** **

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

** **

** **

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**FORM 10-Q**

** **

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**(Mark one)**
| **x**      | ** ** | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE SECURITIES EXCHANGE ACT OF 1934**  |
|------------|------------|-----------------------------------------------------------------------------------------------|
| ** ** | ** ** | ** **                                                                                    |
| ** ** | ** ** | **FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2007.**                                            |
| ** ** | ** ** | ** **                                                                                    |
| **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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**ATS CORPORATION**

(Exact name of registrant as specified in its charter)

 

| **Delaware**                                                      |   | **11-3747850**                        |
|-------------------------------------------------------------------|--------|---------------------------------------|
| (State or other  jurisdiction of   incorporation or organization) |   | (I.R.S. Employer  Identification No.) |

 

**7915 Jones Branch Drive**

**McLean, Virginia 22102**

(Address of principal executive office)

 

 

**(703) 506-0088**

(Registrant’s telephone number, including area code)

 

 

**Not Applicable**

(Former name, former address and former fiscal year,if changed since last year)

 

 

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Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months and (2) has been subject tosuch filing requirements for the past 90days.    Yes  x   No  o

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

Large AcceleratedFiler  o   Accelerated Filer  x   Non-acceleratedFiler  o

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

The number of shares of the issuer’s Common Stock,$0.0001 par value, outstanding as of May 15, 2007 was 18,127,454.

 

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** **

**TABLE OF CONTENTS**
| **PART I — FINANCIAL  INFORMATION** |   |                                                                                                                                                                                                                                                      |
|------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                     |   |                                                                                                                                                                                                                                                      |   |   |
| Item  1.                                 |   | Financial  Statements                                                                                                                                                                                                                                     |   |   |
|                                     |   |                                                                                                                                                                                                                                                      |   |   |
|                                     |   | Consolidated Balance Sheets as of March 31, 2007  (unaudited) and as of December 31, 2006 (successor) and as of January 15,  2007 (unaudited) and October 31, 2006 (predecessor)                                                                          |   | 3 |
|                                     |   |                                                                                                                                                                                                                                                      |   |   |
|                                     |   | Consolidated Statements of Operations (unaudited) for  the three months ended March 31, 2007 and March 31, 2006 (successor) and for  the periods November 1, 2006 through January 15, 2007 and the three months  ended January 31, 2006 (predecessor)     |   | 5 |
|                                     |   |                                                                                                                                                                                                                                                      |   |   |
|                                     |   | Consolidated Statements of Cash Flows (unaudited) for  the three months ended March 31, 2007 and March 31, 2006 (successor) and for  the period from November 1, 2006 through January 15, 2007 and the three  months ended January 31, 2006 (predecessor) |   | 6 |
|                                     |   |                                                                                                                                                                                                                                                      |   |   |
|                                     |   | Notes  to Condensed Unaudited Financial Statements                                                                                                                                                                                                        |   | 7 |
|                                     |   |                                                                                                                                                                                                                                                      |   |   |
| Item 2.                             |   | Management’s Discussion and Analysis of Financial  Condition and Results of Operations                                                                                                                                                               |   | 17 |
|                                     |   |                                                                                                                                                                                                                                                      |   |   |
| Item 3.                             |   | Quantitative and Qualitative Disclosures about Market  Risk                                                                                                                                                                                               |   | 24 |
|                                     |   |                                                                                                                                                                                                                                                      |   |   |
| Item 4.                             |   | Controls and Procedures                                                                                                                                                                                                                                   |   | 24 |
|                                     |   |                                                                                                                                                                                                                                                      |   |   |
| **PART  II — OTHER INFORMATION**    |   |                                                                                                                                                                                                                                                      |
|                                     |   |                                                                                                                                                                                                                                                      |   |   |
| Item 1.                             |   | Legal  Proceedings                                                                                                                                                                                                                                        |   | 26 |
|                                     |   |                                                                                                                                                                                                                                                      |   |   |
| Item 1A.                                 |   | Risk Factors                                                                                                                                                                                                                                              |   | 26 |
|                                     |   |                                                                                                                                                                                                                                                      |   |   |
| Item 2.                             |   | Unregistered Sales of Equity Securities and Use of  Proceeds                                                                                                                                                                                              |   | 26 |
|                                     |   |                                                                                                                                                                                                                                                      |   |   |
| Item 3.                             |   | Defaults upon Senior Securities                                                                                                                                                                                                                           |   | 27 |
|                                     |   |                                                                                                                                                                                                                                                      |   |   |
| Item 4.                                  |   | Submission of Matters to a Vote of Security Holders                                                                                                                                                                                                       |   | 27 |
|                                     |   |                                                                                                                                                                                                                                                      |   |   |
| Item 5.                             |   | Other  Information                                                                                                                                                                                                                                        |   | 28 |
|                                     |   |                                                                                                                                                                                                                                                      |   |   |
| Item 6.                             |   | Exhibits                                                                                                                                                                                                                                                  |   | 28 |
|                                     |   |                                                                                                                                                                                                                                                      |   |   |
| **SIGNATURES**                           |   | 29                                                                                                                                                                                                                                                        |

 

 

2

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**PART I — FINANCIAL INFORMATION**

**ITEM1. — FINANCIAL STATEMENTS**

**ATS Corporation**

Consolidated Balance Sheets

 
| ** **                                        | ** **   | **(Successor)**    | ** **   | ** **            | **(Predecessor)** | ** **   |
|---------------------------------------------------|--------------|--------------------|--------------|-----------------------|-------------------|--------------|
| ** **                                        | ** **   | **March 31,** | ** **   | **December 31,** | ** **        | ** **   | **January 15,** | ** ** | **October 31,** | ** ** |
| ** **                                        | ** **   | **2007**           | ** **   | **2006**              | ** **        | ** **   | **2007** | ** ** | **2006** | ** ** |
| ** **                                        | ** **   | **(unaudited)**    | ** **   | **(audited)**         | ** **        | ** **   | **(unaudited)** | ** ** | **(audited)** | ** ** |
| ** **                                        | ** **   | ** **         | ** **   | ** **            | ** **        | ** **   | ** ** | ** ** | ** ** | ** ** |
| ***Assets***                                      | *** *** | *** ***       | *** *** | *** ***          | *** ***      | *** *** | *** *** | *** *** | *** *** | *** *** |
|                                              |         |               |         |                  |              |         |   |   |   |   |
| **Current Assets**                                | ** **   | ** **         | ** **   | ** **            | ** **        | ** **   | ** ** | ** ** | ** ** | ** ** |
| Cash                                              |         | $                  | 1,728,046    |                  | $                 | 213,395      |   |   | $ | 28,040 |   | $ | 718,571 |   |
| Accounts  receivable                              |         | 23,115,274         |         | —                |              |         | 21,260,609 |   | 20,495,315 |   |
| Prepaid expenses  and other current assets        |         | 593,243            |         | 136,006               |              |         | 525,032 |   | 632,948 |   |
| Income tax  receivable                            |         | 781,278            |         | —                |              |         | 2,524,113 |   | 1,483,728 |   |
| Other current  assets                             |         | 3,525,605          |         | —                |              |         | — |   | — |   |
| Assets held for  sale                             |         | —             |         | —                |              |         | — |   | 231,861 |   |
| Deferred income  taxes, current                   |         | 1,316,803          |         | —                |              |         | — |   | — |   |
|                                              |         |               |         |                  |              |         |   |   |   |   |
| **Total Current Assets**                          |         | 31,060,249         |         | 349,401               |              |         | 24,337,794 |   | 23,562,423 |   |
|                                              |         |               |         |                  |              |         |   |   |   |   |
| **Short term investments held in  trust account** |         | —             |         | 121,024,475           |              |         | — |   | — |   |
| ** **                                        | ** **   | ** **         | ** **   | ** **            | ** **        | ** **   | ** ** | ** ** | ** ** | ** ** |
| **Restricted cash**                               |         | 1,230,681          |         | —                |              |         | 1,217,782 |   | 1,204,710 |   |
|                                              |         |               |         |                  |              |         |   |   |   |   |
| **Cash and cash equivalents held  in Trust fund** |         | —             |         | 1,332                 |              |         | — |   | — |   |
|                                              |         |               |         |                  |              |         |   |   |   |   |
| **Property and equipment,**net                    |         | 1,413,442          |         | —                |              |         | 1,466,108 |   | 1,352,736 |   |
| ** **                                        | ** **   | ** **         | ** **   | ** **            | ** **        | ** **   | ** ** | ** ** | ** ** | ** ** |
| **Goodwill**                                      |         | 64,760,564         |         | —                |              |         | 3,171,886 |   | 3,171,886 |   |
| ** **                                        | ** **   | ** **         | ** **   | ** **            | ** **        | ** **   | ** ** | ** ** | ** ** | ** ** |
| **Intangible assets,**net                         |         | 16,520,665         |         | —                |              |         | — |   | — |   |
| ** **                                        | ** **   | ** **         | ** **   | ** **            | ** **        | ** **   | ** ** | ** ** | ** ** | ** ** |
| **Deferred acquisition costs**                    |         | —             |         | 1,361,215             |              |         | — |   | — |   |
| ** **                                        | ** **   | ** **         | ** **   | ** **            | ** **        | ** **   | ** ** | ** ** | ** ** | ** ** |
| **Other assets**                                  |         | 53,248             |         | —                |              |         | 325,043 |   | 328,678 |   |
| ** **                                        | ** **   | ** **         | ** **   | ** **            | ** **        | ** **   | ** ** | ** ** | ** ** | ** ** |
| **Deferred income tax benefit**                   |         | —             |         | 502,744               |              |         | 239,113 |   | — |   |
| ** **                                        |         |               |         |                  |              |         |   |   |   |   |
| **Total Assets**                                  |         | $                  | 115,038,849  |                  | $                 | 123,239,167  |   |   | $ | 30,757,726 |   | $ | 29,620,433 |   |
|                                              |         |               |         |                  |              |         |   |   |   |   |

 

The accompanying notes arean integral part of these consolidated financial statements.

3

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**ATS Corporation**

Consolidated BalanceSheets—Continued

 

