10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2008.
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: 0-51552

ATS CORPORATION

(Exact name of registrant as specified in its charter)

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

7915 Jones Branch Drive

McLean, Virginia 22102

(Address of principal executive offices)

(703) 506-0088

(Registrant’s telephone number, including area code)

Not Applicable

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

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

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

Large accelerated filer o	Accelerated filer x
Non-accelerated filer o	Smaller reporting company o
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  o   No  x

The number of shares of the issuer’s common stock, $0.0001 par value, outstanding as of May 12, 2008 was 19,277,427.

ATS CORPORATION

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Consolidated Balance Sheets as of March 31, 2008 (unaudited) and as of December 31, 2007 (audited)	3
	Consolidated Statements of Operations (unaudited) for the three months ended March 31, 2008 and March 31, 2007	4
	Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2008 and March 31, 2007	5
	Notes to Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	9
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	15
Item 4.	Controls and Procedures	15
PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	16
Item 1A.	Risk Factors	16
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	16
Item 3.	Defaults upon Senior Securities	17
Item 4.	Submission of Matters to a Vote of Security Holders	17
Item 5.	Other Information	17
Item 6.	Exhibits	17
SIGNATURES		18

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ATS CORPORATION

PART I — FINANCIAL INFORMATION

ITEM 1. — FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

	March 31,			December 31,
	2008			2007
	(unaudited)			(audited)
ASSETS
Current assets
Cash	$	965,988		$	1,901,977
Accounts receivable, net	37,444,641			31,191,784
Prepaid expenses	861,852			923,803
Income taxes receivable	722,004			3,493,319
Other current assets	35,652			16,663
Deferred income taxes, current	1,934,467			1,335,965
Total current assets	41,964,604			38,863,511
Property and equipment, net	1,257,576			1,501,409
Goodwill	107,608,943			107,600,686
Intangible assets, net	19,775,380			21,446,868
Restricted cash	1,292,205			1,278,489
Other assets	370,051			259,353
Total assets	$	172,268,759		$	170,950,316
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	2,670,191		$	2,820,191
Capital leases – current portion	87,889			96,558
Accounts payable and accrued expenses	8,599,831			8,634,665
Accrued salaries and related taxes	3,736,075			4,425,966
Accrued vacation	2,761,756			2,479,540
Income taxes payable	229,467			1,926,225
Deferred revenue	1,746,958			2,164,574
Deferred rent – current portion	62,477			80,984
Total current liabilities	19,894,644			22,628,703
Long-term debt – net of current portion	49,334,983			45,604,958
Capital leases – net of current portion	66,086			87,078
Deferred rent – net of current portion	82,950			94,069
Other long-term liabilities ($1,800,391 and $678,678 at fair value, respectively)	1,846,367			724,654
Deferred income taxes	5,722,671			6,475,540
Total liabilities	76,947,701			75,615,002
Commitments and contingencies	—			—
Shareholders’ equity:
Preferred stock $.001 par value, 1,000,000 shares authorized, and no shares issued and outstanding	—			—
Common stock $.001 par value, 100,000,000 shares authorized,
27,607,682 and 27,529,010 shares issued, respectively, and 19,264,927 and 19,186,255 shares outstanding, respectively	2,761			2,753
Additional paid-in capital	129,794,646			129,384,746
Treasury stock, at cost	(30,272,007		)	(30,272,007		)
Accumulated deficit	(3,087,379		)	(3,362,407		)
Accumulated other comprehensive loss (net of $683,428 and $260,907 tax benefit, respectively)	(1,116,963		)	(417,771		)
Total shareholders’ equity	95,321,058			95,335,314
Total liabilities and shareholders’ equity	$	172,268,759		$	170,950,316

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

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ATS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended March 31,
	2008			2007
	(unaudited)			(unaudited)
Revenue	$	34,876,525		$	23,477,720
Operating costs and expenses
Direct costs	22,268,641			16,464,217
Selling, general and administrative expenses	9,449,681			5,970,982
Depreciation and amortization	2,042,608			926,162
Total operating costs and expenses	33,760,930			23,361,361
Operating income	1,112,595			116,359
Other (expense) income
Interest, net	(804,407		)	143,451
Loss on warrant liabilities	—			(6,930,000		)
Other income	70,877			735
Income (loss) before income taxes	379,065			(6,669,455		)
Income tax expense	104,036			102,711
Net income (loss)	$	275,029		$	(6,772,166	)
Weighted average number of shares outstanding
—basic	19,242,698			20,307,248
—diluted	19,242,698			20,307,248
Net income (loss) per share
—basic	$	0.01		$	(0.33	)
—diluted	$	0.01		$	(0.33	)

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

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ATS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three Months Ended March 31,
	2008				2007
	(unaudited)				(unaudited)
Cash flows from operating activities
Net income (loss)	$	275,029			$	(6,772,166		)
Adjustments to reconcile net income (loss) to net cash (used in) operating activities:
Depreciation and amortization	2,042,608				892,569
Stock-based compensation	323,895				600,670
Deferred income taxes	(774,136			)	(1,947,134			)
Deferred rent	(29,626			)	—
Gain on disposal of equipment	(1,058			)	—
Loss on warrant liabilities	—				6,930,000
Bad debt	164,787				—
Miscellaneous income	(1,433			)	—
Changes in assets and liabilities, net of effects of acquisitions and adjustments related to other comprehensive loss:
Accounts receivable	(6,417,644			)	(1,519,877			)
Prepaid expenses and other current assets	42,962				(3,586,206			)
Restricted cash	(13,716			)	(12,899			)
Other assets	(110,698			)	284,248
Accrued interest payable and receivable	17,283				—
Accounts payable and other accrued expenses	(41,997			)	(251,351			)
Accrued salaries and related taxes	(689,891			)	(5,033,944			)
Accrued vacation	282,216				285,065
Income taxes payable and receivable	919,843				1,432,229
Other current liabilities	(417,616			)	(47,222			)
Other long-term liabilities	—				(113,221			)
Net cash used in operating activities	(4,429,192			)	(8,859,239			)
Cash flows from investing activities
Purchase of property and equipment	(130,748			)	(10,308			)
Proceeds from disposals of equipment	4,519				—
Acquisitions of businesses – net of cash acquired	(18,377			)	(80,356,399			)
Sale of U.S. government securities held in trust fund	—				121,024,475
Release of cash held in trust fund	—				1,332
Net cash (used in) provided by investing activities	(144,606			)	40,659,100
Cash flows from financing activities
Net borrowings on lines-of-credit	4,375,858				—
Payments on notes payable	(795,833			)	—
Payments on capital leases	(28,229			)	(13,203			)
Proceeds from stock issued regarding Employee Stock Purchase Plan	86,013				—
Payments to repurchase treasury stock	—				(30,272,007			)
Net cash provided by (used in) financing activities	3,637,809				(30,285,210			)
Net (decrease) increase in cash	(935,989			)	1,514,651
Cash, beginning of period	1,901,977				213,395
Cash, end of period	$		965,988		$		1,728,046
Supplemental disclosures:
Cash paid or received during the period for:
Income taxes paid	$	1,308,333			$	569,866
Income tax refunds	1,350,000				—
Interest paid	821,284				5,427
Interest received	34,160				153,349
Non-cash financing activities and adjustment to other comprehensive loss:
Issuance of stock related to acquisition of businesses	—				1,200,000
Notes payable issued related to acquisition of businesses	—				86,857
Unrealized other comprehensive loss on interest rate swap – net of tax	(699,192			)	—

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1¾BASIS OF PRESENTATION

Principles of Consolidation - The consolidated financial statements include the accounts of ATS Corporation and its subsidiary (the “Company”).  All material intercompany accounts, transactions, and profits are eliminated in consolidation.  The 2007 financial statements reflect the results of operations of acquired companies from the date acquired.

