                                    |       |                                  |       |
| Pro forma  weighted average number of shares outstanding, excluding shares subject to  possible conversion - diluted                                     |       | 26,350,125                              |       | 26,214,262                            |       |
|                                                                                                                                                     |       |                                    |       |                                  |       |
| Pro forma net  income per share, excluding shares subject to possible conversion - diluted                                                               |       | $                                       | 0.02       |                                  | $          | 0.02 |   |

 

8

----

 

**[4]    Useof estimates:**

The preparation offinancial statements in conformity with accounting principles generallyaccepted in the United States of America requires management to make estimatesand assumptions that affect the amounts in the financial statements andaccompanying notes. Actual results could differ from those estimates.

 

**[5]    Fairvalue of financial instruments:**

The carrying amounts ofthe Company’s financial assets, including cash and cash equivalents and shortterm investments, approximate fair value because of their short termmaturities.

 

**[6]    Incometaxes:**

Deferred income taxes areprovided for the differences between the bases of assets and liabilities forfinancial reporting and income tax purposes. Deferred tax assets andliabilities are measured using tax rates in effect for the year in which thosetemporary differences are expected to be recovered or settled. A valuationallowance is established when necessary to reduce deferred tax assets to theamount expected to be realized.

 

**[7]    NewAccounting Pronouncement:**

The Financial Accounting Standards Board (“FASB”) hasissued interpretation No. 48, “Accounting for Uncertainty in Income Taxes—AnInterpretation of FASB Statement No. 109” (“FIN 48”), regarding accounting for,and disclosure of, uncertain tax positions. FIN 48 clarifies the accounting foruncertainty in income taxes recognized in an enterprise’s financial statementsin accordance with FASB Statement No. 109, “Accounting for Income Taxes.” FIN48 prescribes a recognition threshold and measurement attribute for thefinancial statement recognition and measurement of a tax position taken orexpected to be taken in a tax return. FIN 48 also provides guidance onderecognition, classification, interest and penalties, accounting in interimperiods, disclosure, and transition. FIN 48 is effective for fiscal yearsbeginning after December 15, 2006. The Company is currently evaluating theimpact FIN 48 will have on its results of operations and financial position.The cumulative effect of applying the provisions of FIN 48, if any, will bereported as an adjustment to the opening balance of retained earningsaccumulated during the development stage on January 1, 2007.

 

**NOTED—INITIAL PUBLIC OFFERING**

 

On October 25, 2005, theCompany sold 21,000,000 Units (“Units”).  Each Unit consisted of one shareof the Company’s common stock, $.0001 par value, and two warrants (“Warrants”).Each Warrant entitles the holder to purchase from the Company one share ofcommon stock at an exercise price of $5.00.  Each Warrant is exercisableon the later of (a) the completion of a Business Combination or (b)October 19, 2006 and expires October 19, 2009, or earlier uponredemption.  The Warrants are redeemable at a price of $.01 per Warrantupon 30 days notice after the Warrants become exercisable, only in theevent that the last sale price of the common stock is at least $8.50 per sharefor any 20 trading days within a 30 trading day period ending on the third dayprior to the date on which notice of redemption is given.

 

In connection with theOffering, the Company paid CRT Capital Group LLC an underwriter’s discount of5% of the gross proceeds of the Offering.

 

**NOTEE—INVESTMENTS HELD IN TRUST**

 

The management of theCompany intends to hold till maturity the investments held in the TrustAccount, which consist principally of short-term Treasury Bills. These billsare purchased at a discount and the Company accretes interest income which isequivalent to the difference between the purchase price and the market price.

 

9

----

 

**NOTEF—INCOME TAXES**

 

The provision for incometaxes and the deferred tax liability (benefit) for the three months and the sixmonths ending June 30, 2006, respectively, consists of the following:

 
| ** **                              | ** ** | **For the Three Months  ending June 30, 2006** | ** ** | **For the Six Months  ending June 30, 2006** | ** ** |
|-----------------------------------------|------------|------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------|------------|
| Current                                 |       |                                                                         |       |                                                                       |       |
|                                    |       |                                                                         |       |                                                                       |       |
| Federal                                 |       | $                                                                            | 229,831    |                                                                       | $          | 551,893 |   |
| State and local                         |       | 136,966                                                                      |       | 328,900                                                                    |       |
| Total current  income tax               |       | $                                                                            | 366,797    |                                                                       | $          | 880,793 |   |
|                                    |       |                                                                         |       |                                                                       |       |
| Deferred tax  provision (benefit)       |       |                                                                         |       |                                                                       |       |
| Federal                                 |       | $                                                                            | 84,203     |                                                                       | $          | (75,094 | ) |
| State and local                         |       | 50,181                                                                       |       | (40,958                                                                    | )          |
| Total deferred  tax provision (benefit) |       | $                                                                            | 134,385    |                                                                       | $          | (116,052 | ) |
|                                         |            |                                                                              |            |                                                                            |            |  |  |  |  |

 

Provisions have been madefor deferred taxes based on differences between the tax basis of assets andliabilities using currently enacted rates and regulations.

 

Deferred tax assets andliabilities at June 30, 2006 and December 31, 2005 consist of the following:

 
| ** **                                                 | ** ** | **As of  June 30,  2006** | ** ** | **As of  December 31,  2005** | ** ** |
|------------------------------------------------------------|------------|-------------------------------------|------------|-----------------------------------------|------------|
| Deferred tax  assets – start up costs                 |       | $                                   | 410,705    |                                    | $          | 34,629 |   |
| Deferred tax  liability – accrued interest receivable |       | (275,738                            | )          | (15,714                                 | )          |
|                                                       |       |                                |       |                                    |       |
| Net deferred tax  benefit                                  |       | $                                   | 134,967    |                                    | $          | 18,915 |   |

 

The Company has recordeda deferred tax asset. Realization is dependent on acquiring an operatingcompany and the ability to use the deferred tax expenses to offset operatingincome. Although realization is not assured, management believes it is morelikely than not that all of the deferred tax will be realized through futuretaxable income.

 

**NOTEG—NOTES PAYABLE TO STOCKHOLDERS**

 

The Company issued two$77,000 non-interest bearing unsecured promissory notes to two of the Foundersof the Company on April 18, 2005.   The notes were repaid in theaccordance with their terms on October 25, 2005 from the proceeds of theOffering.

 

**NOTEH—RELATED PARTY TRANSACTION**

 

The Company has agreed topay CM Equity Management, L.P., a company where certain of the Founders servein executive capacities, an administrative fee of $7,500 per month for officespace and general and administrative services from October 19, 2005 through theeffective date of the acquisition of a target business. For the three monthsand six months ended June 30, 2006, the amount paid to this entity was$22,500 and $45,000, respectively. For the period from inception to June 30,2006, the amount paid to this entity was $63,145.

 

Two of the Founders haveagreed with the Company and the underwriters that if the Company liquidatesprior to the consummation of a Business Combination, they may be personallyliable to ensure that the proceeds of the Trust Account are not reduced by theclaims of vendors or others entities that are owed money by the Company forservices rendered or products sold to the Company or the claims of prospectivetarget businesses.

 

10

----

 

**NOTEI - PRIOR RESTATEMENTAND RECLASSIFICATIONS OF INITIALLY ISSUED FINANCIALSTATEMENTS**

 

Theaccompanying financial statements for the three and six months ended June 30,2006 were previouslyrestated to effect the changes described in NotesA(2) and C(2).The impact of the adjustments related to the classification of and accountingfor the warrants for the period from inception to June 30, 2006 and for thethree and six months ended June 30, 2006 is summarized below.

 

**Statementof Operations**

** **
| ** **                                                                                               | ** ** | **For the period from April 12, 2005 (date of inception) through  June 30, 2006** | ** ** |
|----------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------|------------|
| ** **                                                                                               | ** ** | **As Initially**                                                                                                                              | ** ** | ** ** | ** ** | **As Previously** | ** ** |
| ** **                                                                                               | ** ** | **Reported**                                                                                                                                  | ** ** | **Adjustment** | ** ** | **Restated** | ** ** |
| Operating costs                                                                                          |       | $                                                                                                                                             | (1,026,782 | ) | $ | — |   | $ | (1,026,782 | ) |
| Interest income                                                                                          |       | 3,403,080                                                                                                                                     |       | — |   | 3,403,080 |   |
| Loss on warrant  liabilities                                                                             |       | —                                                                                                                                        |       | (4,620,000 | ) | (4,620,000 | ) |
| Income (loss) before  provision for taxes                                                                |       | 2,376,298                                                                                                                                     |       | (4,620,000 | ) | (2,243,702 | ) |
| Provision for  income taxes                                                                              | -current   |                                                                                                                                          | (1,213,793 | ) | — |   | (1,213,793 | ) |
|                                                                                                     | -deferred  |                                                                                                                                          | 134,967    |   | — |   | 134,967 |   |
| Net income (loss)                                                                                        |       |                                                                                                                                          | 1,297,472  |   |   | (4,620,000 | ) |   | (3,322,528 | ) |
| Interest income  attributable to common stock subject to possible conversion (net of taxes of  $294,871) |       | (378,808                                                                                                                                      | )          | — |   | (378,808 | ) |
| Net income (loss)  allocable to common stockholders not subject to possible conversion                   |       | $                                                                                                                                             | 918,664    |   | $ | (4,620,000 | ) | $ | (3,701,336 | ) |
|                                                                                                          |            |                                                                                                                                               |            |  |  |  |  |  |  |  |  |  |

 