 
| ** **                                                                                                                                                                                                                                         | ** **   | **(Successor)**    | ** **   | ** **            | **(Predecessor)** | ** **   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------|--------------------|--------------|-----------------------|-------------------|--------------|
| ** **                                                                                                                                                                                                                                         | ** **   | **March 31,** | ** **   | **December 31,** | ** **        | ** **   | **January 15,** | ** ** | **October 31,** | ** ** |
| ** **                                                                                                                                                                                                                                         | ** **   | **2007**           | ** **   | **2006**              | ** **        | ** **   | **2007** | ** ** | **2006** | ** ** |
| ** **                                                                                                                                                                                                                                         | ** **   | **(unaudited)**    | ** **   | **(audited)**         | ** **        | ** **   | **(unaudited)** | ** ** | **(audited)** | ** ** |
| ** **                                                                                                                                                                                                                                         | ** **   | ** **         | ** **   | ** **            | ** **        | ** **   | ** ** | ** ** | ** ** | ** ** |
| ***Liabilities  and Stockholders’ Equity***                                                                                                                                                                                                   | *** *** | *** ***       | *** *** | *** ***          | *** ***      | *** *** | *** *** | *** *** | *** *** | *** *** |
|                                                                                                                                                                                                                                               |         |               |         |                  |              |         |   |   |   |   |
| **Current  Liabilities**                                                                                                                                                                                                                           | ** **   | ** **         | ** **   | ** **            | ** **        | ** **   | ** ** | ** ** | ** ** | ** ** |
| Line-of-credit                                                                                                                                                                                                                                     |         | $                  | —       |                  | $                 | —       |   |   | $ | 9,964,955 |   | $ | 6,930,000 |   |
| Capital leases–current portion                                                                                                                                                                                                                |         | 87,385             |         | —                |              |         | 61,015 |   | 78,999 |   |
| Accounts payable and accrued expenses                                                                                                                                                                                                              |         | 7,478,648          |         | 942,146               |              |         | 6,645,529 |   | 7,884,056 |   |
| Accrued salaries and related taxes                                                                                                                                                                                                                 |         | 3,886,284          |         | —                |              |         | 8,706,116 |   | 3,620,113 |   |
| Accrued vacation                                                                                                                                                                                                                                   |         | 2,573,676          |         | —                |              |         | 2,284,566 |   | 2,302,812 |   |
| Income taxes payable                                                                                                                                                                                                                               |         | —             |         | 310,606               |              |         | — |   | — |   |
| Warrant liabilities                                                                                                                                                                                                                                |         | —             |         | 13,860,000            |              |         | — |   | — |   |
| Other current liabilities                                                                                                                                                                                                                          |         | 464,214            |         | —                |              |         | 386,992 |   | 387,698 |   |
| Current liabilities of discontinued operations                                                                                                                                                                                                     |         | —             |         | —                |              |         | — |   | 35,422 |   |
| Deferred income taxes-current portion                                                                                                                                                                                                              |         | —             |         | 40,489                |              |         | 889,783 |   | 803,258 |   |
|                                                                                                                                                                                                                                               |         |               |         |                  |              |         |   |   |   |   |
| **Total  Current Liabilities**                                                                                                                                                                                                                     |         | 14,490,207         |         | 15,153,241            |              |         | 28,938,956 |   | 22,042,358 |   |
| ** **                                                                                                                                                                                                                                         | ** **   | ** **         | ** **   | ** **            | ** **        | ** **   | ** ** | ** ** | ** ** | ** ** |
| **Notes  payable**                                                                                                                                                                                                                                 |         | 86,857             |         | —                |              |         | — |   | — |   |
|                                                                                                                                                                                                                                               |         |               |         |                  |              |         |   |   |   |   |
| **Capital  leases–net of current portion**                                                                                                                                                                                                    |         | 141,531            |         | —                |              |         | 181,104 |   | 181,174 |   |
| ** **                                                                                                                                                                                                                                         | ** **   | ** **         | ** **   | ** **            | ** **        | ** **   | ** ** | ** ** | ** ** | ** ** |
| **Other  long-term liabilities**                                                                                                                                                                                                                   |         | 446,801            |         | —                |              |         | 560,022 |   | 625,546 |   |
| ** **                                                                                                                                                                                                                                         | ** **   | ** **         | ** **   | ** **            | ** **        | ** **   | ** ** | ** ** | ** ** | ** ** |
| **Deferred  income taxes–net of current portion**                                                                                                                                                                                             |         | 6,241,032          |         | —                |              |         | — |   | 1,327,915 |   |
| ** **                                                                                                                                                                                                                                         | ** **   | ** **         | ** **   | ** **            | ** **        | ** **   | ** ** | ** ** | ** ** | ** ** |
| **Total  Liabilities**                                                                                                                                                                                                                             |         | 21,406,428         |         | 15,153,241            |              |         | 29,680,082 |   | 24,176,993 |   |
|                                                                                                                                                                                                                                               |         |               |         |                  |              |         |   |   |   |   |
| Common stock,  subject to possible redemption 4,197,900 shares                                                                                                                                                                                     |         | —             |         | 23,424,282            |              |         | — |   | — |   |
|                                                                                                                                                                                                                                               |         |               |         |                  |              |         |   |   |   |   |
| Interest income  attributable to common stock subject to possible redemption (net of taxes of  $0 and $561,204, respectively)                                                                                                                      |         | —             |         | 702,752               |              |         | — |   | — |   |
|                                                                                                                                                                                                                                               |         |               |         |                  |              |         |   |   |   |   |
| Total common  stock, subject to possible redemtion                                                                                                                                                                                                 |         | —             |         | 24,127,034            |              |         | — |   | — |   |
|                                                                                                                                                                                                                                               |         |               |         |                  |              |         |   |   |   |   |
| **Commitments  and Contingencies**                                                                                                                                                                                                                 |         | —             |         | —                |              |         | — |   | — |   |
|                                                                                                                                                                                                                                               |         |               |         |                  |              |         |   |   |   |   |
| **Stockholders’  Equity**                                                                                                                                                                                                                     | ** **   | ** **         | ** **   | ** **            | ** **        | ** **   | ** ** | ** ** | ** ** | ** ** |
| Preferred stock — $.0001 par value; 1,000,000 shares  authorized; no shares issued or outstanding (successor)                                                                                                                                 |         | —             |         | —                |              |         | — |   | — |   |
| Preferred stock; non-voting, no par value;  50,000,000 shares authorized; no shares issued or outstanding (predecessor)                                                                                                                            |         | —             |         | —                |              |         | — |   | — |   |
| Common stock — $.0001 par value, 100,000,000 shares  authorized; 26,470,209 and 26,250,000 issued; 18,127,454 and 26,250,000 outstanding,  respectively (which includes 0 and 4,197,900 shares subject to possible  redemption, respectively) |         | 2,647              |         | 2,625                 |              |         | — |   | — |   |
| Common stock; Class A voting, no par value;  75,000,000 shares authorized; 9,219,700 issued; 9,023,400 outstanding — predecessor                                                                                                              |         | —             |         | —                |              |         | 34,768 |   | 34,768 |   |
| Common stock; Class B voting, no par value;  75,000,000 shares authorized; 10,000,000 issued and outstanding                                                                                                                                       |         | —             |         | —                |              |         | 1,736 |   | 1,736 |   |
| Additional paid-in capital                                                                                                                                                                                                                         |         | 127,482,626        |         | 81,467,698            |              |         | — |   | — |   |
| Treasury stock, at cost 8,342,755 and 0 shares  (sucessor); 197,200 and 196,300 shares (predecessor)                                                                                                                                               |         | (30,272,007        | )            | —                |              |         | (37,358 | ) | (37,358 | ) |
| Retained earnings (deficit)                                                                                                                                                                                                                        |         | (3,580,845         | )            | 2,488,569             |              |         | 1,078,498 |   | 5,444,294 |   |
|                                                                                                                                                                                                                                               |         |               |         |                  |              |         |   |   |   |   |
| **Total  Stockholders’ Equity**                                                                                                                                                                                                               |         | 93,632,421         |         | 83,958,892            |              |         | 1,077,644 |   | 5,443,440 |   |
|                                                                                                                                                                                                                                               |         |               |         |                  |              |         |   |   |   |   |
| **Total  Liabilities and Stockholders’ Equity**                                                                                                                                                                                               |         | $                  | 115,038,849  |                  | $                 | 123,239,167  |   |   | $ | 30,757,726 |   | $ | 29,620,433 |   |

 

The accompanying notesare an integral part of these consolidated financial statements.

4

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**ATS Corporation**

Consolidated Statements ofOperations

 
| ** **                                                                                                                        | ** ** | **(Successor)**                                                   | ** ** | ** **                                             | **(Predecessor)** | ** **  |
|-----------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------|------------|--------------------------------------------------------|-------------------|-------------|
| ** **                                                                                                                        | ** ** | ** **                                                        | ** ** | ** **                                             | ** **        | ** **  | **For the period** | ** ** | ** ** | ** ** |
| ** **                                                                                                                        | ** ** | **For the Three **                                 | ** ** | **For the Three**                            | ** **        | ** **  | **from November 1,** | ** ** | **For the Three ** | ** ** |
| ** **                                                                                                                        | ** ** | **Months Ended**                                             | ** ** | **Months Ended**                                  | ** **        | ** **  | **2006 through** | ** ** | **Months Ended** | ** ** |
| ** **                                                                                                                        | ** ** | **March 31,**                                                | ** ** | **March 31,**                                     | ** **        | ** **  | **January 15,** | ** ** | **January 31,** | ** ** |
| ** **                                                                                                                        | ** ** | **2007**                                                          | ** ** | **2006**                                               | ** **        | ** **  | **2007** | ** ** | **2006** | ** ** |
| ** **                                                                                                                        | ** ** | ** **                                                        | ** ** | ** **                                             | ** **        | ** **  | ** ** | ** ** | ** ** | ** ** |
| **Revenue**                                                                                                                       |       | $                                                                 | 23,477,720 |                                                   | $                 | —      |   |   | $  | 21,447,600 |   | $ | 26,054,341 |   |
| ** **                                                                                                                        | ** ** | ** **                                                        | ** ** | ** **                                             | ** **        | ** **  | ** ** | ** ** | ** ** | ** ** |
| **Operating  costs and expenses**                                                                                                 | ** ** | ** **                                                        | ** ** | ** **                                             | ** **        | ** **  | ** ** | ** ** | ** ** | ** ** |
| Cost of services                                                                                                                  |       | 16,464,217                                                        |       | —                                                 |              |        | 15,472,700 |   | 18,572,701 |   |
| Selling, general and administrative                                                                                               |       | 5,970,982                                                         |       | 610,197                                                |              |        | 12,677,730 |   | 6,260,651 |   |
| Depreciation and amortization                                                                                                     |       | 146,827                                                           |       | —                                                 |              |        | 142,575 |   | 221,508 |   |
| Amortization of intangible assets                                                                                                 |       | 779,335                                                           |       | —                                                 |              |        | — |   | — |   |
|                                                                                                                              |       |                                                              |       |                                                   |              |        |   |   |   |   |
| **Total  operating costs and expenses**                                                                                           |       | 23,361,361                                                        |       | 610,197                                                |              |        | 28,293,005 |   | 25,054,860 |   |
| ** **                                                                                                                        | ** ** | ** **                                                        | ** ** | ** **                                             | ** **        | ** **  | ** ** | ** ** | ** ** | ** ** |
| **Operating  income**                                                                                                             |       | 116,359                                                           |       | (610,197                                               | )                 |        | (6,845,405 | ) | 999,481 |   |
| ** **                                                                                                                        | ** ** | ** **                                                        | ** ** | ** **                                             | ** **        | ** **  | ** ** | ** ** | ** ** | ** ** |
| **Other  Income (Expense)**                                                                                                       | ** ** | ** **                                                        | ** ** | ** **                                             | ** **        | ** **  | ** ** | ** ** | ** ** | ** ** |
| Interest income (expense), net                                                                                                    |       | 143,451                                                           |       | 1,189,712                                              |              |        | (108,200 | ) | (50,847 | ) |
| Loss on derivative liabilities attributable to  warrants                                                                          |       | (6,930,000                                                        | )          | (10,920,000                                            | )                 |        | — |   | — |   |
| Other income                                                                                                                      |       | 735                                                               |       | —                                                 |              |        | 54,267 |   | 7,936 |   |
|                                                                                                                              |       |                                                              |       |                                                   |              |        |   |   |   |   |
| **Income  (Loss) Before Income Taxes**                                                                                            |       |           (6,669,455 | )          |         (10,340,485 | )                 |        |           (6,899,338 | ) |                956,570 |   |
|                                                                                                                              |       |                                                              |       |                                                   |              |        |   |   |   |   |
| **Income  Tax (Benefit) Expense**                                                                                                 |       | 102,711                                                           |       | 263,560                                                |              |        | (2,533,542 | ) | 382,188 |   |
|                                                                                                                              |       |                                                              |       |                                                   |              |        |   |   |   |   |
| **Income  (Loss) from Continuing Operations**                                                                                     |       |           (6,772,166 | )          |         (10,604,045 | )                 |        |           (4,365,796 | ) |                574,382 |   |
| ** **                                                                                                                        | ** ** | ** **                                                        | ** ** | ** **                                             | ** **        | ** **  | ** ** | ** ** | ** ** | ** ** |
| **Loss  from Discontinued Operations,**net of income tax benefits of  $252,252                                                    |       | —                                                            |       | —                                                 |              |        | — |   | (378,377 | ) |
| ** **                                                                                                                        | ** ** | ** **                                                        | ** ** | ** **                                             | ** **        | ** **  | ** ** | ** ** | ** ** | ** ** |
| **Net  Income (Loss)**                                                                                                            |       | $                                                                 | (6,772,166 | )                                                      | $                 | (10,604,045 | ) |   | $ | (4,365,796 | ) | $ | 196,005 |   |
|                                                                                                                              |       |                                                              |       |                                                   |              |        |   |   |   |   |
| **Interest  income attributable to common stock subject to possible redemption (net of  taxes of $0 and $106,135, respectively)** |       | —                                                            |       | (129,093                                               | )                 |        | — |   | — |   |
|                                                                                                                              |       |                                                              |       |                                                   |              |        |   |   |   |   |
| **Net  income (loss) allocable to common stockholders not subject to possible  redemption**                                       |       | $                                                                 | (6,772,166 | )                                                      | $                 | (10,733,138 | ) |   | $ | (4,365,796 | ) | $ | 196,005 |   |
|                                                                                                                              |       |                                                              |       |                                                   |              |        |   |   |   |   |
| **Weighted  average number of shares outstanding**                                                                                | ** ** | ** **                                                        | ** ** | ** **                                             | ** **        | ** **  | ** ** | ** ** | ** ** | ** ** |
| **—basic**                                                                                                                   |       | 20,307,248                                                        |       | 26,250,000                                             |              |        | 19,022,500 |   | 19,023,400 |   |
| **—diluted**                                                                                                                 |       | 20,307,248                                                        |       | 26,250,000                                             |              |        | 19,022,500 |   | 19,400,587 |   |
| ** **                                                                                                                        | ** ** | ** **                                                        | ** ** | ** **                                             | ** **        | ** **  | ** ** | ** ** | ** ** | ** ** |
| **Weighted  average shares outstanding exclusive of shares subject to possible redemption**                                       | ** ** | ** **                                                        | ** ** | ** **                                             | ** **        | ** **  | ** ** | ** ** | ** ** | ** ** |
| **—basic**                                                                                                                   |       | 20,307,248                                                        |       | 22,052,100                                             |              |        | 19,022,500 |   | 19,023,400 |   |
| **—diluted**                                                                                                                 |       | 20,307,248                                                        |       | 22,052,100                                             |              |        | 19,022,500 |   | 19,400,587 |   |
| ** **                                                                                                                        | ** ** | ** **                                                        | ** ** | ** **                                             | ** **        | ** **  | ** ** | ** ** | ** ** | ** ** |
| **Basic  net income (loss) per share**                                                                                            | ** ** | ** **                                                        | ** ** | ** **                                             | ** **        | ** **  | ** ** | ** ** | ** ** | ** ** |
| **—Continuing operations**                                                                                                   |       | $                                                                 | (0.33      | )                                                      | $                 | (0.40       | ) |   | $ | (0.23 | ) | $ | 0.03 |   |
| **—Discontinued operations**                                                                                                 |       | $                                                                 | —     |                                                   | $                 | —      |   |   | $ | — |   | $ | (0.02 | ) |
| **—Net income**                                                                                                              |       | $                                                                 | (0.33      | )                                                      | $                 | (0.40       | ) |   | $ | (0.23 | ) | $ | 0.01 |   |
| **—Net income not subject to possible redemption**                                                                           |       | $                                                                 | (0.33      | )                                                      | $                 | (0.49       | ) |   | $ | (0.23 | ) | $ | 0.01 |   |
| ** **                                                                                                                        | ** ** | ** **                                                        | ** ** | ** **                                             | ** **        | ** **  | ** ** | ** ** | ** ** | ** ** |
| **Diluted  net income (loss) per share**                                                                                          | ** ** | ** **                                                        | ** ** | ** **                                             | ** **        | ** **  | ** ** | ** ** | ** ** | ** ** |
| **—Continuing operations**                                                                                                   |       | $                                                                 | (0.33      | )                                                      | $                 | (0.40       | ) |   | $ | (0.23 | ) | $ | 0.03 |   |
| **—Discontinued operations**                                                                                                 |       | $                                                                 | —     |                                                   | $                 | —      |   |   | $ | — |   | $ | (0.02 | ) |
| **—Net income**                                                                                                              |       | $                                                                 | (0.33      | )                                                      | $                 | (0.40       | ) |   | $ | (0.23 | ) | $ | 0.01 |   |
| **—Net income not subject to possible redemption**                                                                           |       | $                                                                 | (0.33      | )                                                      | $                 | (0.49       | ) |   | $ | (0.23 | ) | $ | 0.01 |   |

 

The accompanying notesare an integral part of these consolidated financial statements.