The accompanying consolidated financial statements of the Company have been prepared by management in accordance with the instructions to Form 10-Q of the Securities and Exchange Commission.  These statements include all adjustments considered necessary by management to present a fair statement of the consolidated balance sheets, results of operations, and cash flows.  The results reported in these financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year.  These financial statements should be read in conjunction with the audited consolidated financial statements, including the notes thereto, contained in the Company’s 2007 Annual Report on Form 10-K.

Accounting Estimates – The Company’s financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).  The preparation of the financial statements requires management to make estimates and judgements that affect the reported amounts of assets and liabilities and the disclosure of contingencies at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period.  Estimates have been prepared on the basis of the most current and best available information and actual results could differ materially from those estimates.

Financial Statements Reclassifications - Certain amounts on the prior period financial statements and related notes have been reclassified to conform to the 2008 presentation.

NOTE 2¾RECENT ACCOUNTING PRONOUNCEMENTS

Adoption of New Accounting Standards

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. Specifically, this Statement sets forth a definition of fair value, and establishes a hierarchy prioritizing the inputs to valuation techniques, giving the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable inputs. The provisions of SFAS No. 157 are generally required to be applied on a prospective basis, except to certain financial instruments accounted for under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, for which the provisions of SFAS No. 157 should be applied retrospectively. In February 2008, the FASB issued Staff Position FAS 157-2, Effective Date of FASB Statement No. 157, which defers the implementation for the non-recurring nonfinancial assets and liabilities from fiscal years beginning after November 15, 2007 to fiscal years beginning after November 15, 2008.  The disclosure requirements of SFAS No. 157, which took effect on January 1, 2008, are presented in Note 4.  On January 1, 2009, the Company will implement the previously-deferred provisions of SFAS No. 157 for nonfinancial assets and liabilities recorded at fair value as required. The Company does not believe that the remaining provisions will have a material effect on the Company’s consolidated financial position or results of operations when they become effective.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115 (“SFAS No. 159”). SFAS No. 159 permits an entity, at specified election dates, to choose to measure certain financial instruments and other items at fair value. The objective of SFAS No. 159 is to provide entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently, without having to apply complex hedge accounting provisions. The adoption of SFAS No. 159 effective January 1, 2008 did not have a material impact on our consolidated financial statements.  The Company did not elect the fair value measurement option for any of our existing financial instruments.

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Standards Issued But Not Yet Effective

In December 2007, the FASB issued SFAS No. 141(R)—Business Combinations (“SFAS No. 141(R)”).  SFAS No. 141(R) replaces FASB Statement No. 141—Business Combinations. The new statement retains the fundamental requirements that the acquisition (or purchase) method of accounting be used for all business combinations and expands the definition of a business, thus increasing the number of transactions which may qualify as business combinations. Contingent consideration will be measured at fair value at the acquisition date, with changes in fair value recognized in earnings, and transaction-related expenses and restructuring costs will be expensed as incurred. Changes in acquired tax contingencies will be recognized in earnings if outside the purchase price allocation period (generally one year or less). Adjustments to finalize purchase price allocations will be shown as revised in future financial statements to reflect the adjustments as if they had been recorded on the acquisition date. Also, in the event of a bargain purchase (acquisition of a business at below fair market value of net assets acquired) a gain could be recognized, or in the event of a change in control of an existing investment, a gain or loss could be recognized. SFAS No. 141(R) will be applied prospectively to business acquisitions with acquisition dates on or after January 1, 2009. The Company is currently assessing the impact of adopting SFAS No. 141(R) on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements—An Amendment of ARB No. 51 (“SFAS 160”). SFAS 160 establishes new accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is effective for fiscal years beginning on or after December 15, 2008 and early adoption is prohibited.  Adoption of this statement is not expected to have a material impact on the Company’s consolidated financial position or results of operations when it becomes effective in 2009, but may significantly affect the accounting for noncontrolling (or minority) interests from that date forward.

In March 2008, the FASB issued Statement SFAS No. 161, Disclosure about Derivative Instruments and Hedging Activities — An Amendment of FASB Statement No. 133 (“SFAS No. 161”).  SFAS No. 161 requires more disclosures about an entity’s derivative and hedging activities in order to improve the transparency of financial reporting.  SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged.  This Statement encourages, but does not require, comparative disclosures for earlier periods at initial adoption.  The Company will adopt the provisions of SFAS No. 161 on January 1, 2009, which is not expected to have a material impact on the Company’s consolidated financial statements.

NOTE 3¾RESTRICTED CASH

The Company is required to maintain $1,200,000 on deposit with a financial institution to support a bonding requirement for one of ATSI’s state contracts.  This amount, and accumulated interest earned thereon, are reflected in restricted cash in the accompanying consolidated balance sheets.

NOTE 4¾FAIR VALUE OF FINANCIAL INSTRUMENTS

In order to manage interest rate fluctuation exposure on bank debt, the Company entered into an interest rate swap agreement with Bank of America on November 9, 2007 providing the Company an ability to eliminate the variability of interest expense based on $35 million of floating rate debt.  The purpose of the derivative instrument is to hedge cash flows and not for trading purposes.  The Company records cash payments and receipts related to its interest rate swap as adjustments to interest expense and as a component of operating cash flow.

A $1.8 million and $0.7 million liability are included in other long-term liabilities, as of March 31, 2008 and December 31, 2007, respectively, related to this interest rate swap, which is recorded at fair market value based upon an extrapolation of forward rates for the remaining term of the interest rate swap.  A $0.6 million loss related to a change in market value for this derivative, net of a tax benefit of $0.5 million, was recorded in other comprehensive loss for the three months ended March 31, 2008.

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NOTE 5¾STOCK PLANS AND STOCK-BASED COMPENSATION

In December 2004, the FASB issued SFAS No. 123(R), Share Based Payment, which requires that compensation costs related to share-based payment transactions be recognized in financial statements. Under the fair value recognition provisions of SFAS No. 123(R), the Company recognizes stock-based compensation based upon the fair value of the stock-based awards taking into account the effects of the employees expected exercise and post-vesting employment termination behavior.

Compensation Related to Options and Restricted Stock and selling expenses	March 31, 2008		March 31, 2007
Non-qualified stock option expense	$	41,668	$	600,670
Restricted stock	282,227		_
Total stock-based compensation expense	$	323,895	$	600,670

The fair value of options granted during the period ended March 31, 2008 has been estimated as of the date of grant using the Black-Scholes option pricing model with the following assumptions:

	Three Months Ended March 31,
	2008
Expected dividend yield	0	%
Expected volatility	38	%
Risk free interest rate	4.4	%
Expected life of options	5.8 years
Forfeiture rate	4	%

NOTE 6¾INCOME TAXES

The Company’s effective tax rates are based upon the estimated effective tax rate applicable for the full fiscal year which is 38.62%.

NOTE 7¾INCOME (LOSS) PER SHARE

Basic and diluted earnings per share information is presented in accordance with SFAS No. 128, Earnings Per Share.  Basic earnings per share is calculated by dividing the net income attributable to common stockholders by the weighted-average common shares outstanding during the period.  Diluted earnings per share is calculated by dividing net income attributable to common stockholders by the weighted average common shares outstanding which includes common stock equivalents.  The Company’s common stock equivalents include stock options, restricted stock units, and warrants.    The weighted average shares outstanding for the three months ending March 31, 2008 and 2007 exclude warrants and stock options to purchase approximately 37,415,423 and 42,755,754 shares, respectively, because such options or warrants have an exercise price in excess of the average market price of the Company’s common stock during the period.

