UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

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

		For the fiscal year ended December 31, 2005

OR

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

		For the transition period from to

Commission file number: 000-51047

FEDERAL SERVICES ACQUISITION
CORPORATION

(Exact name of registrant as specified in its charter)

Delaware		11-3747850
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification Number)

900 Third Avenue, 33^rd Floor
New York, New York, 10022-4775

(Address of principal executive office)

(646) 403-9765

(Registrant’s telephone number, including area code)

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

NONE

Securities registered pursuant to section 12(g) of the Act:

Units, each consisting of one share of Common Stock, $0.0001 par value, and two Warrants

Common Stock, $0.0001 par value

Warrants to purchase shares of Common Stock

(Title Of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ý

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

Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. Large Accelerated Filer o Accelerated Filer o Non-accelerated Filer ý

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant computed by reference to the closing sales price for the Registrant’s Common Stock on December 30, 2005, as reported on the OTC Bulletin Board, was approximately $112,140,000.

The number of shares outstanding of the Registrant’s Common Stock as of February 23, 2006: 26,250,000 shares.

PART I

This Annual Report on Form 10-K/A is being filed as an Amendment to our Annual Report on Form 10-K, which was originally filed with the Securities and Exchange Commission (‘‘SEC’’) on March 31, 2006.We are filing this Form 10-K/A to restate our financial statements for 2005 to reflect non-operating gains and losses related to the classification of and accounting for the warrants to purchase common stock associated with the units sold at the initial public offering of the Company. The Company had previously classified the value of these warrants to purchase common stock, when applicable, as equity. After further review in connection with the preparation of Amendment No. 2 to the Proxy Statement related to the acquisition contemplated by the Stock Purchase Agreement dated as of April 19, 2006, by and among the Company, Advanced Technology Systems, Inc., a Virginia corporation (“ATS”) and shareholders of ATS, the Company has determined that these instruments should have been classified as liabilities and, therefore, the fair value of each instrument must be recorded as a derivative liability on the Company’s balance sheet. Changes in the fair values of these instruments will result in adjustments to the amount of the recorded derivative liabilities, and the corresponding gain or loss will be recorded in the Company’s statement of operations. Except as otherwise stated, all financial information contained in this Annual Report on Form 10-K/A gives effect to these restatements. For information concerning the background of the restatements, the specific adjustments made, and management’s discussion and analysis of our results of operations for 2005 giving effect to the restated information, see ‘‘Restatement of 2005 Financial Statements’’ at Item 7., ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations,’’ and Note D to our Financial Statements.

This Form 10-K/A amends and restates only certain information in the following sections as a result of the current restatements described above:

Part II — Item 6. Selected Financial Data;

Part II — Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations;

Part II — Item 8. Financial Statements and Supplementary Data; and

Part III — Item 15. Exhibits and Financial Statement Schedules.

In addition, we are also including currently dated Sarbanes-Oxley Act Section 302 and Section 906 certifications of the Chief Executive Officer and Chief Financial Officer that are attached to this Form 10-K/A as Exhibits 31.1, 31.2, 32.1 and 32.2.

For the convenience of the reader, this Form 10-K/A sets forth the entire Form 2005 10-K which was prepared and relates to the Company as of December 31, 2005. However, this Form 10-K/A only amends and restates the Items described above to reflect the effects of the restatement and no attempt has been made to modify or update other disclosures presented in our 2005 Form 10-K. Accordingly, except for the foregoing amended information, this Form 10-K/A continues to speak as of March 31, 2006 (the original filing date of the 2005 Form 10-K), and does not reflect events occurring after the filing of our 2005 Form 10-K and does not modify or update those disclosures affected by subsequent events. Forward-looking statements made in the 2005 Form 10-K have not been revised to reflect events, results or developments that have become known to us after the date of the original filing (other than the current restatements described above), and such forward-looking statements should be read in their historical context. Unless otherwise stated, the information in this Form 10-K/A not affected by such current restatements is unchanged and reflects the disclosures made at the time of the original filing.

Item 1. Business.

General

We are a “blank check” company organized under the laws of the State of Delaware on April 12, 2005 and were formed for the purpose of acquiring, through a merger, capital stock exchange, asset acquisition, stock purchase or other similar business combination, an operating business in the federal services and defense industries. We intend to use cash derived from the net proceeds of our initial public offering, together with any additional financing arrangements that we undertake, to effect a business combination with a target whose fair market value is at least equal to 80% of our net assets at the time of such acquisition.

A registration statement for our initial public offering was declared effective on October 19, 2005. On October 25, 2005, we sold 21,000,000 units and consummated our initial public offering. Each of our units consists of one share of our common stock, $0.0001 par value per share, and two redeemable common stock purchase warrants. Each warrant entitles the holder to purchase from us one share of common stock at an exercise price of $5.00. The net proceeds from our initial public offering were approximately $119,169,000, after deducting offering expenses of approximately $531,000 and underwriting discounts of $6,300,000. Of this amount, $117,180,000 (referred to in this Annual Report on Form 10-K/A as the “trust account funds”) was deposited into a trust account and the remaining proceeds (approximately $1,989,000 (referred to in this Annual Report on Form 10-K/A as the “available funds”)) were made available to be used to provide for business, legal and accounting due diligence on prospective business combinations and continuing general and administrative expenses. Through December 31, 2005, we have used $133,161 of the available funds for start up costs representing general and administrative expenses, travel expenses, professional services, insurance and taxes based on capital. The trust account funds remain on deposit in the trust account earning interest. As of December 31, 2005, there was $117,990,384, including interest receivable of $39,444, held in the trust account.

Federal services and defense industries

Companies operating in the federal services and defense industries contract to provide the federal government with outsourced services, including information technology and other technical services, and products and technologies. Joel R. Jacks, our Chairman and Chief Executive Officer, and Peter M. Schulte, our President, Chief Financial Officer and Secretary, are both co-founders and co-managers of CM Equity Management, L.P. and CMLS Management, L.P., which manage various private equity funds under the brand CM Equity Partners. Dr. Edward H. Bersoff, our Vice-Chairman, was the founder and chairman, president and chief executive officer of BTG, Inc., a federal services contractor. Messrs. Jacks and Schulte and Dr. Bersoff have collectively been involved in six platform companies and 15 acquisitions by such companies in the federal services industry. A platform company is one of sufficient magnitude that can serve as a basis for growth and additional acquisitions.

We will likely acquire a business that operates in one or more of the following sectors of the federal services and defense industries. In selecting a target, we have no preference among these various sectors:

•	Human Resources - government workforce management
•	Financial Management - program review, efficiency and cost-benefit analyses and accounting functions
•	Environmental - analysis; policy development; management
•	Information Technology - management of government information
•	Site Management - real estate services
•	Engineering - civil and military
•	Logistics - goods and services supply chain management
•	Data Analysis - collection, review and organization of information

•	Program Management - outsourced management of government programs
•	Policy Consulting - study and development of policies
•	Communications - intra-, inter- and extra-government communications management
•	Systems Engineering and Technical Analysis - technical support for government programs
•	Network Management and Administration - helping insure the continued operation of government networks
•	Information Security - helping protect government information
•	Outsourcing - augmenting government staff
•	Defense - procurement and resale of products related to defense programs
•	Aerospace - procurement and resale of products related to aerospace programs
•	Intelligence - procurement and resale of products related to intelligence programs
•	Homeland Security - procurement and resale of products related to homeland security

There has been a high level of acquisition activity among companies operating in the federal services and defense industries in recent years. We believe that these transactions occurred for a variety of reasons, including competitive pressure to improve economies of scale, operating complexity and the desire of companies’ founders to gain liquidity. We believe that these trends will continue and, based upon management’s years of experience in the federal services and defense industries, are likely to create attractive acquisition opportunities for us.

Many federal service providers provide similar services to state and local governments and commercial entities. Accordingly, our target company may, to a lesser extent, provide services to state and local governments and to commercial entities.

Effecting a Business Combination

General

We are not presently engaged in, and we will not engage in, any substantive commercial business until we consummate a business combination. Upon approval of a business combination by our stockholders, we intend to use our cash, including the trust account funds, capital stock, debt or a combination of these to effect a business combination involving an operating business in the federal services and defense industries. A business combination may involve the acquisition of, or merger with, an operating business which does not need substantial additional capital but which desires to establish a public trading market for its shares, while avoiding what it may deem to be adverse consequences of undertaking a public offering itself. We believe these include certain time delays, significant expense, loss of voting control and compliance with various federal and state securities laws.

Search for a target businesses

We are currently in the process of identifying and evaluating target businesses for a business combination. Although we are participating in acquisition processes, we have not entered into any binding acquisition agreements. Subject to the requirement that our initial business combination must be with an operating business with a fair market value of at least 80% of our net assets at the time of the acquisition, we have virtually unrestricted flexibility in identifying and selecting prospective acquisition candidates in the federal services and defense industries.

Target business candidates have been and will continue to be brought to our attention from various unaffiliated sources that have included or may include investment bankers, venture capital funds, private equity funds, leveraged buyout funds, management buyout funds and other members of the financial community. To date, we have received both solicited and unsolicited proposals. Our stockholders, officers and directors as well as their affiliates have brought and may continue to bring to our attention target business candidates. While we do not presently anticipate engaging the services of professional firms that specialize in business acquisitions on any formal basis, we may engage these firms in the future, in which event we may pay a finder’s fee or other compensation from the available funds. In no event, however, will we pay any stockholders that owned shares of our common stock prior to our initial public offering, officers or directors (referred to in this Annual Report on Form 10-K/A as our “founders”), or any entity with which they are affiliated, any finder’s fee or other compensation for services rendered to us prior to or in connection with the consummation of a business combination. In addition, none of our founders will receive any finder’s fee, consulting fees or any similar fees or other compensation from any other person or entity in connection with any business combination other than any compensation or fees to be received for any services provided following such business combination.

Selection of a target business and structuring of a business combination

In evaluating prospective acquisition candidates, our management will likely consider, among other factors, the following:

•	financial condition and results of operation;
•	historical revenue growth;
•	growth potential;
•	earnings before interest, taxes, depreciation and amortization charges;
•	consistent operating margins:
•	experience and skill of management and availability of additional personnel;
•	nature of the customers and contracts;
•	stability and continuity in customer relationships;
•	backlog of orders for services;
•	capital requirements;
•	competitive position;
•	barriers to entry into other industries;
•	stage of development of the services, processes or products;
•	degree of current or potential market acceptance of the services, processes or products;
•	proprietary features and degree of intellectual property or other protection of the services, processes or products;
•	regulatory environment of the industry;
•	potential growth in government spending in the segment in which the target company operates; and
•	costs associated with effecting the business combination.

These criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular business combination with an operating business will be based, to the extent relevant, on the above factors as well as other considerations deemed relevant by our management in effecting a business combination consistent with our business objective. In evaluating prospective target businesses, we intend to conduct an extensive due diligence review which will encompass, among other things, meetings with incumbent

management and inspection of facilities, as well as review of financial and other information which will be made available to us.

The time and costs required to select and evaluate target businesses and to structure and complete the business combination cannot presently be ascertained with any degree of certainty. Any costs incurred with respect to the identification and evaluation of prospective target businesses with which a business combination is not ultimately completed will result in a loss to us and reduce the amount of capital available to otherwise complete a business combination. Additionally, our founders, directors, officers, and any entity with which they are affiliated, will receive reimbursement for any out-of-pocket expenses incurred by them in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations.

In addition, the terms of sales of target businesses may require a prospective bidder to provide earnest money or a deposit at the time of signing a definitive acquisition agreement or to expend funds prior to closing in excess of those amounts allocated for such purposes. As a result of the terms of the trust arrangements for the trust account funds, the trust account funds are not available for any such earnest money or deposit. Accordingly, unless we could obtain such funds from another source, we would not be able to select any target business that would require earnest money or a deposit, or the expenditure of transaction expenses prior to closing in excess of amounts allocated for such purposes.

Fair market value of target business

The initial target business that we acquire must have a fair market value equal to at least 80% of our net assets at the time of such acquisition. The fair market value of such business will be determined by our board of directors based upon standards generally accepted by the financial community, such as actual and potential sales, earnings and cash flow and book value. If our board is not able to independently determine that the target business has a sufficient fair market value or if a conflict of interest exists with respect to such determination, we will obtain an opinion from an unaffiliated, independent investment banking firm which is a member of the National Association of Securities Dealers, Inc. with respect to the satisfaction of such criteria. However, we are not required to obtain an opinion from an investment banking firm as to the fair market value if our board of directors independently determines that the target business has sufficient fair market value.

Opportunity for stockholder approval of business combination

Prior to the completion of our initial business combination, we will submit the transaction to our stockholders for approval, even if the nature of the acquisition is such as would not ordinarily require stockholder approval under applicable state law. In connection with seeking stockholder approval of a business combination, we will furnish our stockholders with proxy solicitation materials prepared in accordance with the Securities Exchange Act of 1934, which, among other matters, will include a description of the operations of the target business and certain required financial information regarding the business.

In connection with the vote required for our initial business combination, all of our founders, including all of our officers and directors, have agreed to vote all of their shares of common stock (whenever acquired) in accordance with the majority of the shares of common stock voted by stockholders that purchased their shares in our initial public offering or subsequently in the open market (referred to in this Annual Report on Form 10-K/A as “public stockholders”). We will proceed with the business combination only if a majority of the shares of common stock voted by the public stockholders are voted in favor of the business combination and public stockholders owning less than 20% of the shares sold in this offering exercise their conversion rights.