* *

5

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**ATS Corporation**

Consolidated Statements of Cash Flows
| ** **                                                                                           | ** ** | **(Successor)**             | ** ** | ** **                  | **(Predecessor)** | ** **  |
|------------------------------------------------------------------------------------------------------|------------|-----------------------------|------------|-----------------------------|-------------------|-------------|
| ** **                                                                                           | ** ** | **For the Three** | ** ** | **For the Three** | ** **        | ** **  | **For the period  from November 1,** | ** ** | **For the Three** | ** ** |
| ** **                                                                                           | ** ** | **Months Ended**       | ** ** | **Months Ended**       | ** **        | ** **  | **2006 through** | ** ** | **Months Ended** | ** ** |
| ** **                                                                                           | ** ** | **March 31,**          | ** ** | **March 31,**          | ** **        | ** **  | **January 15,** | ** ** | **January 31,** | ** ** |
| ** **                                                                                           | ** ** | **2007**                    | ** ** | **2006**                    | ** **        | ** **  | **2007** | ** ** | **2006** | ** ** |
| ** **                                                                                           | ** ** | ** **                  | ** ** | ** **                  | ** **        | ** **  | ** ** | ** ** | ** ** | ** ** |
| **Cash Flows from Operating  Activities**                                                            | ** ** | ** **                  | ** ** | ** **                  | ** **        | ** **  | ** ** | ** ** | ** ** | ** ** |
| Net income (loss)                                                                                    |       | $                           | (6,772,166 | )                           | $                 | (10,604,045 | ) |   | $ | (4,365,796 | ) | 196,005 |   |
| Adjustments to  reconcile net income (loss) to net cash (used in) provided by operating  activities: |       |                        |       |                        |              |        |   |   |   |   |
| Depreciation and  amortization                                                                       |       | 113,234                     |       | —                      |              |        | 142,575 |   | 221,508 |   |
| Amortization of  intangibles                                                                         |       | 779,335                     |       | —                      |              |        | — |   | — |   |
| Deferred income taxes                                                                                |       | (1,947,134                  | )          | (250,436                    | )                 |        | (1,480,503 | ) | — |   |
| Loss on disposal of  equipment                                                                       |       | —                      |       | —                      |              |        | 45,040 |   | 58,233 |   |
| Bad debt                                                                                             |       | —                      |       | —                      |              |        | — |   | 85,000 |   |
| Stock-based  compensation                                                                            |       | 600,670                     |       | —                      |              |        | 1,870,000 |   | 9,000 |   |
| Loss on derivative  liabilities attrituable to warrants                                              |       | 6,930,000                   |       | 10,920,000                  |              |        | — |   | — |   |
| Changes in assets and  liabilities, net of effects of acquisitions:                                  |       |                        |       |                        |              |        |   |   |   |   |
| Accounts receivable                                                                                  |       | (1,519,877                  | )          | —                      |              |        | (533,433 | ) | (1,378,747 | ) |
| Interest receivable                                                                                  |       | —                      |       | (20,477                     | )                 |        | — |   | — |   |
| Prepaid expenses                                                                                     |       | (60,601                     | )          | 25,314                      |              |        | 107,916 |   | 34,108 |   |
| Other current assets                                                                                 |       | (3,525,605                  | )          | —                      |              |        | — |   | — |   |
| Income taxes payable  (receivable)                                                                   |       | 1,432,229                   |       | 71,111                      |              |        | (1,040,385 | ) | (1,000,180 | ) |
| Other assets                                                                                         |       | 284,248                     |       | —                      |              |        | 3,635 |   | (21,982 | ) |
| Accounts payable and  accrued expenses                                                               |       | (251,351                    | )          | 391,230                     |              |        | (1,238,527 | ) | (1,743,508 | ) |
| Accrued salaries and  related taxes                                                                  |       | (5,033,944                  | )          | —                      |              |        | 3,202,024 |   | (800,854 | ) |
| Accrued vacation                                                                                     |       | 285,065                     |       | —                      |              |        | (39,689 | ) | (94,629 | ) |
| Other current  liabilities                                                                           |       | (47,222                     | )          | —                      |              |        | (66,230 | ) | (77,164 | ) |
| Other long-term  liabilities                                                                         |       | (113,221                    | )          | —                      |              |        | — |   | — |   |
|                                                                                                 |       |                        |       |                        |              |        |   |   |   |   |
| **Net Cash (Used in) Provided by  Operating Activities**                                             |       | (8,846,340                  | )          | 532,697                     |              |        | (3,393,373 | ) | (4,513,210 | ) |
|                                                                                                 |       |                        |       |                        |              |        |   |   |   |   |
| **Cash Flows from Investing  Activities**                                                            | ** ** | ** **                  | ** ** | ** **                  | ** **        | ** **  | ** ** | ** ** | ** ** | ** ** |
| Purchase of property  and equipment                                                                  |       | (10,308                     | )          | —                      |              |        | (300,987 | ) | (71,256 | ) |
| Sale of U.S. government  securities held in Trust fund                                               |       | 121,024,475                 |       | —                      |              |        | — |   | — |   |
| Purchase of U.S.  government securities held in Trust fund                                           |       | —                      |       | (118,220,220                | )                 |        | — |   | — |   |
| Maturuties of U.S.  government securities held in Trust fund                                         |       | —                      |       | 117,669,592                 |              |        | — |   | — |   |
| Purchase of Advanced  Technology Systems Incorporated, net of cash received                          |       | (79,355,621                 | )          | —                      |              |        | — |   | — |   |
| Purchase of Reliable  Integration Services, Inc., net of cash received                               |       | (1,000,778                  | )          | —                      |              |        | — |   | — |   |
| Release (deposit) of  cash held in Trust Fund                                                        |       | 1,332                       |       | (170,738                    | )                 |        | — |   | — |   |
| Restricted cash                                                                                      |       | (12,899                     | )          | —                      |              |        | (13,072 | ) | — |   |
|                                                                                                 |       |                        |       |                        |              |        |   |   |   |   |
| **Net Cash Provided by (Used in)  Investing Activities**                                             |       | 40,646,201                  |       | (721,366                    | )                 |        | (314,059 | ) | (71,256 | ) |
|                                                                                                 |       |                        |       |                        |              |        |   |   |   |   |
| **Cash Flows from Financing  Activities**                                                            | ** ** | ** **                  | ** ** | ** **                  | ** **        | ** **  | ** ** | ** ** | ** ** | ** ** |
| Net borrowings on  line-of-credit                                                                    |       | —                      |       | —                      |              |        | 3,034,955 |   | 3,398,702 |   |
| Payments on notes  payable                                                                           |       | —                      |       | —                      |              |        | — |   | (166,470 | ) |
| Payments on capital  leases                                                                          |       | (13,203                     | )          | —                      |              |        | (18,054 | ) | (14,521 | ) |
| Repurchase of common  stock                                                                          |       | (30,272,007                 | )          | —                      |              |        | — |   | — |   |
|                                                                                                 |       |                        |       |                        |              |        |   |   |   |   |
| **Net Cash (Used in) Provided by  Financing Activities**                                             |       | (30,285,210                 | )          | —                      |              |        | 3,016,901 |   | 3,217,711 |   |
| ** **                                                                                           | ** ** | ** **                  | ** ** | ** **                  | ** **        | ** **  | ** ** | ** ** | ** ** | ** ** |
| **Net Increase (Decrease) in Cash**                                                                  |       | 1,514,651                   |       | (188,669                    | )                 |        | (690,531 | ) | (1,366,755 | ) |
|                                                                                                 |       |                        |       |                        |              |        |   |   |   |   |
| **Cash,**beginning  of period                                                                        |       | 213,395                     |       | 1,855,394                   |              |        | 718,571 |   | 1,366,755 |   |
|                                                                                                 |       |                        |       |                        |              |        |   |   |   |   |
| **Cash,**end  of period                                                                              |       | $                           | 1,728,046  |                        | $                 | 1,666,725   |   |   | $ | 28,040 |   | — |   |

 

The accompanyingnotes are an integral part of these consolidated financial statements.

6

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** **

**NOTE A****3⁄4BASISOF PRESENTATION**

The ConsolidatedFinancial Statements are for the periods ended March 31, 2007 and 2006 for ATSCorporation (the “Successor Company” or the “Company”) and are for the periodsended January 15, 2007 (the acquisition date) and October 31, 2006 for AdvancedTechnology Systems, Inc. (the “Predecessor Company” or “ATSI”).  The Company has included the results ofoperations for the acquisition of ATSI from the acquisition date through March31, 2007.

Except for theconsolidated balance sheets of the Company as of December 31, 2006 andATSI as of October 31, 2006, which are derived from audited financialstatements, the accompanying consolidated financial statements are unaudited.In the opinion of management, all adjustments necessary for a fair statement ofsuch financial position and results of operations have been included. All suchadjustments are of a normal recurring nature. Interim results are notnecessarily indicative of results for a full year.

The consolidatedfinancial statements and notes are presented as required by Form 10-Q and donot contain certain information included in the Company’s annual financialstatements and notes. These financial statements should be read in conjunctionwith the Company’s audited financial statements and the notes thereto filedwith the Securities and Exchange Commission (“SEC”) in the Company’s AnnualReport on Form 10-K for the year ended December 31, 2006. The interimfinancial statements of ATSI has also been presented in accordance with therequirements of Form 10-Q. Such information should be read in conjunction withthe ATSI consolidated financial statements for the year ended October 31, 2006included in the ATS Corporation Form 10-K for the year ended December 31, 2006.

Certain amounts in prior years have been reclassifiedto conform to the current period presentation.

**NOTE B****3⁄4RECENTACCOUNTING PRONOUNCEMENTS**

In September 2006,the Financial Accounting Standards Board (“FASB”) issued Statement of FinancialAccounting Standards (“SFAS”) No. 157, *FairValue Measurements*(SFASNo. 157)*.*SFAS No. 157* *defines fair value, establishes aframework for measuring fair value in generally accepted accounting principlesand expands disclosures about fair value measurements*.*Specifically, this Statement sets forth a definition offair value, and establishes a hierarchy prioritizing the inputs to valuationtechniques, giving the highest priority to quoted prices in active markets foridentical assets and liabilities and the lowest priority to unobservableinputs. The provisions of SFAS No. 157 are generally required to be applied ona prospective basis, except to certain financial instruments accounted forunder SFAS No. 133, *Accounting forDerivative Instruments and Hedging Activities*, for which theprovisions of SFAS No. 157 should be applied retrospectively. SFAS No. 157 iseffective for financial statements issued for fiscal years beginning afterNovember 15, 2007, and interim periods within those fiscal years.  The Company is evaluating the effect, if any,on its financial position or results of operations.

In February 2007,the FASB issued SFAS No. 159, *The Fair Value Option forFinancial Assets and Financial Liabilities — Including an amendment of FASBStatement No. 115*(SFAS No. 159). SFAS No. 159 permits anentity, at specified election dates, to choose to measure certain financialinstruments and other items at fair value. The objective of SFAS No. 159 is toprovide entities with the opportunity to mitigate volatility in reported earningscaused by measuring related assets and liabilities differently, without havingto apply complex hedge accounting provisions. SFAS No. 159 iseffective for accounting periods beginning after November 15, 2007. The Companyis currently assessing the impact of adopting SFAS No. 159 on the consolidatedfinancial statements.

7

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**NOTE C****3⁄4RESTRICTEDCASH**

The Company is required to maintain $1,200,000 ondeposit with a financial institution to support a bonding requirement for oneof ATSI’s state contracts.  Such amountsare reflected in restricted cash in the accompanying consolidated balancesheets.

**NOTE D****3⁄4INVESTMENTSHELD IN TRUST**

The Company held certain investments in a trustaccount consisting principally of short-term treasury bills.  All such investments held in the Trust fundhave been disposed as of March 31, 2007.