NOTE 8¾SEGMENT ACCOUNTING

The Company has only one reportable segment.

NOTE 9¾SUBSEQUENT EVENT

Warrant Exchange Offer - On April 8, 2008, the Company announced an offer, to holders of all 36,380,195 outstanding, publicly-traded warrants, that would permit the exercise of the warrants on amended terms, for a limited time.  The offer modified the terms of the warrants to allow holders to receive one share of common stock for every 12.5 warrants

8

surrendered, without paying a cash exercise price.  In addition, for each 10 warrants a holder tenders in the cashless exercise, the holder may also exercise one additional warrant by paying a reduced cash exercise price of $2.25 for one share of common stock.

If all of the outstanding warrants are tendered without payment of a cash exercise price, a maximum of 2,910,415 shares of common stock would be issued in exchange.  If the maximum number of outstanding warrants were tendered in conjunction with the cash exercise option, a maximum of 5,953,122 shares of common stock would be issued in exchange and the Company would receive $7.4 million in cash.  These amounts are theoretical maximums, without consideration for the actual distribution of specific amounts of warrants outstanding and the fact that no fractional shares will be issued.

The offer commenced on April 8, 2008, and was extended on May 2, 2008 until May 16, 2008.  Upon termination of the offer, the original terms of the warrants will be reinstituted and the warrants will expire on October 19, 2009, unless earlier redeemed according to their original terms.

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

FORWARD-LOOKING STATEMENTS

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

·risks related to the government contracting industry, including possible changes in government spending priorities;

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

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

·risks related to the implementation of our strategic plan, including the ability to identify, finance and complete acquisitions and the integration and performance of acquired businesses; and

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

Additional factors that may affect our results are discussed in our Annual Report on Form 10-K for the year ended December 31, 2007 under “Item 1A. Risk Factors.”  Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements.  You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Quarterly Report on Form 10-Q.  We undertake no obligation to update these forward-looking statements, even if our situation changes in the future.

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

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Overview

ATS Corporation (“ATSC” or the “Company”) was organized as a “blank check” company under the laws of the State of Delaware on April 12, 2005 and was formed for the purpose of acquiring, through a merger, capital stock exchange, asset acquisition, stock purchase or other similar business combination, an operating business in the federal services and defense industries. The Company acquired four companies in 2007.  Their results are included in the results of operations for 2007 from the dates of acquisition.  Calendar year 2008 is the first full year that ATSC is an operating company with the acquisitions fully integrated into its operations.

ATSC (www.atsva.com) is an information technology services firm serving both the government and commercial organizations, specializing in software and systems development, systems integration, information technology infrastructure and outsourcing, information sharing and consulting services.

Our diverse customer base consists primarily of U.S. government agencies. For the quarter ended March 31, 2008, ATSC generated approximately 44% of our revenues from federal civilian agencies, 29% from defense and homeland security agencies, 24% from commercial customers, including government-sponsored enterprises, and 3% from state and local customers. ATSC’s largest clients in the quarter ended March 31, 2008 were the U.S. Department of Housing and Urban Development (“HUD”), Fannie Mae, and the U.S. Coast Guard, representing approximately 18%, 10% and 9%, respectively, of our total revenue.

We derive substantially all of our revenues from fees for consulting services.  We generate these fees from contracts with various payment arrangements, including time and materials contracts and fixed-price contracts.  During the three months ended March 31, 2008, revenues from time and materials and fixed-price contracts were approximately 65% and 35%, respectively, of total revenues.  We typically issue monthly invoices to our clients for services rendered.  We recognize revenues on time and materials contracts based on actual hours delivered at the contracted billable hourly rate plus the cost of materials incurred.  We recognize revenues on fixed-price contracts using the percentage-of-completion method based on costs we incurred in relation to total estimated costs.  However, if the contract is primarily for services. we recognize revenues on a straight-line basis over the term of the contract.  We recognize cost-type contracts to the extent of costs incurred plus a proportionate amount of fee earned.

On occasion, we enter into contracts that include the delivery of a combination of two or more of our service offerings.  Typically, such multiple-element arrangements incorporate the design, development, or modification of systems and an ongoing obligation to manage, staff, maintain, host, or otherwise run solutions and systems provided to the client.  Such contracts are divided into separate units of accounting, and the total arrangement fee is allocated to each unit based on its relative fair value.  In accordance with our revenue recognition policy, revenue is recognized separately for each element.

The fees under certain government contracts may be increased or decreased in accordance with cost or performance incentive provisions that measure actual performance against targets or other criteria.  Such incentive fee awards or penalties are included in revenue at the time the amounts can be reasonably determined.  Provisions for anticipated contract losses are recognized at the time they become known.

In the three months ended March 31, 2008, we derived approximately 26% of our revenues through relationships with prime contractors, who contract directly with the end-client and subcontract with us.

Our most significant expense is direct cost, which consists primarily of project personnel salaries and benefits, and direct expenses incurred to complete projects.  The number of consulting personnel assigned to a project will vary according to the size, complexity, duration, and demands of the project.  As of March 31, 2008, we had 553 personnel that worked on our contracts.

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

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Contract Backlog

We define backlog as the future revenue we expect to receive from our existing contracts and other current engagements.  We generally include in backlog the estimated revenue represented by contract options that have been priced, though not exercised.  We do not include any estimate of revenue relating to potential future delivery orders that may be awarded under our General Services Administration Multiple Award Schedule contracts, other Indefinite Delivery/Indefinite Quantity  (“IDIQ”) contracts, or other contract vehicles that are also held by a large number of firms, an order under which potential further delivery orders or task orders may be issued by any of a large number of different agencies and are likely to be subject to a competitive bidding process.  Our backlog as at March 31, 2008, was approximately $197.2 million, of which $87.3 million was funded.

Recent Events

Warrant Exchange Offer

On April 8, 2008, we announced an offer, to holders of all 36,380,195 outstanding, publicly-traded warrants, that would permit the exercise of the warrants on amended terms, for a limited time.  The offer modified the terms of the warrants to allow holders to receive one share of common stock for every 12.5 warrants surrendered, without paying a cash exercise price.  In addition, for each 10 warrants a holder tenders in the cashless exercise, the holder may also exercise one additional warrant by paying a reduced cash exercise price of $2.25 for one share of common stock.

If all of the outstanding warrants are tendered without payment of a cash exercise price, a maximum of 2,910,415 shares of common stock would be issued in exchange.  If the maximum number of outstanding warrants were tendered in conjunction with the cash exercise option, a maximum of 5,953,122 shares of common stock would be issued in exchange and the Company would receive $7.4 million in cash.  These amounts are theoretical maximums, without consideration for the actual distribution of specific amounts of warrants outstanding and the fact that no fractional shares will be issued.

The offer commenced on April 8, 2008, and was extended on May 2, 2008 until May 16, 2008.  Upon termination of the offer, the original terms of the warrants will be reinstituted and the warrants will expire on October 19, 2009, unless earlier redeemed according to their original terms.

11

Results of Operations (unaudited)

Results of operations for the three months ended March 31, 2008 compared with the three months ended March 31, 2007 are presented below.

The following tables set forth certain financial data as dollars and as a percentage of revenues.