Conversion rights

At the time we seek stockholder approval of any business combination, we will offer each public stockholder the right to have such stockholder’s shares of common stock converted to cash if the stockholder votes against the business combination and the business combination is approved and completed. Our founders will not have this right because they have agreed to vote their stock (whenever acquired) in accordance with the majority of the shares of common stock voted by the public stockholders. The actual per-share conversion price will be equal to the amount in the trust account, inclusive of any interest (calculated as of two business days prior to the consummation of the proposed business combination, and net of taxes payable), divided by the number of shares sold in our initial public offering. As of December 31, 2005, the per-share conversion price was approximately $5.60 ($5.62 less $0.02 per share which is accrued for taxes), or $0.40 less than the price ($6.00 per unit) that we sold each unit for in our initial public offering. An eligible stockholder may request conversion at any time after the mailing to our stockholders of the proxy statement and prior to the vote taken with respect to a proposed business combination at a meeting held for that purpose, but the request will not be granted unless the stockholder votes against the business combination and the business combination is approved and completed. Any request for conversion, once made, may be withdrawn at any time up to the date of the meeting. It is anticipated that the funds to be distributed to stockholders who are entitled to convert their shares and who elect conversion will be distributed promptly after completion of a business combination. Public stockholders who convert their stock into their share of the trust account will retain the right to exercise the warrants they received as part of the units. We will not complete any business combination if public stockholders owning 20% or more of the shares sold in our initial public offering both vote against a business combination and exercise their conversion rights.

Liquidation if no business combination

If we do not complete a business combination by April 25, 2007, or October 25, 2007 if we enter into a letter of intent, an agreement in principle or a definitive agreement to complete a business combination prior to April 25, 2007, but are unable to complete such business combination by such date, we will be dissolved and will distribute to all of our public stockholders, and to any of our founders with respect to any shares of common stock which they purchased in or following our initial public offering, in proportion to their respective equity interests, an aggregate sum equal to the amount in the trust account, inclusive of any interest (net of taxes payable), plus any remaining net assets. Our founders have agreed to waive their respective rights to participate in any liquidation distribution occurring upon our failure to consummate a business combination solely with respect to the shares of common stock owned by them immediately prior to our initial public offering. There will be no distribution from the trust account with respect to our warrants.

As of December 31, 2005, and assuming we had expended all of the available funds, the per share liquidation price was approximately $5.60 ($5.62 less $0.02 per share which is accrued for taxes), or $0.40 less than the price ($6.00 per unit) that we sold each unit for in our initial public offering. The proceeds deposited in the trust account could, however, become subject to the claims of our creditors which could be prior to the claims of our public stockholders. We cannot assure you that the actual per-share liquidation price will not be less than $5.60, plus interest (net of taxes payable), due to claims of creditors. Joel R. Jacks and Peter M. Schulte have agreed pursuant to an agreement with us and CRT Capital Group LLC that, if we liquidate prior to the consummation of a business combination, they may be personally liable to ensure that the proceeds of the trust account are not reduced by the claims of vendors or other entities that are owed money by us for services rendered or products sold to us or the claims of prospective target businesses. We cannot assure you, however, that they will be able to satisfy those obligations.

If we enter into a letter of intent, an agreement in principle or a definitive agreement to complete a business combination prior to April 25, 2007, but are unable to complete the business combination by such date, then we will have until October 25, 2007 in which to complete the business combination contemplated by the letter of intent, agreement in principle or definitive agreement. If we are unable to do so by October 25, 2007, we will then liquidate. Upon notice from us, the trustee of the trust account will

commence liquidating the investments constituting the trust account and will turn over the proceeds to our transfer agent for distribution to our public stockholders and to our founders with respect to any shares of our common stock which they purchased in or following our initial public offering. We anticipate that our instruction to the trustee would be given promptly after the expiration of the applicable deadline.

Our public stockholders will be entitled to receive funds from the trust account only in the event of our liquidation or if a public stockholder seeks to convert his respective shares into cash upon a business combination which the public stockholder voted against and which is actually completed by us. In no other circumstances will a public stockholder have any right or interest of any kind to or in the trust account.

Competition

In identifying, evaluating and selecting target businesses, we may encounter intense competition from other entities having a business objective similar to ours. Many of these entities are well established and have extensive experience identifying and effecting business combinations directly or through affiliates. Many of these competitors possess greater technical, human and other resources than us and our financial resources will be relatively limited when contrasted with those of many of these competitors. While we believe there are numerous potential target businesses that we could acquire, our ability to compete in acquiring certain sizable target businesses will be limited by our available financial resources. This inherent competitive limitation gives others an advantage in pursuing the acquisition of target businesses. Further:

• our obligation to seek stockholder approval of a business combination may delay the completion of a transaction;

• our obligation to convert into cash shares of common stock held by our public stockholders in certain instances may reduce the resources available to us for a business combination; and

• our outstanding warrants, and the future dilution they potentially represent, may not be viewed favorably by certain target businesses.

Any of these factors may place us at a competitive disadvantage in successfully negotiating a business combination. Our management believes, however, that our status as a public entity and potential access to the United States public equity markets may give us a competitive advantage over privately-held entities having a similar business objective as ours in acquiring a target business on favorable terms.

If we succeed in effecting a business combination, there will be, in all likelihood, intense competition from competitors of the target businesses. The degree of competition characterizing the industry of any prospective target business cannot presently be ascertained. We cannot assure you that, subsequent to a business combination, we will have the resources to compete effectively, especially to the extent that the target business is in a high-growth industry.

Employees

We currently have three officers, each of whom is also a member of our board of directors. We have no other employees. These individuals are not obligated to devote any specific number of hours to our matters and intend to devote only as much time as they deem necessary to our affairs. We do not intend to have any full time employees prior to the consummation of a business combination.

Item 1.A. Risk Factors.

In addition to other information included in this Annual Report on Form 10-K/A, the following factors should be considered in evaluating our business and future prospects.

We are a development stage company with no operating history and, accordingly, you will have no basis upon which to evaluate our ability to achieve our business objective.

We are a recently incorporated development stage company with no operating results to date. Since we do not have an operating history, you have no basis upon which to evaluate our ability to achieve our business objective, which is to acquire an operating business in the federal services and defense industries. We will not generate any revenues (other than interest income on the trust account funds) until, at the earliest, after the consummation of a business combination. We cannot assure you as to when or if a business combination will occur.

We may not be able to consummate a business combination within the required time frame, in which case, we would be forced to liquidate.

We must complete a business combination with a fair market value of at least 80% of our net assets at the time of acquisition by April 25, 2007 (or by October 25, 2007 if a letter of intent, agreement in principle or a definitive agreement has been executed by April 25, 2007 and the business combination relating thereto has not yet been consummated by such date). If we fail to consummate a business combination within the required time frame, we will be forced to liquidate our assets. We may not be able to find a suitable target business within the required time frame. In addition, our negotiating position and our ability to conduct adequate due diligence on any potential target may be reduced as we approach the deadline for the consummation for a business combination.

Because there are numerous companies with a business plan similar to ours seeking to effectuate a business combination, it may be more difficult for us to do so.

Between August 1, 2003 and March 13, 2006, based upon publicly available information, approximately 48 similarly structured “blank check” companies completed initial public offerings. Of these companies, six companies have consummated a business combination, while ten other companies have announced they have entered into a letter of intent or a definitive agreement for a business combination, but have not consummated such business combination. Accordingly, as of March 13, 2006, there are approximately 32 “blank check” companies with approximately $2.1 billion in trust that are seeking to carry out a business plan similar to our business plan. Furthermore, as of March 13, 2006, there were approximately 36 additional offerings for “blank check” companies that were still in the registration process but had not completed initial public offerings and there are likely to be more “blank check” companies filing registration statements for initial public offerings after March 13, 2006 and prior to our completion of a business combination. While some of those companies must complete a business combination in specific industries, a number of them may consummate a business combination in any industry they choose or have a very broad definition of the industry they will target. Therefore, we may be subject to competition from these and other companies seeking to consummate a business plan similar to ours. Because of this competition, we cannot assure you that we will be able to effectuate a business combination within the required time period. Further, because only 16 of such companies have either consummated a business combination or entered into a letter of intent or a definitive agreement for a business combination, it may indicate that there are fewer attractive target businesses available to such entities or that many privately held target businesses are not inclined to enter into these types of transactions with publicly held “blank check” companies like ours. If we are unable to consummate a business combination with a target business within the prescribed time period, we will be forced to liquidate.

If we are forced to liquidate before a business combination, our public stockholders will receive less than $6.00 per share upon distribution of the trust account, and our warrants will expire worthless.

If we are unable to complete a business combination and are forced to liquidate our assets, the per-share liquidation value will be less than $6.00 (the price per unit that we sold each unit for in our initial public offering) because of the expenses related to our public offering, our general and administrative expenses and the anticipated costs of seeking a business combination. Furthermore, the warrants will expire worthless if we liquidate before the completion of a business combination.

You will not be entitled to protections normally afforded to investors of “blank check” companies under federal securities laws.

Since the net proceeds of our public offering are intended to be used to complete a business combination with an operating business that has not been identified, we may be deemed to be a “blank check” company under the federal securities laws. However, since we have net tangible assets in excess of $5,000,000 and have filed a Current Report on Form 8-K/A with the SEC, including an audited balance sheet demonstrating this fact, we believe that we are exempt from rules, such as rule 419 under the Securities Act of 1933, as amended, promulgated by the Securities and Exchange Commission, to protect investors of “blank check” companies. Accordingly, investors will not be afforded the benefits or protections of those rules. Because we do not believe we are subject to Rule 419, our units were immediately tradeable, and we have a longer period of time within which to complete a business combination in certain circumstances.

If third parties bring claims against us, the proceeds held in trust could be reduced and the per-share liquidation price received by stockholders will be reduced.

Our placing of funds in trust may not protect those funds from third party claims against us. Although we will seek to have all vendors, prospective target businesses or other entities we engage execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account, there is no guarantee that they will execute such agreements. Nor is there any guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against the trust account for any reason. Accordingly, the proceeds held in the trust account could be subject to claims which could take priority over the claims of our public stockholders and the per-share liquidation price could be reduced due to claims of such creditors. If we are unable to complete a business combination and are forced to liquidate, Joel R. Jacks, our chairman and chief executive officer, and Peter M. Schulte, our president, chief financial officer and secretary, may be personally liable under certain circumstances to ensure that the proceeds in the trust account are not reduced by the claims of various vendors or other entities that are owed money by us for services rendered or products sold to us or claims of prospective target businesses. However, we cannot assure you that they will be able to satisfy those obligations.

Since we have not entered into a binding agreement with any prospective target businesses with which to complete a business combination, public shareholders are unable to currently ascertain the merits or risks of any particular target business’ operations.

Since we have not entered into a binding agreement with any prospective target businesses, public shareholders have no current basis to evaluate the possible merits or risks of any particular target business’ operations. To the extent we complete a business combination with a financially unstable company or an entity in its development stage, we may be affected by numerous risks inherent in the business operations of such entity. Although our management will endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all of the significant risk factors, or that we will have adequate time to complete due diligence.

We may issue shares of our capital stock, including convertible debt securities, to complete a business combination, which could reduce the equity interest of our stockholders and possibly cause a change in control of our ownership.

Our certificate of incorporation authorizes the issuance of up to 100,000,000 shares of common stock, par value $.0001 per share, and 1,000,000 shares of preferred stock, par value $.0001 per share. We have 31,750,000 authorized but unissued shares of our common stock available for issuance (after appropriate reservation for the issuance of shares upon full exercise of our outstanding warrants) and 1,000,000 shares of preferred stock available for issuance. Although we currently have no commitments to issue any securities, we may issue a substantial number of additional shares of our common stock or preferred stock, or a combination of both, including convertible debt securities, to complete a business combination. The issuance of additional shares of our common stock or any number of shares of preferred stock, including upon conversion of any debt securities:

• may significantly reduce the equity interest of investors in our securities;

• may cause a change in control if a substantial number of our shares of common stock or voting preferred stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and may also result in the resignation or removal of our present officers and directors; and

• may adversely affect prevailing market prices for our common stock.

We may issue notes or other debt securities, or otherwise incur substantial debt, to complete a business combination, which may adversely affect our leverage and financial condition.

Although we currently have no commitments to issue any notes or other debt securities, or to otherwise incur outstanding debt, we may choose to incur substantial debt to complete a business combination. The incurrence of debt:

• may lead to default and foreclosure on our assets if our operating earnings after a business combination are insufficient to pay our debt obligations;

• may cause an acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach the covenants contained in any debt agreements, such as covenants that require the maintenance of certain financial ratios or reserves, without a waiver or renegotiation of such covenants;

• may create an obligation to immediately repay all principal and accrued interest, if any, upon demand to the extent any debts are payable on demand; and

• may hinder our ability to obtain additional financing, if necessary, to the extent any debt agreements contain covenants restricting our ability to obtain additional financing while such debt is outstanding, or to the extent our existing leverage discourages other potential investors.

Our ability to successfully effect a business combination and to be successful afterwards will be completely dependent upon the efforts of our key personnel, some of whom may join us following a business combination and may be unfamiliar with the requirements of operating a public company, which may adversely affect our operations.