**NOTE E****3⁄4INCOME(LOSS) PER SHARE**

Successor — Basic and diluted net loss per shareinformation is presented in accordance with SFAS No. 128, *Earnings PerShare*.  Basic loss per shareis calculated by dividing the net loss attributable to common stockholders bythe weighted-average common shares outstanding during the period.  Diluted loss per share is calculated bydividing net loss attributable to common stockholders by the weighted averagecommon shares outstanding which includes common stock equivalents.  The Company’s common stock equivalentsinclude stock options, restricted stock units, and warrants.  For the three months ended March 31, 2007 and2006, a total of 42,755,754 and 42,000,000 common stock equivalents,respectively, were excluded from the calculation of diluted loss per share astheir impact would have been anti-dilutive.

Predecessor — Diluted loss per share from the periodfrom November 1, 2006 through January 15, 2007 did not include the effect of447,100 stock options as the impact would have been anti-dilutive.

Weighted average common shares are calculated asfollows:
| ** **                                                                                  | ** ** | **(Successor)**                                      | ** ** | ** ** | **(Predecessor)**                                                                 | ** **  |
|---------------------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|------------|-----------------------------------------------------------------------------------|-------------|
| ** **                                                                                  | ** ** | **Three Months Ended March 31,** | ** ** | ** ** | **Period from  November 1, 2006   through  January 15,** | ** **  | **Three Months   Ended March 31,** | ** ** |
| ** **                                                                                  | ** ** | **2007**                                             | ** ** | **2006**   | ** **                                                                        | ** **  | **2007** | ** ** | **2006** | ** ** |
| **Net  income (loss) allocable to common stockholders not subject to possible  redemption** |       | $                                                    | (6,772,166 | )          | $                                                                                 | (10,733,138 | ) |   | $ | (4,365,796 | ) | $ | 196,005 |   |
| Weighted average  number of shares outstanding — basic                                 |       | 20,307,248                                           |       | 22,052,100 |                                                                              |        | 19,022,500 |   | 19,023,400 |   |
| Shares from  assumed conversion of options                                                  |       | —                                               |       | —     |                                                                              |        | — |   | 377,187 |   |
| Weighted average  number of shares outstanding — diluted                               |       | 20,307,248                                           |       | 22,052,100 |                                                                              |        | 19,022,500 |   | 19,400,587 |   |
| **Income  (loss) per share — basic**                                                   |       | $                                                    | (.33       | )          | $                                                                                 | (.40        | ) |   | $ | (.23 | ) | $ | .01 |   |
| **Income (loss) per share —  diluted**                                                 |       | $                                                    | (.33       | )          | $                                                                                 | (.40        | ) |   | $ | (.23 | ) | $ | .01 |   |

 

8

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**NOTE F****3⁄4EMPLOYEESTOCK-BASED COMPENSATION**

In December 2004,the FASB issued SFAS No. 123(R), *Share Based Payment,*which requires that compensation costs related to share-based paymenttransactions be recognized in financial statements. Under the fair valuerecognition provisions of SFAS No. 123(R), the Company recognizesstock-based compensation based upon the fair value of the stock-based awardstaking into account the effects of the employees expected exercise andpost-vesting employment termination behavior. The Company recognized $601,000 ($.03 per basic and diluted share) ofstock-based compensation expense for the three months ended March 31,2007, which is included in general and administrative expense.  The Company did not grant any stock-basedawards to employees prior to fiscal year 2007.

The fair value ofoptions granted during the period ended March 31, 2007 has been estimated as ofthe date of grant using the Black-Scholes option pricing model with thefollowing assumptions:

|                           | ** ** | **Three Months   Ended March 31,** | ** ** |
|---------------------------|------------|--------------------------------------------------------|------------|
| ** **                | ** ** | **2007**                                               | ** ** |
| Expected  dividend yield  |       | 0                                                      | %          |
| Expected  volatility      |       | 36                                                     | %          |
| Risk free  interest rate  |       | 4.7                                                    | %          |
| Expected life of  options |       | 5.6 years                                              |       |
| Forfeiture rate           |       | 4                                                      | %          |

 

Effective November 1, 2006, ATSI was required to adopt the provisions ofSFAS 123(R).  However, no options weregranted from the adoption date through January 15, 2007.  In connection with the sale of ATSI to ATSCorporation, ATSI was required to redeem 447,100 outstanding stock options forapproximately $1.6 million.  A liabilitywas recorded on January 15, 2007 to cover such compensation expense.

On January 12, 2007, the stockholders of the Company approved the ATSCorporation 2006 Omnibus Incentive Compensation Plan (the “Plan”). Under thePlan, the Company reserved 1.5 million shares of the Company’s common stock forissuance to employees and directors through incentive stock options, or non-qualifiedstock options or through restricted stock units. Pursuant to the Plan, duringthe three months ended March 31, 2007, the Board of Directors authorized theissuance of 540,000 stock options.  Thestock options have vesting periods up to four years.

The followingtable summarizes information about stock options outstanding at March 31, 2007:
| **Options Outstanding** | ** ** | **Options Exercisable** | ** ** |
|-------------------------|------------|-------------------------|------------|
| ** **              | ** ** | ** **              | ** ** | **Weighted-** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Range**               | ** ** | ** **              | ** ** | **average** | ** ** | **Weighted-** | ** ** | ** ** | ** ** | **Weighted-** | ** ** |
| **of**                  | ** ** | ** **              | ** ** | **Remaining** | ** ** | **average** | ** ** | ** ** | ** ** | **average** | ** ** |
| **Exercise**            | ** ** | **Number**              | ** ** | **Life in** | ** ** | **Exercise** | ** ** | **Number** | ** ** | **Exercise** | ** ** |
| **Price**               | ** ** | **Outstanding**         | ** ** | **Years** | ** ** | **Price** | ** ** | **Exercisable** | ** ** | **Price** | ** ** |
| $3.65                   |       | 15,000                  |       | 10.00 |   | $3.65 |   | — |   | $— |   |
| $4.32                   |       | 15,000                  |       | 9.92 |   | 4.32 |   | — |   | — |   |
| $4.88                   |       | 210,000                 |       | 9.91 |   | 4.88 |   | — |   | — |   |
| $4.95                   |       | 300,000                 |       | 9.80 |   | 4.95 |   | 300,000 |   | 4.95 |   |
|                    |       | 540,000                 |       | 9.85 |   | $4.87 |   | 300,000 |   | $4.95 |   |

 

9

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The weightedaverage grant date fair value of options granted during the three months endedMarch 31, 2007 was $ 2.07.  As of March31, 2007, there was $ 519,271 of unrecognized compensation expense related tounvested options.  This cost is expectedto be recognized over a weighted-average period of 3.9 years.  The fair value of options vested during theperiod was approximately $591,000.

On March 31, 2007,pursuant to the Plan, the Company issued 215,574 restricted stock units valuedat approximately $183,000 to certain directors of the Company.  Such units vest ratably over a 5 year period.

**NOTE G****3⁄4ACCOUNTINGFOR WARRANTS AND DERIVATIVE INSTRUMENTS**

On October 25, 2005,the Company consummated its initial public offering of 21,000,000 units. Eachunit consisted of one share of common stock and two redeemable common stockpurchase warrants. Each warrant entitles the holder to purchase from the Companyone share of its common stock at an exercise price of $5.00. The warrantagreement provides for the Company to register the shares underlying thewarrants and was silent as to the penalty to be incurred in the absence of theCompany’s ability to deliver registered shares to the warrant holders uponwarrant exercise. The warrants expire on October 19, 2009.

Emerging Issues Task Force Issue00-19, or EITF 00-19, “*Accounting forDerivative 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 EITF00-19, a contract designated as an asset or a liability must be carried at fairvalue on a company’s balance sheet, with any changes in fair value recorded ina company’s results of operations. A contract classified as an equityinstrument is included within equity, and no fair value adjustments arerequired from period to period.

Fair values for tradedsecurities and derivatives are based on quoted market prices. Where marketprices are not readily available, as in the case of the Company’s warrants asof the date of issuance, fair values are determined using methods requiringjudgment and estimates. Utilizing such methods, the fair value of the warrantliability at October 20, 2005 (the date of issuance) was determined to be$0.34 per warrant. At the date of issuance, the Company allocated the unitprice between the share of common stock and the warrants issued based uponrelative fair value determined, among other things, by reference to theunderlying cash held in the Trust fund. The warrants included in the units soldin the Company’s initial public offering began to be publicly traded on theOver the Counter Bulletin Board on December 5, 2005, and consequently thefair value of the warrants was reflected as the market price of a warrant ateach reporting period. To the extent that the market prices of the Company’swarrants increase or decrease, the Company’s derivative liabilities will alsoincrease or decrease with a corresponding impact on its statements of operations.

In accordance with EITF00-19, the warrants to purchase common stock included in the units sold in theCompany’s initial public offering were separately accounted for as liabilitiesprevious to March 14, 2007 and the fair value of these securities was presentedon the Company’s balance sheets as warrant liabilities. On March 14, 2007, theCompany entered into a warrant clarification agreement to expressly state that,in the event a warrant would expire unexercised and without value andunredeemed on the expiration date, under no circumstances would the Company berequired to net cash settle the warrants.  As such, the effect modifiesthe classification of the warrants from a liability to equity.  The Companyrecognized a loss of $6,930,000 representing the change in fair value of thewarrant liability from December 31, 2006 through March 14, 2006.  The fairvalue of the warrants at March 14, 2007 of $20,790,000 was reclassified toadditional paid in capital.

10

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**NOTE H—COMMON STOCK REDEMPTION**

Following the consummationof the acquisition of ATSI, the Company announced and implemented a commonstock and warrant repurchase program.  Through March 31, 2007, the Companypaid approximately $13.5 million in cash to redeem 2,811,400 shares of commonstock at an average price of $4.80 per share.

On January 16, 2007,the Company announced that it would repurchase 2,625,000 shares of the Company’scommon stock from the founders at $0.011 per share. This program was completedin January 2007.

On January 16, 2007,the Company announced that it would repurchase shares of those shareholdersthat voted against the acquisition of ATSI and requested that their shares(2,906,355) be redeemed at the then per share trust value of $5.77 per share. Thisprogram was completed in January 2007.

**NOTE I****3⁄4INCOMETAXES**

The Company and ATSI’s effective tax rates are basedupon the effective tax to be applicable to the full fiscal year.  As of March 31, 2007, the Company had a netdeferred tax liability of approximately $4.9 million.

Effective January 1, 2007, the Company was required toadopt FASB Interpretation No. 48, *Accounting forUncertainity in Income Taxes* (FIN 48).  FIN 48 prescribes a more-likely-than-notthreshold of financial statement recognition and measurement of a tax positiontaken or expected to be taken in a tax return. This interpretation also provides guidance on derecognition of incometax assets and liabilities, classification of current and deferred tax assetsand liabilities, accounting for interest and penalties associated with taxpositions, accounting for income taxes in interim periods and income taxdisclosures.  Since inception and throughJanuary 1, 2007, the adoption date of this standard, the Company was in essencea “blank check” company with no substantive operations.  The Companying recognizes accrued interestand penalties related to uncertain tax positions in income tax expense. TheCompany files its tax returns as prescribed by the tax laws of thejurisdictions in which it operates. The Company is currently under audit by theInternal Revenue Service (“IRS”). The Company’s 2004 through 2006 tax years arestill subject to examination by the IRS. Various state jurisdiction tax yearsremain open to examination. As a result, management has concluded that theadoption of this standard had no material effect on its financial position orresults of operations.

Management is in the process of evaluating the varioustax positions associated with the acquisitions of ATSI and Reliable IntegrationsServices, Inc. (RISI) and is of the opinion that any deferred tax liabilitiesthat would ultimately result from uncertain tax positions related to these entities would be covered byindemnification provisions provided in the acquisition agreements or wouldresult in an adjustment to goodwill.

**NOTE J-SEGMENT ACCOUNTING**

The Company reviewed its services by unit to determineif any unit of the business is subject to risks and returns that are differentthan those of other units in the Company. Based on this review, the Company has determined that all units of theCompany are providing comparable services to its clients, and the Company hasonly one reportable segment.

 

11

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** **

**NOTE K****3⁄4ACQUISITIONS**

***ATSI***

Effective theclose of business of January 15, 2007, the Company acquired all of theoutstanding capital stock of ATSI, a provider of systems integration andapplication development to the U.S. government, for $84.0 million in cash, and173,913 shares valued at approximately $1,000,000 as of the closing date. TheCompany was organized to effect a business combination with an operatingbusiness in the federal services and defense industries.  ATSI is active primarily in the growing U.S.government information technology services market. ATS designs, develops andintegrates enterprise-wide information technology solutions, including customsoftware applications, that address the U.S. government’s need to improvesystem efficiency, track human and financial capital, and reduce systemdowntime. Management believes that ATSI provides a strong federal servicesplatform from which the Company can grow, has strong core competencies that theCompany can build upon, and provides opportunities to create additionalstockholder value. The stock purchase agreement provides for a working capitaladjustment to the extent the net working capital on the closing date variesfrom the target amount as defined in the agreement.  Based on a determination of net workingcapital at the acquisition date, the Company has recorded a receivable forapproximately $3.5 million, included in other current assets on the March 31,2007 consolidated balance sheet, that it expects to receive from funds thatwere placed in escrow to cover any purchase price adjustments.