	For the Three					For the Three
	Months Ended					Months Ended
	March 31,					March 31,
	2008			%		2007			%
Revenue	$	34,876,525				$	23,477,720
Operating costs and expenses
Direct costs	22,268,641			63.8	%	16,464,217			70.1	%
Selling, general and administrative expenses	9,449,681			27.1	%	5,970,982			25.5	%
Depreciation and amortization	2,042,608			5.9	%	926,162			3.9	%
Total operating costs and expenses	33,760,930			96.8	%	23,361,361			99.5	%
Operating income	1,112,595			3.2	%	116,359			0.5	%
Other (expense) income
Interest, net	(804,407		)	(2.3	)%	143,451			0.6	%
Loss on warrant liabilities	—			—		(6,930,000		)	(29.5	)%
Other income	70,877			0.2	%	735			—
Income (loss) before income taxes	379,065			1.1	%	(6,669,455		)	(28.4	)%
Income tax expense	104,036			0.3	%	102,711			0.4	%
Net Income (Loss)	$	275,029		1.3	%	$	(6,772,166	)	(28.8	)%
Weighted average number of shares outstanding
—basic	19,242,698					20,307,248
—diluted	19,242,698					20,307,248
Net income (loss) per share
—basic	$	0.01				$	(0.33	)
—diluted	$	0.01				$	(0.33	)

Revenue – Revenue increased by $11.4 million, or 48%, to $34.9 million for the three months ended March 31, 2008.  The first quarter was strongly influenced by the acquisitions in 2007.  Revenue from commercial contracts increased $2.2 million to $8.3 million, or 36%.  Revenue from the civilian and defense divisions increased $9.2 million to $26.6 million, or 53%.  Growth with existing customers combined with revenue from new sources such as the United States Air Force and the United States Coast Guard have driven this increase.

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Direct costs – Direct costs were 63.8% and 70.1% of revenue for the periods ended March 31, 2008 and 2007, an improvement of 6.3%.  Direct costs are comprised of direct labor, fringe on this labor, subcontract labor costs and material and other direct costs (“ODCs”).  Material and ODCs are incurred in response to specific client tasks and may vary from period to period.  The single largest component of direct costs, direct labor, was $11.4 million and $7.0 million for the periods ended March 31, 2008 and 2007, respectively.  This increase was attributable to three full months of operations in the first quarter 2008 compared to two and one-half months in the first quarter 2007, as well as the effect of additional acquisitions in 2007.  Overall margins for the first quarter 2008 in the commercial division improved 1.5% over 2007 to 33.3% from 31.8%  This is attributable to higher margins associated with acquired commercial business in 2007.  Higher margins in the defense division are also driving this margin improvement.

Selling, general and administrative (“SG&A”) expenses – Components of SG&A are marketing, bid and proposal costs, indirect labor and the associated fringe benefits, facilities costs and other discretionary expenses.  As a percentage of revenue, SG&A expenses were 27.1% and 25.5% for the periods ended March 31, 2008 and 2007, respectively.  Approximately 0.7% of this 1.6% increase was related to increased legal fees.  See Part II, Item 1 concerning legal proceedings.  Also, the business development function has been enhanced to address the expanded markets presented by the acquisitions made in 2007.

Depreciation and amortization – Amortization expenses increased to 5.9% of revenue for the three months ended March 31, 2008 compared to 3.9% for the period ended March 31, 2007.  This was directly related to additional intangible amortization expense associated with acquisitions in  2007.

Interest, net – The net change in interest (expense) income was $0.9 million for the three months ended March 31, 2008 compared with March 31, 2007.  This is a result of liquidating investments we held prior to the acquisition of Advanced Technology Systems, Inc, and borrowings to finance other acquisitions made in 2007, as well as interest on notes with the former owners of the acquired companies.

Financial Condition, Liquidity and Capital Resources

Financial Condition.  Total assets increased $1.3 million to $172.3 million as of March 31, 2008 compared to $171.0 million as of December 31, 2007.  This was primarily due to an increase in trade accounts receivable of $6.2 million and decreases in income taxes receivable of $2.8 million and net intangible assets of $1.7 million.  The increase in trade accounts receivable was due to issues related to the integration of acquired companies.

Our total liabilities increased $1.3 million to $76.9 million as of March 31, 2008 from $75.6 million as of December 31, 2007.  This was primarily caused by increased borrowings under our lines of credit of $4.4 million and decreases in taxes payable of $1.9 million and deferred taxes of $0.8 million.

Liquidity and Capital Resources.  Our primary liquidity needs are to finance the costs of operations, acquire capital assets and to make selective strategic acquisitions.  We expect to meet our short-term requirements through funds generated from operations and from our $50 million line of credit facility.    As of March 31, 2008, we had an outstanding balance of $45.4 million on the line of credit.  As noted above, there was a large increase in accounts receivable in the first quarter.  The balance is expected to decline now that these integration efforts have been completed, thus reducing the outstanding balance on the line of credit.  This line of credit is considered adequate to meet the operations liquidity and capital requirements, as well as support our strategic acquisitions.

Net cash used by operating activities was $4.4 million for the three months ended March 31, 2008.  Cash used by operating activities was primarily driven by working capital changes, which were principally changes in accounts receivable as discussed above.

Net cash used by investing activities was $0.1 million for the three months ended March 31, 2008.

Net cash provided by financing activities was $3.6 million for the three months ended March 31, 2008.  This was used to fund most of the working capital growth during the first quarter.

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

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On May 12, 2008, ATSC and its lenders modified the terms of the Company’s credit agreement, effective March 31, 2008.  The facility is a three-year, secured facility that permits continuously renewable borrowings of up to $50.0 million, with an expiration date of June 4, 2010. The interest rate is based on LIBOR plus the applicable rate ranging from 200 to 350 basis points depending on the Company’s consolidated leverage ratio. The Company pays a fee in the amount of .20% to .375% on the unused portion of the facility, based on its consolidated leverage ratio, as defined in the agreement.  Any outstanding balances under the facility are due in full June 4, 2010.  The amended agreement places certain restrictions on the Company’s ability to make acquisitions.  It also requires the Company to reduce the principal amount on its loan outstanding by between 50% to 100% of the net cash proceeds from the sale or issuance of equity interests, other than the warrant exercise program currently in process.

Off-Balance Sheet Arrangements

As of the three months ended March 31, 2008, we did not have any off-balance sheet arrangements.

Contractual Obligations

The following table summarizes our contractual obligations as of March 31, 2008 that require us to make future cash payments.

	Less than One Year		One to Three Years		Three to Five Years		More than Five Years		Total
	(in thousands)
Long-Term Debt Obligations	$	1,851	$	46,433	$	—	$	—	$	48,284
Capital Leases	78		95		—		—		173
Operating Leases	1,997		4,528		5,267		8,445		20,237
Total	$	3,926	51,056		$	5,267	$	8,445	$	68,694

Recent Accounting Pronouncements

Adoption of New Accounting Standards.  In September 2006, the FASB issued “SFAS” No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. Specifically, this Statement sets forth a definition of fair value, and establishes a hierarchy prioritizing the inputs to valuation techniques, giving the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable inputs. The provisions of SFAS No. 157 are generally required to be applied on a prospective basis, except to certain financial instruments accounted for under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, for which the provisions of SFAS No. 157 should be applied retrospectively. In February 2008, the FASB issued Staff Position FAS 157-2, Effective Date of FASB Statement No. 157, which defers the implementation for the non-recurring nonfinancial assets and liabilities from fiscal years beginning after November 15, 2007 to fiscal years beginning after November 15, 2008.  The disclosure requirements of SFAS No. 157 which took effect on January 1, 2008 are presented in Note 4.  On January 1, 2009, the Company will implement the previously-deferred provisions of SFAS No. 157 for nonfinancial assets and liabilities recorded at fair value as required. The Company does not believe that the remaining provisions will have a material effect on the Company’s consolidated financial position or results of operations when they become effective.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115 (“SFAS No. 159”). SFAS No. 159 permits an entity, at specified election dates, to choose to measure certain financial instruments and other items at fair value. The objective of SFAS No. 159 is to provide entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently, without having to apply complex hedge accounting provisions. The adoption of SFAS No. 159 effective January 1, 2008 did not have a material impact on our consolidated financial statements.  The Company did not elect the fair value measurement option for any of our existing financial instruments.