Our ability to successfully effect a business combination will be completely dependent upon the efforts of our key personnel. The future role of our key personnel following a business combination, however, cannot presently be fully ascertained. Specifically, the members of our current management are not obligated to remain with us subsequent to a business combination, and we cannot assure you that the resignation or retention of our current management will be included as a term or condition in any agreement with respect to a business combination. Although we expect one or more members of our management to serve on our board of directors following a business combination, subject to continued election by the stockholders, it is unlikely that they will operate the target company on a day-to-day basis.

Accordingly, we anticipate employing other personnel following the business combination. While we intend to closely scrutinize any additional individuals we engage after a business combination, we cannot assure you that our assessment of these individuals will prove to be correct. These individuals may be unfamiliar with the requirements of operating a public company as well as United States securities laws which could cause us to expend time and resources helping them become familiar with such laws. This could be expensive and time-consuming and could lead to various regulatory issues that may adversely affect our operations.

Our officers and directors are not required to, and will not, commit their full time to our affairs, which may result in a conflict of interest in allocating their time between our operations and other businesses. This could have a negative impact on our ability to consummate a business combination. We do not intend to have any full time employees prior to the consummation of a business combination. Each of our officers is engaged in other business endeavors and is not obligated to contribute any specific number of hours per week to our affairs. If our officers’ other business affairs require them to devote substantial amounts of time to such affairs in excess of their current commitment levels, it could limit their ability to devote time to our affairs and could have a negative impact on our ability to consummate a business combination. We cannot assure you that these conflicts will be resolved in our favor.

Our officers and directors are and may in the future become affiliated with entities engaged in business activities similar to those intended to be conducted by us and, accordingly, may have conflicts of interest in determining to which entity a particular business opportunity should be presented.

Our officers and directors may in the future become affiliated with entities, including other “blank check” companies, engaged in business activities similar to those conducted by us. Additionally, our officers and directors may become aware of business opportunities which may be appropriate for presentation to us as well as the other entities with which they are or may be affiliated. Further, certain of our officers and directors are currently involved in other businesses that are similar to the business activities that we intend to conduct following a business combination. For example, Joel R. Jacks, our chairman and chief executive officer, and Peter M. Schulte, our president, chief financial officer and secretary, have preexisting fiduciary obligations that arise as a result of their affiliations with the private equity funds for which they act as principals and their directorships with those funds’ portfolio companies. In addition, Dr. Edward H. Bersoff, our vice-chairman, and Arthur L. Money, our non-executive director, serve on the boards of various companies in the federal services and defense industries. Due to these existing affiliations, our officers and directors may have fiduciary obligations to present potential business opportunities to those entities prior to presenting them to us which could cause additional conflicts of interest. Accordingly, they may have conflicts of interest in determining to which entity a particular business opportunity should be presented. We cannot assure you that these conflicts will be resolved in our favor.

Because all of our directors own shares of our securities that will not participate in liquidation distributions, they may have a conflict of interest in determining whether a particular target business is appropriate for a business combination.

All of our directors own stock in our company, but have, solely with respect to those shares of common stock acquired by them prior to our initial public offering, waived their right to receive distributions upon our liquidation in the event we fail to complete a business combination. Additionally, Joel R. Jacks, Peter M. Schulte, Dr. Edward H. Bersoff and FSAC Partners, LLC purchased warrants in the public marketplace following our initial public offering. None of our executive directors or any of their affiliates is precluded from acquiring additional warrants in the aftermarket if any of them so chooses. All of the shares of common stock owned by our directors immediately prior to our public offering and any warrants owned by our directors will be worthless if we do not consummate a business combination. The personal and financial interests of our directors may influence their motivation in identifying and selecting a target business and completing a business combination in a timely manner. Consequently, our directors’ discretion in identifying and selecting a suitable target business may result in a conflict of interest when

determining whether the terms, conditions and timing of a particular business combination are appropriate and in our stockholders’ best interest.

If our common stock becomes subject to the SEC’s penny stock rules, broker-dealers may experience difficulty in completing customer transactions and trading activity in our securities may be adversely affected.

If at any time we have net tangible assets of $5,000,000 or less and our common stock has a market price per share of less than $5.00, transactions in our common stock may be subject to the “penny stock” rules promulgated under the Securities Exchange Act of 1934, as amended. Under these rules, broker-dealers who recommend such securities to persons other than institutional accredited investors must:

• make a special written suitability determination for the purchaser;

• receive the purchaser’s written agreement to a transaction prior to sale;

• provide the purchaser with risk disclosure documents which identify certain risks associated with investing in “penny stocks” and which describe the market for these “penny stocks” as well as a purchaser’s legal remedies; and

• obtain a signed and dated acknowledgment from the purchaser demonstrating that the purchaser has actually received the required risk disclosure document before a transaction in a “penny stock” can be completed.

If our common stock becomes subject to these rules, broker-dealers may find it difficult to effect customer transactions and trading activity in our securities may be adversely affected. As a result, the market price of our securities may be depressed, and you may find it more difficult to sell our securities.

We will only be able to complete one business combination with the proceeds of our public offering, which will cause us to be solely dependent on a single business which may have a limited number of services or products.

The net proceeds from our initial public offering have provided us with approximately $119,169,000, which we may use to complete our initial business combination. Our initial business combination must be with an operating business with a fair market value of at least 80% of our net assets at the time of such business combination. It is probable that the company we acquire in our initial business combination will have only a limited number of services or products. The resulting lack of diversification:

• will result in our dependency upon the performance of a single operating business;

• may result in our dependency upon the development or market acceptance of a single or limited number of services, processes or products; and

• may subject us to numerous economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact upon the particular industry in which we may operate subsequent to a business combination.

In this case, we will not be able to diversify our operations or benefit from the possible spreading of risks or offsetting of losses, unlike other entities which may have the resources to complete several business combinations in different industries or different areas of a single industry so as to diversify risks and offset losses. Further, the prospects for our success will be entirely dependent upon the performance of the initial target business we acquire and such target business may not be successful.

Because of our limited resources and the significant competition for business combination opportunities, we may not be able to consummate an attractive business combination.

We expect to encounter intense competition from other entities having a business objective similar to ours, including venture capital funds, leveraged buyout funds and operating businesses competing for acquisitions. Many of these entities are well established and have extensive experience in identifying and effecting business combinations directly or through affiliates. Many of these competitors possess greater technical, human and other resources than we do and our financial resources will be relatively limited when contrasted with those of many of these competitors. While we believe that there are numerous potential target businesses that we could acquire with the net proceeds of our initial public offering, together with additional financing if available, our ability to compete in acquiring certain sizable target businesses will be limited by our available financial resources. This inherent competitive limitation gives others an advantage in pursuing the acquisition of certain target businesses. Further:

• our obligation to seek stockholder approval of a business combination may delay the consummation of a transaction;

• our obligation to convert into cash certain shares of common stock in the event a business combination is consummated and public stockholders owning less than 20% of the shares sold in our initial public offering vote against such business combination and exercise their conversion rights may reduce the resources available for a business combination; and

• our outstanding warrants, and the future dilution they potentially represent, may not be viewed favorably by certain target businesses.

Any of these obligations may place us at a competitive disadvantage in successfully negotiating a business combination.

We may have insufficient resources to cover our operating expenses and the expenses of consummating a business combination.

As of October 25, 2005, we reserved approximately $1,989,000 from the proceeds of our initial public offering to cover our operating expenses for at least 24 months following the date we consummated our initial public offering, and to cover the expenses incurred in connection with a business combination. This amount is based on management’s estimates of the costs needed to fund our operations for such period and consummate a business combination. Those estimates may prove inaccurate, especially if a portion of the available proceeds is used to make a down payment or pay exclusivity or similar fees in connection with a business combination or if we expend a significant portion of the available proceeds in pursuit of a business combination that is not consummated. If we do not have sufficient proceeds available to fund our expenses, we may be forced to obtain additional financing, either from our management or our founders or from third parties. We may not be able to obtain additional financing and our existing stockholders and management are not obligated to provide any additional financing. If we do not have sufficient proceeds and cannot find additional financing when needed to consummate a particular business combination, we would be compelled to restructure or abandon that particular business combination or seek alternate target businesses, and eventually may be forced to liquidate prior to consummating a business combination. In addition, if we consummate a business combination, we may require additional financing to fund the operations or growth of the target business. The failure to secure additional financing could have a material adverse effect on the continued development or growth of the target business.

Our founders control a substantial interest in us and thus may influence certain actions requiring stockholder vote.

Our founders collectively own 20% of our issued and outstanding shares of common stock as of March 15, 2006. Additionally, as of March 15, 2006, four of our founders, Joel R. Jacks, Peter M. Schulte, Dr. Edward H. Bersoff and FSAC Partners, LLC, collectively owned 3,699,528 warrants, or 8.8% of our outstanding warrants.

Furthermore, our founders are not precluded from purchasing additional warrants or shares of common stock in the aftermarket. Any exercise of these warrants by our founders would substantially increase their relative percentage ownership in us.

Our board of directors is divided into three classes, each of which will generally serve for a term of three years with only one class of directors being elected in each year. It is unlikely that there will be an annual meeting of stockholders to elect new directors prior to the consummation of a business combination, in which case all of the current directors will continue in office at least until the consummation of the business combination. If there is an annual meeting, as a consequence of our “staggered” board of directors, only a minority of the board of directors will be considered for election and our founders, because of their ownership position, will have considerable influence regarding the outcome. Accordingly, our founders will continue to exert control at least until the consummation of a business combination. In addition, our founders and their affiliates and relatives are not prohibited from purchasing units or shares in the aftermarket, and have full voting rights with respect to any shares of common stock they may acquire in such market transactions. If they do, we cannot assure you that our founders will not have considerable influence upon the vote on a business combination.

Our amended and restated certificate of incorporation and by-laws contain certain provisions that may make it more difficult, expensive or otherwise discourage, a tender offer or a change in control or takeover attempt by a third party, even if such a transaction would be beneficial to our stockholders.

The existence of certain provisions in our amended and restated certificate of incorporation and by-laws may have a negative impact on the price of our common stock by discouraging a third party from purchasing our common stock. These provisions could also have the effect of discouraging a third party from pursuing a non-negotiated takeover of our company and preventing certain changes of control. In addition to our staggered board, our by-laws require that, subject to certain exceptions, any stockholder desiring to propose business or nominate a person to the board of directors at a stockholders meeting must give notice of any proposals or nominations within a specified time frame. Our by-laws also limit the ability of stockholders to remove directors, call stockholders meetings and act by written consent and provide that vacancies of the board of directors may only be filled by a majority of the remaining directors.

Our outstanding warrants may have an adverse effect on the market price of common stock and make it more difficult to effect a business combination.

In connection with our initial public offering, as part of the units, we issued warrants to purchase 42,000,000 shares of common stock. To the extent we issue shares of common stock to effect a business combination, the potential for the issuance of substantial numbers of additional shares upon exercise of these warrants could make us a less attractive acquisition vehicle in the eyes of a target business as such securities, when exercised, will increase the number of issued and outstanding shares of our common stock and reduce the value of the shares issued to complete the business combination. Accordingly, our warrants may make it more difficult to effectuate a business combination or increase the cost of a target business. Additionally, the sale, or even the possibility of sale, of the shares underlying the warrants could have an adverse effect on the market price for our securities or on our ability to obtain future public financing. If and to the extent these warrants are exercised, you will experience dilution to your holdings.

If our founders exercise their registration rights, it may have an adverse effect on the market price of our common stock and the existence of these rights may make it more difficult to effect a business combination.

Our founders are entitled to demand that we register the resale of their shares of common stock in certain circumstances. If our founders exercise their registration rights with respect to all of their shares of common stock, then there will be an additional 5,250,000 shares of common stock eligible for trading in the public market. The presence of this additional number of shares of common stock eligible for trading in the public market may have an adverse effect on the market price of our common stock. In addition, the existence of these rights may make it more difficult to effect a business combination or increase the cost of a target business, as the stockholders of a particular target business may be discouraged from entering into a business combination with us or will request a higher price for their securities as a result of these registration rights and the potential future effect their exercise may have on the trading price of our common stock.

Our securities are quoted on the OTC Bulletin Board, which limits the liquidity and price of our securities more than if our securities were quoted or listed on the Nasdaq Stock Market or a national exchange.

Our securities are traded in the over-the-counter market and are quoted on the OTC Bulletin Board, an inter-dealer automated quotation system for equity securities sponsored and operated by the National Association of Securities Dealers, Inc., or NASD, but not included in the Nasdaq Stock Market. We cannot assure you that our securities will continue to be quoted on the OTC Bulletin Board. Quotation of our securities on the OTC Bulletin Board may limit the liquidity and price of our securities more than if our securities were quoted or listed on The Nasdaq Stock Market or a national exchange. Lack of liquidity may limit the price at which you may be able to sell our securities or your ability to sell our securities at all.

If we are deemed to be an investment company, we may be required to institute burdensome compliance requirements and our activities may be restricted, which may make it difficult for us to complete a business combination.

If we are deemed to be an investment company under the Investment Company Act of 1940, as amended, our activities may be restricted, including:

• restrictions on the nature of our investments; and

• restrictions on the issuance of securities, each of which may make it difficult for us to complete a business combination.

In addition, we may have burdensome requirements imposed upon us, including:

• registration as an investment company;

• adoption of a specific form of corporate structure; and

• reporting, record keeping, voting, proxy and disclosure requirements and other rules and regulations.