Itis possible that the former shareholders of ATSI could benefit from earnoutopportunities if certain adjusted earnings thresholds are achieved duringsubsequent periods. These earnout opportunities had two components, eachdependent on ATSI achieving certain levels of trailing 12-month EBITDA, asdefined in the stock purchase agreement. One component of the earnout, up to anaggregate of $15.0 million, was dependent on ATSI achieving certain levelsof adjusted EBITDA during the 12-month trailing periods ended October 31,2006 and April 30, 2007. The second component of the earnout up to anaggregate of $24.0 million, was dependent on the award of a large U.S. AirForce contract that ATSI bid on, which ATSI was notified on March 26,2007, that it did not receive. The Company funded the cash portion of the ATSIpurchase price with the proceeds of its initial public offering. In connectionwith the acquisition of ATSI, holders of 2,906,355 shares of common stock votedagainst the acquisition and perfected their right to convert their shares ofcommon stock into $5.77 of cash per share. An aggregate of $16,769,668 was paidto such dissenting stockholders.

Under the purchase methodof accounting, the preliminary purchase price has been allocated to the nettangible and intangible assets acquired and liabilities assumed, based uponpreliminary estimates, which assume that historical cost approximates fairvalue of the assets and liabilities of ATSI. As such, management estimates thata substantial portion of the excess purchase price will be allocated tonon-amortizable intangible assets. These estimates are subject to change uponthe finalization of the valuation of certain assets and liabilities and may beadjusted in accordance with the provisions of SFAS No. 141, *Business Combinations*. Management has preliminarily estimated that the transaction will resultin $63.7 million of goodwill that is not expected to be deductible for incometax purposes. Additionally, management estimated that approximately $17.0million of the purchase price is allocable to customer-related intangibleassets, which include customer contracts, backlog, and non-contractual customerrelationships (including trade name recognition).  Such intangible assets will be amortized overperiods ranging from three to six years based upon factors such as customerrelationships and contract periods.

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The total purchase pricepaid, including transaction costs of approximately $4.2 million, has beenpreliminarily allocated as follows:

| (in thousands):                                                                            | ** ** | ** ** | ** ** | ** ** | ** ** |
|-------------------------------------------------------------------------------------------------|------------|------------|------------|------------|------------|
| Cash                                                                                            |       | $          | 76,635     |       |
| Common stock  (173,913 shares valued on the date of the purchase agreement—April 19, 2006) |       | 1,000      |       |
| Transaction  costs                                                                              |       | 4,234      |       |
| Total purchase price                                                                            |       | $          | 81,869     |       |
| Purchase price  allocation:                                                                     |       |       |       |
| Current assets                                                                                  |       | $          | 24,160     |       |
| Property and equipment                                                                          |       | 1,466      |       |
| Intangible  assets                                                                              |       | 17,000     |       |
| Goodwill                                                                                        |       | 63,742     |       |
| Other assets                                                                                    |       | 1,781      |       |
| Total assets  acquired                                                                          |       | 108,149    |       |
| Current  liabilities                                                                            |       | 18,587     |       |
| Long-term  liabilities                                                                          |       | 1,128      |       |
| Deferred tax  liability from acquisition intangibles                                            |       | 6,565      |       |
| Total liabilities  assumed                                                                      |       | 26,280     |       |
| Net assets  acquired                                                                            |       | $          | 81,869     |       |

 

Thepreliminary estimated value and the weighted-average amortization period ofeach of the components of the customer-related intangible assets are asfollows:

|                                                                            | ** ** | **Estimated Value   (in millions)** | ** ** | **Weighted-Average   Amortization Period** | ** ** |
|----------------------------------------------------------------------------|------------|----------------------------------------------------|------------|------------------------------------------------------|------------|
| Customer  contracts                                                        |       | $                                                  | 10.0       |                                                 | 6 years    |   |
| Backlog                                                                    |       | 6.0                                                |       | 3.5 years                                            |       |
| Non-contractual  customer relationships (including trade name recognition) |       | 1.0                                                |       | 3 years                                              |       |
| Total / Average                                                            |       | $                                                  | 17.0       |                                                 | 5 years    |   |

 

Theresults of operations for ATSI have been included in the Consolidated Statementsof Income from the acquisition date through March 31, 2007.

***RISI***

On March 1, 2007, theCompany acquired Reliable Integration Services, Inc. (“RISI”), a 37-employeenetwork systems integrator serving U.S. government defense and civilianagencies for approximately $1.3 million as set forth below. Management believesthat RISI’s client base and work product complements ATSI’s client base andwork product and provides opportunities for both companies to cross sell theirservices.

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Underthe purchase method of accounting, the preliminary purchase price has beenallocated to the net tangible and intangible assets acquired and liabilitiesassumed, based upon preliminary estimates, which assume that historical costapproximates fair value of the assets and liabilities of RISI. As such,management estimates that a substantial portion of the excess purchase pricewill be allocated to non-amortizable intangible assets. These estimates aresubject to change upon the finalization of the valuation of certain assets andliabilities and may be adjusted in accordance with the provisions of SFASNo. 141, *Business Combinations*.

Theresults of operations for RISI are included in the consolidated statements ofoperations from the acquisition date through March 31, 2007.

The total purchase pricepaid, including transaction costs of $ 67,000, has been preliminarily allocatedas follows:

| (in thousands):                                 | ** ** | ** ** | ** ** | ** ** | ** ** |
|------------------------------------------------------|------------|------------|------------|------------|------------|
| Cash                                                 |       | $          | 933        |       |
| Common stock  (46,296 shares issued)                 |       | 200        |       |
| Promissory note                                      |       | 86         |       |
| Transaction  costs                                   |       | 67         |       |
| Total purchase price                                 |       | $          | 1,286      |       |
| Purchase price  allocation:                          |       |       |       |
| Current assets                                       |       | $          | 671        |       |
| Property and  equipment                              |       | 50         |       |
| Intangible  assets                                   |       | 300        |       |
| Goodwill                                             |       | 1,177      |       |
| Other assets                                         |       | 12         |       |
| Total assets  acquired                               |       | $          | 2,210      |       |
| Current  liabilities                                 |       | 648        |       |
| Deferred tax  liability from acquisition intangibles |       | 116        |       |
| Total  liabilities assumed                           |       | 764        |       |
| Net assets  acquired                                 |       | $          | 1,286      |       |

 

Managementhas preliminarily estimated that the transaction will result in $1.0 million ofgoodwill.  Management is currentlyanalyzing the deductibility of goodwill on future income taxes. Approximately $300,000of the purchase price is expected to be allocated to acquired customer-relatedintangible assets, that include customer contracts, backlog, andnon-contractual customer relationships (including trade name recognition), andwill be amortized over periods ranging from three to six years based uponfactors such as expected customer relationships and contract periods.

Thepreliminary estimated value and the weighted-average amortization period ofeach of the components of the customer-related intangible assets are asfollows:

|                                                                            | ** ** | **Estimated Value   (in thousands)** | ** ** | **Weighted-Average   Amortization Period** | ** ** |
|----------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|------------------------------------------------------|------------|
| Customer  contracts                                                        |       | $                                                   | 173        |                                                 | 6 years    |   |
| Backlog                                                                    |       | 102                                                 |       | 3.5 years                                            |       |
| Non-contractual  customer relationships (including trade name recognition) |       | 25                                                  |       | 3 years                                              |       |
| Total / Average                                                            |       | $                                                   | 300        |                                                 | 4.9 years  |   |

** **

Unauditedproforma results of operations are as follows. The amounts are shown as if theATSI and RISI acquisitions had occurred on January 1, 2006:

 

|                                                                            | ** ** | **Three months ended March 31,** | ** ** |
|----------------------------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                                                 | ** ** | **2007**                                             | ** ** | **2006** | ** ** |
| Proforma revenue                                                           |       | $                                                    | 28,260,926 |   | $ | 30,466,687 |   |
| Proforma net  loss                                                         |       | (12,291,560                                          | )          | (9,043,525 | ) |
| Net loss per  share (basic and diluted)                                    |       | $                                                    | (.61       | ) | $ | (.34 | ) |
| Net loss per share not  subject to possible redemption (basic and diluted) |       | $                                                    | (.61       | ) | $ | (.41 | ) |

 

This information is notnecessarily indicative of the operational results that would have occurred ifthe acquisition had been consummated on the dates indicated nor is itnecessarily indicative of future operating results of the combined enterprise.The unaudited proforma combined condensed financial information does notreflect any adjustments to conform accounting practices or to reflect any costsavings or other synergies anticipated as a result of the acquisition.

** **

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**NOTE L****3⁄4DISCONTINUEDOPERATIONS**

***Advanced Technology Systems International,Inc.***

In August 2005, ATSI adopteda formal plan for the sale of Advanced Technology Systems International, Inc.(“ATSII”), which had a history of operating losses.  On November 30, 2005,pursuant to the terms of a stock purchase agreement entered into by and betweenATSI, ATSII, New Technology Management, Inc. (NTMI) and NTMI AcquisitionCorporation, ATSI sold all of the outstanding common stock of ATSII.

The following represents theresults of the operations of ATSII:

|                    | ** ** | **Three Months  Ended January 31,  2006** | ** ** |
|--------------------|------------|----------------------------------------------------------|------------|
|               | ** ** | ** **                                               | ** ** |
| Revenue            |       | $                                                        | 234,386    |   |
| Loss before  taxes |       | (66,588                                                  | )          |
| Net loss           |       | (39,952                                                  | )          |
|                    |            |                                                          |            |  |

 

***Pyramid***

In January 2006, managementdecided to discontinue the operations of the Pyramid Products Solutions Group. Thefollowing represents the results of the operations of Pyramid:

|                    | ** ** | **Three Months   Ended January 31,** | ** ** |
|--------------------|------------|----------------------------------------------------------|------------|
| ** **         | ** ** | **2006**                                                 | ** ** |
| Revenue            |       | $                                                        | 340,615    |   |
| Loss before  taxes |       | (564,041                                                 | )          |
| Net loss           |       | (338,425                                                 | )          |
|                    |            |                                                          |            |  |

 

**NOTE M****3⁄4COMMITMENTS**

# *Change in Control Agreements*

Prior to theacquisition, ATSI’s Board of Directors approved Retention Agreements to keyemployees which authorized the payment of bonuses if the employee continuedemployment through the date of the ATS Corporation acquisition.  Asfurther described in Note K, as of the close of business on January 15, 2007, ATSIwas acquired by the Company. As a condition of the Retention Agreements,certain key employees received approximately $3,705,000 in bonuses upon theclosing of the transaction.  These bonuses are recorded in overheadexpense in ATSI’s consolidated statements of operations for the period fromNovember 1, 2006 through January 15, 2007.

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***Employment Agreement***

On March 19, 2007,the Company entered into an employment agreement with its Chairman, Presidentand Chief Executive Officer who has been serving in that capacity since January16, 2007. The employment agreement was filed as part of a current report onForm 8-K on March 21, 2007. The employment agreement specifies annual salaryand incentive compensation for the terms of the agreement.  The agreementalso provides for between twelve and eighteen months’ salary and 50% of anyincentive compensation targets if the employee is terminated other than forcause.

# *Phantom Stock Option Plan*

In December 2004,ATSI’s subsidiary, Appix, Inc. (Appix), adopted the Appix Phantom Stock Plan(the Phantom Stock Plan).  Under the Phantom Stock Plan, a committee ofthe Board of Directors of Appix could award up to 2,000,000 Phantom stock unitsto eligible participants.  The value of the units was determined basedupon a formula that is defined in the agreement.  The units were alsosubject to a vesting schedule as defined in the Phantom Stock Plan, and becameimmediately exercisable in the event of a change in control of Appix or theCompany.  Units issued under the Phantom Stock Plan were also subject tocertain termination and cancellation provisions.

As furtherdescribed in Note K, as of the close of business on January 15, 2007, ATSI wasacquired by the Company. As a condition of the stock purchase agreement, alloutstanding phantom stock units were repurchased for approximately$276,000.  Compensation expense associated with the phantom stockredemption is recorded in general and administrative expense in ATSI’sstatements of operations for the period from November 1, 2006 throughJanuary 15, 2007.

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** **

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

***FORWARD-LOOKING STATEMENTS***

Some of the statements in this Quarterly Report onForm 10-Q constitute forward-looking statements.  These statements involve known and unknownrisks, uncertainties, and other factors that may cause our actual results,levels of activity, performance or achievements to be materially different fromany future results, levels of activity, performance or achievements expressed orimplied by such forward-looking statements. In some cases, you can identify these statements by forward-lookingwords such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,”“may,” “plan,” “potential,” “should,” “will,” and “would” or similarwords.  You should read statements thatcontain these words carefully because they discuss our future expectations,contain projections of our future results of operations or of our financialposition, or state other forward-looking information.  The factors described in our filings with theSEC, as well as any cautionary language in this Quarterly Report on Form 10-Q,provide examples of risks, uncertainties and events that may cause our actualresults to differ materially from the expectations we describe in ourforward-looking statements, including but not limited to:

·                  risks related to the governmentcontracting industry, including possible changes in government spendingpriorities;

·                  risks related to our business,including our dependence on contracts with U.S. Federal Government agencies anddepartments and continued good relations, and being successful in competitivebidding, with those customers;

·                  uncertainties as to whether revenuescorresponding to our contract backlog will actually be received;

·                  risks related to the implementationof our strategic plan, including the ability to make acquisitions and theperformance and future integration of acquired businesses; and

·                  other risks and uncertaintiesdisclosed in our filings with the Securities and Exchange Commission.