Standards Issued But Not Yet Effective.   In December 2007, the FASB issued SFAS No. 141(R)—Business Combinations (“SFAS No. 141(R)”).  SFAS No. 141(R) replaces FASB Statement No. 141—Business Combinations. The new statement retains the fundamental requirements that the acquisition (or purchase) method of accounting be used for all

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business combinations and expands the definition of a business, thus increasing the number of transactions which may qualify as business combinations. Contingent consideration will be measured at fair value at the acquisition date, with changes in fair value recognized in earnings, and transaction-related expenses and restructuring costs will be expensed as incurred. Changes in acquired tax contingencies will be recognized in earnings if outside the purchase price allocation period (generally one year or less). Adjustments to finalize purchase price allocations will be shown as revised in future financial statements to reflect the adjustments as if they had been recorded on the acquisition date. Also, in the event of a bargain purchase (acquisition of a business at below fair market value of net assets acquired) a gain could be recognized, or in the event of a change in control of an existing investment a gain or loss could be recognized. SFAS No. 141(R) will be applied prospectively to business acquisitions with acquisition dates on or after January 1, 2009. The Company is currently assessing the impact of adopting SFAS No. 141(R) on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements–An Amendment of ARB No. 51 (“SFAS 160”). SFAS 160 establishes new accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is effective for fiscal years beginning on or after December 15, 2008 and early adoption is prohibited.  Adoption of this statement is not expected to have a material impact on the Company’s consolidated financial position or results of operations when it becomes effective in 2009, but may significantly affect the accounting for noncontrolling (or minority) interests from that date forward.

In March 2008, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 161, Disclosure about Derivative Instruments and Hedging Activities – An Amendment of FASB Statement No. 133 (“SFAS No. 161”).  SFAS No. 161 requires more disclosures about an entity’s derivative and hedging activities in order to improve the transparency of financial reporting.  SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged.  This Statement encourages, but does not require, comparative disclosures for earlier periods at initial adoption.  The Company will adopt the provisions of SFAS No. 161 on January 1, 2009, which is not expected to have a material impact on the Company’s consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

We are exposed to certain financial market risks, the most predominant being fluctuations in interest rates for a portion of our borrowings under our credit facility.  As of March 31, 2008, we had an outstanding balance of $45.4 million under our variable interest rate line of credit.  In November 2007, we hedged the interest rate risk on $35 million of this debt by executing an interest rate swap as discussed in Note 4 of the financial statements.

Item 4. Controls and Procedures.

Our management performed an assessment, under the supervision and with the participation of our Chief Executive Officer (principal executive officer) and our Chief Financial Officer (principal financial officer) of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934, as amended) as of March 31, 2008 and have concluded that these controls and procedures are effective to ensure that information required to be disclosed by the Company is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s (the “SEC”) rules and forms.  The forms of certification are required in accordance with Section 302 of the Sarbanes – Oxley Act of 2002.

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

Changes in Internal Control Over Financial Reporting

During the three months ended March 31, 2008, no change occurred in the Company’s internal control over financial reporting that materially affected, or is likely to materially affect, the Company’s internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we are involved in various legal matters and proceedings concerning matters arising in the ordinary course of business. Other than possibly the below disclosure, we currently believe that any ultimate liability arising out of these matters and proceedings will not have a material adverse effect on our financial position, results of operations or cash flows.

We are a defendant in Maximus, Inc. vs. Advanced Technology Systems, Inc., pending in the Connecticut Superior Court, Hartford District.  The lawsuit asserts breach of contract and other claims related to a subcontract between Maximus and Advanced Technology Systems, Inc. (“ATSI”) associated with a prime contract between Maximus and the State of Connecticut.  The case was filed in August 2007 and is in the preliminary stages of discovery.  We have filed our answer and counterclaims, and Maximus’ response to our counterclaims is due May 24, 2008.  In addition, based on the claims asserted in the lawsuit, we have made an indemnification demand against the selling shareholders of ATSI under the stock purchase agreement governing the transaction in which the Company (then Federal Services Acquisition Corporation) acquired ATSI.  That demand is subject to the dispute resolution process provided for in the stock purchase agreement.  This has been submitted to arbitration.

Item 1A. Risk Factors.

There are no material updates to the risk factors previously disclosed in our Form 10-K for the year ended December 31, 2007.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

The Company did not repurchase any equity securities this period.

Recent Sales of Unregistered Securities

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

On March 1, 2007, in connection with the closing of the acquisition of RISI, the Company issued 46,296 shares of common stock, valued at $0.2 million for purposes of the transaction, to the selling shareholders of RISI. The Company also issued a subordinated note to the selling shareholders, valued at $0.1 million. These shares and note constituted a portion of the transaction consideration. The issuance of the shares was exempt as a private placement pursuant to Section 4(2) of the Securities Act of 1933.

On September 1, 2007, in connection with the closing of the acquisition of PMG, the Company issued 134,408 shares of common stock, valued at $0.5 million for purposes of the transaction, to the selling shareholders of PMG. The Company also issued two subordinated notes to the selling stockholders, valued at $2.25 million.  These shares and notes constituted a portion of the transaction consideration. The issuance of the shares and notes was exempt as a private placement pursuant to Section 4(2) of the Securities Act of 1933.

On November 9, 2007, in connection with the closing of the acquisition of NSS, the Company issued 845,812 shares of common stock, valued at $3.05 million for purposes of the transaction, to the selling shareholders of NSS.  The Company also issued five subordinated notes to the selling shareholders, valued at $5.5 million.  These shares and notes constituted a portion of the transaction consideration.  The issuance of the shares and notes was exempt as a private placement pursuant to Section 4(2) of the Securities Act of 1933, as amended.

In lieu of cash for director fee compensation, a total of 11,462 shares of unregistered stock, valued at approximately $42,650, were issued to six directors of the Company on July 20, 2007, a total of 11,619 shares of unregistered stock, valued at approximately $42,650, were issued to six directors of the Company on October 16, 2007, and a total of 9,999 shares of unregistered stock, valued at approximately $36,000 were issued to six directors of the Company on January 11, 2008, and a

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total of 62,606 shares of unregistered stock valued at approximately $144,000 were issued to five directors of the Company on May 7, 2008.  The issuances of these shares are exempt under Section 4(2) of the Securities Act of 1933, as amended.

Item 3.  Defaults upon Senior Securities.

Not applicable.

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

Nothing was brought before the security holders for consideration during the quarter ended March 31, 2008.  The Company, however, held a meeting of the security holders on Wednesday May 7, 2008.  At this meeting, Joesph Saponaro and Peter Schulte were re-elected as directors of ATSC, the 2007 Employee Stock Purchase Plan was approved and Grant Thornton LLP was appointed as the external auditor for 2008.

Item 5.  Other Information.