We do not believe that our principal activities will subject us to the Investment Company Act of 1940. To this end, the proceeds held in the trust account may only be invested by the trust agent in “government securities” with specific maturity dates or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act of 1940. By restricting the investment of the proceeds to these instruments, we intend to meet the requirements for the exemption provided in Rule 3a-1 promulgated under the Investment Company Act of 1940. If we were deemed to be subject to the Investment Company Act of 1940, compliance with these additional regulatory burdens would require additional expense that we have not provided for.

Our directors may not be considered “independent” under the policies of the North American Securities Administrators Association, Inc. and, therefore, may take actions or incur expenses that are not deemed to be independently approved or independently determined to be in our best interest.

Under the policies of the North American Securities Administrators Association, Inc., an international organization devoted to investor protection, because each of our directors owns shares of our securities and may receive reimbursement for out-of-pocket expenses incurred by them in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations, state securities administrators could take the position that such individuals are not “independent.” If this were the case, they would take the position that we would not have the benefit of independent directors examining the propriety of expenses incurred on our behalf and subject to reimbursement by us. Additionally, there is no limit on the out-of-pocket expenses that could be incurred by our directors and there will be no review of the reasonableness of the expenses we reimburse by anyone other than our board of directors, which would include persons who may seek reimbursement or a court of competent jurisdiction if such reimbursements are challenged. To the extent such out-of-pocket expenses exceed the available funds, such out-of-pocket expenses would not be reimbursed by us unless we consummate a business combination. Although we believe that all actions taken by our directors on our behalf will be in our best interests, whether or not they are deemed to be “independent,” we cannot assure you that this will actually be the case. If actions are taken or expenses are incurred that are actually not in our best interests, it could have a material adverse effect on our business and operations and the price of our stock held by our stockholders.

Risks associated with the federal services and defense industries

We may acquire an operating business that contracts directly with the federal government and its agencies, in which case the risks below would directly affect us. We may also acquire an operating business that acts as a subcontractor, supplier or partner with another party or parties that contract with the federal government and its agencies, in which case the risk factors below would still affect us directly or indirectly.

The loss or impairment of our relationship with the federal government and its agencies could adversely affect our business.

Our target company may derive a substantial portion of its revenue from government contracts, either directly or as a subcontractor, partner or supplier to a party working under such a contract. If our target company or other company with which it had any such relationship were suspended or prohibited from contracting with the federal government or its agencies, or with a significant agency of the government, or if any of these agencies ceased doing business with them or significantly decreased the amount of business it does with them, our target company’s business, prospects, financial condition and operating results could be significantly impaired.

Changes by the federal government in its spending priorities may cause a reduction in the demand for the products or services that we may ultimately offer, which could adversely affect our business.

Because our target company may derive a significant portion of its revenues from contracts with the federal government or its agencies, we believe that the success and development of the target company’s business will depend on its successful participation in the federal contract program. Changes in the federal government budgetary priorities could directly affect the target company’s financial performance. Government expenditures tend to fluctuate based on a variety of political, economic and social factors. A significant decline in government expenditures, or a shift of expenditures away from programs our target company supports, or a change in federal government contracting policies causing its agencies to reduce their expenditures under contracts, to exercise their right to terminate contracts at any time without penalty, not to exercise options to renew contracts or to delay or not enter into new contracts, could adversely affect our target company’s business, prospects, financial condition or operating results. Moreover, although

contracts with governmental agencies often contemplate that the services will be performed over a period of several years, Congress usually must approve funds for a given program each government fiscal year and may significantly reduce or eliminate funding for a program. Significant reductions in these appropriations by Congress or the failure by Congress to pass a budget resolution in a timely manner could have a material adverse effect on our target company’s business.

Federal government contracts often contain provisions that are unfavorable, which could adversely affect our business.

Federal government contracts contain provisions and are subject to laws and regulations that give the federal government rights and remedies not typically found in commercial contracts, including without limitation, allowing the federal government to:

• terminate existing contracts for convenience, as well as for default;

• reduce or modify contracts or subcontracts;

• cancel multi-year contracts and related orders if funds for contract performance for any subsequent year become unavailable;

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

• claim rights in services or products provided by the target company;

• suspend or bar the target company from doing business with the federal government or with a governmental agency; and

• control or prohibit the export of products.

If the federal government terminates a contract “for convenience” (for instance, due to a change in its perceived needs or its desire to consolidate work under another contract), our target company may recover only its incurred or committed costs, settlement expenses and profit on services completed prior to the termination. If the government terminates a contract for default, our target company may not recover even those amounts, and instead may be liable for excess costs incurred by the government or agency in procuring undelivered services or products from another source. As is common with government contractors, some of our target company’s contracts may experience performance issues in the future. Our target company may in the future receive “show cause” or cure notices under contracts that, if not addressed to the government’s satisfaction, could give the government the right to terminate those contracts for default or to cease procuring services under those contracts in the future. Even if the target company is not directly the party to a government contract, as in the case of a subcontract relationship, the impact of the above on the prime contractor would likely have a material adverse effect on our target company.

We will likely have to comply with complex procurement laws and regulations, and the cost of compliance with these laws and regulations and penalties and sanctions for any non-compliance could adversely affect our business.

Our target company will likely have to comply with and will be affected by laws and regulations relating to the formation, administration and performance of federal government contracts, which affect how the target company does business with its customers and may impose added costs on its business. For example, our target company or parties with which it does business will likely be subject to the Federal Acquisition Regulations and all supplements, which comprehensively regulate the formation, administration and performance of federal government contracts, and to the Truth-in-Negotiations Act, which requires certification and disclosure of cost and pricing data in connection with contract negotiations. If a government review or investigation uncovers improper or illegal activities, our target company may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines and suspension or debarment from doing business with federal government agencies, which could materially adversely affect our target company’s business, prospects, financial condition or operating results. In addition, our target company or parties with which it

does business will likely be subject to industrial security regulations of the Department of Defense and other federal agencies that are designed to safeguard against foreigners’ access to classified information. The target company may also be liable for systems and services failure and security breaks with respect to the solutions, services or products, or other applications it sells to the government. If the target company were to come under foreign ownership, control or influence, its federal government customers could terminate or decide not to renew their contracts, and it could impair their ability to grant new contracts to our target company.

The federal government may reform its procurement or other practices in a manner adverse to us.

The federal government may reform its procurement practices or adopt new contracting rules and regulations, including cost-accounting standards, that could be costly to satisfy or that could impair our target company’s ability to obtain new contracts. It also could adopt new contracting methods for General Services Administration, or GSA, or other government-wide contracts, or adopt new standards for contract awards intended to achieve certain social or other policy objectives, such as establishing new set-aside programs for small or minority-owned businesses. In addition, the federal government may face restrictions from new legislation or regulations, as well as pressure from government employees and their unions, on the nature and amount of services the federal government may obtain from private contractors. These changes could impair our target company’s ability to obtain new contracts. Any new contracting methods could be costly or administratively difficult for our target company to implement and, as a result, could harm its operating results.

Government contracts are usually awarded through a competitive bidding process which entails risks not present in other circumstances.

A meaningful amount of the business that our target company may expect to seek directly or through parties with which it does business in the foreseeable future will likely be awarded through competitive bidding. Competitive bidding presents a number of risks, including without limitation:

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

• the substantial cost and managerial time and effort that our target company may spend to prepare bids and proposals for contracts that may not be awarded to our target company;

• the need to accurately estimate the resources and cost structure that will be required to service any contract our target company is awarded; and

• the expense and delay that may arise if our target company’s or its partners’ competitors protest or challenge contract awards made to our target company or partners pursuant to competitive bidding, and the risk that any such protest or challenge could result in the resubmission of bids on modified specifications, or in termination, reduction or modification of the awarded contract.

Our target company may not be provided the opportunity to bid on contracts that are held by other companies and are scheduled to expire if the government determines to extend the existing contracts. If our target company is unable to win particular contracts that are awarded through the competitive bidding process or our target company is unable to consistently win new contract awards over any extended period its business and prospects could be adversely affected.

Federal government customers sometimes spend their procurement budgets through multiple award contracts and our target company’s failure to successfully compete for post-award orders under these contracts could adversely affect its business.

Budgetary pressure and reforms in the procurement process may cause the federal government to increase its use of task order or delivery order contracts (commonly known in the industry as “indefinite delivery, indefinite quantity” contracts, or ID/IQ contracts), including GSA Contracts, and other

government-wide acquisition contracts, or GWAC contracts, to purchase services or products. Under a task order or delivery order contract, the federal government may submit, but is not required to submit, orders for services or products. Thus, the revenue that may be realized under these contracts is not guaranteed, but instead depends, among other things, on the quantity of orders that the government in fact submits to the contractor. Such contracts, some of which are awarded to multiple contractors, have increased pricing pressure and require that contractors make sustained post-award efforts to procure service orders in order to realize revenue under such contracts. Our target company may not be able to successfully sell its services or products or otherwise increase its revenues under these contracts. Our target company’s failure to compete effectively in the procurement environment could have a material adverse effect on our target company’s business, prospects, financial condition and results of operations.

We may lose money on some contracts if we underestimate the resources we need to perform under the contract.

Our target company may provide services or products to the federal government under three types of contracts: cost-plus-fee, time-and-materials, and fixed-price. Each of these types of contracts, to differing degrees, involves the risk that our target company could underestimate its cost of fulfilling the contract, which may reduce the profit it earns or lead to a financial loss on the contract.

• Under cost-plus-fee contracts, which are subject to a ceiling amount, our target company may be reimbursed for allowable costs and paid a fee, which may be fixed or performance-based. However, if its costs exceed the ceiling or are not allowable under the terms of the contract or applicable regulations, our target company may not be able to recover those costs.

• Under time-and-materials contracts, our target company may be reimbursed for labor at negotiated hourly billing rates and for certain expenses, and our target company assumes the risk that its costs of performance may exceed the negotiated hourly rates.

• Under fixed-price contracts, our target company performs specific tasks for a fixed price. Compared to cost-plus-fee contracts and time-and-materials contracts, fixed-price contracts involve greater financial risk because our target company bears the impact of cost overruns. To the extent its actual costs exceed the estimates upon which the price was negotiated, our target company will generate less than the anticipated amount of profit or could incur a loss.

Our contracts with the federal government and its agencies will be subject to audits and cost adjustments.

The federal government audits and reviews performance on contracts, pricing practices, cost structure and compliance with applicable laws, regulations and standards. Like most government contractors, our target company’s contract costs will be audited and reviewed on a continual basis. In addition, nonaudit reviews by the government may still be conducted on all government contracts. An audit of work performed by our target company could result in a substantial adjustment to its revenues because any costs found to be improperly allocated to a specific contract will not be reimbursed, and revenues our target company may have already recognized may need to be refunded. If a government audit uncovers improper or illegal activities, our target company may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines and suspension or debarment from doing business with federal government agencies. In addition, our target company could suffer serious harm to its reputation if allegations of impropriety were made.

Our business depends upon obtaining and maintaining required security clearances, and our failure to do so could result in termination of certain of our contracts or cause us to be unable to bid or rebid on certain contracts.

Many federal government contracts will require our target company’s employees to maintain various levels of security clearances, and our target company may be required to maintain certain facility security clearances complying with federal government requirements. Obtaining and maintaining security clearances for employees involves a lengthy process, and it is difficult to identify, recruit and retain employees who already hold security clearances. If our target company’s employees are unable to obtain or retain security clearances or if such employees who hold security clearances terminate employment with the target company, the customer whose work requires cleared employees could terminate the contract or decide not to renew it upon its expiration. In addition, we expect that some of the contracts on which our target company will bid will require it to demonstrate its ability to obtain facility security clearances and perform work with employees who hold specified types of security clearances. To the extent our target company is not able to obtain facility security clearances or engage employees with the required security clearances for a particular contract, it may not be able to bid on or win new contracts, or effectively rebid on expiring contracts.

Failure to maintain strong relationship with other contractors could result in a decline in our revenue.

Our target company may act as a subcontractor or under a “teaming” arrangement in which the target company and other contractors jointly bid on particular contracts or programs. As a subcontractor or team member, the target company will often lack control over fulfillment of a contract, and poor performance on the contract could tarnish its reputation, even when the target company performs as required. Moreover, our target company’s revenue and operating results could be adversely affected if any prime contractor or teammate chooses to offer a client services of the types that the target company provides or if any prime contractor or teammate teams with other companies to independently provide those services.

We may rely on third-party manufacturers or subcontractors to complete our contracts, and any delay or failure to perform by these manufacturers or subcontractors may result in a decline in our revenue.

Our target company may use third-party manufacturers in addition to or instead of any internal manufacturing capacity that it may have. This arrangement affords less control over the reliability of supply, quality and price of products or components than internal manufacturing. Our target company may risk disruptions in its supply of key products and components if its suppliers fail to perform because of strikes, natural disasters, financial condition or other factors beyond the control of our target business. Products that are supplied by a third-party manufacturer may not perform as expected, and these performance failures may result in delays in completion of a project or additional costs to complete a project. Any delay by subcontractors to complete their portion of a project, or any failure by a subcontractor to satisfactorily complete its portion of a project, may result in delays in the overall progress of the project and may cause our target business to incur additional costs. The additional costs incurred by our target company due to the delay or failure to perform by a third-party manufacturer or a subcontractor may be substantial. While our target company may recover some of these additional costs from the responsible third-party manufacturer or subcontractor, it may not be able to recover all of these costs in all circumstances.

We may be unable to protect or enforce our intellectual property rights.