Additional factors thatmay affect our results are discussed in our Annual Report on Form 10-K for theyear ended December 31, 2006 under “Item 1A. Risk Factors.”  Although we believe the expectationsreflected in the forward-looking statements are reasonable, we cannot guaranteefuture results, levels of activity, performance, or achievements.  You should not place undue reliance on theseforward-looking statements, which apply only as of the date of this QuarterlyReport on Form 10-Q.  We undertake noobligation to update these forward-looking statements, even if our situationchanges in the future.

The terms “we” and “our”as used throughout this Quarterly Report on Form 10-Q refer to ATS Corporationand its consolidated subsidiaries, unless otherwise indicated.

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**Overview**

ATS Corporation (“ATS”) was organized as a “blankcheck” company under the laws of the State of Delaware on April 12, 2005and was formed for the purpose of acquiring, through a merger, capital stock exchange,asset acquisition, stock purchase or other similar business combination, anoperating business in the federal services and defense industries. As of closeof business on  January 15, 2007, weacquired all of the outstanding capital stock of Advanced Technology Systems,Inc. (“ATSI”), a provider of systems integration and application development tothe U.S. government, for (a) $84.0 million in cash, reduced by a workingcapital adjustment, the repayment of outstanding indebtedness of ATSI and an aggregateof $8.395 million of escrowed funds, and (b) 173,913 shares of our commonstock.  It is possible that the formershareholders of ATSI could benefit from certain earn out opportunities ifcertain adjusted EBITDA thresholds are achieved.  In addition, on March 1, 2007, we acquiredall of the outstanding capital stock of Reliable Integration Services, Inc. (“RISI”),a network systems integrator provider serving U.S. government defense andcivilian agencies for $1.3 million in the form of cash, promissory notes andthe assumption of debt, plus 46,296 shares of our common stock.

ATS (www.atsva.com) is a professional services firmserving both the Federal Government and state and local government agencies,specializing in systems integration and application development; informationtechnology infrastructure management to support its clients’ program or systemobjectives through the design and implementation of customized solutions;  strategicinformation technology consulting (business process redesign); and networkmanagement.

Our diverse customer base consists primarily of U.S.government agencies. For the quarter ended March 31, 2007, ATS generatedapproximately 46% of its revenue from federal civilian agencies, 18% fromdefense and homeland security agencies, 26% from commercial customers,including government sponsored enterprises, and 10% from state and localcustomers. ATS’ largest clients in the first quarter ended March 31, 2007 wereHUD and Fannie Mae, representing approximately 24% and 18%, respectively, ofits total revenue.

We derive substantially all of our revenues from feesfor consulting services.  We generatethese fees from contracts with various payment arrangements, including time andmaterials contracts, fixed-price contracts and cost-reimbursablecontracts.  During the three months endedMarch 31, 2007, revenues from these contract types were approximately 56%, 39%and 5%, respectively, of total revenues. We typically issue invoices monthly to manage outstanding accountsreceivable balances.  We recognizerevenues on time and materials contracts based on actual hours delivered at thecontracted billable hourly rate plus the cost of materials incurred.  We recognize revenues on fixed-pricecontracts using the percentage-of-completion method based on costs we incurredin relation to total estimated costs. However, if the contract has a service element, we recognize revenues ona straight-line basis over the term of the contract.  We recognize cost-type contracts to theextent of costs incurred plus a proportionate amount of fee earned.

On occasion, we enter into contracts that include thedelivery of a combination of two or more of our service offerings.  Typically, such multiple-element arrangementsincorporate the design, development, or modification of systems and an ongoingobligation to manage, staff, maintain, host, or otherwise run solutions andsystems provided to the client.  Suchcontracts are divided into separate units of accounting and the totalarrangement fee is allocated to each unit based on its relative fairvalue.  In accordance with our revenuerecognition policy, revenue is recognized separately for each element.

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The fees under certain government contracts may beincreased or decreased in accordance with cost or performance incentiveprovisions that measure actual performance against targets or othercriteria.  Such incentive fee awards orpenalties are included in revenue at the time the amounts can be reasonablydetermined.  Provisions for anticipatedcontract losses are recognized at the time they become known.

In the three months ended March 31, 2007, we derivedapproximately 14% of our revenues through relationships with prime contractors,who contract directly with the end-client and subcontract with us.

Our most significant expense is direct cost, whichconsists primarily of project personnel salaries and benefits, and directexpenses incurred to complete projects. The number of consulting personnel assigned to a project will varyaccording to the size, complexity, duration, and demands of the project.  As of March 31, 2007, we had 442 personnelthat worked on our contracts.

General and administrative expenses consist primarilyof costs associated with our executive management, finance and administrativegroups, human resources, sales and marketing personnel, and costs associatedwith marketing and bidding on future projects, unassigned consulting personnel,personnel training, occupancy costs, depreciation and amortization, travel andall other branch and corporate costs.

Investment and other income consist primarily ofinterest income earned on our cash, cash equivalents and marketable securities.

**ContractBacklog**

We define backlog as the future revenue we expect toreceive from our contracts and other engagements.  We generally include in backlog the estimatedrevenue represented by contract options that have been priced, though notexercised.  We do not include anyestimate of revenue relating to potential future delivery orders that might beawarded under our General Services Administration Multiple Award Schedulecontracts, other Indefinite Delivery/Indefinite Quantity  (IDIQ) contracts, or other contract vehiclesthat are also held by a large number of firms, an order which potential furtherdelivery orders or task orders might be issued by any of a large number ofdifferent agencies and are likely to be subject to a competitive biddingprocess.  Our backlog as at March 31,2007 was approximately $150.0 million.

**RecentEvents**

On January 16, 2007, we announced that the board ofdirectors of the Company had approved the repurchase of up to $15 million ofeither the Company’s common stock or its warrants.  Through May 10, 2007, the Company hadrepurchased a total of 2,811,400 shares of common stock for a total of approximately$13.5 million.

On January 16, 2007,the Company announced it would repurchase 2,625,000 shares of the Company’scommon stock from the founders at $0.011 per share. This program was completedin January 2007.

On January 16, 2007,the Company announced that it would repurchase shares of those shareholdersthat voted against the acquisition of ATSI and requested that their shares(2,906,355) be redeemed at the then per share trust value of $5.77 per share.This program was completed in January 2007.

**Resultsof Operations**

We acquired ATSI as of close of business on January 15,2007, and acquired RISI on March 1, 2007. Prior to our acquisition of the ATSI business, we had no operations andgenerated no revenue.  Accordingly, weare presenting two comparisons.  Thefirst compares our results for the three months ended March 31, 2007 to thethree months ended March 31, 2006.   Theresults for the three months ended March 31, 2007, reflect 2.5 months ofrevenues and expenses for ATSI and 1 month of revenues and expenses for RISI,which correspond to the dates these companies were acquired during thequarter.  The results for the threemonths ended March 31, 2006, only reflect the results of ATS which had nooperations during the quarter.  Thesecond comparison we are providing is that of ATSI for the period from November1, 2006 through January 15, 2007, the last day of operations before it wasacquired by ATS, to the three months ended January 31, 2006.  There were only 2.5 months of operations forthe period ended January 15, 2007.

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The followingtables set forth certain financial data as dollars and as a percentage ofrevenues.
| ** **                                                                                                                              | ** ** | **(Successor)**                       | ** ** | ** **                            | **(Predecessor)** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------|------------|---------------------------------------|-------------------|------------|
| ** **                                                                                                                              | ** ** | ** **                            | ** ** | ** **                            | ** **        | ** ** | **For the period** | ** ** | ** ** | ** ** |
| ** **                                                                                                                              | ** ** | **For the Three**           | ** ** | **For the Three**           | ** **        | ** ** | **from November 1, 2006** | ** ** | **For the Three** | ** ** |
| ** **                                                                                                                              | ** ** | **Months Ended  March 31, 2007** | ** ** | **Months Ended  March 31, 2006** | ** **        | ** ** | **through  January 15, 2007** | ** ** | **Months Ended  January 31, 2006** | ** ** |
| ** **                                                                                                                              | ** ** | **(dollars in thousands)**  | ** ** |
| **Statement of Income:**                                                                                                                |       |                                  |       |                                  |              |       |   |   |   |   |
| **Revenue**                                                                                                                             |       | $                                     | 23,478     |                                  | $                 | —     |   |   | $ | 21,448 |   | $ | 26,054 |   |
|                                                                                                                                    |       |                                  |       |                                  |              |       |   |   |   |   |
| **Operating costs and expenses**                                                                                                        |       |                                  |       |                                  |              |       |   |   |   |   |
| Cost of services                                                                                                                        |       | 16,464                                |       | —                                |              |       | 15,473 |   | 18,573 |   |
| Selling, general and  administrative                                                                                                    |       | 5,971                                 |       | 610                                   |              |       | 12,678 |   | 6,261 |   |
| Depreciation and  amortization                                                                                                          |       | 147                                   |       | —                                |              |       | 142 |   | 221 |   |
| Amortization of  intangible assets                                                                                                      |       | 779                                   |       | —                                |              |       | — |   | — |   |
|                                                                                                                                    |       |                                  |       |                                  |              |       |   |   |   |   |
| **Total operating costs and  expenses**                                                                                                 |       | 23,361                                |       | 610                                   |              |       | 28,293 |   | 25,055 |   |
|                                                                                                                                    |       |                                  |       |                                  |              |       |   |   |   |   |
| **Operating income (loss)**                                                                                                             |       | 116                                   |       | (610                                  | )                 |       | (6,845 | ) | 999 |   |
|                                                                                                                                    |       |                                  |       |                                  |              |       |   |   |   |   |
| **Other Income (Expense)**                                                                                                              |       |                                  |       |                                  |              |       |   |   |   |   |
| Interest income (expense),  net                                                                                                         |       | 144                                   |       | 1,190                                 |              |       | (108 | ) | (51 | ) |
| Loss on derivative  liabilities attributable to warrants                                                                                |       | (6,930                                | )          | (10,920                               | )                 |       | — |   | — |   |
| Other income                                                                                                                            |       | 1                                     |       | —                                |              |       | 54 |   | 8 |   |
|                                                                                                                                    |       |                                  |       |                                  |              |       |   |   |   |   |
| **Income (Loss) Before Income  Taxes**                                                                                                  |       | (6,669                                | )          | (10,340                               | )                 |       | (6,899 | ) | 956 |   |
|                                                                                                                                    |       |                                  |       |                                  |              |       |   |   |   |   |
| **Income Tax (Benefit) Expense**                                                                                                        |       | 103                                   |       | 264                                   |              |       | (2,533 | ) | 382 |   |
|                                                                                                                                    |       |                                  |       |                                  |              |       |   |   |   |   |
| **Income (Loss) from Continuing  Operations**                                                                                           |       | (6,772                                | )          | (10,604                               | )                 |       | (4,366 | ) | 574 |   |
|                                                                                                                                    |       |                                  |       |                                  |              |       |   |   |   |   |
| **Loss  from Discontinued Operations,**net of income tax benefits of $252,252                                                           |       | —                                |       | —                                |              |       | — |   | (378 | ) |
|                                                                                                                                    |       |                                  |       |                                  |              |       |   |   |   |   |
| **Net Income (Loss)**                                                                                                                   |       | (6,772                                | )          | (10,604                               | )                 |       | (4,366 | ) | 196 |   |
|                                                                                                                                    |       |                                  |       |                                  |              |       |   |   |   |   |
| **Interest income attributable to  common stock subject to possible redemption (net of taxes of $0 and $106,135,  respectively)**       |       | —                                |       | (129                                  | )                 |       | — |   | — |   |
|                                                                                                                                    |       |                                  |       |                                  |              |       |   |   |   |   |
| **Net income (loss) allocable to  common stockholders not subject to possible redemption**                                              |       | $                                     | (6,772     | )                                     | $                 | (10,733    | ) |   | $ | (4,366 | ) | $ | 196 |   |
|                                                                                                                                    |       |                                  |       |                                  |              |       |   |   |   |   |
|                                                                                                                                    |       |                                  |       |                                  |              |       |   |   |   |   |
|                                                                                                                                    |       |                                  |       |                                  |              |       |   |   |   |   |
|                                                                                                                                    |       |                                  |       |                                  |              |       |   |   |   |   |
| **As a Percentage of Revenue:**                                                                                                         |       |                                  |       |                                  |              |       |   |   |   |   |
|                                                                                                                                    |       |                                  |       |                                  |              |       |   |   |   |   |
| **Revenue**                                                                                                                             |       | 100.0                                 | %          |                                  |              |       | 100.0 | % | 100.0 | % |
|                                                                                                                                    |       |                                  |       |                                  |              |       |   |   |   |   |
| **Operating costs and expenses**                                                                                                        |       |                                  |       |                                  |              |       |   |   |   |   |
| Cost of services                                                                                                                        |       | 70.1                                  |       |                                  |              |       | 72.1 |   | 71.3 |   |
| Selling, general and  administrative                                                                                                    |       | 25.5                                  |       |                                  |              |       | 59.1 |   | 24 |   |
| Depreciation and  amortization                                                                                                          |       | 0.6                                   |       |                                  |              |       | 0.7 |   | 0.9 |   |
| Amortization of  intangible assets                                                                                                      |       | 3.3                                   |       |                                  |              |       | — |   | — |   |
|                                                                                                                                    |       |                                  |       |                                  |              |       |   |   |   |   |
| **Total operating costs and  expenses**                                                                                                 |       | 99.5                                  |       |                                  |              |       | 131.9 |   | 96.2 |   |
|                                                                                                                                    |       |                                  |       |                                  |              |       |   |   |   |   |
| **Operating income (loss)**                                                                                                             |       | 0.5                                   |       |                                  |              |       | (31.9 | ) | 3.8 |   |
|                                                                                                                                    |       |                                  |       |                                  |              |       |   |   |   |   |
| **Other Income (Expense)**                                                                                                              |       |                                  |       |                                  |              |       |   |   |   |   |
| Interest income  (expense), net                                                                                                         |       | 0.6                                   |       |                                  |              |       | (0.5 | ) | (0.2 | ) |
| Loss on derivative  liabilities attributable to warrants                                                                                |       | (29.5                                 | )          |                                  |              |       | — |   | — |   |
| Other income                                                                                                                            |       | —                                |       |                                  |              |       | 0.2 |   | — |   |
|                                                                                                                                    |       |                                  |       |                                  |              |       |   |   |   |   |
| **Income (Loss) Before Income  Taxes**                                                                                                  |       | (28.4                                 | )          |                                  |              |       | (32.2 | ) | 3.6 |   |
|                                                                                                                                    |       |                                  |       |                                  |              |       |   |   |   |   |
| **Income Tax (Benefit) Expense**                                                                                                        |       | 0.4                                   |       |                                  |              |       | (11.8 | ) | 1.4 |   |
|                                                                                                                                    |       |                                  |       |                                  |              |       |   |   |   |   |
| **Income (Loss) from Continuing  Operations**                                                                                           |       | (28.8                                 | )          |                                  |              |       | (20.4 | ) | 2.2 |   |
|                                                                                                                                    |       |                                  |       |                                  |              |       |   |   |   |   |
| **Loss  from Discontinued Operations,**net of income tax benefits of $252,252                                                           |       | —                                |       |                                  |              |       | — |   | 1.4 |   |
|                                                                                                                                    |       |                                  |       |                                  |              |       |   |   |   |   |
| **Net Income (Loss)**                                                                                                                   |       | (28.8                                 | )          |                                  |              |       | (20.4 | ) | 0.8 |   |
|                                                                                                                                    |       |                                  |       |                                  |              |       |   |   |   |   |
| ** Interest income attributable to common stock  subject to possible redemption (net of taxes of $0 and $106,135,  respectively)** |       | —                                |       |                                  |              |       | — |   |   |   |
|                                                                                                                                    |       |                                  |       |                                  |              |       |   |   |   |   |
| **Net income (loss) allocable to  common stockholders not subject to possible redemption**                                              |       | (28.8                                 | )%         |                                  |              |       | (20.4 | )% | 0.8 | % |