On May 12, 2008, ATS Corporation, a Delaware corporation (“ATS”), with Bank of America, N.A., as lenders’ agent and their other lenders and the guarantors listed on the signature page thereto, modified their existing credit agreement by entering into an Amendment No. 3 to Credit Agreement (the “Third Amendment”),  Capitalized terms used in this summary have the same meanings assigned to them in the Third Amendment.  The following primary changes were made pursuant to such Third Amendment:  (i) amendment of the financial covenants to revise the required Consolidated Leverage Ratios, the required minimum Consolidated EBITDA, the required Consolidated Asset Coverage Ratio, and the required Consolidated Fixed Charge Coverage Ratios; (ii) inclusion of a requirement of the Lenders’ consent to acquisitions, if the pro forma Consolidated Leverage Ratio exceeds 2.50 to 1.00; (iii) inclusion of a new requirement that, depending on the Consolidated Leverage Ratio, either 50% or 100% of the Net Cash Proceeds from ATS’ sale of Equity Interests shall be applied to prepay the Loans (provided, however, that this prepayment requirement does not apply to either proceeds from the sale of the ATS Early Warrant Exercise Program effective as of April 8, 2008, or sales or issuances of Equity Interests to ATS); (iv)  adjustmentof the due date for the accounts receivable aging report and accounts payable aging report from ATS to 30 days after the end of each month; and (v) modification of the interest rate applicable to loans outstanding under the Third Amendment (with interest continuing to be based on LIBOR, but with increments ranging from 200 basis points to 350 basis points, depending on the Consolidated Leverage Ratio).  This description of the Third Amendment is qualified in its entirety by the full text of the Third Amendment attached as Exhibit 10.1 to this Quarterly Report on Form 10-Q and is incorporated by reference.

Item 6.  Exhibits.

Exhibit Number	Description
10.1	Amendment No. 3 to Credit Agreement
31.1	Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended
31.2	Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended
32.1	Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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SIGNATURES

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

	ATS Corporation
	By:	/s/ Edward H. Bersoff
		Chairman of the Board and
		Chief Executive Officer
	By:	/s/ Pamela A. Little
		Chief Financial Officer
Date: May 12, 2008

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EX-10.1

Exhibit 10.1

AMENDMENT NO. 3 TO CREDIT AGREEMENT

This Amendment No. 3 to Credit Agreement (this “Amendment”) dated as of May 12, 2008, is made among ATS CORPORATION, a Delaware corporation (the “Borrower”), BANK OF AMERICA, N.A., a national banking association organized and existing under the laws of the United States, in its capacity as administrative agent for the Lenders (as defined in the Credit Agreement (as defined below)) (in such capacity, the “Administrative Agent”), each of the Lenders signatory hereto and each of the Guarantors signatory hereto.

W I T N E S S E T H:

WHEREAS, the Borrower, the Administrative Agent and the Lenders have entered into that certain Credit Agreement dated as of June 4, 2007 (as amended by Amendment No. 1 to Credit Agreement dated as of June 29, 2007, Amendment No. 2 to Credit Agreement, Limited Consent and Agreement to Increase Commitments dated as of November 9, 2007, as amended by this Amendment and as from time to time hereafter further amended, restated, supplemented or otherwise modified, the “Credit Agreement”; capitalized terms used in this Amendment not otherwise defined herein shall have the definition given thereto in the Credit Agreement), pursuant to which the Lenders have made available to the Borrower a revolving credit facility, including a letter of credit subfacility; and

WHEREAS, each of the Guarantors has entered into a Guaranty pursuant to which it has guaranteed the payment and performance of the obligations of the Borrower under the Credit Agreement and the other Loan Documents; and

WHEREAS, the Borrower has advised the Administrative Agent and the Lenders that it desires to amend certain provisions of the Credit Agreement as set forth below and the Administrative Agent and the Lenders signatory hereto are willing to effect such amendment on the terms and conditions contained in this Agreement; and

NOW, THEREFORE, in consideration of the premises and further valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

1.Amendments to Credit Agreement.  Subject to the terms and conditions set forth herein, and in reliance upon the representations and warranties of the Borrower made herein, the Credit Agreement is hereby amended as follows:

(a)Section 1.01 of the Credit Agreement is amended to add the following defined term thereto:

“Net Cash Proceeds” means with respect to the sale of any Equity Interests by the Borrower or any of its Subsidiaries, or the exercise or conversion of any warrants, options or rights with respect to such Equity Interests, the excess of (i) the sum of the cash and cash equivalents received in connection therewith over (ii) the underwriting discounts and commissions, and other out-of-pocket expenses, incurred by such Person in connection therewith.

(b)Section 1.01 of the Credit Agreement is amended by replacing the definitions of “Applicable Rate” and “Coverage Adjustment Amount” in their entirety with the following definitions:

“Applicable Rate” means, from time to time, the following percentages per annum, based upon the Consolidated Leverage Ratio as set forth in the most recent Compliance Certificate received by Agent pursuant to Section 6.02(b)(i):

Applicable Rate

Pricing Level	Consolidated Leverage Ratio	Unused Fee		LIBOR Monthly Floating Rate and Letter of Credit Fee
1	Less than or equal to 2.00 to 1.00	0.200	%	2.000	%
2	Less than or equal to 2.50 to 1.00, but greater than 2.00 to 1.00	0.250	%	2.250	%
3	Less than or equal to 3.00 to 1.00, but greater than 2.50 to 1.00	0.250	%	2.750	%
4	Greater than 3.00 to 1.00	0.375	%	3.500	%

Any increase or decrease in the Applicable Rate resulting from a change in the Consolidated Leverage Ratio shall become effective as of the first Business Day of the month immediately following the date a Compliance Certificate is delivered pursuant to Section 6.02(b) (each such day, an “Applicable Rate Change Date”); provided, however, that if a Compliance Certificate is not delivered  when due in accordance with such Section, then Pricing Level 4 shall apply as of the first Business Day of the month following the date such Compliance Certificate was required to have been delivered; provided further that notwithstanding the Coverage Adjustment Amount then in effect, if at any date a Coverage Adjustment Amount equal to $0 would result in the Borrower’s failure to comply with Section 6.12(a) then Pricing Level 4 shall apply as of such date until such time as the Borrower has demonstrated that a Coverage Adjustment Amount equal to $0 would not result in such non-compliance.

“Coverage Adjustment Amount” means, with respect to any date occurring during each period set forth below, an amount equal to the amount set

2

forth below opposite such period, but subject to adjustment pursuant to Section 6.10:

Period	Coverage Adjustment Amount
December 31, 2007 through May 31, 2008	$	9,250,000
June 1, 2008 through August 31, 2008	$	7,500,000
September 1, 2008 through February 28, 2009	$	6,500,000
March 1, 2009 through May 31, 2009	$	5,500,000
June 1, 2009 through August 31, 2009	$	3,500,000
September 1, 2009 through November 30, 2009	$	1,500,000
December 1, 2009 and thereafter	$	0

provided, however, each of the Coverage Adjustment Amounts set forth in the table above shall be reduced by (i) the amount of any mandatory prepayment required to be made by Sections 2.05(d) and (e), and (ii) the Net Cash Proceeds received by the Borrower or any of its Subsidiaries in connection with the Borrower’s Early Warrant Exercise Program effective as of April 8, 2008.

(c)Section 1.01 of the Credit Agreement is amended by adding the following sentence to the end of the definition of “Consolidated Cash Flow”:

“Amounts included in the calculation of Consolidated Cash Flow under clause (b) above for losses from discontinued operations and extraordinary items and clause (c) above for other non-cash charges shall be subject to the approval of such items by the Administrative Agent.”

(d)Section 1.01 of the Credit Agreement is amended by adding the following sentence to the end of the definition of “Consolidated EBITDA”:

“Amounts included in the calculation of Consolidated EBITDA under clause (b) above for losses from discontinued operations and extraordinary items and clause (e) above for other non-cash charges shall be subject to the approval of such items by the Administrative Agent.”