After completing a business combination, the protection of our target company’s trade secrets, proprietary know-how, technological innovations and other proprietary rights through patents and other intellectual property protections in the U.S. and other countries may be critical to our success. We may rely on a combination of patent, copyright, trademark, trade secret laws and contractual restrictions to protect any proprietary technology or other rights that we may acquire. Despite our efforts, we may not be able to prevent misappropriation of those proprietary rights or deter independent development of technologies that

PART II

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

Our units, common stock and warrants are traded on the Over-The-Counter Bulletin Board under the symbols FDSAU, FDSA and FDSAW, respectively. Each of our units consists of one share of our common stock and two redeemable common stock purchase warrants. The following table sets forth the range of high and low closing bid prices for the units, common stock and warrants for the period indicated. The units commenced public trading on October 19, 2005 and the common stock and warrants commenced public trading on December 5, 2005. The quotations listed below reflect interdealer prices without retail markup, markdown or commission, and may not necessarily represent actual transactions. Prior to October 19, 2005, there was no established public trading market for our units. Prior to December 5, 2005, there was no established public trading market for our common stock or warrants.

	Units				Common Stock				Warrants
Quarter ended	High		Low		High		Low		High		Low

December 31, 2005	$	6.28	$	5.90	$	5.34	$	5.25	$	0.47	$	0.32

Holders of Common Equity

As of March 22, 2006, there were one (1) record holder of our units, six (6) record holders of our common stock and one (1) record holder of our warrants.

Dividends

We have not paid any dividends on our common stock to date and do not intend to pay dividends prior to the completion of a business combination. The payment of dividends in the future will be contingent upon our revenues and earnings, if any, capital requirements and general financial condition subsequent to completion of a business combination. The payment of any dividends subsequent to a business combination will be within the discretion of our then board of directors. It is the present intention of our board of directors to retain all earnings, if any, for use in our business operations and, accordingly, our board does not anticipate declaring any dividends in the foreseeable future.

Our use of net proceeds from our initial public offering are as set forth in the following table:

Gross proceeds	$	126,000,000
Offering expenses(1)
Underwriting discount (5% of gross proceeds)	6,300,000
Legal fees and expenses (including blue sky services and expenses)	298,875
Miscellaneous expenses(2)	67,334
Printing and engraving expenses	45,567
Accounting fees and expenses	35,000
SEC registration fee	45,479
NASD registration fee	39,140

Net proceeds
Held in trust	117,180,000
Not held in trust	1,988,605

Total net proceeds	$	119,168,605

(1) A portion of the offering expenses were paid from the funds we received from Joel R. Jacks and Peter M. Schulte. These funds have been repaid out of the proceeds of our initial public offering.

(2)Miscellaneous expenses include the reimbursement of our founders for out-of-pocket expenses incurred in connection with the offering.

$117,180,000 of net proceeds were placed in a trust account, which has been invested in government securities, at JPMorgan Chase NY Bank maintained by Continental Stock Transfer & Trust Company, New York, New York, as trustee. These proceeds will not be released from the trust account until the earlier of the completion of a business combination or our liquidation. The proceeds held in the trust account may be used as consideration to pay the sellers of a target business with which we ultimately complete a business combination. Any amounts not paid as consideration to the sellers of the target business may be used to finance operations of the target business or to effect other acquisitions, as determined by our board of directors at that time.

We have agreed to pay CM Equity Management, L.P., an affiliate of Messrs. Jacks and Schulte, a monthly fee of $7,500 for general and administrative services including office space, utilities and secretarial support. We believe, based on rents and fees for similar services in the New York, New York metropolitan area, that the fee charged by CM Equity Management, L.P. is at least as favorable as we could have obtained from an unaffiliated third party.

On October 25, 2005, we used $154,000 of our net proceeds from the public offering to repay the notes payable to two of our founders, Messrs. Jacks and Schulte. The loans were repaid in full, without interest, and cancelled.

Item 6. Selected Financial Data.

The following is a summary of selected financial data of the Company for the period from April 12, 2005, (inception) to December 31, 2005, which should be read in conjunction with our financial statements and the notes thereto:

SELECTED FINANCIAL DATA

(As Restated)

Income statement data

		For the period from April 12, 2005 (date of inception) through December 31, 2005
Operating costs		$	(133,161	)
Interest income		819,167
Loss on warrant liabilities		(5,460,000		)

Loss before provision for taxes		(4,773,994		)
Provision for income taxes	—current	(333,000		)
	—deferred	18,915

Net loss		$	(5,088,079	)
Interest income attributable to common stock subject to possible conversion (net of taxes of $64,000)		(97,996		)

Net loss allocable to common stockholders not subject to possible conversion		$	(5,186,075	)

Weighted average number of shares outstanding
—basic and diluted		10,599,810
Net loss per share
—basic and diluted		$	(0.48	)

Weighted average number of shares outstanding exclusive of shares subject to possible redemption
—basic and diluted		9,530,382

Net loss per share not subject to possible redemption
—basic and diluted		$	(0.54	)

Balance sheet data, As restated

	December 31, 2005
Cash and cash equivalents	$	1,855,394

Investments held in trust (including interest receivable of $39,444) and cash held in trust	117,990,384
Other Assets	106,751

Total Assets	$	119,952,529

Total liabilities	$	20,146,003
Common stock subject to possible redemption (including interest income)	23,522,278
Total stockholders’ equity	76,284,248

Total Liabilities and Stockholders’ equity	$	119,952,529

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our historical consolidated financial statements and related notes thereto to Item 8. “Financial Statements and Supplementary Data.”

Restatement of Financial Statements

We have restated our annual financial statements for the period ended December 31, 2005 to reflect the classification of and accounting for the warrants to purchase common stock associated with the units sold at the initial public offering of the Company and adjustment of the warrant liabilities to the fair value, and the resulting change is reported as gain or loss on the derivative liability. The Company had previously classified the value of these warrants to purchase common stock as equity. After further review, the Company has determined that these instruments should have been classified as liabilities and, therefore, the fair value of such instruments must be recorded as a liability on the Company’s balance sheet. Changes in the fair values of these instruments will result in adjustments to the amount of the recorded liabilities and the corresponding gain or loss will be recorded in the Company’s statement of operations. At the date of the conversion of each warrant or portion thereof (or exercise of the warrants or portion thereof, as the case may be), the corresponding liability will be reclassified as equity.

The accompanying financial statements for the period ended December 31, 2005 have been restated to effect the changes described above. The impact of the adjustments related to the classification of and accounting for the warrants for the period ended December 31, 2005 are summarized below. See Note D to our Financial Statements for an explanation of these restatements. The following table shows the net impact of the restatements on our net income.

Statement of Operations

	For the period from April 12, 2005 (date of inception) through December 31, 2005
	As Previously Reported			Adjustment			As Restated
Operating costs	$	(133,161	)	$	—		$	(133,161	)
Interest income	819,167			—			819,167
Loss on warrant liabilities	—			(5,460,000		)	(5,460,000		)
Income (loss) before provision for taxes	686,006			(5,460,000		)	(4,773,994		)
Provision for income taxes -current	(333,000		)	—			(333,000		)
-deferred	18,915			—			18,915
Net income (loss)	$	371,921		$	(5,460,000	)	$	(5,088,079	)
Interest income attributable to common stock subject to possible conversion (net of taxes of $64,000)	(97,996		)	—			(97,996		)
Net income (loss) allocable to common stockholders not subject to possible conversion	$	273,925		$	(5,460,000	)	$	(5,186,075	)
Weighted average number of shares outstanding
-basis	10,599,810						10,599,810
-diluted	11,050,752						10,599,810
Net income (loss) per share
-basic	$	0.04					$	(0.48	)
-diluted		0.03						(0.48	)
Weighted average number of shares outstanding exclusive of shares subject to possible redemption
-basic	9,530,382						9,530,382
-diluted	9,891,181						9,530,382
Net income (loss) per share not subject to possible redemption
-basic	$	0.03					$	(0.54	)
-diluted		0.03						(0.54	)

As a result of recording the change in the fair value of warrant liability, we reported a net loss for the period ended December 31, 2005 compared to net income as previously reported. Therefore, the per share effect of potential common shares issued upon exercise of warrants, aggregating 42,000,000 shares, has not been included in diluted loss per share as the effect is anti-dilutive.

Balance Sheet Impact

The following table sets forth the effects for the restatement adjustment on the Company’s balance sheet as of December 31, 2005:

	December 31, 2005					December 31, 2005
	As Previously Reported		Adjustment			As Restated
ASSETS
Current assets:
Cash and cash equivalents	$	1,855,394	$	—		$	1,855,394
Prepaid expenses	72,122					72,122
Total current assets	1,927,516					1,927,516
Short-term investments held in Trust Account (including interest receivable of $39,444)(fair value $117,709,036)	117,709,036		—			117,709,036
Cash and cash equivalents held in trust	281,348		—			281,348
Deferred income tax benefit	34,629		—			34,629
Total assets	$	119,952,529	$	—		$	119,952,529
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accrued expenses	$	34,289	$	—		$	34,289
Income tax payable-current	356,000		—			356,000
Deferred income tax	15,714		—			15,714
Warrant liabilities	—		19,740,000			19,740,000
Total current liabilities	406,003		19,740,000			20,146,003
Common Stock subject to possible redemption 4,197,900 shares	23,424,282		—			23,424,282
Interest income attributable to common stock subject to possible redemption (net of taxes of $64,000)	97,996		—			97,996
Total common stock, subject to possible redemption	23,522,278		—			23,522,278
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY:
Preferred stock-$.0001 par value; 1,000,000 shares authorized; 0 issued and outstanding
Common stock- $.0001 par value; 100,000,000 shares authorized; 26,250,000 issued and outstanding (which includes 4,197,900 shares subject to possible redemption)	2,625		—			2,625
Additional paid-in capital	95,747,698		(14,280,000		)	81,467,698
Earnings (deficit) accumulated during the development stage	273,925		(5,460,000		)	(5,186,075		)
Total stockholders’ equity	96,024,248		(19,740,000		)	76,284,248
Total liabilities and stockholders’ equity	$	119,952,529	$	—		$	119,952,529

Except as otherwise clearly stated, all financial information contained in this Annual Report on Form 10-K/A gives effect to the restatements.

• $46,244 for franchise and capital taxes;

• $17,233 for director and officer liability insurance premiums; and

• $15,177 for miscellaneous expenses and reserves.

As described above, as a result of recording the change in the fair value of warrant liability, we reported a net loss for the period ended December 31, 2005

We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, we may need to raise additional funds through a private offering of debt or equity securities if such funds are required to consummate a business combination that is presented to us. We would only consummate such a fundraising simultaneously with the consummation of a business combination.

On October 25, 2005, we used $154,000 of our general working capital to repay the notes payable to our initial stockholders, Mr. Jacks and Mr. Schulte. The loans were repaid in full, without interest, and cancelled.

On October 25, 2005, we used $85,000 of our general working capital to pay premiums associated with our directors and officers’ liability insurance, of which, $67,767 of this amount represents the prepaid portion for the cost of such insurance for 2006.

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

As of December 31, 2005, approximately $117,990,384, including interest receivable of $39,444, was held in trust and we had approximately $1,855,000 of the available funds remaining and available to us for our activities in connection with identifying and conducting due diligence of a suitable business combination, and for general corporate matters.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

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

Item 8. Financial Statements and Supplementary Data.

Reference is made to our financial statements beginning on page F-1 of this report.

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

Not applicable.

Item 9A. Controls and Procedures.

Our management carried out an evaluation, with the participation of our Chief Executive Officer (principal executive officer) and our Chief Financial Officer (principal financial officer) of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d – 15(e) of the Securities Exchange Act of 1934, as amended) as of December 31, 2005. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and

reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission.

There has not been any change in our internal control over financial reporting (as defined in Rule 13a-15(f) or 15d – 15(f) of the Securities Exchange Act of 1934, as amended) in connection with the evaluation required by Rule 13a-15(d) under the Exchange Act that occurred during the quarter ended December 31, 2005, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information.

Not applicable.

PART III

Item 10. Directors and Executive Officers of the Registrant.

Our current directors and executive officers are as follows:

Name	Age	Position

Joel R. Jacks	58	Chairman of the Board, Chief Executive Officer and Director
Peter M. Schulte	48	President, Chief Financial Officer, Secretary and Director
Dr. Edward H. Bersoff	63	Vice-Chairman and Director
Arthur L. Money	66	Director

Joel R. Jacks, who has served as our chairman and chief executive officer since inception and a Director since April 20, 2005, has over 30 years of experience in private equity investing, mergers and acquisitions and managing and operating companies in a wide variety of industries. In 1996, Mr. Jacks together with Peter M. Schulte co-founded CMLS Management, L.P. and in 2000 they co-founded CM Equity Management, L.P. Mr. Jacks serves as a managing partner of each of these CM Equity Management, L.P. entities. CM Equity Management, L.P. manages private equity funds which make investments in middle-market companies, and specializes in investing in companies which serve the federal government. CM Equity Management, L.P. is affiliated with Carl Marks and Co. Inc., a privately-owned merchant banking firm, since 1996. From 1992 to 1996, Mr. Jacks co-founded and managed Carl Marks Consulting Group Co., the predecessor of Carl Marks Advisory Group, LLC, a consulting company that is affiliated with Carl Marks & Co., Inc. Neither Carl Marks & Co. Inc. nor any of its shareholders, directors or officers owns any interest in us. From 1988 to 1992, Mr. Jacks was involved in interim management and profit improvement programs for under-performing companies as a private consultant. From 1984 to 1988, Mr. Jacks served as chief financial officer, was responsible for information technology and subsequently was chief executive officer of USSCO (affiliated with ADT, Ltd.), a distributor of security alarm and CCTV equipment throughout the U.S. and Puerto Rico. From 1976 to 1983, Mr. Jacks worked for The Penn Central Corporation as Director of Financial Planning and Information Technology Director, where he was involved with the restructuring of Penn Central’s public securities, and was later assigned to the New York City Partnership to assist the NYC Transportation Authority as the Information Technology vice president. Prior to 1976, Mr. Jacks was a management consultant for Deloitte Haskins & Sells.