11

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| ** **                                                                                               | ** ** | **For the three months ended June 30, 2006** | ** ** |
|----------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------|------------|
| ** **                                                                                               | ** ** | **As Initially**                                            | ** ** | ** ** | ** ** | **As Previously** | ** ** |
| ** **                                                                                               | ** ** | **Reported**                                                     | ** ** | **Adjustment** | ** ** | **Restated** | ** ** |
| Operating costs                                                                                          |       | $                                                                | (283,424   | ) | $ | — |   | $ | (283,424 | ) |
| Interest income                                                                                          |       | 1,394,201                                                        |       | — |   | 1,394,201 |   |
| Gain on warrant  liabilities                                                                             |       | —                                                           |       | 11,760,000 |   | 11,760,000 |   |
| Income before  provision for taxes                                                                       |       | 1,110,777                                                        |       | 11,760,000 |   | 12,870,777 |   |
| Provision for  income taxes                                                                              | -current   |                                                             | (366,797   | ) | — |   | (366,797 | ) |
|                                                                                                     | -deferred  |                                                             | (134,384   | ) | — |   | (134,384 | ) |
| Net income                                                                                               |       |                                                             | 609,596    |   |   | 11,760,000 |   |   | 12,369,596 |   |
| Interest income  attributable to common stock subject to possible conversion (net of taxes of  $124,736) |       | (151,719                                                         | )          | — |   | (151,719 | ) |
| Net income allocable  to common stockholders not subject to possible conversion                          |       | $                                                                | 457,877    |   | $ | 11,760,000 |   | $ | 12,217,877 |   |
| Weighted average  number of shares outstanding                                                           |       |                                                             |       |   |   |   |   |
| -basic                                                                                                   |       | 26,250,000                                                       |       |   |   | 26,250,000 |   |
|                                                                                                     |       |                                                             |       |   |   |   |   |
| -diluted                                                                                                 |       | 30,548,025                                                       |       |   |   | 30,548,025 |   |
|                                                                                                     |       |                                                             |       |   |   |   |   |
| Net income per  share                                                                                    |       |                                                             |       |   |   |   |   |
| -basic                                                                                                   |       | $                                                                | 0.02       |   |   |   |   | $ | 0.47 |   |
|                                                                                                     |       |                                                             |       |   |   |   |   |
| -diluted                                                                                                 |       | $                                                                | 0.02       |   |   |   |   | $ | 0.02 |   |
|                                                                                                     |       |                                                             |       |   |   |   |   |
| Weighted average  number of shares outstanding exclusive of shares subject to possible  redemption       |       |                                                             |       |   |   |   |   |
| -basic                                                                                                   |       | 22,052,100                                                       |       |   |   | 22,052,100 |   |
|                                                                                                     |       |                                                             |       |   |   |   |   |
| -diluted                                                                                                 |       | 26,350,125                                                       |       |   |   | 26,350,125 |   |
|                                                                                                     |       |                                                             |       |   |   |   |   |
| Net income per  share not subject to possible redemption                                                 |       |                                                             |       |   |   |   |   |
| -basic                                                                                                   |       | $                                                                | 0.02       |   |   |   |   | $ | 0.55 |   |
|                                                                                                     |       |                                                             |       |   |   |   |   |
| -diluted                                                                                                 |       | $                                                                | 0.02       |   |   |   |   | $ | 0.02 |   |

 

12

----

 
| ** **                                                                                               | ** ** | **For the six months ended June 30, 2006** | ** ** |
|----------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------|------------|
| ** **                                                                                               | ** ** | **As Initially**                                          | ** ** | ** ** | ** ** | **As Previously** | ** ** |
| ** **                                                                                               | ** ** | **Reported**                                                   | ** ** | **Adjustment** | ** ** | **Restated** | ** ** |
| Operating costs                                                                                          |       | $                                                              | (893,621   | ) | $ | — |   | $ | (893,621 | ) |
| Interest income                                                                                          |       | 2,583,913                                                      |       | — |   | 2,583,913 |   |
| Gain on warrant  liabilities                                                                             |       | —                                                         |       | 840,000 |   | 840,000 |   |
| Income before  provision for taxes                                                                       |       | 1,690,292                                                      |       | 840,000 |   | 2,530,292 |   |
| Provision for  income taxes                                                                              | -current   |                                                           | (880,793   | ) | — |   | (880,793 | ) |
|                                                                                                     | -deferred  |                                                           | 116,052    |   | — |   | 116,052 |   |
| Net income                                                                                               |       |                                                           | 925,551    |   |   | 840,000 |   |   | 1,765,551 |   |
| Interest income  attributable to common stock subject to possible conversion (net of taxes of  $230,871) |       | (280,812                                                       | )          | — |   | (280,812 | ) |
| Net income  allocable to common stockholders not subject to possible conversion                          |       | $                                                              | 644,739    |   | $ | 840,000 |   | $ | 1,484,739 |   |
| Weighted average  number of shares outstanding                                                           |       |                                                           |       |   |   |   |   |
| -basic                                                                                                   |       | 26,250,000                                                     |       |   |   | 26,250,000 |   |
|                                                                                                     |       |                                                           |       |   |   |   |   |
| -diluted                                                                                                 |       | 30,412,162                                                     |       |   |   | 30,412,162 |   |
|                                                                                                     |       |                                                           |       |   |   |   |   |
| Net income per  share                                                                                    |       |                                                           |       |   |   |   |   |
| -basic                                                                                                   |       | $                                                              | 0.04       |   |   |   |   | $ | 0.07 |   |
|                                                                                                     |       |                                                           |       |   |   |   |   |
| -diluted                                                                                                 |       | $                                                              | 0.03       |   |   |   |   | $ | 0.03 |   |
|                                                                                                     |       |                                                           |       |   |   |   |   |
| Weighted average  number of shares outstanding exclusive of shares subject to possible  redemption       |       |                                                           |       |   |   |   |   |
| -basic                                                                                                   |       | 22,052,100                                                     |       |   |   | 22,052,100 |   |
|                                                                                                     |       |                                                           |       |   |   |   |   |
| -diluted                                                                                                 |       | 26,214,262                                                     |       |   |   | 26,214,262 |   |
|                                                                                                     |       |                                                           |       |   |   |   |   |
| Net income per  share not subject to possible redemption                                                 |       |                                                           |       |   |   |   |   |
| -basic                                                                                                   |       | $                                                              | 0.03       |   |   |   |   | $ | 0.07 |   |
|                                                                                                     |       |                                                           |       |   |   |   |   |
| -diluted                                                                                                 |       | $                                                              | 0.02       |   |   |   |   | $ | 0.02 |   |

 

13

----

 

**BalanceSheet Impact**

** **

Thefollowing table sets forth the effects for the restatement adjustment on the Company’sbalance sheet as of June 30, 2006:

 
| ** **                                                                                                                                                          | ** ** | **June 30, 2006**     | ** **  | ** **     | ** ** | **June, 2006**          | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------|-------------|----------------|------------|-------------------------|------------|
| ** **                                                                                                                                                          | ** ** | **As Initially** | ** **  | ** **     | ** ** | **(As Previously** | ** ** |
| ** **                                                                                                                                                          | ** ** | **Reported**          | ** **  | **Adjustment** | ** ** | **Restated)**           | ** ** |
| ASSETS                                                                                                                                                              |       |                  |        |           |       |                    |       |
| Current assets:                                                                                                                                                     |       |                  |        |           |       |                    |       |
| Cash and cash  equivalents                                                                                                                                          |       | $                     | 1,299,534   |           | $          | —                  |       | $ | 1,299,534 |   |
| Prepaid expenses                                                                                                                                                    |       | 25,616                |        | —         |       | 25,616                  |       |
| Prepaid income  taxes                                                                                                                                               |       | 66,004                |        | —         |       | 66,004                  |       |
| Total current  assets                                                                                                                                               |       | 1,391,154             |        | —         |       | 1,391,154               |       |
| Short-term  investments held in Trust Account (including interest receivable of  $611,123)(fair value $119,010,275)                                                 |       | 119,010,275           |        | —         |       | 119,010,275             |       |
| Cash and cash  equivalents held in trust                                                                                                                            |       | 264,419               |        | —         |       | 264,419                 |       |
| Deferred income  tax benefit                                                                                                                                        |       | 410,705               |        | —         |       | 410,705                 |       |
| Deferred  acquisition costs                                                                                                                                         |       | 614,625               |        | —         |       | 614,625                 |       |
| Total assets                                                                                                                                                        |       | $                     | 121,691,178 |           | $          | —                  |       | $ | 121,691,178 |   |
|                                                                                                                                                                |       |                  |        |           |       |                    |       |   |   |   |
| LIABILITIES AND  STOCKHOLDERS’ EQUITY                                                                                                                          |       |                  |        |           |       |                    |       |
| Current  liabilities:                                                                                                                                               |       |                  |        |           |       |                    |       |
| Accrued expenses                                                                                                                                                    |       | $                     | 923,951     |           | $          | —                  |       | $ | 923,951 |   |
| Income tax  payable-current                                                                                                                                         |       | 19,412                |        | —         |       | 19,412                  |       |
| Deferred income  tax                                                                                                                                                |       | 275,738               |        | —         |       | 275,738                 |       |
| Warrant  liabilities                                                                                                                                                |       | —                |        | 18,900,000     |       | 18,900,000              |       |
| Total current  liabilities                                                                                                                                          |       | 1,219,101             |        | 18,900,000     |       | 20,119,101              |       |
| Common Stock,  subject to possible redemption 4,197,900 shares                                                                                                      |       | 23,424,282            |        | —         |       | 23,424,282              |       |
| Interest income  attributable to common stock subject to possible redemption (net of taxes of  $294,871)                                                            |       | 378,808               |        | —         |       | 378,808                 |       |
| Total common  stock, subject to possible redemption                                                                                                                 |       | 23,803,090            |        | —         |       | 23,803,090              |       |
|                                                                                                                                                                |       |                  |        |           |       |                    |       |
| COMMITMENTS AND  CONTINGENCIES                                                                                                                                      |       |                  |        |           |       |                    |       |
| STOCKHOLDERS’  EQUITY:                                                                                                                                         |       |                  |        |           |       |                    |       |
| Preferred stock-  $.0001 par value, 1,000,000 shares authorized; 0 issued and outstanding                                                                           |       |                  |        |           |       |                    |       |
| Common stock-  $.0001 par value; 100,000,000 shares authorized; 26,250,000 issued and  outstanding (which includes 4,197,900 shares subject to possible redemption) |       | 2,625                 |        |           |       | 2,625                   |       |
| Additional  paid-in capital                                                                                                                                         |       | 95,747,698            |        | (14,280,000    | )          | 81,467,698              |       |
| Earnings (deficit)  accumulated during the development stage                                                                                                        |       | 918,664               |        | (4,620,000     | )          | (3,701,336              | )          |
| Total  stockholders’ equity                                                                                                                                    |       | 96,668,987            |        | (18,900,000    | )          | 77,768,987              |       |
| Total  liabilities and stockholders’ equity                                                                                                                    |       | $                     | 121,691,178 |           | $          | —                  |       | $ | 121,691,178 |   |
|                                                                                                                                                                     |            |                       |             |                |            |                         |            |  |  |  |  |  |  |

 

14

----

 

**NOTEJ—COMMITMENTS AS RESTATED**

 

The Company has acommitment to pay to CRT Capital Group LLC a 2% fee of the gross offeringproceeds, or $2,520,000, payable upon the Company’s consummation of a BusinessCombination.

 

The Company has engagedCRT Capital Group LLC, the underwriter, on a non-exclusive basis, as theiragent for the solicitation of the exercise of the warrants. The Company hasagreed to pay CRT Capital Group LLC a commission equal to 2% of the exerciseprice for each warrant exercised more than one year from October 19, 2005 if theexercise was solicited by CRT Capital Group LLC.

 

Under anagreement entered into May 2006, an entity owned and controlled by Stuart R. Lloyd, whowill become the Company’s Executive Vice President and Chief Financial Officerand will receive a payment of $100,000 if the acquisition of ATS is completed. TheCompany will alsoreimburse for out-of-pocket costs. The services being provided by this entityare performed by Mr. Lloyd and consist of consulting on financial andaccounting matters, including evaluation of ATS’ operations, reviewing monthlyfinancial information, commenting on filings to be made with the Securities andExchange Commission, and assisting in the preparation for, and participationin, investor presentations and similar activities.