(e)Section 2.05 of the Credit Agreement is amended by adding new subsections (d) and (e) thereto as follows:

“(d)Upon the sale or issuance by the Borrower or any of its Subsidiaries of any of its Equity Interests (including, without limitation, any conversion or exercise by any Person of any warrants, options or rights with respect to any such Equity Interests other than in connection with the Borrower’s Early Warrant Exercise Program effective as of April 8, 2008, but not including any sales or issuances of Equity Interests to the Borrower or any Guarantor), the Borrower shall prepay an aggregate principal amount of Loans equal to (i) at any time the Consolidated Leverage Ratio is less than or equal to 2.50 to 1.00 (before giving effect to any prepayment required by this Section 2.05(d)), 50% of the Net

3

Cash Proceeds of such sale or issuance and (ii) at any time the Consolidated Leverage Ratio is greater than 2.50 to 1.00 (before giving effect to any prepayment required by this Section 2.05(d)), 100% of the Net Cash Proceeds of such sale or issuance.

(e)Upon the receipt by the Borrower or any of its Subsidiaries of any funds held in an escrow or similar arrangement in connection with, or pursuant to any document related to, any Acquisition (“Escrowed Funds”), the Borrower shall prepay an aggregate principal amount of Loans equal to 100% of the amount of such Escrowed Funds.”

(f)Section 6.01(d) of the Credit Agreement is amended by replacing such Section in its entirety with the following:

“(d)as soon as available, but in any event within 30 days after the end of each month, an accounts receivable aging report and accounts payable aging report for the Borrower and each Subsidiary;”

(g)Section 6.02(a) of the Credit Agreement is amended by replacing such Section in its entirety with the following:

“(a)beginning with such financial statements for the fiscal year of the Borrower ending December 31, 2008, concurrently with the delivery of the financial statements referred to in Section 6.01(a) a certificate of the Registered Public Accounting Firm certifying such financial statements and stating that in making the examination necessary therefor no knowledge was obtained of any Default under any financial covenant contained in this Agreement or, if any such Default shall exist, stating the nature and status of such event;”

(h)Section 6.02(b) of the Credit Agreement is amended by replacing such Section in its entirety with the following:

“(b)concurrently with the delivery of (i) the financial statements referred to in Sections 6.01(a) and (b), a duly completed Compliance Certificate in the form attached hereto as Exhibit D-1 and (ii) the reports referred to in Section 6.01(d), a duly completed Compliance Certificate in the form attached hereto as Exhibit D-2, in each case signed by the chief executive officer, chief financial officer, treasurer or controller of Borrower;”

(i)Section 6.12 of the Credit Agreement is amended by replacing such Section in its entirety with the following:

“6.12Financial Covenants.

(a)Consolidated Asset Coverage Ratio.  Maintain a Consolidated Asset Coverage Ratio of not less than 1.00 to 1.00 at all times.  This ratio will be reported at the end of each month.”

4

(b)Consolidated Leverage Ratio.  Maintain a Consolidated Leverage Ratio at any time during any period set forth below not exceeding the ratio set forth opposite such period.  This ratio will be reported at the end of each reporting period for which this Agreement requires the Borrower to deliver financial statements (pursuant to Sections 6.01(a), 6.01(b) or 6.01(f), as applicable), using the results of the twelve-month period ending with that reporting period (except as otherwise provided in Section 1.07(c)).

Period	Consolidated Leverage Ratio
March 31, 2008 through June 29, 2008	4.25 to 1.00
June 30, 2008 through September 29, 2008	4.00 to 1.00
September 30, 2008 through December 30, 2008	3.75 to 1.00
December 31, 2008 and thereafter	3.50 to 1.00

(c)Consolidated Fixed Charge Coverage Ratio.  Maintain at all times a Consolidated Fixed Charge Coverage Ratio of not less than 1.30 to 1.00.  This ratio will be reported at the end of each reporting period for which this Agreement requires the Borrower to deliver financial statements (pursuant to Sections 6.01(a), 6.01(b) or 6.01(f), as applicable), using the results of the twelve-month period ending with that reporting period (except as otherwise provided in Section 1.07(c)).

(d)Minimum Consolidated EBITDA.  Maintain Consolidated EBITDA for each fiscal quarter set forth below in an amount not less than the amount set forth below opposite such fiscal quarter:

Fiscal Quarter	Minimum Consolidated EBITDA
Fiscal quarter ending March 31, 2008	$	3,200,000
Fiscal quarter ending June 30, 2008	$	2,750,000
Fiscal quarter ending September 30, 2008	$	3,000,000
Fiscal quarter ending December 31, 2008	$	2,600,000

(j)Section 7.07 of the Credit Agreement is amended by replacing such Section in its entirety with the following:

“7.07Acquisitions.  Enter into any agreement, contract, binding commitment or other arrangement providing for any Acquisition, or take any action to solicit the tender of securities or proxies in respect thereof in order to effect any Acquisition, unless (a) the Person to be (or whose assets are to be) acquired does not oppose such Acquisition and the line or lines of business of the Person to be acquired are (i) the provision of services primarily in the governmental contracting field, or (ii) substantially the same as one or more line or lines of business conducted by Borrower and its Subsidiaries, or substantially related or incidental thereto, (b) no Default or Event of Default shall have

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occurred and be continuing and the representations and warranties contained in Section 5.06 shall be true and correct, in each case, immediately prior to and immediately after giving effect to such Acquisition, (c) the Cost of Acquisition is less than $10,000,000, (d) the Person acquired shall be a wholly-owned Subsidiary, or be merged into the Borrower, a Guarantor or any wholly-owned Subsidiary, immediately upon consummation of the Acquisition (or if assets are being acquired, the acquirer shall be the Borrower, a Guarantor or any wholly-owned Subsidiary), (e) after giving effect to such Acquisition, the aggregate Costs of Acquisition incurred during the fiscal year in which such Acquisition is made shall not exceed $20,000,000, and (f) immediately after giving effect to any such Acquisition the difference between the Aggregate Commitments and the Total Outstandings shall not be less than $5,000,000; provided that, prior to effecting any such transaction, the Borrower shall have furnished to Agent (i) pro forma historical financial statements as of the end of the most recently completed fiscal year of the Borrower and most recent interim fiscal quarter, if applicable, giving effect to such Acquisition and (ii) a Compliance Certificate prepared on a historical pro forma basis as of the most recent date for which financial statements have been furnished pursuant to Section 6.01(a) or (b) giving effect to such Acquisition, which certificate shall demonstrate that immediately after giving effect to such Acquisition (including,  without limitation, any Borrowings related thereto)  (A) the Consolidated Leverage Ratio would not exceed 2.50 to 1.00, and (B) no Default or Event of Default would then exist.  Each Acquisition complying with the terms of this Section 7.07, or otherwise consented to by the Required Lenders in writing is referred to herein as a “Permitted Acquisition.”  The parties acknowledge that the Borrower may from time to time seek the consent of the Required Lenders to an Acquisition that does not conform to the requirements of this Section 7.07, provided that the Required Lenders shall have no obligation to give such consent.”

(k)The existing Exhibit D-1 and Exhibit D-2 to the Credit Agreement are deleted in their entirety and Exhibit D-1 and Exhibit D-2 attached hereto, respectively, are inserted in lieu thereof.

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2.Consent to 2007 Fiscal Year End Consolidated EBITDA and Consolidated Cash Flow Calculations.  Solely for the purpose of calculating Consolidated EBITDA and Consolidated Cash Flow for the fiscal year of the Borrower ending December 31, 2007, the Administrative Agent hereby consents to and accepts the calculations by the Borrower thereof as each is set forth in that certain Compliance Certificate dated as of March 17, 2008 and delivered by the Borrower to the Administrative Agent in connection with such fiscal year end pursuant to Section 6.02(b) of the Credit Agreement other than the adjustments reflected in each such calculation for the “Nashville loss” and “PBGC loss” (as each of those items is set forth by the Borrower in such Compliance Certificate).