Mr. Jacks is a director of several portfolio companies of CM Equity Partners, which are managed by CM Equity Management, L.P. or CMLS Management, L.P., including ICF Consulting Group, Inc., a management, technology and policy consulting firm in the areas of defense, homeland security, energy, environment, social programs, and transportation serving the Department of Defense, U.S. Department of

Homeland Security, U.S. civil agencies and the commercial sector; 3001, Inc., a geospatial data analysis firm serving various national security and civil agencies of the federal government; Falcon Communications, Inc., a global provider of mobile and fixed satellite communications services to commercial, U.S. and international government clients, as well as emergency response, crisis management and humanitarian organizations; Echo Bridge Entertainment, LLC; Evans Consoles Inc., a Canadian company that consummated a court-ordered reorganization in 2004 by which all of its assets were transferred to its creditors; Martin Designs, Inc. and Devon Publishing Group. Mr. Jacks was previously a director of Resource Consultants, Inc., a technical services and program management firm serving the Department of Defense and federal civil agencies; Examination Management Services, Inc. (EMSI), which, subsequent to Mr. Jacks’ serving as Chairman of the Board, underwent a voluntary restructuring in January 2005 resulting in the senior lenders and certain members of management owning all of the equity in EMSI’s business and, consequently, CM Equity Partners losing its investment in EMSI; Kronos Products, Inc.; Central Foodservice Co. and a member of the executive committee of Missota Paper Holding LLC, a company whose assets were sold in 2004 to an unaffiliated third party at a loss. From January 2000 to April 2003, Mr. Jacks was chairman of Beta Brands Incorporated, a Canadian manufacturer, exporter and marketer of quality confectionery and baked goods products. In May 2003, following default by Beta Brands in the repayment of its secured indebtedness, a Canadian court approved a consensual foreclosure by which the secured lenders acquired all of the assets of Beta Brands. As a consequence of the foreclosure, CM Equity Partners lost its equity investment in Beta Brands.

Mr. Jacks received a Bachelor of Commerce degree from the University of Cape Town and an MBA from the Wharton School, University of Pennsylvania.

Peter M. Schulte, who has served as our president and secretary since inception, as chief financial officer since November 8, 2005 and as a Director since April 20, 2005, has over 20 years of experience in private equity investing and mergers and acquisitions. In 1996, Mr. Schulte together with Mr. Jacks co-founded CMLS Management, L.P., and in 2000 they co-founded CM Equity Management, L.P. Mr. Schulte serves as a managing partner of each of these CM Equity Management, L.P. entities. From 1992 to 1996, Mr. Schulte co-founded and co-managed a private equity investment partnership that was associated with Carl Marks & Co., Inc. and that focused on private equity investments and acquisitions of middle-market companies. From 1990 to 1992, Mr. Schulte was a member of the buyout group at Arnhold and S. Bleichroeder, Inc. From 1983 to 1990, Mr. Schulte was a vice president of Salomon Brothers Inc. Prior to graduate school, Mr. Schulte was employed at IBM in its Data Processing Division (DPD) focused on the financial services sector.

Mr. Schulte is a director of several portfolio companies of CM Equity Partners, which are managed by CM Equity Management, L.P. or CMLS Management, L.P., including ICF Consulting Group, Inc.; 3001, Inc.; Falcon Communications, Inc.; and Echo Bridge Entertainment, LLC. Mr. Schulte was previously a director of Resource Consultants, Inc.; AverStar, Inc., a provider of information technology services and software products for the mission-critical systems of federal, civil and defense agencies and to large commercial companies, which was managed by the private equity investment partnership co-managed by Mr. Schulte from 1992 to 1996; Evans Consoles, Inc., a Canadian company that consummated a court-ordered reorganization in 2004 by which all of its assets were transferred to its creditors; Kronos Products, Inc.; Central Foodservice Co.; and as a member of the executive committee of Missota Paper Holding LLC, a company whose assets were sold in 2004 to an unaffiliated third party at a loss. Subsequent to the Canadian court-approved foreclosure of the assets of Beta Brands Incorporated and until its dissolution, Mr. Schulte was a director of Beta Brands Incorporated.

Mr. Schulte received a BA in Government from Harvard College and a Masters in Public and Private Management from the Yale School of Management.

Dr. Edward H. Bersoff has served as our vice-chairman and Director since April 27, 2005. Dr. Bersoff is the chairman and founder of Greenwich Associates, a business advisory firm located in Northern Virginia which was formed in 2003. From November 2002 to June 2003, he was managing director of Quarterdeck Investment Partners, LLC, an investment banking firm, and chairman of Re-route

Corporation, a company that offers email forwarding and address correction services. From February 1982 until November 2001, Dr. Bersoff was chairman, president and chief executive officer of BTG, Inc., an information technology firm he founded in 1982. Under Dr. Bersoff’s leadership, BTG, Inc. completed six acquisitions in the federal services industry. In November 2001 BTG, Inc. was acquired by The Titan Corporation, a NYSE listed company. Dr. Bersoff served as a director of Titan from February 2002 until August 2005 when Titan was sold to L-3 Corporation. Dr. Bersoff serves on the boards of EFJ, Inc., a manufacturer of wireless communications products and systems primarily for public service and government customers, and Fargo Electronics, Inc., a manufacturer of identity card issuance systems, materials and software for government and corporate applications, which are both public companies, and a number of private companies, including 3001, Inc. and ICF Consulting, Inc., each of which are portfolio companies of CM Equity Management, L.P.

Dr. Bersoff holds A.B., M.S. and Ph.D. degrees in mathematics from New York University and is a graduate of the Harvard Business School’s Owner/President Management Program. Previously, as an officer in the U.S. Army, he was assigned to the NASA Electronics Research Center in Cambridge, Massachusetts.

Dr. Bersoff is the Rector of the Board of Visitors of Virginia Commonwealth University, a Trustee of the VCU Medical Center, and a Trustee of New York University. He also serves as a Trustee of the Inova Health System.

Arthur L. Money has served as a Director since April 27, 2005. Mr. Money served as Assistant Secretary of Defense (ASD) for Command, Control, Communications and Intelligence from 1998 to 2001. Mr. Money also served as the Department of Defense Chief of Information from 1998 to 2001 and as the Senior Civilian Officer, Office of the ASD from 1998 to 1999. Mr. Money served as Assistant Secretary of the Air Force for Research, Development and Acquisition, and as Chief Information Officer for the Air Force from 1996 to 1998. Prior to that, Mr. Money was Vice President and Deputy General Manager of TRW’s Avionics and Surveillance Group and held various positions with ESL Inc. (a subsidiary of TRW) from 1990 to 1994.

Mr. Money is a director of the following public companies: CACI International Inc, Silicon Graphics, Inc., SafeNet, Inc., Essex Corporation, Intelli-Check, Inc., Terremark Worldwide, Inc., Intevac, Inc. and SteelCloud, Inc. Mr. Money also serves on the boards of directors of various private companies. Mr. Money serves on the advisory boards of several companies in the federal services and defense industries.

Our board of directors is divided into three classes with only one class of directors being elected in each year and each class serving a three-year term. The term of office of the first class of directors, consisting of Dr. Edward H. Bersoff will expire at our first annual meeting of stockholders. The term of office of the second class of directors, consisting of Joel R. Jacks and Arthur L. Money will expire at the second annual meeting. The term of office of the third class of directors, consisting of Peter M. Schulte, will expire at the third annual meeting.

These individuals will play a key role in identifying and evaluating prospective acquisition candidates, selecting the target business, and structuring, negotiating and consummating its acquisition. None of these individuals has been a principal of or affiliated with a public company or blank check company that executed a business plan similar to our business plan and none of these individuals is currently affiliated with such an entity. However, we believe that the skills and expertise of these individuals, their collective access to acquisition opportunities and ideas, their contacts, and their transaction expertise should enable them to successfully identify and effect a business combination. However, we cannot assure you that they will, in fact, be able to do so.

Audit Committee

On November 8, 2005, our board of directors established an Audit Committee. The Audit Committee was established to provide assistance to the board of directors in fulfilling its oversight

responsibility to the stockholders, potential stockholders, the investment community, and others relating to our financial statements and the financial reporting process, our systems of internal accounting and financial controls, the internal audit function, the annual independent audit of our financial statements and report on internal control over financial reporting, and the legal compliance and ethics programs as established by management and our board of directors. In so doing, it is the responsibility of the Audit Committee to maintain free and open communication among the Audit Committee, our independent registered public accounting firm, and our management. In discharging its oversight role, the Audit Committee is empowered to investigate any matter brought to its attention with full access to all books, records, facilities, and personnel and has the power to retain outside counsel or other experts for this purpose. Notwithstanding the foregoing, the Audit Committee is not responsible for conducting audits, preparing financial statements, or assuring the accuracy of financial statements or filings, all of which is the responsibility of our management and the independent registered public accounting firm. Dr. Edward H. Bersoff and Mr. Arthur L. Money comprise the Audit Committee, of which Dr. Bersoff is the Chairman.

The Company’s board of directors has not determined whether any of the members of the Audit Committee of the board of directors meets the definition of “audit committee financial expert” as defined in the rules adopted by the Securities and Exchange Commission because we currently are not an operating company and, therefore, have not sought out a person with such qualifications to add to our board of directors. The Audit Committee did not meet during the fiscal year ended December 31, 2005.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our officers, directors and persons who beneficially own more than ten percent of our common stock to file reports of ownership and changes in ownership with the SEC. These reporting persons are also required to furnish us with copies of all Section 16(a) forms they file. All of these reports were filed in a timely manner.

Code of Ethics

Our board of directors has adopted a Code of Ethics for our employees, officers and directors, available on our website at www.fedsac.com.

Item 11. Executive Compensation.

No executive officer or director has received any cash compensation for services rendered. We will not pay any finders or consulting fees to our founders, or any of their respective affiliates, for services rendered to or in connection with the consummation of the business combination. However, our founders will receive reimbursement for any out-of-pocket expenses incurred by them in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. There is no limit on the amount of these out-of-pocket expenses and there will be no review of the reasonableness of the expenses or fees by anyone other than our board of directors, which includes persons who may be entitled to reimbursement or a court of competent jurisdiction if such expenses are challenged. If all of our directors are not deemed “independent,” we will not have the benefit of independent directors examining the propriety of expenses incurred on our behalf and subject to reimbursement or monitoring our compliance with the terms of this offering. In addition, because the role of our current management and directors subsequent to a business combination is uncertain, we have no ability to determine what remuneration, if any, will be paid to our current management and directors after a business combination. We have agreed to pay CM Equity Management, L.P., an affiliate of Messrs. Jacks and Schulte, a monthly fee of $7,500 for general and administrative services including office space, utilities and secretarial support.

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

The following table sets forth information regarding the beneficial ownership of our common stock as of February 28, 2006, by each of our officers and directors, all of our officers and directors as a group, and each person known by us, as a result of such person’s public filings with the SEC and the information contained therein, to be the beneficial owner of more than 5% of our outstanding shares of common stock.

Name and Address of Beneficial Owner(1)	Amount and Nature of Beneficial Ownership	Percentage of Outstanding Common Stock

Joel R. Jacks(2) (3)	2,940,000	11.2	%
Peter M. Schulte(2) (4)	2,940,000	11.2	%
Dr. Edward H. Bersoff (5)	525,000	2.0	%
Arthur L. Money	52,500	*
FSAC Partners, L.P.	1,207,500	4.6	%
All directors and executive officers as a group(5 individuals)	5,250,000	20.0	%
Sapling, LLC/ Fir Tree Recovery Master Fund LP (6) 535 Fifth Avenue, 31^st Floor New York, New York 10017	2,500,000	9.5	%
Scion Capital, LLC/ Scion Qualified Value Fund (7) 20400 Stevens Creek Blvd. Suite 804 Cupertino, California 95014	2,500,000	9.5	%

* Less than 1% of shares of our common stock outstanding.

(1)		Unless otherwise indicated, the business address of each of the above is 900 Third Avenue, 33^rd Floor, New York, New York 10022-4775.
(2)		Includes 1,207,500 shares held by FSAC Partners, LLC over which Messrs. Jacks and Schulte have shared voting and dispositive power. The members of FSAC Partners, LLC include Joel R. Jacks, Peter M. Schulte, Dr. Edward H. Bersoff and employees and affiliates of CM Equity Partners who may assist the Company in finding and evaluating a business combination. They will not receive any compensation for such services.
(3)		Does not include 803,184 shares of common stock issueable upon the exercise of warrants held by Mr. Jacks, which warrants are exercisable upon the later of the completion of a business combination or October 19, 2006. Does not include 1,849,764 shares of common stock issuable upon the exercise of warrants held by FSAC Partners, LLC, which warrants are exercisable upon the later of the completion of a business combination or October 19, 2006.
(4)		Does not include 803,184 shares of common stock issueable upon the exercise of warrants held by Mr. Schulte, which warrants are exercisable upon the later of the completion of a business combination or October 19, 2006. Does not include 1,849,764 shares of common stock issuable upon the exercise of warrants held by FSAC Partners, LLC, which warrants are exercisable upon the later of the completion of a business combination or October 19, 2006.
(5)		Does not include any shares or warrants held by FSAC Partners, LLC, of which Dr. Bersoff is a member. Dr. Bersoff does not currently have voting or dispositive power as to any shares or warrants held by FSAC Partners, LLC. Does not include 243,396 shares of common stock issueable upon the exercise of warrants held by Dr. Bersoff, which warrants are exercisable upon the later of the completion of a business combination or October 19, 2006.
(6)		As reported in a Schedule 13G dated October 31, 2005, and filed with the SEC on October 31, 2005.
(7)		As reported in a Schedule 13G dated October 25, 2005, and filed with the SEC on October 25, 2005.