 

**NOTE K—COMMONSTOCK RESERVED FOR ISSUANCE**

 

At June 30, 2006,42,000,000 shares of common stock were reserved for issuance upon exercise ofredeemable warrants.

 

**NOTEL—FOUNDERS**

 

One or more of theFounders agreed with the Company that during the 40 trading day periodbeginning 60 days after the end of the “restricted period” underRegulation M, they collectively would spend up to $2,000,000 to purchasewarrants in the public marketplace at prices not to exceed $.65 per warrant.They have further agreed that any warrants purchased by them or theiraffiliates or designees would not be sold or transferred until the completionof a Business Combination. As of June 30, 2006, 3,699,528 warrants have beenpurchased by the Founders.

** **

**NOTEM—PROPOSED ACQUISITION OF ADVANCED TECHNOLOGY SYSTEMS, INC.**

 

On April 19, 2006,the Company entered into a Stock Purchase Agreement (the “Stock PurchaseAgreement”) with Advanced Technology Systems, Inc. (“ATS”), the holders ofall of the outstanding shares of ATS, and Claude Rumsey, as shareholders’representative, pursuant to which we will acquire (the “Acquisition”) all ofthe issued and outstanding shares of ATS and, indirectly through ATS, all ofthe outstanding shares of ATS’ wholly owned subsidiaries.

 

The Company will purchaseall of the outstanding capital stock of ATS for up to $124 million.  The purchase price will be comprised of $84million in cash and $1 million in stock at closing and up to $39 million inaggregate additional cash payments over a two-year period upon ATS’ achievementof specified targets for adjusted earnings before interest, taxes, depreciationand amortization following the closing.

 

**NOTEN—DEFERRED ACQUISITION COSTS**

 

As of June 30, 2006, the Company had accumulated $614,625 in deferredcosts related to the proposed acquisition of ATS.  These charges will be capitalized contingentupon the completion of the Acquisition following the required approval by theCompany’s stockholders and the fulfillment of certain other conditions.  If the Acquisition is not completed thesecharges will be recorded as expenses.

 

15

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**Item 2. Management’s Discussion and Analysis of FinancialCondition and Results of Operations.**

 

***FORWARD-LOOKINGSTATEMENTS***

 

*This Quarterly Report on Form 10-Q/A and the documentsincorporated by reference into the Quarterly Report onForm 10-Q/A include forward-looking statements within the meaning of Section27A of the Securities Act of 1933 and Section 21E of the Securities ExchangeAct of 1934. These forward-looking statements can be identified by the use offorward-looking terminology, including the words “believes,” “estimates,”“anticipates,” “expects,” “intends,” “may,” “will” or “should,” or, in eachcase, their negative or other variations or comparable terminology. Suchstatements include, but are not limited to, any statements relating to our abilityto consummate any acquisition or other business combination and any otherstatements that are not historical facts. These statements are based onmanagement’s current expectations, but actual results may differ materially dueto various factors, including, but not limited to:*

 

•                  *our being a development stage company with nooperating history;*

•                  *our dependence on key personnel, some of whom may ormay not join us following a business combination;*

•                  *risks that the acquisition of ATS or another businesscombination may not be completed due to failure of the conditions to closing ofthe acquisition being satisfied or other factors;*

•                  *our personnel allocating their time to otherbusinesses and potentially having conflicts of interest with our business;*

•                  *our potentially being unable to obtain additionalfinancing to complete a business combination;*

•                  *the ownership of our securities being concentrated;*

•                  *risks associated with the federal services industry;*

•                  *risks associated with the defense industry; and*

•                  *those other risks and uncertainties detailed in theCompany’s filings with the Securities and Exchange Commission.*

 

*By their nature, forward-looking statements involve risksand uncertainties because they relate to events and depend on circumstancesthat may or may not occur in the future. We caution you that forward-lookingstatements are not guarantees of future performance and that our actual resultsof operations, financial condition and liquidity, and developments in theindustry in which we operate, may differ materially from those made in orsuggested by the forward-looking statements contained in this Quarterly Reporton Form 10-Q/A. In addition, even if our results of operations, financialcondition and liquidity, and developments in the industry in which we operate,are consistent with the forward-looking statements contained in this QuarterlyReport on Form 10-Q/A, those results or developments may not be indicative ofresults or developments in subsequent periods.*

 

*These forward-looking statements are subject to numerousrisks, uncertainties and assumptions about us. The forward-looking events wediscuss in this Quarterly Report on Form 10-Q/A speak only as of the date ofsuch statement and might not occur in light of these risks, uncertainties andassumptions. We undertake no obligation and disclaim any obligation to publiclyupdate or revise any forward-looking statements, whether as a result of newinformation, future events or otherwise.*

 

*Unless otherwise provided in this Quarterly Report on Form 10-Q/A,references to “the Company,” “the Registrant,” “we,” “us” and “our” refer toFederal Services Acquisition Corporation.*

 

**MANAGEMENT’S DISCUSSION AND ANALYSIS**

**OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS**

 

We area “blank check” company organized under the laws of the State of Delaware onApril 12, 2005 and were formed for the purpose of acquiring, through amerger, capital stock exchange, asset acquisition, stock purchase or othersimilar business combination, an operating business in the federal 

 

16

----

 

services and defense industries. We intend to use thetrust account funds, together with any additional financing arrangements thatwe undertake, to effect a business combination.

 

Wehave neither engaged in any operations nor generated any revenues nor incurredany debt or expenses during the period ended June 30, 2006, other than inconnection with our public offering and, thereafter, certain legal and otherexpenses related to pursuing acquisitions of target businesses. Our entireactivity since inception has been to prepare for and consummate our initialpublic offering and to identify and investigate target businesses for abusiness combination.

 

Ournet proceeds from the sale of our units, after deducting offering expenses ofapproximately $531,000 and underwriting discounts of $6,300,000, wereapproximately $119,169,000. Of this amount, $117,180,000, was placed in trustand the remaining $1,989,000 was not placed in trust. We will use substantiallyall of the net proceeds of our offering to acquire a target business, includingidentifying and evaluating prospective acquisition candidates, selecting thetarget business, and structuring, negotiating and consummating the businesscombination. To the extent that our capital stock is used in whole or in partas consideration to effect a business combination, the proceeds held in thetrust account as well as any other net proceeds not expended will be used tofinance the operations of the target business. We believe that the fundsavailable to us outside of the trust account will be sufficient to allow us tooperate for at least the next 15 months, assuming that a business combinationis not consummated during that time. For the three and the six months endedJune 30, 2006, respectively, we have incurred the following expenses:

 

•                  $177,727 and$663,327 for legal, accounting, travel and other expenses attendant to the duediligence investigations, structuring, and negotiating of a businesscombination;

 

•                  $22,500 and$45,000 for administrative services and support ($7,500 per month);

 

•                  $22,541 and$64,681 of expenses for legal and accounting fees relating to our SEC reportingobligations;

 

•                  $30,060 and$60,120 for franchise taxes;

 

•                  $21,192 and$42,151 for director and officer liability insurance premiums; and

 

•                  $9,404 and$18,342 for miscellaneous expenses.

 

As ofJune 30, 2006, we had accumulated $614,625 in deferred costs related to theproposed acquisition of Advanced Technology Systems, Inc.  These charges will be capitalized contingentupon the completion of the acquisition following the required approval by ourstockholders and the fulfillment of certain other conditions.  If the acquisition is not completed thesecharges will be recorded as expenses.

 

Forthe three months and the six months ended June 30, 2006, respectively, we haveearned interest from the proceeds held in the trust account in the amount of$1,382,968 and $2,559,696 (including accrued interest of $611,123). For thethree months and the six months ended June 30, 2006, respectively, we haveearned interest from the funds not placed in the trust account of $11,233 and$24,217.

 

As described below, as a result of recording thechange in the fair value of warrant liability, the Company has reported a netloss for the period ended June 30, 2006.

 

We donot believe we will need to raise additional funds in order to meet theexpenditures required for operating our business. However, we may need to raiseadditional funds through a private offering of debt or equity securities ifsuch funds are required to consummate a business combination that is presentedto us. We would only consummate such a fundraising simultaneously with theconsummation of a business combination.

 

OnOctober 25, 2005, we used $154,000 of our general working capital to repay thenotes payable to our initial stockholders, Mr. Jacks and Mr. Schulte. The loanswere repaid in full, without interest, and cancelled.

 

OnOctober 25, 2005, we used $85,000 of our general working capital to paypremiums associated with our directors and officers’ liability insurance. As ofJune 30, 2006, $25,616 of this amount represents the prepaid portion for thecost of such insurance through October 19, 2006.

 

Wehave agreed to pay, through the date of our acquisition of a target business,CM Equity Management, L.P., an affiliate of Messrs. Jacks and Schulte, $7,500per month for office space and certain office and secretarial services.

 

17

----

 

As ofJune 30, 2006, $119,274,694, including interest receivable of $611,123, washeld in trust and we had $1,299,534 of the available funds remaining andavailable to us for our activities in connection with identifying andconducting due diligence of a suitable business combination, and for generalcorporate matters.

 

**CriticalAccounting Policies**

 

Thepreparation of financial statements and related disclosures in conformity withgenerally accepted accounting principles in the United States requiresmanagement to make estimates and assumptions that affect the reported amountsof assets and liabilities, disclosure of contingent assets and liabilities atthe date of the financial statements, and revenues and expenses during theperiods reported. Actual results could materially differ from those estimates.

 

**Prior Restatementof Financial Statements**

** **

We had previously  restated our annual financialstatements for the period ended December 31, 2005 and for the interim periodsended March 31, 2006 and June 30, 2006 to reflect non-operating gains and losesrelated to the classification of and accounting for the warrants to purchasecommon stock associated with the units sold at the initial public offering ofthe Company. The Company had initially classifiedthe value of these warrants to purchase common stock, when applicable, asequity. After further review in connection with the preparation of AmendmentNo. 2 to the Proxy Statement related to the acquisition contemplated by theStock Purchase Agreement by and among the Company, Advanced Technology Systems,Inc., a Virginia corporation ("ATS"), and shareholders of ATS, theCompany had determined that theseinstruments should have been classified as liabilities and, therefore, the fairvalue of each instrument must be recorded as a liability on the Company’sbalance sheet. Changes in the fair values of these instruments resulted  in adjustments to the amount ofthe recorded liabilities and the corresponding gain or loss was recorded in the Company’sstatement of operations. At the date of the conversion of each warrants orportion thereof (or exercise of the warrants or portion thereof, as the casemay be), the corresponding liability will be reclassified as equity.