3.Effectiveness; Conditions Precedent.  The amendments, consents and acceptances set forth in Sections 1(c),  (d) and (g) and Section 2 of this Amendment shall be effective as of December 31, 2007, and all other amendments contained in this Amendment shall be effective as of March 31, 2008, in each case upon the satisfaction of the following conditions precedent:

(a)The Administrative Agent shall have received each of the following documents or instruments in form and substance acceptable to the Administrative Agent:

(i)one or more counterparts of this Amendment, duly executed by the Borrower and each Guarantor; and

(ii)such other documents, instruments, opinions, certifications, undertakings, further assurances and other matters as the Administrative Agent shall reasonably request.

(b)All upfront, amendment or modification fees due to the Lenders, together with all other fees and expenses payable to the Administrative Agent (including the fees and expenses of counsel to the Administrative Agent) estimated to date shall have been paid in full (without prejudice to final settling of accounts for such fees and expenses).

4.Consent of the Guarantor.  Notwithstanding that such consent is not required by the Loan Documents, the Guarantor hereby consents, acknowledges and agrees to the amendments set forth herein and hereby confirms and ratifies in all respects the Loan Documents to which such Person is a party (including without limitation the continuation of such Person’s payment and performance obligations and the effectiveness and priority of any Liens granted thereunder, in each case upon and after the effectiveness of this Amendment and the amendments contemplated hereby) and the enforceability of such Loan Documents against such Person in accordance with its terms.

5.Representations and Warranties.  In order to induce the Administrative Agent and the Lenders to enter into this Amendment, the Borrower represents and warrants to the Administrative Agent and such Lenders as follows:

(a)The representations and warranties made by it in Article V of the Credit Agreement, and by each Loan Party in each of the Loan Documents to which such Loan Party is a party are true and correct on and as of the date hereof, except

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to the extent that such representations and warranties expressly relate to an earlier date, in which case such representations and warranties are true and correct as of such earlier date;

(b)Since the date of the most recent financial reports of the Borrower delivered pursuant to Section 6.01 of the Credit Agreement, no act, event, condition or circumstance has occurred or arisen which, singly or in the aggregate with one or more other acts, events, occurrences or conditions (whenever occurring or arising), has had or could reasonably be expected to have a Material Adverse Effect;

(c)The Persons appearing as Guarantors on the signature pages to this Agreement constitute all Persons who are required to be Guarantors pursuant to the terms of the Credit Agreement and the other Loan Documents, including without limitation all Persons who became Subsidiaries or were otherwise required to become Guarantors after the Closing Date, and each of such Persons has become and remains a party to a Guaranty as a Guarantor;

(d)This Amendment has been duly authorized, executed and delivered by the Borrower and the Guarantor and constitutes a legal, valid and binding obligation of such Persons, except as may be limited by general principles of equity or by the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors’ rights generally; and

(e)No Default or Event of Default has occurred and is continuing after giving effect to this Amendment.

6.Entire Agreement.  This Amendment, together with all the Loan Documents (collectively, the “Relevant Documents”), sets forth the entire understanding and agreement of the parties hereto in relation to the subject matter hereof and supersedes any prior negotiations and agreements among the parties relating to such subject matter.  No promise, condition, representation or warranty, express or implied, not set forth in the Relevant Documents shall bind any party hereto, and no such party has relied on any such promise, condition, representation or warranty.  Each of the parties hereto acknowledges that, except as otherwise expressly stated in the Relevant Documents, no representations, warranties or commitments, express or implied, have been made by any party to the other in relation to the subject matter hereof or thereof.  None of the terms or conditions of this Amendment may be changed, modified, waived or canceled orally or otherwise, except in writing and in accordance with Section 10.01 of the Credit Agreement.

7.Full Force and Effect of Agreement.  Except as hereby specifically amended, modified or supplemented, the Credit Agreement and all other Loan Documents are hereby confirmed and ratified in all respects and shall be and remain in full force and effect according to their respective terms.

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8.Counterparts.  This Amendment may be executed in any number of counterparts, each of which shall be deemed an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument.  Delivery of an executed counterpart of a signature page of this Amendment by telecopy shall be effective as delivery of a manually executed counterpart of this Amendment.

9.Governing Law; Jurisdiction, Etc.  This Amendment shall in all respects be governed by, and construed in accordance with, the laws of the Commonwealth of Virginia, and shall be further subject to the provisions of Section 10.13 of the Credit Agreement.

10.Enforceability.  Should any one or more of the provisions of this Amendment be determined to be illegal or unenforceable as to one or more of the parties hereto, all other provisions nevertheless shall remain effective and binding on the parties hereto.

11.References.  All references in any of the Loan Documents to the “Credit Agreement” shall mean the Credit Agreement, as amended hereby.

12.Successors and Assigns.  This Amendment shall be binding upon and inure to the benefit of the Borrower, the Guarantor, the Administrative Agent and each Lender, and their respective successors and assignees to the extent such assignees are permitted assignees as provided in Section 10.06 of the Credit Agreement.

[Signature pages follow.]

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be made, executed and delivered by their duly authorized officers as of the day and year first above written.

BORROWER:
ATS CORPORATION
By:	/s/ Pamela A. Little
Name:	Pamela A. Little
Title:	Chief Financial Officer

ADMINISTRATIVE AGENT:
BANK OF AMERICA, N.A.,
as Administrative Agent
By:	/s/ Anne M. Zeschke
Name:	Anne M. Zeschke
Title:	Assistant Vice President

LENDERS:
BANK OF AMERICA, N.A.,
as a Lender
By:	/s/ Michael D. Brannan
Name:	Michael D. Brannan
Title:	Senior Vice President
CITIZENS BANK OF PENNSYLVANIA
By:	/s/ Owen B. Burman
Name:	Owen B. Burman
Title:	Vice President

GUARANTOR:
ADVANCED TECHNOLOGY SYSTEMS, INC.
By:	/s/ Pamela A. Little
Name:		Pamela A. Little
Title:		Chief Financial Officer

EX-31.1

Exhibit 31.1

CERTIFICATION BY PRINCIPAL EXECUTIVE OFFICER

I, Edward H. Bersoff, certify that:

1.I have reviewed this quarterly report on Form 10-Q of ATS Corporation (the “Registrant”);

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

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

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

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

(b)    designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

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

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

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

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

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

Dated this 12th day of May, 2008.
	By:	/s/ Edward H Bersoff
		Edward H. Bersoff
		Chairman and Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION BY PRINCIPAL FINANCIAL OFFICER

I, Pamela A. Little, certify that:

1.I have reviewed this quarterly report on Form 10-Q of ATS Corporation (the “Registrant”);

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

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

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

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

(b)    designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

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

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

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

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

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

Dated this 12th day of May, 2008.
	By:	/s/ Pamela A. Little
		Pamela A. Little
		Chief Financial Officer
		(Principal Financial Officer)

EX-32.1

Exhibit 32.1

Certification of Principal Executive Officer
Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)

In connection with the Quarterly Report on Form 10-Q for the quarter ended  March 31, 2008 (the “Report”) of ATS Corporation (the “Registrant”), as filed with the Securities and Exchange Commission on the date hereof, I, Edward H. Bersoff, Chairman and Chief Executive Officer of the Registrant, hereby certify that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Date: May 12, 2008	By:	/s/ Edward H. Bersoff
		Edward H. Bersoff
		Chairman and Chief Executive Officer
		(Principal Executive Officer)

EX-32.2

Exhibit 32.2

Certification of Principal Financial Officer
Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)

In connection with the Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 (the “Report”) of ATS Corporation (the “Registrant”), as filed with the Securities and Exchange Commission on the date hereof, I, Pamela A. Little, Chief Financial Officer of the Registrant, hereby certify that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Date: May 12, 2008	By:	/s/ Pamela A. Little
		Pamela A. Little
		Chief Financial Officer
		(Principal Financial Officer)