 

20

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Our revenues and operating results may be subject tosignificant variation from quarter to quarter depending on a number of factors,including the progress of contracts, revenue earned on contracts, the number ofbillable days in a quarter, the timing of the pass-through of other directcosts, the commencement and completion of contracts during any particularquarter, the schedule of the government agencies for awarding contracts, theterm of each contract that we have been awarded, and general economicconditions.  Because a significantportion of our expenses, such as personnel and facilities costs, are fixed inthe short term, successful contract performance and variation in the volume ofactivity, as well as in the number of contracts commenced or completed duringany quarter, may cause significant variations in operating results from quarterto quarter.

The Federal Government’s fiscal year ends September30.  If the budget for the next fiscalyear has not been approved by that date, our clients may have to suspendengagements that we are working on until a budget has been approved.  Such suspensions may cause us to realizelower revenues in the fourth quarter of the year.  Further, a change in presidentialadministrations and in senior government officials may negatively affect therate at which the Federal Government purchases technology.

As a result of the factors above, period-to-periodcomparisons of our revenues and operating results may not be meaningful.  You should not rely on these comparisons asindicators of future performance as no assurances can be given that quarterlyresults will not fluctuate, causing a material adverse effect on our operatingresults and financial condition.

**Results of Operations for the Successor Companyfor the Three Months Ended March 31, 2007, compared with the Three Months EndedMarch 31, 2006.**

*Revenues and cost of services. *The Company had nooperating revenues or cost of services in the three months ended March 31, 2006,compared to $23.5 million of revenues and $16.5 million cost of services in thethree months ended March 31, 2007. The revenues for 2007 were due to ouracquisitions of ATSI and RISI during the quarter. There was no significantchange in contract revenue between the periods.

*Selling, general and administrative expenses.  *Selling, general andadministrative expenses of $610,000 for the three months ended March 31, 2006were related to the pursuit of potential acquisition candidates. For the threemonths ended March 31, 2007, the $6.0 million of selling, general andadministrative expenses were related to the operations of ATSI and RISI whichwere acquired during the quarter.

*Interest income and expense*.  For the three months ended March 31, 2007, weearned $144,000 of net interest income. For the three months ended March 31, 2006, we had interest income of$1.2 million.  The interest income for2006 was primarily related to the earnings on funds that were held in trustuntil the Company consummated an acquisition, which occurred on January 16, 2007.

*Loss on derivative liabilities attributable towarrants. *For thethree months ended March 31, 2007 and March 31, 2006, we incurred losses of$6.9 million and $10.9 million, respectively, on the Company’s warrants.  Because the warrant agreement, until March14, 2007, was not clear as to whether the we were required to net cash settlethe warrants if we were unable to deliver common stock to the warrant holders,we were required to mark the warrants to market as liabilities and therefore recognizegains or losses on the increase or decrease in the fair market value of thewarrants.  Effective March 14, 2007, thewarrant agreement was clarified to state that we are not required to net cashsettle the instruments if we are unable to deliver shares of common stock tothe warrant holders.  We are therefore nolonger required to mark the warrants to market and the warrants have beenreclassified as stockholders’ equity from liabilities.

*Provision for income taxes.*  Our income tax expense for the quarters endedMarch 31, 2007 and March 31, 2006 were $0.1 million and $0.3 million,respectively.  The effective tax ratesfor the quarters ended March 31, 2007 and March 31, 2006 were (1.6%) and (2.6%),respectively.  The effective tax rateswere impacted by the loss on warrants, which is a non-deductible expense.

**Results of Operations for the Predecessor Companyfor the period from November 1, 2006 through January 15, 2007, compared withthe Three Months Ended January 31, 2006.**

*Revenues. *Revenuesdecreased by 17.7% to $21.4 million for the 2.5 month period ended January 15,2007, from $26.1 million for the three months ended January 31, 2006.  The decline in revenues between these twoperiods is primarily related to the fact that the period ended January 15, 2007is a shorter period. There were not significant changes in contract revenuesduring the period.

21

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*Cost of services.*  Cost of services decreased by 16.7% to $15.5million for the 2.5 month period ended January 15, 2007, from $18.6 million forthe three months ended January 31, 2006. Cost of services did not decrease in proportion to the decrease inrevenues primarily due to the non-recovery of all increases of compensation duringthis period.

*Selling, general and administrative expenses.*  Selling, general and administrative expensesincreased 102.5% to $12.7 million in the 2.5 month period ended January 15,2007 from $6.3 million for the three months ended January 31, 2006.  The primary reasons for this increase werefactors related to the acquisition of ATSI by ATS.  ATSI was required to pay $4.7 million inretention bonuses, including associated payroll taxes, $1.7 million to makefinal payments under a phantom stock plan, including dividends, and $0.3million in legal and accounting fees associated with the transaction.

*Depreciation and amortization.*  Depreciation and amortization expensedecreased 35.6% to $0.1 million for the 2.5 month period ended January 15,2007, from $0.2 million for the three months ended January 31, 2006.

*Operating income (loss).*  Operating income decreased 784.9% to a $6.8million loss for the 2.5 month period ended January 15, 2007 from income of$1.0 million for the three months ended January 31, 2006, due to the factorsdiscussed above.

*Interest income (expense). *Interest expense increasedby 112.8% to ($108,000) in the 2.5 months ended January 15, 2007 from ($51,000)for the three months ended January 31, 2006, because of higher borrowingsduring this period.

*Other income.*  Other income increased by 583.8% to $54,000for the 2.5 month period ended January 15, 2007 from $8,000 for the three monthsended January 31, 2006.

*Provision for income taxes.*  Our income tax expense for the 2.5 monthsended January 15, 2007 and the three months ended January 31, 2006 were $(2.5)million and $0.4 million, respectively. The effective tax rates for the periods ended January 15, 2007 andJanuary 31, 2006 were 36.8% and 40.0%, respectively.

**FinancialCondition, Liquidity and Capital Resources**

**FinancialCondition. **Total assets decreased $8.2 million to $115.0million as of March 31, 2007 compared to $123.2 million as of December 31,2006, due to our acquisitions during the first quarter of fiscal year2007.  At March 31, 2007, we no longerhad $121.0 million in short term investments as we did at December 31, 2006 assuch funds were used to acquire ATSI and RISI.

Our total liabilities increased to $21.4 million as of March 31, 2007from $15.2 million as of December 31, 2006, also due primarily to ouracquisitions.  Accordingly, our accountspayable increased to $7.5 million at March 31, 2007 from $1.0 million atDecember 31, 2006, our accrued salaries and related taxes, and accrued vacationboth went from $0 at December 31, 2006 to $3.9 million and $2.6 million atMarch 31, 2007, respectively.  Ourdeferred income taxes, net of current portion, also increased from $0 atDecember 31, 2006 to $6.2 million at March 31, 2007.  These increases inliabilities were offset by the decrease in warrant liabilities from $13.9million at December 31, 2006 to $0 at March 31, 2007.  As the warrant agreement was clarifiedeffective March 14, 2007 to provide that we are not required to net cash settlethe instruments if we are unable to deliver shares of common stock to thewarrant holders, we are therefore no longer required to mark the warrants tomarket and the warrants were classified during the quarter as stockholders’equity rather than liabilities.

**Liquidityand Capital Resources. **Our primary liquidity needs are to financethe costs of operations, acquire capital assets and to make selective strategicacquisitions.  We expect to meet ourshort-term requirements through funds generated from operations and from acredit facility with Bank of America, which is currently being negotiated.  Our strategic acquisition cash requirementswill also be funded by cash generated from operations and the aforementionedcredit facility.

Net cash used by operating activities was $9.0 million for the threemonths ended March 31, 2007.  Cash usedby operating activities is primarily driven by net loss, adjusted for workingcapital changes, which were principally changes in accounts receivable, currentassets and accrued expenses.

22

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Net cash provided by investing activities was $40.7 million for the threemonths ended March 31, 2007.  During thethree months ended March 31, 2007, we had $121.0 million from the sale of U.S.government securities and $1.4 million from deferred acquisition costs, whileinvesting $80.8 million in the acquisition of ATSI and $1.0 million in theacquisition of RISI which comprised the majority of this investing activity.

Net cash used by financing activities was $30.0 million for the threemonths ended March 31, 2007.  This wasprincipally used to repurchase shares of the company’scommon stock.

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

We currently maintain a $9.0 million line of credit with Bank of America,bearing interest at the LIBOR Rate plus between 150 to 225 basis points perannum, depending on the amount borrowed, which expires on May 30, 2007. TheLIBOR Rate at March 31, 2007 was 5.32%.  We are in the process of finalizing negotiations with Bank of America ona line of credit for $25.0 million with the ability to expand it by another$25.0 million.  We anticipate having thisline in place by the end of May 2007.  Asof March 31, 2007, we had no outstanding balance on the line of credit.

Under some of our fixed-price contracts, we receive advance payments forwork to be performed in future months. If we do not perform the work, the unearned portion of these advanceswill be returned to our clients.  AtMarch 31, 2007, our accounts receivable turnover rate, net of advance paymentson contracts, was approximately five times a year.

**Off-BalanceSheet Arrangements**

As of the three months ended March 31, 2007, we did not have anyoff-balance sheet arrangements.

23

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***Recent Accounting Pronouncements***.

In September 2006, the FASB issued Statement ofFinancial Accounting Standards No. 157 (SFAS No. 157), Fair Value Measurements.  SFAS No. 157 provides a new singleauthoritative definition of fair value and enhanced guidance for measuring thefair value of assets and liabilities.  Itrequires additional disclosures related to the extent to which companiesmeasure assets and liabilities at fair value, the information used to measurefair value, and the effect of fair value measurements on earnings.  SFAS No. 157 is effective for fiscal yearsbeginning after November 15, 2007, and interim periods within those fiscalyears.  We are currently evaluating whateffect, if any, the adoption of SFAS No. 157 will have on our financialposition, results of operations, or cash flows.

In February 2007, theFASB issued SFAS No. 159, *The Fair Value Option forFinancial Assets and Financial Liabilities — Including an amendment of FASBStatement No. 115*(SFAS No. 159). SFAS No. 159 permits anentity, at specified election dates, to choose to measure certain financialinstruments and other items at fair value. The objective of SFAS No. 159 is toprovide entities with the opportunity to mitigate volatility in reportedearnings caused by measuring related assets and liabilities differently,without having to apply complex hedge accounting provisions.SFAS No. 159 is effective for accounting periods beginning afterNovember 15, 2007. The Company will adopt SFAS No. 159 for the fiscal yearbeginning January 1, 2008 and is currently assessing the impact of adoptingSFAS No. 159 on the consolidated financial statements.