 

Theaccompanying financial statements for the three and six months ended June 30,2006 were restated to effect thechanges described above. The impact of the adjustments related to theclassification of and accounting for the warrants for the period from inceptionto June 30, 2006 and for the three and six months ended June 30, 2006 aresummarized below. See Notes A(2), C (2), C(3) and I to our Financial Statementsfor an explanation of these restatements. The following table shows the netimpact of the restatements on our net income.

 

**Statementof Operations**

** **
| ** **                                                                                               | ** ** | **For the period from April 12, 2005 (date of inception) through  June 30, 2006** | ** ** |
|----------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------|------------|
| ** **                                                                                               | ** ** | **As Initially**                                                                                                                         | ** ** | ** ** | ** ** | **As Previously** | ** ** |
| ** **                                                                                               | ** ** | **Reported**                                                                                                                                  | ** ** | **Adjustment** | ** ** | **Restated** | ** ** |
| Operating costs                                                                                          |       | $                                                                                                                                             | (1,026,782 | ) | $ | — |   | $ | (1,026,782 | ) |
| Interest income                                                                                          |       | 3,403,080                                                                                                                                     |       |   |   | 3,403,080 |   |
| Loss on warrant  liabilities                                                                             |       | —                                                                                                                                        |       | (4,620,000 | ) | (4,620,000 | ) |
| Income (loss)  before provision for taxes                                                                |       | 2,376,298                                                                                                                                     |       | (4,620,000 | ) | (2,243,702 | ) |
| Provision for  income taxes                                                                              | -current   |                                                                                                                                          | (1,213,793 | ) |   |   | (1,213,793 | ) |
|                                                                                                     | -deferred  |                                                                                                                                          | 134,967    |   | — |   | 134,967 |   |
| Net income (loss)                                                                                        |       |                                                                                                                                          | 1,297,472  |   |   | (4,620,000 | ) |   | (3,322,528 | ) |
| Interest income  attributable to common stock subject to possible conversion (net of taxes of  $294,871) |       | (378,808                                                                                                                                      | )          | — |   | (378,808 | ) |
| Net income (loss)  allocable to common stockholders not subject to possible conversion                   |       | $                                                                                                                                             | 918,664    |   | $ | (4,620,000 | ) | $ | (3,701,336 | ) |
|                                                                                                          |            |                                                                                                                                               |            |  |  |  |  |  |  |  |  |  |

 

18

----

 
| ** **                                                                                               | ** ** | **For the three months ended June 30, 2006** | ** ** |
|----------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------|------------|
| ** **                                                                                               | ** ** | **As Initially**                                            | ** ** | ** ** | ** ** | **As Previously** | ** ** |
| ** **                                                                                               | ** ** | **Reported**                                                     | ** ** | **Adjustment** | ** ** | **Restated** | ** ** |
| Operating costs                                                                                          |       | $                                                                | (283,424   | ) | $ | — |   | $ | (283,424 | ) |
| Interest income                                                                                          |       | 1,394,201                                                        |       | — |   | 1,394,201 |   |
| Gain on warrant  liabilities                                                                             |       | —                                                           |       | 11,760,000 |   | 11,760,000 |   |
| Income before  provision for taxes                                                                       |       | 1,110,777                                                        |       | 11,760,000 |   | 12,870,777 | ) |
| Provision for  income taxes                                                                              | -current   |                                                             | (366,797   | ) | — |   | (366,797 | ) |
|                                                                                                     | -deferred  |                                                             | (134,384   | ) | — |   | (134,384 | ) |
| Net income                                                                                               |       |                                                             | 609,596    |   |   | 11,760,000 |   |   | 12,369,596 |   |
| Interest income  attributable to common stock subject to possible conversion (net of taxes of  $124,736) |       | (151,719                                                         | )          | — |   | (151,719 | ) |
| Net income  allocable to common stockholders not subject to possible conversion                          |       | $                                                                | 457,877    |   | $ | 11,760,000 |   | $ | 12,217,877 |   |
| Weighted average  number of shares outstanding                                                           |       |                                                             |       |   |   |   |   |
| -basic                                                                                                   |       | 26,250,000                                                       |       |   |   | 26,250,000 |   |
|                                                                                                     |       |                                                             |       |   |   |   |   |
| -diluted                                                                                                 |       | 30,548,025                                                       |       |   |   | 30,548,025 |   |
|                                                                                                     |       |                                                             |       |   |   |   |   |
| Net income per  share                                                                                    |       |                                                             |       |   |   |   |   |
| -basic                                                                                                   |       | $                                                                | 0.02       |   |   |   |   | $ | 0.47 |   |
|                                                                                                     |       |                                                             |       |   |   |   |   |
| -diluted                                                                                                 |       | $                                                                | 0.02       |   |   |   |   | $ | 0.02 |   |
|                                                                                                     |       |                                                             |       |   |   |   |   |
| Weighted average  number of shares outstanding exclusive of shares subject to possible  redemption       |       |                                                             |       |   |   |   |   |
| -basic                                                                                                   |       | 22,052,100                                                       |       |   |   | 22,052,100 |   |
|                                                                                                     |       |                                                             |       |   |   |   |   |
| -diluted                                                                                                 |       | 26,350,125                                                       |       |   |   | 26,350,125 |   |
|                                                                                                     |       |                                                             |       |   |   |   |   |
| Net income per  share not subject to possible redemption                                                 |       |                                                             |       |   |   |   |   |
| -basic                                                                                                   |       | $                                                                | 0.02       |   |   |   |   | $ | 0.55 |   |
|                                                                                                     |       |                                                             |       |   |   |   |   |
| -diluted                                                                                                 |       | $                                                                | 0.02       |   |   |   |   | $ | 0.02 |   |

 

19

----

 
| ** **                                                                                              | ** ** | **For the six months ended June 30, 2006** | ** ** |
|---------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------|------------|
| ** **                                                                                              | ** ** | **As Initially**                                          | ** ** | ** ** | ** ** | **As Previously** | ** ** |
| ** **                                                                                              | ** ** | **Reported**                                                   | ** ** | **Adjustment** | ** ** | **Restated** | ** ** |
| Operating costs                                                                                         |       | $                                                              | (893,621   | ) | $ | — |   | $ | (893,621 | ) |
| Interest income                                                                                         |       | 2,583,913                                                      |       | — |   | 2,583,913 |   |
| Gain on warrant  liabilities                                                                            |       | —                                                         |       | 840,000 |   | 840,000 |   |
| Income before  provision for taxes                                                                      |       | 1,690,292                                                      |       | 840,000 |   | 2,530,292 |   |
| Provision for  income taxes                                                                             | -current   |                                                           | (880,793   | ) | — |   | (880,793 | ) |
|                                                                                                    | -deferred  |                                                           | 116,052    |   | — |   | 116,052 |   |
| Net income                                                                                              |       |                                                           | 925,551    |   |   | 840,000 |   |   | 1,765,551 |   |
| Interest income attributable  to common stock subject to possible conversion (net of taxes of $230,871) |       | (280,812                                                       | )          | — |   | (280,812 | ) |
| Net income  allocable to common stockholders not subject to possible conversion                         |       | $                                                              | 644,739    |   | $ | 840,000 |   | $ | 1,484,739 |   |
| Weighted average  number of shares outstanding                                                          |       |                                                           |       |   |   |   |   |
| -basic                                                                                                  |       | 26,250,000                                                     |       |   |   | 26,250,000 |   |
|                                                                                                    |       |                                                           |       |   |   |   |   |
| -diluted                                                                                                |       | 30,412,162                                                     |       |   |   | 30,412,162 |   |
|                                                                                                    |       |                                                           |       |   |   |   |   |
| Net income per  share                                                                                   |       |                                                           |       |   |   |   |   |
| -basic                                                                                                  |       | $                                                              | 0.04       |   |   |   |   | $ | 0.07 |   |
|                                                                                                    |       |                                                           |       |   |   |   |   |
| -diluted                                                                                                |       | $                                                              | 0.03       |   |   |   |   | $ | 0.03 |   |
|                                                                                                    |       |                                                           |       |   |   |   |   |
| Weighted average  number of shares outstanding exclusive of shares subject to possible  redemption      |       |                                                           |       |   |   |   |   |
| -basic                                                                                                  |       | 22,052,100                                                     |       |   |   | 22,052,100 |   |
|                                                                                                    |       |                                                           |       |   |   |   |   |
| -diluted                                                                                                |       | 26,214,262                                                     |       |   |   | 26,214,262 |   |
|                                                                                                    |       |                                                           |       |   |   |   |   |
| Net income per  share not subject to possible redemption                                                |       |                                                           |       |   |   |   |   |
| -basic                                                                                                  |       | $                                                              | 0.03       |   |   |   |   | $ | 0.07 |   |
|                                                                                                    |       |                                                           |       |   |   |   |   |
| -diluted                                                                                                |       | $                                                              | 0.02       |   |   |   |   | $ | 0.02 |   |

 

20

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**BalanceSheet Impact**

** **

Thefollowing table sets forth the effects for the restatement adjustment on thecompany’s balance sheet as of June 30, 2006:

 
| ** **                                                                                                                                                          | ** ** | **June 30, 2006**     | ** **  | ** **     | ** ** | **June 30, 2006** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------|-------------|----------------|------------|-------------------|------------|
| ** **                                                                                                                                                          | ** ** | **As Initially** | ** **  | ** **     | ** ** | **As Previously** | ** ** |
| ** **                                                                                                                                                          | ** ** | **Reported**          | ** **  | **Adjustment** | ** ** | **Restated**      | ** ** |
| ASSETS                                                                                                                                                              |       |                  |        |           |       |              |       |
| Current assets:                                                                                                                                                     |       |                  |        |           |       |              |       |
| Cash and cash  equivalents                                                                                                                                          |       | $                     | 1,299,534   |           | $          | —            |       | $ | 1,299,534 |   |
| Prepaid expenses                                                                                                                                                    |       | 25,616                |        | —         |       | 25,616            |       |
| Prepaid income  taxes                                                                                                                                               |       | 66,004                |        | —         |       | 66,004            |       |
| Total current  assets                                                                                                                                               |       | 1,391,154             |        |           |       | 1,391,154         |       |
| Short-term  investments held in Trust Account (including interest receivable of  $611,123)(fair value $119,010,275)                                                 |       | 119,010,275           |        | —         |       | 119,010,275       |       |
| Cash and cash  equivalents held in trust                                                                                                                            |       | 264,419               |        | —         |       | 264,419           |       |
| Deferred income  tax benefit                                                                                                                                        |       | 410,705               |        | —         |       | 410,705           |       |
| Deferred  acquisition costs                                                                                                                                         |       | 614,625               |        | —         |       | 614,625           |       |
| Total assets                                                                                                                                                        |       | $                     | 121,691,178 |           | $          | —            |       | $ | 121,691,178 |   |
|                                                                                                                                                                |       |                  |        |           |       |              |       |   |   |   |
| LIABILITIES AND  STOCKHOLDERS’ EQUITY                                                                                                                          |       |                  |        |           |       |              |       |
| Current  liabilities:                                                                                                                                               |       |                  |        |           |       |              |       |
| Accrued expenses                                                                                                                                                    |       | $                     | 923,951     |           | $          | —            |       | $ | 923,951 |   |
| Income tax  payable-current                                                                                                                                         |       | 19,412                |        | —         |       | 19,412            |       |
| Deferred income  tax                                                                                                                                                |       | 275,738               |        | —         |       | 275,738           |       |
| Warrant  liabilities                                                                                                                                                |       | —                |        | 18,900,000     |       | 18,900,000        |       |
| Total current  liabilities                                                                                                                                          |       | 1,219,101             |        | 18,900,000     |       | 20,119,101        |       |
| Common Stock,  subject to possible redemption 4,197,900 shares                                                                                                      |       | 23,424,282            |        | —         |       | 23,424,282        |       |
| Interest income  attributable to common stock subject to possible redemption (net of taxes of  $294,871)                                                            |       | 378,808               |        | —         |       | 378,808           |       |
| Total common  stock, subject to possible redemption                                                                                                                 |       | 23,803,090            |        | —         |       | 23,803,090        |       |
|                                                                                                                                                                |       |                  |        |           |       |              |       |
| COMMITMENTS AND  CONTINGENCIES                                                                                                                                      |       |                  |        |           |       |              |       |
| STOCKHOLDERS’  EQUITY:                                                                                                                                         |       |                  |        |           |       |              |       |
| Preferred stock-  $.0001 par value, 1,000,000 shares authorized; 0 issued and outstanding                                                                           |       |                  |        |           |       |              |       |
| Common stock-  $.0001 par value; 100,000,000 shares authorized; 26,250,000 issued and  outstanding (which includes 4,197,900 shares subject to possible redemption) |       | 2,625                 |        | —         |       | 2,625             |       |
| Additional  paid-in capital                                                                                                                                         |       | 95,747,698            |        | (14,280,000    | )          | 81,467,698        |       |
| Earnings (deficit)  accumulated during the development stage                                                                                                        |       | 918,664               |        | (4,620,000     | )          | (3,701,336        | )          |
| Total  stockholders’ equity                                                                                                                                    |       | 96,668,987            |        | (18,900,000    | )          | 77,768,987        |       |
| Total  liabilities and stockholders’ equity                                                                                                                    |       | $                     | 121,691,178 |           | $          | —            |       | $ | 121,691,178 |   |
|                                                                                                                                                                     |            |                       |             |                |            |                   |            |  |  |  |  |  |  |

 

21

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**ProposedAcquisition of Advanced Technology Systems, Inc.**

 

OnApril 19, 2006, we entered into a Stock Purchase Agreement (the “StockPurchase Agreement”) with Advanced Technology Systems, Inc. (“ATS”), theholders of all of the outstanding shares of ATS, and Claude Rumsey, asshareholders’ representative, pursuant to which we will acquire (the“Acquisition”) all of the issued and outstanding shares of ATS and, indirectlythrough ATS, all of the outstanding shares of ATS’ wholly owned subsidiaries.

 

ATSprovides systems integration and application development, IT infrastructuremanagement and strategic IT consulting services to U.S. federal governmentagencies. As part of its complete systems life-cycle approach, ATS offersits clients an integrated full-service IT infrastructure outsourcing solutionthat allows an agency to focus on its core mission while reducing costs andmaintaining system uptime.

 

TheAcquisition is expected to be consummated during the fall of 2006, after therequired approval by our stockholders and the fulfillment of certain otherconditions. For additional information on the Acquisition, please see ourCurrent Report on Form 8-K filed with the Securities and Exchange Commission onApril 20, 2006 and our preliminary proxy statement filed with the Securitiesand Exchange Commission on July 28, 2006.

 

**Item3. Quantitative and Qualitative Disclosures about Market Risk.**

 

Marketrisk is the sensitivity of income to changes in interest rates, foreignexchanges, commodity prices, equity prices, and other market-driven rates orprices. We are not presently engaged in, and if a suitable business target isnot identified by us prior to the prescribed liquidation of the trust account,we may not engage in, any substantive commercial business. Accordingly, therisks associated with foreign exchange rates, commodity prices, and equityprices are not significant. The available funds which are not immediatelyrequired to pay our expenses have been invested only in United States“government securities,” defined as any Treasury Bill issued by the UnitedStates having a maturity of one hundred and eighty days or less. Given ourlimited risk in our exposure to U.S. Treasury Bills, we do not view theinterest rate risk to be significant. We do not enter into derivatives or otherfinancial instruments for trading or speculative purposes.

 

**Item 4. Controls and Procedures.**

 

Ourmanagement carried out an evaluation, with the participation of our ChiefExecutive Officer (principal executive officer) and our Chief Financial Officer(principal financial officer) of the effectiveness of our disclosure controlsand procedures (as defined in Rule 13a-15(e) or 15d – 15(e) of the SecuritiesExchange Act of 1934, as amended) as of June 30, 2006. Based upon thatevaluation, our Chief Executive Officer and Chief Financial Officer haveconcluded that our disclosure controls and procedures were effective to ensurethat information required to be disclosed by us in reports that we file orsubmit under the Securities Exchange Act of 1934, as amended, is recorded,processed, summarized and reported, within the time periods specified in therules and forms of the Securities and Exchange Commission.

 

22

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Therehas not been any change in our internal control over financial reporting (asdefined in Rule 13a-15(f) or 15d – 15(f) of the Securities Exchange Act of1934, as amended) in connection with the evaluation required by Rule 13a-15(d)under the Exchange Act that occurred during the quarter ended June 30, 2006,that has materially affected, or is reasonably likely to materially affect, ourinternal control over financial reporting.

 

PART II – OTHER INFORMATION

 

**Item 1. Legal Proceedings.**

 

Notapplicable.

 

**Item 1A. Risk Factors.**

 

Inaddition to our risk factors contained in our Annual Report on Form 10-K/A forthe fiscal year ended December 31, 2005, filed with the Securities and ExchangeCommission on September      , 2006, you shouldconsider the following risk factors relating to the business and our proposedacquisition of ATS:

 

**Risks Associated with the Acquisition of ATS**

** **

***Wemay not be able to consummate the acquisition, or another business combination,within the required time frame, in which case, we would be forced to liquidate.***

*** ***

We must complete abusiness combination with a fair market value of at least 80% of our net assetsat the time of acquisition by April 25, 2007 (or by October 25, 2007if a letter of intent, agreement in principle or a definitive agreement hasbeen executed by April 25, 2007 and the business combination relativethereto has not been consummated by such date). If we fail to consummate theacquisition within the required time frame, we will be forced to liquidate ourassets.

 

***Ifwe are forced to liquidate before a business combination, our publicstockholders will receive less than $6.00 per share upon distribution of thetrust account, and our warrants will expire worthless.***

*** ***

If we are unable tocomplete the acquisition or another business combination and are forced toliquidate our assets, the per share liquidation value will be less than $6.00because of the expenses related to our initial public offering, our operatingexpenses and the costs of performing due diligence for the acquisition,negotiating the stock purchase agreement and otherwise seeking a businesscombination. Furthermore, the warrants will expire worthless if we liquidatebefore the completion of a business combination.

 

***Certainof our key personnel may join us following the acquisition and may be unfamiliarwith the requirements of operating a public company, which may adversely affectour operations, including significantly reducing our revenues and net income,if any.***

*** ***

Our ability tosuccessfully effect the acquisition of ATS will be completely dependent uponthe efforts of our key personnel. Upon the completion of the acquisition, ourcurrent Chairman and Chief Executive Officer, Joel R. Jacks, and our currentPresident, Treasurer and Secretary, Peter M. Schulte, will resign as officersbut will remain members of our board of directors. Dr. Edward H. Bersoffwill become our Chairman, President and Chief Executive Officer, Stuart R.Lloyd will become our Executive Vice President and Chief Financial Officer, andLeon C. Perry, the Senior Vice President and Chief Operating Officer of ATSwill continue in that role. Dr. Bersoff and Mr. Lloyd each havesignificant public company experience. The members of the management of ATS whowill remain with us following the closing of the acquisition do not have suchexperience and are unfamiliar with the requirements of operating a publiccompany under U.S. securities laws, which could cause us to expend time andresources helping them become familiar with such laws. This could 

 

23

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be expensive andtime-consuming and could lead to various regulatory issues that may adverselyaffect our operations, including significantly reducing our revenues and netincome, if any.

 

***Weexpect to incur significant costs associated with the acquisition, whether ornot the acquisition is completed, which costs will significantly reduce theamount of cash available to be used to consummate a business combination.***

*** ***

We expect to incursignificant costs associated with the acquisition, whether or not theacquisition is completed. By incurring these costs, we will significantlyreduce the amount of cash available to be used for consummating a businesscombination.

 

***Asa result of the acquisition, our stockholders will be solely dependent on asingle business.***

*** ***

As a result of theacquisition, our stockholders will be solely dependent upon the performance ofATS and its business. ATS will remain subject to a number of risks that relategenerally to the federal services industry and other risks. See “Risks Relatedto our Business and Operations Following the Acquisition.”

 

***If the acquisition’s benefits do not meet theexpectations of financial or industry analysts, the market price of our commonstock may decline.***

*** ***

The market price of our common stock may decline as a result of theacquisition if:

 

•       we do not achieve the perceived benefits of the acquisition as rapidlyas, or to the extent anticipated by, financial or industry analysts; or

 

•       the effect of the acquisition on our financial results is not consistentwith the expectations of financial or industry analysts.

 

Accordingly, investors may experience a loss as a result of a decreasingstock price.

 

***Our directors may have certain conflicts indetermining to recommend the acquisition of ATS since certain of theirinterests, and certain interests of their affiliates and associates, aredifferent from, or in addition to, the interests of our stockholders.***

*** ***

Members of our board of directors have interests in and arising from theacquisition of ATS that are different from, or in addition to, your interestsas a stockholder which could result in a real or perceived conflict ofinterest. These interests include the fact that certain of the shares of commonstock owned by them, or their affiliates and associates, would become worthlessif the acquisition is not approved and we otherwise fail to consummate abusiness combination prior to our liquidation date. Such shares, as of June 30,2006, had a market value of approximately $28,245,000. Similarly, the warrantsowned by such directors, affiliates and associates to purchase 3,699,528 shares of common stock, with an aggregate market value of $1,627,792 asof June 30, 2006, would expire worthless. If the acquisition is approved,Messrs. Jacks and Schulte will continue to serve as members of our boardof directors after the acquisition, and will be compensated for such services.Furthermore, Dr. Bersoff, who currently serves as our Vice Chairman, willbecome our Chairman, President and Chief Executive Officer, and be compensatedin such capacity.