Item 13. Certain Relationships and Related Transactions.

On April 20, 2005, we issued an aggregate of 100 shares to Joel R. Jacks and Peter M. Schulte and, on April 27, 2005, we issued 5,249,900 shares of our common stock to the individuals set forth below as follows:

Name	Number of Shares	Relationship to ISE

Joel R. Jacks	1,732,450	Chairman of the Board, Chief Executive Officer and Director
Peter M. Schulte	1,732,450	President, Chief Financial Officer, Secretary and Director
Dr. Edward H. Bersoff	525,000	Vice-Chairman and Director
Arthur L. Money	52,500	Director
FSAC Partners, LP	1,207,500	Stockholder

Such shares were issued in connection with our organization pursuant to the exemption from registration contained in the Section 4(2) of the Securities Act of 1933 as they were sold to sophisticated, wealthy individuals or entities. The shares were issued for an aggregate offering price of $6,000, at an average purchase price of approximately $0.001 per share. No underwriting discounts or commissions were paid with respect to such sales.

The holders of the majority of these shares will be entitled to make up to two demands that FSAC register these shares pursuant to a registration rights agreement previously entered into. The holders of the majority of these shares may elect to exercise these registration rights at any time after the date on which these shares of common stock are released from escrow, which, except in limited circumstances, is not before October 19, 2008. In addition, these stockholders have certain “piggy-back” registration rights on registration statements filed subsequent to the date on which these shares of common stock are released from escrow. We will bear the expenses incurred in connection with the filing of any such registration statements.

On October 25, 2005, we used $154,000 of our net proceeds from the public offering to repay the notes payable to our initial stockholders, Mr. Jacks and Mr. Schulte. The loans were repaid in full, without interest, and cancelled.

We will reimburse our officers and directors for any reasonable out-of-pocket business expenses incurred by them in connection with certain activities on our behalf such as identifying and investigating possible target businesses and business combinations. There is no limit on the amount of accountable out-of-pocket expenses reimbursable by us, which will be reviewed only by our board of directors or a court of competent jurisdiction if such reimbursement is challenged.

All ongoing and future transactions between us and any of our officers and directors or their respective affiliates, including loans by our officers and directors, will be, or are, on terms believed by us to be no less favorable than are available from unaffiliated third parties, and such transactions or loans, including any forgiveness of loans, will require prior approval in each instance by a majority of our uninterested “independent” directors (to the extent we have any) or the members of our board of directors who do not have an interest in the transaction, in either case who had access, at our expense, to independent legal counsel.

Item 14. Principal Accountant Fees and Services.

The fees billed by Eisner LLP for services rendered to us in 2005 were as follows (we did not pay any fees to Eisner LLP for services that fall under the categories “Audit-Related Fees,” “Tax Fees” or “All Other Fees”, as such categories are defined in the rules promulgated by the Securities and Exchange Commission):

Audit Fees

Fees incurred in connection with our initial public offering, the review of our quarterly financial statements, and services provided in connection with the our statutory and regulatory filings in respect of year ended December 31, 2005 were in the amount of $39,000.

Pre-Approval of Fees

All the services and fees described above were approved by our full board of directors which considered whether the provision of non-audit related services was compatible with maintaining the independence of Eisner LLP. Commencing on November 8, 2005, the Audit Committee of the Board of Directors was granted the authority to pre-approve all auditing services and all non-audit services (including the fees and terms thereof) to be performed by the independent auditors. The Audit Committee may delegate to the Audit Committee Chairman the authority to grant pre-approvals for audit and permitted non-audit services to be performed for us by the independent auditor, provided that decisions of such member to grant pre-approvals shall be presented to the full Audit Committee at its next regularly scheduled meeting. Substantially all hours expended on the independent registered public accounting firm’s engagement to audit the Company’s financial statement for the year ended December 31, 2005, were attributed to work performed by persons that were full-time, permanent employees of the independent registered public accounting firm.

PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a) The following documents are filed as a part of this Report:

1. Financial Statements:

Index to Financial Statements and Schedules

Report of Independent Registered Public Accounting Firm

Balance sheet as of December 31, 2005

Statement of operations for the period from April 12, 2005 (date of inception) through December 31, 2005

Statement of changes in stockholders’ equity for the period from April 12, 2005 (date of inception) through December 31, 2005

Statement of cash flows for the period from April 12, 2005 (date of inception) through December 31, 2005

Notes to Financial Statements

2. Financial Statement Schedule(s):

All schedules are omitted for the reason that the information is included in the financial statements or the notes thereto or that they are not required or are not applicable.

3. Exhibits:

Exhibit No.		Description
3.1		Amended and Restated Certificate of Incorporation**
3.2		By-laws*
4.1		Specimen Unit Certificate*
4.2		Specimen Common Stock Certificate*
4.3		Specimen Warrant Certificate*
4.4		Warrant Agreement between Continental Stock Transfer & Trust Company and the Company**
10.1		Letter Agreement between the Company and Joel R. Jacks**
10.2		Letter Agreement between the Company and Peter M. Schulte**
10.3		Letter Agreement between the Company and Dr. Edward H. Bersoff**
10.4		Letter Agreement between the Company and Arthur L. Money**
10.5		Letter Agreement between the Company and FSAC Partners, LLC**
10.6		Letter Agreement between CRT Capital Group LLC and Joel R. Jacks**
10.7		Letter Agreement between CRT Capital Group LLC and Peter M. Schulte**
10.8		Letter Agreement between CRT Capital Group LLC and Dr. Edward H. Bersoff**
10.9		Letter Agreement between CRT Capital Group LLC and Arthur L. Money**
10.10		Letter Agreement between CRT Capital Group LLC and FSAC Partners, LLC**
10.11		Investment Management Trust Agreement between Continental Stock Transfer & Trust Company and the Company**
10.14		Registration Rights Agreement among the Company and FSAC Partners, LLC, Joel R. Jacks, Peter M. Schulte, Edward H. Bersoff and Arthur L. Money**
10.15.1		Warrant Purchase Agreement between CRT Capital Group LLC and Joel R. Jacks**
10.15.2		Warrant Purchase Agreement between CRT Capital Group LLC and Peter M. Schulte**
10.15.3		Warrant Purchase Agreement between CRT Capital Group LLC and Dr. Edward H. Bersoff **
10.15.4		Warrant Purchase Agreement between CRT Capital Group LLC and FSAC Partners, LLC **
10.16		Office Service Agreement between the Company and CM Equity Management, L.P.**
10.17		Stock Escrow Agreement between the Company and Continental Stock Transfer & Trust Company**
14		Code of Ethics is available at Company’s website at www.fedsac.com
31.1		Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15(d)-19(a) of the Securities Exchange Act of 1934, as amended**
31.2		Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15(d)-19(a) of the Securities Exchange Act of 1934, as amended**
32.1		Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
32.2		Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**

* Incorporated by reference to exhibits of the same number filed with our Registration Statement on Form S-1 or amendments thereto (File No. 333-124638).

** Incorporated by reference to exhibits of the same number filed with our Form 10-K on March 31, 2006..

SIGNATURES

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

	Federal Services Acquisition Corporation

	By:	/s/ Joel R. Jacks
		Chairman of the Board and
		Chief Executive Officer
		(Principal executive officer)


	By:	/s/ Peter M. Schulte
		President and
		Chief Financial Officer
		(Principal financial officer)
Date: September 29, 2006

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name	Position	Date

/s/ JOEL R. JACKS	Chairman of the Board and Chief Executive Officer (Principal Executive	September 29, 2006
Joel R. Jacks	Officer)

/s/ PETER M. SCHULTE	President, Chief Financial Officer, Secretary and Director (Principal	September 29, 2006
Peter M. Schulte	Financial Officer)

/s/ EDWARD H. BERSOFF	Vice-Chairman	September 29, 2006
Edward H. Bersoff

/s/ JOSEPH A. SAPONARO	Director	September 29, 2006
Joseph A. Saponaro

/s/ EDWARD J. SMITH	Director	September 29, 2006
Edward J. Smith

Federal Services Acquisition Corporation
(a development stage company)

Balance Sheet

December 31, 2005

(Restated)

ASSETS
Current assets:
Cash and cash equivalents	$	1,855,394
Prepaid expenses	72,122

Total current assets	1,927,516

Short-term investments held in Trust Account (including interest receivable of $39,444) (fair value $117,709,036)	117,709,036
Cash and cash equivalents held in trust fund	281,348

Deferred income tax benefit	34,629

Total assets	$	119,952,529

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accrued expenses	$	34,289
Income tax payable - current	356,000
Deferred income tax	15,714
Warrant liabilities	19,740,000

Total current liabilities	20,146,003

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 $64,000)	97,996

Total common stock, subject to possible redemption	23,522,278

COMMITMENTS AND CONTINGENCIES (Note I)

STOCKHOLDERS’ EQUITY:
Preferred stock—$.0001 par value; 1,000,000 shares authorized; 0 issued and outstanding
Common stock—$.0001 par value, 100,000,000 shares authorized; 26,250,000 issued and outstanding (which includes 4,197,900 shares subject to possible redemption)	2,625
Additional paid-in capital	81,467,698
Deficit accumulated during the development stage	(5,186,075		)

Total stockholders’ equity	76,284,248

	$	119,952,529

See notes to financial statements

F-3

Statement of Operations

For the period from April 12, 2005 (date of inception) through December 31, 2005

(Restated)

Expenses:
Operating costs	$	133,161
Other income (loss):
Bank interest	8,783
Interest on cash and short term investments held in trust	810,384
Loss on warrant liabilities	(5,460,000		)

Total other income (loss)	(4,640,833		)

Loss before provision for taxes	(4,773,994		)
Provision for income taxes
Current	(333,000		)
Deferred	18,915

Net loss	(5,088,079		)
Interest income attributable to common stock subject to possible redemption (net of taxes of $64,000)	(97,996		)
Net loss allocable to common stockholders not subject to possible redemption	$	(5,186,075	)

Weighted average number of shares outstanding
—basic and diluted	10,599,810

Net loss per share
—basic and diluted	$	(0.48	)

Weighted average number of shares outstanding exclusive of shares subject to possible redemption
—basic and diluted	9,530,382

Net loss per share not subject to possible redemption
—basic and diluted	$	(0.54	)

See notes to financial statements.

F-4

Statement of changes in Stockholders’ Equity
For the period from April 12, 2005 (date of inception) through December 31, 2005

							Deficit
							accumulated
				Additional			during
	Common Stock			Paid-In			development
	Shares	Amount		Capital			stage			Total

Balance—April 12, 2005 (date of inception)
Initial capital from founding stockholders	5,250,000	$	525	$	5,475		$	—		$	6,000
Sale of 21,000,000 units (including 4,197,900 shares of common stock subject to possible redemption), net of underwriters’ discount and offering expenses	21,000,000	2,100		119,166,505			—			119,168,605
Reclassification of proceeds allocated to warrants — derivatives liability	—	—		(14,280,000		)	—			(14,280,000		)
Reclassification of 4,197,900 shares of common stock being subject to possible redemption				(23,424,282		)	—			(23,424,282		)
Accretion of trust fund relating to common stock subject to possible redemption	—	—		—			(97,996		)	(97,996		)
Net loss for the period	—	—		—			(5,088,079		)	(5,088,079		)

Balance—December 31, 2005 (Restated)	26,250,000	$	2,625	$	81,467,698		$	(5,186,075	)	$	76,284,248

See notes to financial statements

F-5

Statement of Cash Flows
For the period from April 12, 2005 (date of inception) through December 31, 2005

(Restated)

Cash flows from operating activities:
Net loss	$	(5,088,079		)
Adjustments to reconcile net loss to net cash provided by operating activities:
Deferred income tax	(18,915			)
Loss on warrant liabilities	5,460,000
Changes in:
Interest receivable	(39,444			)
Prepaid expenses	(72,122			)
Accrued expenses	34,289
Income taxes payable—current	356,000

Net cash provided by operating activities	631,729

Cash flows from investing activities:
Purchase of U.S. government securities held in Trust fund	(234,848,658			)
Maturities of U.S. government securities held in Trust fund	117,179,066
Cash held in Trust Fund	(281,348			)

Net cash used in investing activities	(117,950,940			)

Cash flows from financing activities:
Proceeds from public offering, net of expenses	119,168,605
Proceeds from notes payable to stockholders	154,000
Repayment of notes to stockholders	(154,000			)
Proceeds from sale of common stock to founders	6,000

Net cash provided by financing activities	119,174,605

Net increase in cash and cash equivalents	1,855,394
Cash and cash equivalents—beginning of period	—

Cash and cash equivalents—end of period	$	1,855,394

Supplemental Disclosure of noncash activities:
Reclassification of common stock subject to possible redemption	$	23,424,282
Accretion of trust fund relating to common stock subject to possible redemption	97,996
Warrant obligation in connection with sale of units in offering			14,280,000

See notes to financial statements.