**Item 3. Quantitative and QualitativeDisclosures about Market Risk.**

We are exposed to certainfinancial market risks, the most predominant being fluctuations in interestrates for borrowings under our credit facility. As of March 31, 2007, we had no outstanding balance under our line ofcredit.  We currently invest our excessfunds in an overnight bank sweep account.

**Item 4.Controls and Procedures.**

Ourmanagement performed an evaluation under the supervision and with theparticipation of our Chief Executive Officer (principal executive officer) andour Chief Financial Officer (principal financial officer) of the effectivenessof our disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e)of the Securities Exchange Act of 1934, as amended) as of March 31, 2007. Basedupon that evaluation, our Chief Executive Officer and Chief Financial Officerhave concluded that as of March 31, 2007, the Company’s disclosure controls andprocedures were ineffective.

24

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**Changes in Internal Control OverFinancial Reporting**

As noted in ourAnnual Report Form 10-K for the fiscal year ended December 31, 2006, our management,including our Chief Executive Officer and Chief Financial Officer, conducted anassessment of the effectiveness of our internal control over financialreporting as of December 31, 2006, based on the criteria set forth in theframework in Internal Control-Integrated Framework issued by the Committee ofSponsoring Organizations of the Treadway Commission (COSO). We determined thatour internal control over financial reporting was ineffective because of thefollowing material weaknesses as described below:

1.      Through December 31,2006, we had no operations, no full-time personnel and very few personnel ofany kind. Our activities from inception in late 2005 and into 2006 focused oncompleting our initial public offering, identifying acquisition candidates andthen completing the acquisition of ATSI. As a result of these factors, we hadneither the resources, nor the personnel, to have in place adequate internalcontrol. The material weaknesses in our internal control over financialreporting relates primarily to our inability to segregate duties.

2.      In addition, welacked documentation of the policies and procedures that were in place.

With thecompletion of the acquisition of ATSI in January 2007, we have additionalpersonnel, access to financial and internal control systems, and actualoperations. We have begun to address the internal control weaknesses summarizedabove beginning in the first quarter of 2007, with the goal of eliminating suchdeficiencies by the end of 2007. In addition, the acquisition of ATSI willrequire the development of more robust disclosure controls and procedures,which we also expect to develop during 2007.

It was determinedduring the audit of ATSI’s fiscal year ended October 31, 2006, that ATSI hadmaterial weaknesses in its internal control. ATSI did not have in place policies or controls that required theaccounting and finance department to review and evaluate contracts that were atrisk to determine the proper revenue recognition.  In addition, ATSI did not have a process inplace to review the collectibility of its accounts receivable on a regularbasis.  Subsequent to the acquisition ofATSI by the Company, procedures have been put in place to address these twoissues and to monitor them on a regular basis.

Therewere no other changes in the Company’s internal control over financialreporting for the first quarter of 2007 that have materially affected, or arereasonably likely to materially affect, the Company’s internal control overfinancial reporting.

**Limitationson the Effectiveness of Controls**

Because of the inherentlimitations in all control systems, no assessment of controls can provide absoluteassurance that all control issues and instances of fraud, if any, within the company have been detected.  These inherent limitations include therealities that judgments in decision-making can be faulty, and that breakdownscan occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts ofsome persons, by collusion of two or more people, or by management’s overrideof the control.  The design of any systemof controls also is based in part upon certain assumptions about the likelihoodof future events, and there can be no assurance that any design will succeed inachieving its stated goals under all potential future conditions; over time,controls may become inadequate because of changes in conditions, or the degreeof compliance with the policies or procedures may deteriorate.  Because of the inherent limitations in acost-effective control system, misstatements due to error or fraud may occurand not be detected.

25

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**PART II — OTHER INFORMATION**

**Item 1.Legal Proceedings.**

Fromtime to time, we are involved in various legal matters and proceedingsconcerning matters arising in the ordinary course of business. We currentlybelieve that any ultimate liability arising out of these matters andproceedings will not have a material adverse effect on our financial position,results of operations or cash flows.

**Item 1A.Risk Factors.**

Thereare no material updates to the risk factors previously disclosed in our Form10-K for the year ended December 31, 2006.

**Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.**
| **Purchases of Equity Securities by Issuer** | ** ** |
|-----------------------------------------------------------------------|------------|
| **Period**                                                            | ** ** | ** ** | ** ** | **Total Number of   Shares Purchased** | ** ** | **Average Price Paid   per Share** | ** ** | **Total Number of   Shares Purchased as   Part of Publicly   Announced Plans or   Programs** | ** ** | **Maximum Number   (or Approximate   Dollar Value) of   Shares (or Units)   that May Yet Be   Purchased Under the   Plans or Programs** | ** ** |
| January 1-31, 2007                                                    |       | 1,005,400 |   | $ | 5.03 |   | 1,005,400 |   | $ | 9,946,629 |   |
| February 1-28, 2007                                                   |       | 1,394,000 |   | $ | 4.97 |   | 1,394,000 |   | $ | 3,016,709 |   |
| March 1-31, 2007                                                      |       | 412,000 |   | $ | 3.68 |   | 412,000 |   | $  | 1,500,549 | (1) |
|                                                                  |       |   |   |   |   |   |   |   |   |
| January 1-31, 2007                                                    |       | 2,625,000 |   | $ | 0.0011 |   | 2,625,000 |   | 0 | (2) |
|                                                                  |       |   |   |   |   |   |   |   |   |
| January 1-31, 2007                                                    |       | 2,906,355 |   | $ | 5.77 |   | 2,906,355 |   | 0 | (3) |
|                                                                  |       |   |   |   |   |   |   |   |   |
| Total                                                                 |       | 8,342,755 |   | $ | 3.63 |   | 8,342,755 |   |   |   |

----

(1)             OnJanuary 16, 2007, the Company announced a stock repurchase program of up to $15million of either the Company’s common stock or its warrants, from time totime, subject to market conditions.  Therepurchase program will continue until completion or termination by the Boardof Directors.

(2)             OnJanuary 16, 2007, the Company announced that it would repurchase 2,625,000shares of the Company’s common stock from the founders at $0.0011 pershare.  This program was completed inJanuary 2007.

(3)             OnJanuary 16, 2007, the Company announced that it would repurchase shares ofthose shareholders that voted against the acquisition of ATSI and requestedthat their shares be redeemed at the then per share trust value.  This program was completed in January 2007.

**Recent Sales of UnregisteredSecurities**

OnJanuary 16, 2007, in connection with the closing of the acquisition ofATSI, the Company issued 173,913 shares of common stock, valued at$1.0 million for purposes of the transaction, to the selling shareholdersof ATSI. These shares constituted a portion of the transaction consideration.The issuance of the shares was exempt as a private placement pursuant toSection 4(2) of the Securities Act of 1933.

On March 1,2007, in connection with the closing of the acquisition of RISI, the Companyissued 46,296 shares of common stock, valued at $0.2 million for purposesof the transaction, to the selling shareholders of RISI. These sharesconstituted a portion of the transaction consideration. The issuance of theshares was exempt as a private placement pursuant to Section 4(2) of theSecurities Act of 1933.

26

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**Item3.  Defaults Upon Senior Securities.**

Not applicable.

**Item4.  Submission of Matters to a Vote of Security Holders.**

A Special Meetingof Stockholders of the Company was held on January 11, 2007.  The results of the vote with respect to theproposal to approve any adjournment or postponement of the Special Meeting forthe purpose of soliciting additional proxies were as follows:
| **Votes For** | ** ** | **Votes  Against** | ** ** | **Votes  Withheld** |
|---------------|------------|--------------------|------------|---------------------|
| 16,050,954    |       | 8,801,689          |       | 903,906             |

 

The SpecialMeeting of Stockholders was adjourned and reconvened on January 12, 2007.  The results of the vote on the matterspresented at the meeting on that date were as follows:

1.                                       Toapprove the acquisition of Advanced Technology Systems, Inc. and itssubsidiaries substantially on the terms set forth in the Stock PurchaseAgreement dated April 19, 2006, as amended, by and among Federal ServicesAcquisition Corporation, Advanced Technology Systems, Inc., the shareholders ofAdvanced Technology Systems, Inc. and Claude Rumsey, as the shareholders’representative.
| **Votes For** | ** ** | **Votes  Against** | ** ** | **Abstain** | ** ** | **Votes  Withheld** |
|---------------|------------|--------------------|------------|-------------|------------|---------------------|
| 15,350,901    |       | 2,906,355          |       | 51,606      |       | 1,883,227           |

 

2.                                       Toamend and restate Federal Services Acquisition Corporation’s Amended andRestated Certificate of Incorporation to change Federal Services AcquisitionCorporation’s name from “Federal Services Acquisition Corporation” to “ATSCorporation” and to remove certain provisions only applicable to FederalServices Acquisition Corporation prior to its completion of a businesscombination.
| **Votes For** | ** ** | **Votes  Against** | ** ** | **Abstain** | ** ** | **Votes  Withheld** |
|---------------|------------|--------------------|------------|-------------|------------|---------------------|
| 19,386,945    |       | 3,121,395          |       | 797,312     |       | 2,136,437           |

 

3.                                       Toapprove the 2006 Omnibus Incentive Compensation Plan.
| **Votes For** | ** ** | **Votes  Against** | ** ** | **Abstain** | ** ** | **Votes  Withheld** |
|---------------|------------|--------------------|------------|-------------|------------|---------------------|
| 17,835,045    |       | 4,654,295          |       | 816,312     |       | 2,136,437           |

 

 

4.                                       Theelection of Dr. Edward H. Bersoff as a Class I Director, for a three-year term.
| **Votes For** | ** ** | **Votes  Withheld** |
|---------------|------------|---------------------|
| 21,044,510    |       | 4,397,579           |

 

27

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**Item5.  Other Information.**

Not applicable.

**Item6.  Exhibits.**
| Exhibit  Number | ** ** | **Description**                                                                                                                                                                                           | ** ** | ** ** |
|-----------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------|
| ** **      | ** ** | ** **                                                                                                                                                                                                |
| 3.1             |       | Second Amended and  Restated Certificate of Incorporation dated January 16, 2007 (incorporated by  reference to Exhibit 3.1 to a Current Report on Form 8-K filed January 19,  2007)                      |
|            |       |                                                                                                                                                                                                      |
| 3.2             |       | By-laws (incorporated  by reference to Exhibit 3.2 to the Registration Statement on Form S-1, as  amended, initially filed May 4, 2005)                                                                   |
|            |       |                                                                                                                                                                                                      |
| 4.1             |       | Specimen Unit  Certificate (incorporated by reference to Exhibit 4.1 to the Registration  Statement on Form S-1, as amended, initially filed May 4, 2005)                                                 |
|            |       |                                                                                                                                                                                                      |
| 4.2             |       | Specimen Common Stock  Certificate (incorporated by reference to Exhibit 4.2 to the Registration  Statement on Form S-1, as amended, initially filed on May 4, 2005)                                      |
|            |       |                                                                                                                                                                                                      |
| 4.3             |       | Specimen Warrant  Certificate (incorporated by reference to Exhibit 4.3 to the Registration  Statement on Form S-1, as amended, initially filed on May 4, 2005)                                           |
|            |       |                                                                                                                                                                                                      |
| 4.4             |       | Warrant Agreement  between Continental Stock Transfer & Trust Company and the Company  (incorporated by reference to Exhibit 4.4 in our Annual Report on Form 10-K  filed March 31, 2006)             |
|            |       |                                                                                                                                                                                                      |
| 4.5             |       | Warrant Clarification  Agreement between Continental Stock Transfer & Trust Company and the  Company (incorporated by reference to Exhibit 4.1 to a Current Report on Form  8-K filed March 14, 2007) |
|            |       |                                                                                                                                                                                                      |
| 10.1            |       | Employment Agreement  with Dr. Edward H. Bersoff dated March 19, 2007 (incorporated by reference to  Exhibit 10.1 on a Current Report on Form 8-K filed March 21, 2007)                                   |
|            |       |                                                                                                                                                                                                      |
| 10.2            |       | Restricted Share Award  Agreement with Dr. Edward H. Bersoff dated March 19, 2007 (incorporated by  reference to Exhibit 10.2 on a Current Report on Form 8-K filed March 21,  2007)                      |
|            |       |                                                                                                                                                                                                      |
| 31.1            |       | Certification of  Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the  Securities Exchange Act of 1934, as amended                                                                    |
|            |       |                                                                                                                                                                                                      |
| 31.2            |       | Certification of  Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(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                                                                                                   |

##### ** **

28

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##### **SIGNATURES**

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the Registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized.
|                     |   | ATS Corporation |
|---------------------|--------|-----------------|
|                |   |            |   |   |
|                |   | By:             |   | /s/ Edward H. Bersoff |
|                |   |            |   | Chairman of the Board and |
|                |   |            |   | Chief Executive Officer |
|                |   |            |   |   |
|                |   | By:             |   | /s/ Stuart R. Lloyd |
|                |   |            |   | Chief Financial Officer |
| Date: May 15,  2007 |   |            |   |   |

 

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