 

 

24

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***Weplan to issue shares of our common stock to complete the acquisition of ATS,which will reduce the equity interest of our stockholders.***

*** ***

Our Amended and RestatedCertificate of Incorporation authorizes the issuance of up to 100.0 millionshares of common stock, par value $0.0001 per share, and 1.0 million shares ofpreferred stock, par value $0.0001 per share. We currently have 31,750,000authorized but unissued shares of our common stock available for issuance(after appropriate reservation for the issuance of shares upon full exercise ofour outstanding warrants) and all of the 1.0 million shares of preferred stockavailable for issuance. As set forth in the stock purchase agreement, certainATS shareholders have elected to receive a portion of the purchase price forthe acquisition in shares of our common stock. Such shareholders will receivean aggregate of 173,913 shares of our common stock on the closing date. Theissuance of such shares will reduce the equity interest of our stockholders ona pro rata basis.

 

***If our initial stockholders and certain ATSshareholders exercise their registration rights, it may have an adverse effecton the market price of our common stock.***

*** ***

Our initial stockholders are entitled to demand that we register theresale of their shares of common stock in certain circumstances. If our initialstockholders exercise their registration rights with respect to all of theirshares of common stock, then there will be an additional 5,250,000 shares ofcommon stock eligible for trading in the public market. We have also grantedregistration rights to those shareholders of ATS who will receive 173,913shares of our common stock upon closing of the acquisition pursuant to thestock purchase agreement. The presence of this additional number of shares ofcommon stock eligible for trading in the public market may have an adverseeffect on the market price of our common stock.

 

**Risks Related to Our Business and OperationsFollowing the Acquisition**

** **

***Theloss or impairment of ATS’ relationship with the U.S. government and itsagencies could adversely affect ATS business.***

*** ***

ATS derivedapproximately 90% of its total revenue in fiscal 2005 from contracts with theU.S. government and government-sponsored enterprises. ATS expects that U.S.government contracts will continue to be a significant source of revenue forthe foreseeable future. If ATS or any of its partners was suspended orprohibited from contracting with the U.S. government generally or any agency orrelated entity, if ATS’ reputation or relationship with government agencies wasimpaired, or if the U.S. government or any agency or related entity ceaseddoing business with them or significantly decreased the amount of business itdoes with them, ATS’ business, prospects, financial condition and operatingresults could be significantly impaired.

 

***Changesby the U.S. government in its spending priorities may cause a reduction in thedemand for the products or services that we may ultimately offer, which couldadversely affect our business.***

*** ***

Changes in the U.S.government budgetary priorities could directly affect ATS’ financialperformance. Government expenditures tend to fluctuate based on a variety ofpolitical, economic and social factors. A significant decline in governmentexpenditures, or a shift of expenditures away from programs ATS supports, or achange in U.S. government contracting policies causing its agencies to reducetheir expenditures under contracts, to exercise their right to terminatecontracts at 

 

25

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any time withoutpenalty, not to exercise options to renew contracts or to delay or not enterinto new contracts, could adversely affect ATS’ business, prospects, financialcondition or operating results.

 

***ATSis required to comply with complex procurement laws and regulations, and thecost of compliance with these laws and regulations and penalties and sanctionsfor any non-compliance could adversely affect ATS’ business.***

*** ***

ATS is required tocomply with laws and regulations relating to the administration and performanceof U.S. government contracts, which affect how ATS does business with itscustomers and imposes added costs on its business. If a government review orinvestigation uncovers improper or illegal activities, ATS may be subject tocivil and criminal penalties and administrative sanctions, includingtermination of contracts, forfeiture of profits, suspension of payments, finesand suspension or debarment from doing business with U.S. government agencies,any of which could materially adversely affect ATS’ business, prospects,financial condition or operating results.

 

***TheU.S. government may reform its procurement or other practices in a manneradverse to ATS.***

*** ***

Because ATS derives asignificant portion of its revenues from contracts with the U.S. government orits agencies, we believe that the success and development of ATS’ business willdepend on its continued successful participation in federal contractingprograms. The U.S. government may reform its procurement practices or adopt newcontracting rules and regulations, including cost-accounting standards,that could be costly to satisfy or that could impair ATS’ ability to obtain newcontracts. It also could adopt new contracting methods to General ServicesAdministration, or GSA, or other government-wide contracts, or adopt newstandards for contract awards intended to achieve certain socio-economic orother policy objectives, such as establishing new set-aside programs for smallor minority-owned businesses. In addition, the U.S. government may facerestrictions from new legislation or regulations, as well as pressure fromgovernment employees and their unions, on the nature and amount of services theU.S. government may obtain from private contractors. These changes could impairATS’ ability to obtain new contracts. Any new contracting methods could becostly or administratively difficult for ATS to implement and, as a result,could harm its operating results.

 

***Governmentcontracts are usually awarded through a competitive bidding process thatentails risks not present in other circumstances.***

*** ***

A significant portion ofATS’ contracts and task orders with the U.S. government are awarded through acompetitive bidding process. ATS expects that much of the business it will seekin the foreseeable future will continue to be awarded through competitivebidding. Budgetary pressures and changes in the procurement process have causedmany government clients to increasingly purchase goods and services throughindefinite delivery/indefinite quantity, or ID/IQ, contracts, GSA schedulecontracts and other government-wide acquisition contracts, or GWACs. Thesecontracts, some of which are awarded to multiple contractors, have increasedcompetition and pricing pressure, requiring ATS to make sustained post-awardefforts to realize revenue under each such contract. Competitive biddingpresents a number of risks, including without limitation:

 

•       the need tobid on programs in advance of the completion of their design, which may resultin unforeseen technological difficulties and cost overruns;

 

•       thesubstantial cost and managerial time and effort that ATS may spend to preparebids and proposals for contracts that may not be awarded to ATS;

 

•       the need toaccurately estimate the resources and cost structure that will be required toservice any contract ATS is awarded; and

 

•       the expenseand delay that may arise if ATS’ or its partners’ competitors protest orchallenge contract awards made to ATS or its partners pursuant to competitivebidding, and the risk that 

 

26

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any such protest orchallenge could result in the resubmission of bids on modified specifications,or in termination, reduction or modification of the awarded contract.

 

If ATS is unable toconsistently win new contract awards over any extended period, ATS’ businessand prospects will be adversely affected and that could cause ATS’ actual resultsto be adversely affected. In addition, upon the expiration of a contract, ifthe client requires further services of the type provided by the contract,there is frequently a competitive rebidding process. There can be no assurancethat we will win any particular bid, or that we will be able to replacebusiness lost upon expiration or completion of a contract, and the terminationor non-renewal of any of our significant contracts could cause our actualresults could be adversely affected.

 

***Restrictionson or other changes to the U.S. government’s use of service contracts may harmATS’ operating results.***

*** ***

ATS derives asignificant amount of its revenue from service contracts with the U.S.government. The U.S. government may face restrictions from new legislation,regulations or government union pressures, on the nature and amount of servicesthe government may obtain from private contractors. Any reduction in thegovernment’s use of private contractors to provide federal services wouldadversely impact ATS’ business.

 

***ATS’contracts with the U.S. government and its agencies are subject to audits andcost adjustments.***

*** ***

U.S. governmentagencies, including the Defense Contract Audit Agency, or the DCAA, routinelyaudit and investigate government contracts and government contractors’ incurredcosts, administrative processes and systems. These agencies review ATS’performance on contracts, pricing practices, cost structure and compliance withapplicable laws, regulations and standards. They also review ATS’ compliancewith government regulations and policies and the adequacy of ATS’ internalcontrol systems and policies, including ATS’ purchasing, property, estimating,compensation and management information systems. Any costs found to beimproperly allocated to a specific contract will not be reimbursed, and anysuch costs already reimbursed must be refunded. Moreover, if any of theadministrative processes and systems is found not to comply with requirements,ATS may be subjected to increased government scrutiny and approval that coulddelay or otherwise adversely affect ATS’ ability to compete for or performcontracts. Therefore, an unfavorable outcome to an audit by the DCAA or anothergovernment agency could cause actual results to be adversely affected and differmaterially from those anticipated. If a government investigation uncoversimproper or illegal activities, ATS may be subject to civil and criminalpenalties and administrative sanctions, including termination of contracts,forfeitures of profits, suspension of payments, fines and suspension ordebarment from doing business with the U.S. government. In addition, ATS couldsuffer serious reputational harm if allegations of impropriety were madeagainst ATS. Each of these results could cause actual results being adverselyaffected.

 

***Aportion of ATS’ business depends upon obtaining and maintaining requiredsecurity clearances, and its failure to do so could result in termination ofcertain of its contracts or cause it to be unable to bid or rebid on certaincontracts.***

*** ***

Some U.S. governmentcontracts require ATS’ employees to maintain various levels of securityclearances, and ATS may be required to maintain certain facility securityclearances complying with U.S. government requirements.

 

Obtaining and maintainingsecurity clearances for employees involves a lengthy process, and it isdifficult to identify, recruit and retain employees who already hold securityclearances. If ATS’ employees are unable to obtain or retain securityclearances or if such employees who hold security clearances terminate theiremployment with ATS, the customer whose work requires cleared employees couldterminate the contract or decide not to renew it upon its expiration. To theextent ATS is not able to engage employees with the required securityclearances for a particular contract, 

 

27

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ATS may not be able tobid on or win new contracts, or effectively re-bid on expiring contracts, whichcould adversely affect ATS’ business.

 

In addition, ATS expectsthat some of the contracts on which it will bid will require it to demonstrateits ability to obtain facility security clearances and perform work withemployees who hold specified types of security clearances. A facility securityclearance is an administrative determination that a particular facility iseligible for access to classified information or an award of a classifiedcontract. A contractor or prospective contractor must meet certain eligibilityrequirements before it can be processed for facility security clearance.Contracts may be awarded prior to the issuance of a facility securityclearance, and in such cases the contractor is processed for facility securityclearance at the appropriate level and must meet the eligibility requirementsfor access to classified information. ATS’ ability to obtain and maintainfacility security clearances has a direct impact on its ability to compete forand perform U.S. government contracts the performance of which require accessto classified information. We do not expect potential acquisitions to endangerATS’ facility clearances. However, to the extent that any acquisition or mergercontemplated by ATS might adversely impact its eligibility for facilitysecurity clearance, the U.S. government could revoke ATS’ facility securityclearance if ATS was unable to adequately address concerns regarding potentialunauthorized access to classified information.

 

***ATSmay not receive the full amounts authorized under the contracts included in itsbacklog, which could reduce its revenue in future periods.***

*** ***

ATS’ backlog consists offunded backlog, which is based on amounts actually obligated by a client forpayment of goods and services, and unfunded backlog, which is based uponmanagement’s estimate of the future potential of our existing contracts andtask orders, including options, to generate revenue. ATS’ unfunded backlog maynot result in actual revenue in any particular period, or at all, which couldcause ATS’ actual results to differ materially from those anticipated.