F-6

Notes to Financial Statements

December 31, 2005

NOTE A—ORGANIZATION AND BUSINESS OPERATIONS

Federal Services Acquisition Corporation (the “Company”) was incorporated in Delaware on April 12, 2005. The Company was formed to serve as a vehicle for the acquisition of an operating business in the federal services and defense industries through a merger, capital stock exchange, asset acquisition, stock purchase or other similar business combination. The Company has neither engaged in any operations nor generated revenue to date. The Company is considered to be in the development stage and is subject to the risks associated with activities of development stage companies. The Company has selected December 31 as its fiscal year end.

The registration statement for the Company’s initial public offering (“Offering”) was declared effective on October 19, 2005. The Company consummated the offering on October 25, 2005 and received net proceeds of $119,169,000. The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Offering, although substantially all of the net proceeds of the Offering are intended to be generally applied toward consummating a business combination with (or acquisition of) an operating business in the federal services and defense industries (“Business Combination”). Nonetheless, there is no assurance that the Company will be able to successfully effect a Business Combination. As of December 31, 2005, an amount of $117,990,384 including interest receivable of $39,444 of the net proceeds is being held in a trust account (“Trust Account”) and is invested in U.S. government securities, and cash or cash equivalents until the earlier of (i) the consummation of its first Business Combination or (ii) the distribution of the Trust Account to the Company’s public stockholders. The remaining proceeds may be used to pay for business, legal and accounting due diligence on prospective acquisitions and continuing general and administrative expenses. The Company, after signing a definitive agreement for the acquisition of a target business, will submit such transaction for stockholder approval. In the event that public stockholders of 20% or more of the outstanding stock (excluding, for this purpose, those shares of common stock issued prior to the Offering) vote against the Business Combination and exercise their conversion rights, the Business Combination will not be consummated.

In the event that the Company does not consummate a Business Combination within 18 months from the date of the consummation of the Offering, or 24 months from the consummation of the Offering if certain extension criteria have been satisfied (the “Acquisition Period”), the proceeds held in the Trust Account will be distributed to the Company’s public stockholders, excluding the Founders (defined in the following sentence) to the extent of their stock acquired prior to the Offering. However, the persons who were stockholders prior to the Offering (the “Founders”) will participate in any liquidation distribution with respect to any shares of the common stock acquired in connection with or following the Offering. In the event of such distribution, it is likely that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the initial public offering price per unit in the Offering (assuming no value is attributed to the Warrants contained in the Units offered in the Offering as discussed in Note C).

Public stockholders owning less than 20% of the shares sold in the Offering who vote against a business combination and exercise their conversion rights will be entitled to convert their stock into a pro rata share of the Trust Account, including any interest earned on their portion of the Trust Account (net of taxes payable), if the business combination is approved and consummated. The Founders cannot convert their stock into a pro rata share of the Trust Account under these circumstances, because they have agreed to vote their stock in accordance with the majority of the shares of common stock voted by the public stockholders. Public stockholders who convert their stock will retain any warrants they hold.

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

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

• three years following the date of the Offering,

• liquidation; or

• the consummation of a liquidation, merger, stock exchange or other similar transaction which results in all of the stockholders having the right to exchange their shares of common stock for cash, securities or other property subsequent to the Company consummating a business combination with a target business.

F-7

NOTE B—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

[1] Cash and cash equivalents:

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company had cash deposits in excess of the federally insured limits at December 31, 2005.

[2] Earnings per common share:

Basic income per share is based on the weighted average number of common shares outstanding during the period. Diluted income per share reflects the potential dilution assuming common shares were issued upon the exercise of outstanding in-the-money warrants and the proceeds thereof were used to purchase treasury shares at the average market price during the period.

[3] Use of estimates:

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts in the financial statements and accompanying notes. Actual results could differ from those estimates.

[4] Fair value of financial instruments:

The carrying amounts of the Company’s financial assets, including cash and cash equivalents and short term investments, approximate fair value because of their short term maturities.

[5] Income taxes:

Deferred income taxes are provided for the differences between the bases of assets and liabilities for financial reporting and income tax purposes. Deferred tax assets and liabilities are measured using tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized.

[6] Accounting for Warrants and Derivative Instruments-Restatement:

As described in Note C, the Company sold units in the Offering which included warrants. The warrant agreement provides for the Company to register the shares underlying the warrants and is silent as to the penalty to be incurred in the absence of the Company’s ability to deliver registered shares to the warrant holders upon warrant exercise.

In September 2000, the Emerging Issues Task Force issued EITF 00-19, “Accounting for Derivative Financial Instruments Indexed to and Potentially Settled in, a Company’s Own Stock,” (“EITF 00-19”) which requires freestanding contracts that are settled in a company’s own stock, including common stock warrants, to be designated as equity instrument, asset or a liability. Under the provisions of EITF 00-19, a contract designated an asset or a liability must be carried at fair value on a company’s balance sheet, with any changes in fair value recorded in the company’s results of operations. A contract designated as an equity instrument must be included within equity, and no fair value adjustments are required from period to period. In accordance with EITF 00-19, the 42,000,000 warrants issued to purchase stock are separately accounted for as liabilities. The fair value of these warrants is shown on the Company’s balance sheet, and the unrealized changes in the values of these warrants are shown in the Company’s statement of operations as “Gain (loss) on warrant liabilities.” These warrants are freely traded on the “Over The Counter Bulletin Board.” Consequently, the fair value of these warrants is estimated as the market price of a warrant at each period end. To the extent the market price increases or decreases, the Company’s warrant liabilities will also increase or decrease, including the effect on the Company’s statement of operations.

NOTE C—INITIAL PUBLIC OFFERING

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

In connection with the Offering, the Company paid CRT Capital Group LLC an underwriter’s discount of 5% of the gross proceeds of the Offering.

NOTE D-RESTATEMENT AND RECLASSIFICATIONS OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

Summary of restatement items:

In September 2006, the Company concluded that it was necessary to restate its financial statements for the period ended December 31, 2005 to reflect the classification of and accounting for the warrants to purchase common stock associated with the units sold at the initial public offering of the Company. The Company had previously classified the value of these warrants to purchase common stock, when applicable, as equity. After further review in connection with the preparation of Amendment No. 2 to the Proxy Statement related to the acquisition contemplated by the Stock Purchase Agreement dated April 19, 2006, by and among the Company, Advanced Technology Systems, Inc., a Virginia corporation (“ATS”) and shareholders of ATS, the Company has determined that these instruments should have been classified as liabilities and, therefore, the fair value of each instrument must be recorded as a liability on the Company’s balance sheet. Changes in the fair values of these instruments will result in adjustments to the amount of the recorded liabilities, and the corresponding gain or loss will be recorded in the Company’s statement of operations. At the date of the conversion of each warrants or portion thereof (or exercise of the warrants or portion thereof, as the case may be), the corresponding liability will be reclassified as equity.

	At issuance date				At December 31, 2005
	per warrant		Total		per warrant		Total
Fair Value of warrants part of initial public offering unit 42,000,000 warrants	$	0.34	$	14,280,000	$	0.47	$	19,740,000

Statement of Operations

The accompanying financial statements for the period ended December 31, 2005 have been restated to effect the changes described above. The impact of the adjustments related to the classification of and accounting for the warrants for the period ended December 31, 2005 are summarized below. The following table shows the impact of the restatements on the statement of operations.

		For the period from April 12, 2005 (date of inception) through December 31, 2005
		As Previously Reported				Adjustment				As Restated
Operating costs		$	(133,161		)	$	—			$	(133,161		)
Interest income		819,167								819,167
Loss on warrant liabilities										(5,460,000			)
Income (loss) before provision for taxes				686,006				(5,460,000	)			(4,773,994	)
Provision for income taxes	-current	(333,000			)	—				(333,000			)
	-deferred	18,915				—				18,915
Net income (loss)			371,921				(5,460,000		)		(5,088,079		)
Interest income attributable to common stock subject to possible conversion (net of taxes of $64,000)		(97,996			)	—				(97,996			)
Net income (loss) allocable to common stockholders not subject to possible conversion		$	273,925			$	(5,460,000		)	$	(5,186,075		)
Weighted average number of shares outstanding
-basic		10,599,810								10,599,810
-diluted		11,050,752								10,599,810
Net income (loss) per share
-basic		$	0.04							$	(0.48		)
-diluted		$	0.03							$	(0.48		)
Weighted average number of shares outstanding exclusive of shares subject to possible redemption
-basic		9,530,382								9,530,382
-diluted		9,891,181								9,530,382
Net income (loss) per share not subject to possible redemption
-basic		$	0.03							$	(0.54		)
-diluted		$	0.03							$	(0.54		)

As a result of recording the change in the fair value of warrant liability, the Company has reported a net loss for the period ended December 31, 2005 compared to net income as previously reported. Therefore, the per share effect of potential common shares issued upon the exercise of warrants, aggregating 42,000,000 shares, have not been included in diluted loss per share as the effect is anti-dilutive.

F-9

Balance Sheet Impact

The following table set forth the effects for the restatement adjustment on the Company’s balance sheet as of December 31, 2005:

	December 31, 2005					December 31, 2005
	As Previously Reported		Adjustment			As Restated
ASSETS
Current assets:
Cash and cash equivalents	$	1,855,394	$	—		$	1,855,394
Prepaid expenses	72,122		—			72,122
Total current assets	1,927,516		—			1,927,516
Short-term investments held in Trust Account (including interest receivable of $39,444)(fair value $117,709,036)	117,709,036		—			117,709,036
Cash and cash equivalents held in trust	281,348		—			281,348
Deferred income tax benefit	34,629		—			34,629
Total assets	$	119,952,529	—			$	119,952,529
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accrued expenses	$	34,289	$	—		$	34,289
Income tax payable-current	356,000		—			356,000
Deferred income tax	15,714		—			15,714
Warrant liabilities	—		19,740,000			19,740,000
Total current liabilities	406,003		19,740,000			20,146,003
Common Stock subject to possible redemption 4,197,900 shares	23,424,282		—			23,424,282
Interest income attributable to common stock subject to possible redemption (net of taxes of $64,000)	97,996		—			97,996
Total common stock, subject to possible redemption	23,522,278		—			23,522,278
COMMITMENTS AND CONTINGENCIES (Note H)
STOCKHOLDERS’ EQUITY:
Preferred stock-$.0001 par value; 1,000,000 shares authorized; 0 issued and outstanding
Common stock- $.0001 par value; 100,000,000 shares authorized; 26,250,000 issued and outstanding (which includes 4,197,900 shares subject to possible redemption)	2,625		—			2,625
Additional paid-in capital	95,747,698		(14,280,000		)	81,467,698
Earnings (deficit) accumulated during the development stage	273,925		(5,460,000		)	(5,186,075		)
Total stockholders’ equity	96,024,248		(19,740,000		)	76,284,248
Total liabilities and stockholders’ equity	$	119,952,529	$	—		$	119,952,529

NOTE E—INVESTMENTS HELD IN TRUST

The management of the Company intends to hold till maturity the investments held in the Trust Account which consists principally of short-term Treasury Bills. These bills are purchased at a discount and the Company accretes the difference between the purchase price and the market price which is considered as interest income.

F-10

NOTE F—INCOME TAXES

The provision for income taxes for the period ending December 31, 2005 consists of the following:

Current
Federal	$	206,000
State and local	127,000
Deferred tax (benefit)
Federal	(14,733		)
State and local	(4,182		)

Total	$	314,085

Provisions have been made for deferred taxes based on differences between the financial statements and the tax basis of assets and liabilities using currently enacted rates and regulations.

Deferred tax assets and liabilities at December 31, 2005 consist of the following:

Deferred tax assets – start up costs	$	34,629
Deferred tax liability – accrued interest receivable	(15,714		)

Net deferred tax benefit	$	18,915

The Company has recorded a deferred tax asset. Realization is dependent on acquiring an operating company and the ability to use the deferred tax expenses to offset operating income. Although realization is not assured, management believes it is more likely than not that all of the deferred tax will be realized through future taxable income.

The provision for income taxes differs from the amount computed using the federal statutory rate of 34% as a result of the following:

Period from April 12, 2005 (inception) to December 31, 2005

	As Reported		As Restated
Federal statutory rate	34.0	%	(34.0	)%
State and local income taxes, net of federal income tax benefit	11.8		1.7
Non deductible loss			38.9
	45.8	%	6.6	%

NOTE G—NOTES PAYABLE TO STOCKHOLDERS

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

F-11

Report of Independent Registered Public Accounting Firm

Financial statements

Balance sheet as of December 31, 2005, as restated
Statement of operations for the period from April 12, 2005 (date of inception) through December 31, 2005, as restated
Statement of changes in stockholders’ equity for the period from April 12, 2005 (date of inception) through December 31, 2005, as restated
Statement of cash flows for the period from April 12, 2005 (date of inception) through December 31, 2005, as restated

Notes to Financial Statements, as restated

Stockholders	Number of Shares
Joel R. Jacks	2,940,000	*
Peter M. Schulte	2,940,000	*
Dr. Edward H. Bersoff	525,000
Arthur L. Money	52,500
FSAC Partners, LLC	1,207,500