 

***Withoutadditional Congressional appropriations, some of the contracts included in ATS’backlog will remain unfunded which could significantly harm ATS’ prospects.***

*** ***

Although many of ATS’U.S. government contracts require performance over a period of years, Congressoften appropriates funds for these contracts for only one year at a time. As aresult, ATS’ contracts typically are only partially funded at any point duringtheir term, and all or some of the work intended to be performed under thecontracts will remain unfunded pending subsequent Congressional appropriationsand the obligation of additional funds to the contract by the procuring agency.Nevertheless, ATS estimates its share of the contract values, including valuesbased on the assumed exercise of options relating to these contracts, incalculating the amount of its backlog. Because ATS may not receive the fullamount it expects under a contract, ATS’ estimate of its backlog may beinaccurate.

 

***Lossof ATS’ GSA contracts or GWACs would impair ATS’ ability to attract newbusiness.***

*** ***

ATS is a primecontractor under several GSA contracts, Blanket Purchase Agreements, and GWACschedule contracts. ATS’ ability to continue to provide services under thesecontracts will continue to be important to ATS’ business because of themultiple opportunities for new engagements each contract provides. If ATS wereto lose its position as prime contractor on one or more of these contracts, ATScould lose substantial revenues and our operating results could be adverselyaffected. ATS’ GSA contracts and other GWACs have an initial term of five ormore years, with multiple options exercisable at the government client’sdiscretion to extend the contract for one or more years. There can be noassurances that government clients will continue to exercise the optionsremaining on ATS’ current contracts, nor can ATS be assured that future clientswill exercise options on any contracts ATS may receive in the future.

 

28

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***U.S.government contracts often contain provisions that are unfavorable, which couldadversely affect ATS’ business.***

*** ***

U.S. governmentcontracts contain provisions and are subject to laws and regulations that givethe U.S. government rights and remedies not typically found in commercialcontracts, including without limitation, allowing the U.S. government to:

 

•       terminateexisting contracts for convenience, as well as for default;

 

•       establishlimitations on future services that can be offered to prospective clients basedon conflict of interest regulations;

 

•       reduce ormodify contracts or subcontracts;

 

•       cancelmulti-year contracts and related orders if funds for contract performance forany subsequent year become unavailable;

 

•       decline toexercise an option to renew a multi-year contract;

 

•       claimintellectual property rights in products provided by ATS; and

 

•       suspend orbar ATS from doing business with the federal government or with a governmentalagency.

 

***Themarkets ATS competes in are highly competitive, and many of the companies ATScompetes against have substantially greater resources.***

*** ***

The markets in which ATSoperates include a large number of participants and are highly competitive.Many of ATS’ competitors may compete more effectively than ATS can because theyare larger, better financed and better known companies than ATS. In order tostay competitive in our industry, ATS must also keep pace with changingtechnologies and client preferences. If ATS is unable to differentiate ourservices from those of our competitors, ATS’ revenue may be adversely affected.In addition, ATS’ competitors have established relationships among themselvesor with third parties to increase their ability to address client needs. As aresult, new competitors or alliances among competitors may emerge and competemore effectively than ATS can. There is also a significant industry trendtowards consolidation, which may result in the emergence of companies who arebetter able to compete against ATS. The results of these competitive pressurescould cause ATS’ business to be adversely affected.

 

***ATS’failure to attract and retain qualified employees, including its seniormanagement team, may adversely affect its business.***

*** ***

ATS’ continued successdepends to a substantial degree on its ability to recruit and retain thetechnically skilled personnel it needs to serve its clients effectively. ATS’business involves the development of tailored solutions for its clients, aprocess that relies heavily upon the expertise and services of employees.Accordingly, ATS’ employees are its most valuable resource. Competition forskilled personnel in the information technology services industry is intense,and technology service companies often experience high attrition among theirskilled employees. There is a shortage of people capable of filling thesepositions and they are likely to remain a limited resource for the foreseeablefuture. Recruiting and training these personnel requires substantial resources.ATS’ failure to attract and retain technical personnel could increase its costsof performing its contractual obligations, reduce its ability to efficientlysatisfy its clients’ needs, limit its ability to win new business and constrainits future growth.

 

***ATS is dependent upon key personnel whose loss mayhave an adverse impact on ATS’ business.***

*** ***

ATS depends on the expertise, experience and continued services of itssenior management employees, especially Leon C. Perry, its Senior VicePresident and Chief Operating Officer. 

 

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Mr. Perry has acquired specialized knowledge and skills withrespect to ATS and its operations and most decisions concerning the business ofATS will be made or significantly influenced by him. The loss of Mr. Perryor other senior management employees of ATS, or an inability to attract orretain other key individuals, could materially adversely affect ATS’ business.If Mr. Perry or other senior management were to leave ATS following theacquisition, we could face substantial difficulty in hiring qualifiedsuccessors and could experience a loss in productivity while any successorobtains the necessary training and experience. ATS will seek to compensate andincentivize key executives, as well as other employees, through competitivesalaries and bonus plans, but there can be no assurance that these programswill allow ATS to retain key employees or hire new key employees.

 

***If ATS is unable to fund its capital expenditures,ATS may not be able to continue to develop new offerings and***services, which would have a material adverse effect on its business.

*** ***

In order to fund ATS capital expenditures, we may be required to incurborrowings or raise capital through the sale of debt or equity securities. Ourability to access the capital markets for future offerings may be limited byour and ATS’ financial condition at the time of any such offering as well as byadverse market conditions resulting from, among other things, general economicconditions and contingencies and uncertainties that are beyond our or ATS’control. Our failure to obtain the funds for necessary future capitalexpenditures would limit ATS’ ability to****develop newofferings and services and could have a material adverse effect on ourbusiness, results of operations and financial condition.

 

***Future acquisitions by us or ATS would subject usand ATS to additional business, operating and industry risks, the impact ofwhich cannot presently be evaluated, and could adversely impact our or ATS’capital structure.***

*** ***

We plan to pursue other acquisition opportunities following the closingof the ATS acquisition in an effort to take advantage of the platform we expectATS to constitute. Although we are often engaged in preliminary discussionswith acquisition candidates, as of the date of this proxy statement we have nobinding commitments or agreements to enter into any acquisition. Following theacquisition of ATS, we will not be limited to any particular industry or typeof business that we may acquire. Accordingly, there is no current basis for youto evaluate the possible merits or risks of the particular business or assetsthat we may acquire, or of the industry in which such business operates. Inaddition, the financing of any acquisition completed by us after the ATSacquisition could adversely impact our capital structure as any such financingwould likely include the issuance of additional equity securities and/or theborrowing of additional funds.

*** ***

***Members of our board of directors may haveconflicts of interest that could hinder our ability to make acquisitions.***

*** ***

One of our growth strategies following completion of the acquisition ofATS will be to make selective acquisitions of complementary businesses. Two ofour directors, Messrs. Jacks and Schulte, are principals of CM Equity Partners,a sponsor of private equity funds. Some of these funds are focused on investments in, among other things, businesses inthe federal services sector. Messrs. Jacks and Schulte also serve on the boardsof a number of CM Equity portfolio companies and, with Dr. Bersoff, are membersof the board of directors of ICF International, Inc., a diversified federalservices business that plans to grow in part through acquisitions. It ispossible that CM Equity Partners and related funds and portfolio companies andICF International, Inc. could be interested in acquiring businesses that wewould also be interested in, and that these relationships could hinder ourability to carry out our acquisition strategy. None of CM Equity Partners, Mr.Jacks, Mr. Schulte nor ICF International, Inc. is an investor or potentialinvestor in ATS (except, in the case of Messrs. Jacks and Schulte, throughdirect or indirect ownership of FSAC stock and warrants).

 

***ATSmay be unable to protect or enforce its intellectual property rights.***

*** ***

The protection of ATS’trade secrets, proprietary know-how, technological innovations, otherproprietary information and other intellectual property protections in the U.S.and other countries may be critical to our success. ATS may rely on acombination of copyright, trademark, trade secret laws and contractualrestrictions to protect any proprietary technology or other rights ATS may haveor may acquire. Despite ATS’ efforts, it may not be able to preventmisappropriation of those proprietary rights or deter independent developmentof technologies that compete with ATS. Litigation may be necessary in thefuture to enforce ATS’ intellectual property rights, to protect ATS’ tradesecrets, or to determine the validity and scope of the proprietary rights ofothers. It is also possible that third parties may claim ATS has infringedtheir patent, trademark, copyright or other proprietary rights. Claims orlitigation, with or without merit, could result in substantial costs anddiversions of resources, either of which could have a material adverse effecton ATS’ competitive position and business.

 

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***ATSmay be harmed by intellectual property infringement claims.***

*** ***

ATS may become subjectto claims from our employees and third parties who assert that intellectualproperty that ATS uses in delivering services and business solutions to itsclients infringe upon intellectual property rights of such employees or thirdparties. ATS’ employees develop much of the intellectual property that it usesto provide its services and business solutions to its clients, but ATS alsolicenses technology from other vendors. If ATS’ vendors, its employees, orthird parties assert claims that ATS or its clients are infringing on theirintellectual property, ATS could incur substantial costs to defend thoseclaims. In addition, if any of these infringement claims is ultimatelysuccessful, ATS could be required to:

 

•       ceaseselling and using products and services that incorporate the challengedintellectual property;

 

•       obtain alicense or additional licenses from its vendors or other third parties; and

 

•       redesign itsproducts and services that rely on the challenged intellectual property.

 

Any of these outcomescould further adversely affect ATS’ operating results.

 

***ATS’quarterly revenue,***operating results and profitability could bevolatile.

*** ***

ATS’ quarterly revenue,operating results and profitability may fluctuate significantly andunpredictably in the future.

 

Factors which maycontribute to the volatility of quarterly revenue, operating results orprofitability include:

 

•       fluctuationsin revenue earned on contracts;

 

•       commencement,completion, and termination of contracts during any particular quarter;

 

•       variablepurchasing patterns under GSA Schedule contracts, and agency-specific ID/IQcontracts;

 

•       additionsand departures of key personnel;

 

•       changes inATS’ staff utilization rates;

 

•       timing ofsignificant costs, investments and/or receipt of incentive fees;

 

•       strategicdecisions by ATS and its competitors, such as acquisitions, divestitures,spin-offs, joint ventures, strategic investments, and changes in businessstrategy;

 

•       contract mixand the extent of use of subcontractors;

 

•       changes inpolicy and budgetary measures that adversely affect government contracts; and

 

•       anyseasonality of ATS’ business.

 

Therefore,period-to-period comparisons of ATS’ operating results may not be a goodindication of ATS’ future performance. ATS’ quarterly operating results may notmeet the expectations of securities analysts or investors, which in turn mayhave an adverse affect on the market price of our common stock.

 

Furthermore, reductionsin revenue in a particular quarter could lead to lower profitability in thatquarter because a relatively large amount of ATS’ expenses are fixed in theshort-term. ATS may incur significant operating expenses during the start-upand early stages of large contracts and may not receive corresponding paymentsor revenue in that same quarter. ATS may also incur significant orunanticipated expenses or both when contracts expire, are terminated, or arenot renewed. In addition, payments due to ATS from government agencies anddepartments may be delayed due to 

 

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billing cycles, as aresult of failures of governmental budgets to gain Congressional andadministration approval in a timely manner, and for other reasons.

 

***Ifsubcontractors on ATS’ prime contracts are able to secure positions as primecontractors, ATS may lose revenue.***

*** ***

For each of the pastseveral years, as the GSA Schedule contracts have increasingly been used ascontract vehicles, ATS has received substantial revenue from government clientsrelating to work performed by other firms acting as subcontractors to ATS. Insome cases, companies that have not held GSA Schedule contracts have approachedATS in its capacity as a prime contractor, seeking to perform services as ATS’subcontractor for a government client. Some of the providers that are currentlyacting as subcontractors to ATS may in the future secure positions as primecontractors upon renewal of a GSA Schedule contract. If one or more of itscurrent subcontractors is awarded prime contractor status in the future, it couldreduce or eliminate ATS’ revenue for the work they were performing assubcontractors to it. Revenue derived from work performed by ATS’subcontractors for fiscal year 2004 and fiscal year 2005 represented 21% and28% of ATS’ gross revenue, respectively.

 

***If***ATS’subcontractors fail to perform their contractual obligations, its performanceas a prime contractor and its ability to obtain future business could bematerially and adversely impacted.

*** ***

ATS’ performance ofgovernment contracts may involve the issuance of subcontracts to othercompanies upon which it relies to perform all or a portion of the work ATS isobligated to deliver to its clients. A failure by one or more of ATS’subcontractors to satisfactorily deliver on a timely basis the agreed-upon suppliesand/or perform the agreed-upon services may materially and adversely affect itsability to perform its obligations as a prime contractor.

 

In extreme cases, asubcontractor’s performance deficiency could result in the governmentterminating ATS’ contract for default. A default termination could expose us toliability for excess costs of reprocurement by the government and have amaterial adverse effect on ATS’ ability to compete for future contracts andtask orders.

 

***ATS***sometimes incurscosts before a contract is executed or appropriately modified. To the extent asuitable contract or modification is not later signed and these costs are notreimbursed, its revenues and profits will be reduced.

*** ***

When circumstanceswarrant, ATS sometimes incur expenses and performs work without a signedcontract or appropriate modification to an existing contract to cover suchexpenses or work. When ATS does so, it is working “at-risk,” and there is achance that the subsequent contract or modification will not ensue, or if itdoes, that it will not allow ATS to be paid for the expenses already incurredor work already performed or both. In such cases, ATS has generally beensuccessful in obtaining the required contract or modification, but any failureto do so in the future could adversely affect operating results.

 

***IfATS is unable to manage ATS’ growth, ATS’ business may be adversely affected.***

*** ***

Sustaining ATS’ growthmay place significant demands on ATS’ management, as well as on ATS’administrative, operational and financial resources. If ATS sustainssignificant growth, ATS must improve its operational, financial and managementinformation systems and expand, motivate and manage its workforce. If ATS isunable to do so, or if new systems that ATS implements to assist in managingany future growth do not produce the expected benefits, ATS’ business,prospects, financial condition or operating results could be adverselyaffected.

 

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**Risks Related to our Limited Experience as aPublic Company and our Capital Structure**

 

***Wehave not had operations, and ATS has never operated as a public company.Fulfilling our obligations incident to being a public company after acquiringATS will be expensive and time consuming.***

*** ***

Both we, as a companywithout operations, and ATS, as a private company, have maintained relativelysmall finance and accounting staffs. Neither we nor ATS currently has aninternal audit group. Although we have maintained disclosure controls andprocedures and internal control over financial reporting as required under thefederal securities laws with respect to our very limited activities, we havenot been required to maintain and establish such disclosure controls andprocedures and internal control as will be required with respect to a businesssuch as ATS with substantial operations. Under the Sarbanes-Oxley Act of 2002and the related rules and regulations of the SEC, as well as therules of the Nasdaq National Market, we will need to implement additionalcorporate governance practices and adhere to a variety of reportingrequirements and complex accounting rules. Compliance with these obligationswill require significant management time, place significant additional demandson our finance and accounting staff and on our financial, accounting andinformation systems, and increase our insurance, legal and financial compliancecosts. We may also need to hire additional accounting and financial staff withappropriate public company experience and technical accounting knowledge.

 

***Section 404of the Sarbanes-Oxley Act of 2002 will require us to document and test ourinternal controls over financial reporting for fiscal 2007 and beyond and willrequire an independent registered public accounting firm to report on our assessmentas to the effectiveness of these controls. Any delays or difficulty insatisfying these requirements could adversely affect our future results ofoperations and our stock price.***

*** ***

Section 404 of theSarbanes-Oxley Act of 2002 will require us to document and test theeffectiveness of our internal controls over financial reporting in accordancewith an established internal control framework and to report on our conclusionas to the effectiveness of our internal controls. It will also require anindependent registered public accounting firm to test our internal controlsover financial reporting and report on the effectiveness of such controls forour fiscal year ending December 31, 2007 and subsequent years. Anindependent registered public accounting firm will also be required to test,evaluate and report on the completeness of our assessment. It may cost us morethan we expect to comply with these control- and procedure-relatedrequirements.

 

We may in the futurediscover areas of our internal controls that need improvement, particularlywith respect to ATS or other businesses that we may acquire in the future. Wecannot be certain that any remedial measures we take will ensure that weimplement and maintain adequate internal controls over our financial processesand reporting in the future. Any failure to implement required new or improvedcontrols, or difficulties encountered in their implementation could harm ouroperating results or cause us to fail to meet our reporting obligations. If weare unable to conclude that we have effective internal controls over financialreporting, or if our independent auditors are unable to provide us with anunqualified report regarding the effectiveness of our internal controls overfinancial reporting as of December 31, 2007 and in future periods asrequired by Section 404, investors could lose confidence in thereliability of our financial statements, which could result in a decrease inthe value of our common stock. Failure to comply with Section 404 could potentiallysubject us to sanctions or investigations by the SEC, the Nasdaq NationalMarket or other regulatory authorities.

 

***If we are unable tomaintain a current prospectus relating to the common stock underlying ourwarrants, our warrants are not required to be settled for cash and,accordingly, may be worthless.***

*** ***

Our warrants will beexercisable and we will not be obligated to issue shares of common stockunless, at the time a holder seeks to exercise such warrant, a prospectusrelating to the common stock issuable upon exercise of the warrant is currentand the common stock has been registered or qualified or deemed to be exemptunder the securities laws of the state of residence of the holder of thewarrants. Under the terms of the warrant agreement between Continental StockTransfer & Trust Company, as warrant agent, and us, we have agreed to useour best efforts to maintain a current prospectus relating to the common stockissuable upon exercise of our warrants until the expiration of our warrants.However, we cannot assure warrant 

 

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holders that we will beable to do so. The warrant agreement does not provide that we are required tonet-cash settle the warrants if we are unable to maintain a current prospectus. If the prospectus relating to the common stock issuable upon exercise ofthe warrants is not current, or if the common stock is not qualified or exemptfrom qualification in the jurisdictions in which the holders of the warrantsreside, our warrants may not be exercisable before they expire. Thus, ourwarrants may be deprived of any value, the market for our warrants may belimited or non-existent and the warrants may expire worthless.

 

**Item 2. Unregistered Sales of Equity Securities and Use ofProceeds.**

 

Notapplicable.

 

**Item 3.  Defaults Upon Senior Securities.**

 

Notapplicable.

 

**Item 4.  Submission of Matters to a Vote of SecurityHolders.**

 

Notapplicable.

 

**Item 5.  Other Information.**

 

Notapplicable.

 

**Item 6.  Exhibits.**

 
| 3.1  |   | Amended and Restated  Certificate of Incorporation (incorporated by reference to exhibit of same  number in our Annual Report on Form 10-K filed with the Securities and  Exchange Commission on March 31, 2006)                                                   |
|------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.2  |   | By-laws (incorporated  by reference to exhibit of same number in our Annual Report on Form 10-K  filed with the Securities and Exchange Commission on March 31, 2006)                                                                                              |
| 4.1  |   | Specimen Unit  Certificate (incorporated by reference to exhibit of same number in our  Annual Report on Form 10-K filed with the Securities and Exchange Commission  on March 31, 2006)                                                                           |
| 4.2  |   | Specimen Common Stock  Certificate (incorporated by reference to exhibit of same number in our  Annual Report on Form 10-K filed with the Securities and Exchange Commission  on March 31, 2006)                                                                   |
| 4.3  |   | Specimen Warrant  Certificate (incorporated by reference to exhibit of same number in our  Annual Report on Form 10-K filed with the Securities and Exchange Commission  on March 31, 2006)                                                                        |
| 4.4  |   | Warrant Agreement  between Continental Stock Transfer & Trust Company and the  Company (incorporated by reference to exhibit of same number in our Annual  Report on Form 10-K filed with the Securities and Exchange Commission on  March 31, 2006) |
| 31.1 |   | Certification of  Principal Executive Officer pursuant to Rule 13a-14(a)/15(d)-19(a) of the  Securities Exchange Act of 1934, as amended                                                                                                                           |
| 31.2 |   | Certification of  Principal Financial Officer pursuant to Rule 13a-14(a)/15(d)-19(a) of the  Securities Exchange Act of 1934, as amended                                                                                                                           |
| 32.1 |   | Certification of  Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act  of 2002                                                                                                                                                           |
| 32.2 |   | Certification of  Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act  of 2002                                                                                                                                                           |

 

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##### **SIGNATURES**

 

 

Pursuantto the requirements of Section 13 or 15(d) of the Securities Exchange Act of1934, the Registrant has duly caused the report to be signed on its behalf bythe undersigned, thereunto duly authorized.

 

 
|                   | Federal Services  Acquisition Corporation |
|------------------------|-------------------------------------------|
|                   |                                      |   |
|                   | By:                                       | /s/ Joel R. Jacks |   |
|                   |                                      | Chairman of the Board  and |
|                   |                                      | Chief Executive Officer |
|                   |                                      |   |
|                   | By:                                       | /s/ Peter M. Schulte |   |
|                   |                                      | President and |
|                   |                                      | Chief Financial Officer |
| Date: December 5, 2006 |                                      |   |

 

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